Subsidies work too well

By MATHEW DEARNALEY and SIMON COLLINS

Employers eager for Government subsidies to recruit long-term unemployed people face rationing to cope with an unprecedented demand on Work and Income NZ's budget.

The department's budget for subsidised work schemes was cut by $5 million this year, to $113 million, after being under-spent by $15 million in 1999-2000.

But heavier demand this financial year has seen the Auckland region spend $11.7 million of an annual allocation of $30.9 million in the first four months to October 31.

Its southern zone is particularly over-stretched, with one manufacturer saying he faces a severe reduction in subsidy assistance for any new worker.

The employer says a Work and Income official told him future subsidies would be capped in some, though not all, parts of Auckland at $120 a week, compared with the $214 he now receives for each of three workers rescued from the long-term dole queue.

And he says he is on notice that new subsidies will run out after 12 to 13 weeks, before being reviewed, compared with the six-month term for those already working for him.

"It's because they have blown their budget and especially in the South Auckland area, where it is needed," said the employer, who does not want to be named.

He said he was taking a chance on hiring unemployed people to start a new export division of his company, and needed the subsidies during the establishment phase.

"We are creating new jobs. These are new opportunities for putting the long-term unemployed back into the workforce. Not everybody wants to take this sort of employee on."

Work and Income NZ's acting national commissioner, Graeme Carruthers, said extra demand for wage subsidies throughout the country appeared to reflect a greater willingness by employers to take on the long-term unemployed.

However, subsidies always varied depending on the level of disadvantage a particular job-seeker suffered, so the maximum of $214 was not a hard-and-fast figure.

He said regional commissioners had to work within capped budgets, which they expected to fully use up this year.

While unaware of plans to cut subsidies in South Auckland to $120, he acknowledged that local commissioner Denise Fisk was "well ahead" of her budget target and expected she would want to achieve "a level of comfort."

What happens next

The end of the Jobs Challenge doesn't mark the end of the Herald's commitment to the debate over the way ahead for New Zealand.

We will now focus on defining the core principles that all New Zealanders can agree on - the things that will make the country a better place.

Next week we will provide more food for thought over the holidays and in January we will generate a summer debate, followed by a major new series on the economy.