Tuesday, 15 Jun 2021

Budget 2021: Government working on unemployment insurance, likened to ACC

A proposed new form of income insurance could see Kiwis who are made unemployed paid 80 per cent of what they were earning when they were working.

Thursday’s Budget revealed that the Government is working with BusinessNZ and the Council of Trade Unions (CTU) on a new “social unemployment insurance”.

The scheme was a manifesto commitment of the Labour Party in the 2020 election.

The announcement is light on detail and makes it clear that discussions are at an early stage.

Finance Minister Grant Robertson’s statement only says the scheme could cover affected workers for “a period” with minimum and maximum caps.

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It provides no detail of what the insurance might cost or how it would be funded, although Robertson’s release references ACC, a scheme where levies are charged to cover the cost of certain types of injuries and accidents. A CTU official has also pointed to the ACC example.

“We have an opportunity to better support New Zealanders who lose their jobs through no fault of their own,” Robertson said.

“Covid-19 has exposed how vulnerable employment can be, and the risk to dramatic income loss from employment to unemployment.

“Finding a job takes time, and many workers may accept lower-paid jobs that don’t match their skillsets, because financial pressures mean they need work quickly.”

At a Budget lock-up in Parliament, Robertson was unclear around when the scheme would be introduced, but said it was not likely to be in place within two years, even though the CTU and BusinessNZ wanted it to be in place more quickly.

“We’re targeting, likely, around 2023 for that,” Robertson said.

During Covid-19 the Government, like many around the world, upped benefit rates for those made unemployed, arguably creating a two-tier welfare system separating long term employed from those who lost their jobs in 2020.

BusinessNZ and the CTU had “asked to work with Government to propose a more enduring solution and this is our joint response,” Robertson said.

In the coming months Government, CTU and BusinessNZ would consult “on what the right settings could be, balancing the support needed for Kiwis to find quality new jobs against the costs of running the scheme.”

A wider public consultation would be undertaken this year.

Craig Renney, policy director at the CTU (and a former advisor to Robertson) said no decisions had been made on the scheme, which were in place in a number of countries.

“There’s a wide range internationally of how these things are paid for. Either by the Crown or by employers or employees,” Renney said.

“Clearly, there’s already an ACC levy, so one of the things you might consider is whether that’s one of the ways it has to be paid for.”

Overseas schemes ranged from six months to two years, Renney said, and all were compulsory as the schemes effectively socialised the cost of group insurance.

“What’s important is getting the setting right to give people enough time to find the right job, not just the jobs that’s available, because we want to stop the scarring effect of unemployment,” Renney said.

Increases in automation and artificial intelligence were likely to lead to widespread unemployment in particular industries and regions. “This helps to smooth the impact on people who are undergoing that change,” Renney said.

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