Editorial: Income insurance will cost those who benefit the most

Finance Minister Grant Robertson with the proposed New Zealand Income Insurance Scheme discussion document. Photo / Mark Mitchell

EDITORIAL:

Launching an unemployment insurance scheme at a time of 3.2 per cent unemployment might sound absurd. But if a government waited for the right time, there never would be a time.

Finance Minister Grant Robertson said the scheme is a more "enduring solution" to the problem of managing unemployment during a downturn.

The details outlined so far have been negotiated by agreement between the Government, the Council of Trade Unions and BusinessNZ. But the plan released yesterday is a draft, and will go out for consultation before any decisions. It will be interesting to see how close the unions and business groups still are when the submissions came back, particularly the latter on employers' having to match employees' contributions to the scheme.

An International Labour Organisation report in 2020 found at least 98 countries had unemployment insurance schemes and equal sharing of costs is "a common rule".

It will also be interesting to hear what the insurance industry thinks, having become accustomed to wrapping income cover into individual policies.

The Greens have pointed out the scheme fails to address inequities for low-income earners. "This means lower levels of support for those who have been earning less, including those in casual or seasonal work, and/or those with caring responsibilities," says Green Party employment spokesman Ricardo Menéndez March.

This is not entirely true. The proposed scheme offers a case management service to support people's return to work and broad coverage for different working arrangements. These provisions will be of much more value to those on lower incomes. Those on higher earnings are also much more likely to have income insurance through private providers.

The proposed scheme would also be capped at salaries of $130,911 a year.

Administering the scheme through the Accident Compensaton Corporation (ACC) would seem a natural fit but our ACC scheme is not above reproach. Ten years ago, stricter enforcement of a policy to decline paying surgery costs for "pre-existing conditions" brought an outcry by those courageous enough to go public about it. The practice was eventually exposed by the large number of surgery cases going to legal review, and a commensurate decline in the ACC's success rate.

Similarly there would be a need for transparency in the New Zealand Income Insurance Scheme to assure public confidence.

The Act Party says it is concerned the scheme will exacerbate New Zealand's low productivity but claimants will need to search and prepare for work, and demonstrate this. They will also need to accept any job offer that matches their previous income and other terms and conditions.

National Party leader Christopher Luxon says the "tax" is a further cost to "every worker and business". True, it's another unwelcome dent in pay packets - and more compliance and cost to business - but assisting workers to swivel out of unproductive sectors and into areas of need is surely worth consideration.

Ultimately, workers will pay for any benefit. As Act Welfare spokeswoman Karen Chhour notes, the contribution will come from workers' overall pay. "There's no free lunch."