Dialogue: Time to make training pay

Improving our 'human capital' means providing incentives to learn new skills, says LINDA WANNAN-EDGAR .

Cheers! We've 1.8 million people employed (36,000 extra in one year), and the lowest unemployment rate for 12 years.

But should we celebrate? Wellington has more jobs, but its unemployment is up. Northland's working-age population declined but its unemployment rate is static and high.

Auckland attracted more than 19,000 potential extra workers, but only 5000 new jobs. The total area north of Taupo experienced no job growth, and national unemployment went down by only 11,000. What's happening?

Unemployment rates are based on a percentage of the workforce (1.9 million), and not working-age population (2.9 million).

What of the other one million people "not in the labour force"? The otherwise-jobless (discouraged, etc.) total only 100,000.

What do we know of the other 900,000? Not all, surely, are in early retirement, sick, on ACC or caring for others. When they move in and out of the workforce they upset the figures.

In Wellington at least, people re-entered the workforce maybe expecting the new Government to create jobs. It did not oblige. So Wellington's "not in the labour force" numbers fell while its "labour force" increased by more than the new jobs. The result? Unemployment worsened.

Much of last year's change in regional unemployment can be explained by such workforce changes, not by job creation or loss. Regions are either "sources" or "sinks" for the working-age population. People moved out of Northland and the Bay of Plenty and into Auckland and Waikato. Wellington gained potential workers and so did Canterbury, while others lost.

This all pales into insignificance when compared to Auckland. It's the Dick Whittington phenomenon: "I'm off to London, the streets are paved with gold!" he cried, only to find life tough in London, at least at first. Meanwhile, Waihi Gold reopened its mine 20 years ago, but unemployment in Waihi increased, because the inflow of hopeful workers exceeded the number of new jobs.

And what of last year's new jobs? Around 16,000 were in retail, restaurants and cafes - not high-tech, and few requiring tertiary qualifications.

Another 16,000 came from "other services," which includes Government and defence (both no-growth industries) plus cultural, recreational, and personal services. Again, not "knowledge-economy" jobs with high incomes.

Compare this with the United States' experience of "jobless growth" in certain periods over the past decade.

With our Government's own December forecast of real GDP growth being not much more than 1 per cent, is New Zealand experiencing a period of jobless growth? Unemployment erodes our overall welfare as a nation, as the Prime Minister's taskforce pointed out in 1994.

It is endemically high in many regions and for people with certain skills - or more correctly, lack of skills. That's the problem. Not that race and age don't figure. The biggies are geography and skills, or "structural unemployment," and the reason behind most of the 100,000 unemployed still.

Earnings incentives are stark. According to Statistics New Zealand's June 2000 Incomes Survey, the average gross weekly income for the 28 per cent of the working-age population who have no qualifications is $490. Those with secondary-school qualifications earn an average of $550 a week, while those with vocational or trade qualifications average $670 a week. The remaining 10 per cent, who have at least one degree behind them, can expect an average of $960 a week.

We must correct the disincentive to work and train. The average income for those not in paid employment is $140 to $180 per week. Compare this with average income from paid employment. Effective marginal tax rates on beneficiaries are a major disincentive. They are significantly higher than those for superannuitants. Are we as a nation trying to get working-age beneficiaries into jobs and training, or elderly retirees back into jobs?

The IT industry gets training right. When needing certain skills, what happens? Wait for some Government-funded tertiary institution to do something? No. Time is precious and so is up-to-date knowledge. Vendor courses from Oracle, Microsoft, IBM and the like are used.

For speed and effectiveness, there's no need to expand the public sector's share of the training industry at taxpayer expense, or in competition with private providers.

If skills are seen as nationally important, then make individual training expenses tax-deductible.

A tertiary student should be able to capitalise his/her fees, creating an asset to earn future income, and write this asset off against future income. Businesses can and do capitalise development salaries and other expenses and, just like a truck or a building, depreciate the asset over its life. Why cannot individuals? Politicians rankle with talk of "human capital" without the same financial incentives as other investments.

And let's not get too prissy about what constitutes training. Training in workplace communications should be tax-deductible. Heaven knows, it's hard enough communicating with English as your first language, let alone your second. Just yesterday I heard the phrases "class act" and "class action" at work. Try explaining those to a new New Zealander!

* Linda Wannan-Edgar is an economist with the Employers and Manufacturers Association.