Delay to income insurance scheme a blow for workers, union says

Wednesday, 8 February 2023

The now-delayed social insurance scheme would provide a safety net for workers who found themselves unemployed.

The Government’s decision to indefinitely delay the introduction of an income insurance scheme is a blow for workers, E tū union says.

On Wednesday, Prime Minister Chris Hipkins said the scheme, first floated by Finance Minister Grant Robertson at the height of the Covid-19 pandemic, was off the table and would not proceed as proposed.

The scheme was modelled on similar social insurance programmes in Europe and would provide an ACC-like safety net for workers who found themselves unemployed, funded through employee and employers’ contributions.

Hipkins said there would need to be “significant improvement” in economic conditions before it would advance.

* Businesses want a cheaper, redundancy-only unemployment insurance scheme

* How social insurance could provide a safety net for NZ's most vulnerable workers

E tū, the largest private sector union in Aotearoa, said the delay was bad news for workers.

“The New Zealand Income Insurance Scheme should be a policy priority as we face a possible recession and other huge changes in the job market,” E tū assistant national secretary Annie Newman said.

“The Prime Minister has told Aotearoa that he’s squarely focused on the cost of living for Kiwis. [The scheme] should be a key part of that plan, as job losses are often devastating for family budgets.”

Newman said New Zealand was behind the eight-ball when it came to unemployment insurance, which many other countries had successfully incorporated into their welfare schemes.

However, the union was pleased with the announcement that the minimum wage would be increased to keep up with inflation. From April 1, the minimum wage will rise from $21.20 to $22.70 per hour.

“Many of our members are on or near the minimum wage, and $1.50 per hour is a significant increase for them. It will take some of the sting out of the rising costs across the economy,” Newman said.

“Increasing the minimum wage by anything less than inflation would have seen minimum wage workers effectively have their pay cut in real terms.

“While this is an adequate increase, we do know that workers really need the Living Wage if they are to live a decent life.”

Craig Renney, a policy director and economist at the Council of Trade Unions, said increasing the minimum wage in line with inflation would leave workers with $3000 a year more in their hand after tax, and was worth more than a tax cut.

Max Rashbrooke, a senior associate at the Institute for Governance and Policy Studies, said increasing the minimum wage made 'total sense'. However, deferring income insurance was a shame.

'The point was to give people a bit of protection against job loss and help them keep their lives together while they are looking for a new job,” he said.