Coronavirus: Ministry of Social Development swamped, as job losses mount
Saturday, 4 April 2020
Workers, businesses and Government agencies are bracing for a spike in unemployment. But how bad could it get? Carmen Parahi and John Anthony report.
Dire warnings are being made by a range of employment leaders and economists from across the country, as the Government gears up to deal with an unemployment shock triggered by the coronavirus response.
On April Fool's Day, the Ministry of Social Development was processing around 100,000 applications for wage subsidies..
Deputy chief executive service delivery Viv Rickard said MSD had paid wage subsidies to over 500,000 employees so far. A total of $3.7b of the Government's business package scheme has already been spent, he said.
Rickard was forced to apologise this week about the delays to the Work and Income call centre.
On average callers are waiting around 34 minutes, but it can take up to 70-80 minutes. To help with the load, 400 staff have been moved to the frontline services.
**READ MORE:
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* Coronavirus: Government starts economic planning for post-lockdown New Zealand**
The move has increased the number of staff to 3000 who are working to process income support, wage subsidies and emergency grants.
'We are working through a number of steps to further respond to the high demand for our services – we have hired 84 new staff, and will be hiring another 200,' said Rickard.
'Our staff are working hard, and long hours to meet these high levels of demand.
'On average, our call centres are answering more than 20,000 calls a day, which is around double what we normally see.'
On Wednesday, Finance Minister Grant Robertson was heavily criticised by the Epidemic Response Committee for not having data available around unemployment.
In response, the Ministry of Social Development announced on Saturday it expected to start releasing monthly unemployment benefit numbers next week.
The Government is forecasting a hit from its Covid-19 response that significantly exceeds the Global Financial Crisis, with unemployment possibly hitting double digits.
According to Stats NZ, prior to the 2008 crisis, the unemployment rate was 3.8 per cent. Two years later, the unemployment rate had risen to 6.8 per cent, the highest rate in over 10 years.
The current unemployment rate from December 2019, was 4 per cent or 111,000 people. Many are predicting that number to skyrocket.
TOURISM & HOSPO COULD LOSE HALF ITS WORKFORCE
Two weeks ago, Tourism Industry Aotearoa chief executive Chris Roberts believed around 100,000 people would lose their jobs from the tourism and hospitality sector.
Now, he thinks it will be much more, up to half the industry.
'I'm now starting to think if we only lose 100,000 jobs that might be a reasonable outcome. It could be worse than that,' said Roberts.
Before Covid-19, 393,000 jobs were being supported by the industry, generating $42b in annual revenue. Roberts estimates revenue will plummet by more than half in the next 12 months resulting in massive job losses.
'It's not just the people working in the hotels or activity providers or coach drivers,' said Roberts.
'When frontline tourism businesses are no longer buying the goods and services of others, the impact quickly spreads out to all sorts of activities across the economy.'
Roberts said the only companies currently making any money in the industry are hotels being used by the Government to house returning New Zealanders and those accommodating stranded tourists.
He expects a large percentage of the 12-week business and wage subsidy packages are being paid out to tourism and hospitality employers. It's buying a bit of time, but the situation is dire, he said.
'Unfortunately, many of those who are currently closed may never open again,' said Roberts.
He said the closure of provincial tourism giants Hobbiton in Matamata, Te Puea in Rotorua and Whale Watch in Kaikōura is devastating for those communities.
The key for us is how fast we rebound and fill those jobs again, said Roberts.
There is nothing wrong with the industry, but it has lost its customers, he said. The customers will return but like everyone else, he doesn't know how long it will take before they can.
UNEMPLOYMENT SHOCK
Manukau Urban Māori Authority chief executive Wyn Osborne said the indicators are beginning to show that a significant unemployment shock is unfolding as thousands upon thousands lose their jobs.
'History shows that urban Māori will feel this shock up to twice that of the wider population,' said Osborne.
'So many in our community are employed by the hospitality and tourism industries which are being hit hard.'
Osborne said in the last week its Māngere drive-through food bank has provided double the number of food parcels it usually does.
'The reality is already here for these whānau.'
On Monday, the Government will announce a new Covid-19 payment will be available to essential businesses if they can't pay staff who are being forced to stay home because of health concerns.
Osborne is calling for the Government to implement a guaranteed wage for everyone who is unemployed.
'A periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement,' said Osborne.
The authority has a 90-unit housing project that it has been attempting to set up for a number of years with limited progress. Osborne said the Government needs to identify kick-starter projects like the housing unit that meets social procurement objectives.
These may be more difficult to assemble, Osborne said, but without them we will only repeat and amplify the failure of trickle down thinking.
He's pushing for Māori and Pacific community leaders to work with the Government on the economic recovery plans.
'If we only do what we've always done, we'll only get what we've always got.'
NO-ONE SHOULD BE MADE TO BE UNEMPLOYED
Council of Trade Union president Richard Wagstaff believes unemployment could reach up to 200,000.
'It's still less than 10 per cent,' said Wagstaff. 'Few think it will stay under double digits. It could be conservative.'
Wagstaff said business support packages have definitely cushioned the numbers of people needing the dole.
'From our point of view people shouldn't be made to be unemployed right now,' said Wagstaff.
'They should be talking with their employers and working out how they can maintain their employment using the business support package.
'We shouldn't really be seeing a massive growth in unemployment. We should see massive growth on the business support package.'
He said there are three types of companies operating at the moment.
The first is using the support to park their workers while hoping things will pick up. 'We think that's really good, that's what it's for,' said Wagstaff.
The other group is those who don't think they've got any chance of coming out of the pandemic at all. Wagstaff, used the aviation industry as an example.
He said the industry is very pessimistic about their medium and long-term chances.
'Yes, they are reaching out to get the business support packages. We strongly support them to do that. It's far superior to putting someone on the dole.
'But they don't think it's a longer-term option to park their staff. Those companies are signalling they still expect to lay off thousands of workers.'
The companies that aren't applying for the income support concern Wagstaff. 'We think that is not acceptable,' he said.
If they don't really have any prospects, they should still put people on that business support package, said Wagstaff. It wouldn't cost them anything, but would leave those workers in a better position than being unemployed.
'We know that it is happening and there are companies that can't be bothered doing that which is really disappointing,' said Wagstaff.
He said without the business package, unemployment would be much worse.
'If they'd put in twice as much as they have now maybe the damage would be a lot less. But it would have other consequences. It's a balancing act.'
A THIRD OF SMALL TO MEDIUM BUSINESSES TO CLOSE
Auckland Business Chamber chief executive Michael Barnett said he had seen 'a significant number of firms' making people redundant over the past week.
Small and medium businesses were hardest hit with about 10 per cent having to make staff redundant, he said.
The wage subsidy provided some relief , but only went so far in covering costs, he said.
'If they haven't got anything to top it up and all they can see is ongoing costs they are having to make sweeping redundancies.'
About 30 per cent of small/medium business owners believed it would be difficult for them to survive the economic impact of Covid-19, he said.
Before deciding to make redundancies businesses should talk to their accountants, mentors or independent advisers who could provide objective advice, he said.
Many owners were having to watch their livelihoods 'crumbling in front of them' as a result of the nationwide lockdown.
CUT 20 PER CENT OF STAFF TO SURVIVE
Economist Shamubeel Eaqub said he was hearing of a lot of businesses laying staff off because they did not think they would have as many customers after the lockdown.
Or they expected to run out of cash within one or two months if they maintained current staff numbers.
'To survive through this period where you may not have any revenue you're going to have to make some big adjustments,' Eaqub said.
Businesses were trying to retain about 80 per cent of their workforce, he said.
The remaining 20 per cent of staff 'at the margins' would be made redundant so businesses could be the right size for a weaker economy when a recovery happened.
Many firms would be trading as insolvent in the coming months and SMEs were most at risk because they had high operating costs without the economies of scale that larger businesses benefited from, he said.
'It's those uncomfortable, in-between size businesses that tend to be affected quite hard because they have lots of fixed costs.'
On Wednesday Eaqub told the Epidemic Response Committee that New Zealand needed faster, more real-time reporting of redundancies or unemployment.
'It feels like right now there's none of that data available on the jobs side.'
Eaqub did not expect to see a big lift in official unemployment figures until three to six months time because the wage subsidy had bought businesses some time, he said.
'The layoffs and business failures are probably still to come.'