A new scheme to cover a chunk of the wages of people who lose their jobs is an idea worth considering argues Sam Gribben of E tū.
In this year’s budget, the Government described its new proposal for a social insurance scheme, as an ACC-style system that would cover around 80% of wages for several months while people who lose their jobs are looking for work. Everyone in paid work would be covered.
Many countries levy separate payments to fund unemployment benefits. Their design varies greatly. Like some others, ours would sit alongside other unemployment support, funded from general taxation.
FLAWED WELFARE SYSTEM
Our current welfare system has many serious flaws. Even after the increases announced in the budget, beneficiaries will struggle to make ends meet.
The Welfare Expert Advisory Group report proposed a new purpose for the Social Security Act; to whakamana tāngata and ensure a dignified life by:
- providing financial security and social security sufficient for an adequate standard of living
- supporting people to achieve their potential for learning, caring or volunteering, and earning through good and appropriate work
Could a social insurance scheme help to further that goal?
STRENGTHENING THE SAFETY NET
That’s a completely valid position but ignores the reality that, frustratingly, the government has mostly rejected raising more revenue to raise benefits to the levels and terms being considered for social insurance payments.
It will undoubtedly strengthen the social safety net for the newly unemployed. But some critics argue it comes at the expense of other beneficiaries, that the money directed at this super-safety net should be distributed equally.
The criticism also ignores the support people in paid work provide to whānau and others who rely on the current welfare system.
Entire communities can be devastated when a local workplace closes. Recently, mills in Whakatāne and Kawerau have been on shaky ground. Social insurance would mean hundreds of workers, and all the people who rely on their wages including beneficiaries, would be better off for much longer if they did close.
It would also give those who lose their jobs some breathing room to seek or create meaningful employment – a step towards the ‘just transition’ that unions have been advocating for.
The Covid crisis reminded us that it is precarious and vulnerable workers, notably women, who end up worst off when things go belly up.
Solutions then were the wage subsidy and other support that maintained incomes closer to usual wages than welfare benefits. These were necessary because our benefit levels are too low.
Under a social insurance scheme, higher paid workers would get more than lower paid workers when they lose their jobs. That is unequal, but wage inequality should be addressed at work, where it starts.
Besides, there are ways a social insurance scheme can be made fairer than the wage system, all of which is why considering this proposal makes sense.
Having said that, equity concerns must be addressed in the design process, in which unions, business, beneficiaries, and communities trapped in intergenerational poverty must be included.
The specifics will be very important. But as someone who has seen two “once in a lifetime” global economic downturns in the 15 years I’ve been working, I believe social insurance is an idea worth discussing.
This is an abridged version of an article which originally appeared in The Spinoff