Monday, January 18, 2016

Doubling the unemployment benefit rate?

Grant Robertson is talking up the Danish 'Flexicurity' model intimating Labour policy in 2017 might look like something similar:

The Danish system has three parts. It has flexible rules for hiring and firing workers, to make it easier to cut staff in downturns and easier to hire new staff when an economy rebounds. It has a generous unemployment benefit of up to 90 per cent for low-paid workers. And it has an "active labour market" policy, which means unemployed are helped into work, given guidance or re-trained.
Mr Robertson said New Zealand already had a flexible labour market, but it needed to be balanced with greater security and income support.
"Obviously you can't take a model and replicate it from one country to another. It's the principles of it that we are looking at and how something similar could be put in place in New Zealand."
 The following graph is apparently based on data extracted from the OECD database. I am assuming it is accurate:

NZ has the most "flexible labour market" already.

But what would "a generous unemployment benefit of up to 90 per cent for low-paid workers" entail?

40 hours at minimum wage taxed at 20% = $472.  90% of that is $425.

The current Job Seeker benefit for a single person aged 25+ is $210.13. Of course that ignores any accommodation supplement but on the face of it Robertson is talking about doubling unemployment benefits.

That would mean other benefits would have to rise relative to the Job Seeker benefit. You couldn't have a single person getting a basic benefit higher than a sole parent with dependent children.

I'm actually for an unemployment benefit that pays more on the proviso that:

It is funded via employee/employer contributions and is time-limited.

I wonder if Labour would go for that?


Anonymous said...

I'm actually for an unemployment benefit that pays more on the proviso that:

good grief! Economics 101: the rate of the dole or any other benefit should be zero.

Brendan McNeill said...

Perhaps as one option, the unemployment benefit could be treated like a student loan, to be repaid a little at a time once employment has recommenced?

Likewise with reimbursing the cost of time spent in prison etc etc.

Lindsay Mitchell said...

Brendan, You could say that genuine unemployment insurance is the similar - paying a little at a time - in advance rather than retrospect.

Regarding unemployment insurance - what I suggested - not everyone will become unemployed but neither does everyone have a car crash or house burn down but pay for that possible contingency.

Anonymous said...

Probably the people most affected by the non payment of an unemployment benefit are two income couples.
Once one becomes unemployed there is no assistance if the other earns more than a certain amount. That's despite the person who becomes unemployed paying their taxes maybe for many years. It hurts more because people become used to living on an income and if half is suddenly not available then there is a problem. This happened 8-9-10 years back and caused a lot of people anxiety.

JC said...

The Denmark system isn't quite as straightforward as Grant suggests..

1. Its an unemployment *insurance* fund.
2. You need to have had at least 52 weeks in employment over 3 years beforehand
3. You need to have been in the insurance fund for at least one year beforehand
4. Benefit lasts only four years
5. Stops automatically at age 65.


Jim Rose said...

Lindsay, nice post. the level of labour market flexibility in Nz is understated by that chart. see

Anonymous said...

NZ has the most "flexible labour market" already.

this of course is another lie. We don't have "right to work" or "right to employ". We have employment tribunals and courts and unions and disputes and mediation and all the rest. We need to get rid of the lot and go to full at-will employment, with employee breaches contracts as straightforward criminal matters. That's a flexible labour market.

Anonymous said...

The Danish word for collectivism is "jantelov," (pronounced YAN-tee-loav), or Jante Law. It roughly means that nobody is better than anyone else.

There you have it. Communism. Nobody is better than anyone else. Whereas freedom is dedicated to exactly the opposite principle!