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    Essential Information on an Essential Issue

    Letter No.34

    28 February, 1996

    The number of people in employment is still rising, and continues to be at the highest since records began in 1986. Employment levels have now increased for every quarter since December 1992. Fulltime employment is at 1.297 million people which is 47,000 more than December 1994. And the number of people in part-time jobs was 357,000, up 18,000.

    Auckland was the main job creator in the last year, recording a 6.3% increase or 29,900 more people in work. This compares with 11,000 more jobs in the Waikato and 4,500 in Northland.

  • The unemployment rate remains static at 6.1%, after a modest rise in the official unemployment statistics of 1000 people. The jobless figures however show a very different story (see insert in this issue). The official jobless numbers people "without a job and wanting a job" has risen by 16,600 people, indicating that many more `discouraged' people are not making it onto the official numbers of unemployment. There are 77,800 people on the jobless tally that are not counted within the official numbers of unemployed. According to Statistics NZ, they are "available for work, but not actively seeking it..." (see Irony ... later this issue)
    Source - Statistics from Statistics NZ, and The Daily News 17 February 1996 "Unemployment tally static in Taranaki".

    Bill Birch's announcements last week made much of the connection between his policies and the initiatives being made "in response to the Employment Task Force...". A major section of his booklet, which details the tax reductions, is devoted to reproducing the policy announcements already outlined in the October 1995 government jobs package. Bill Birch says his package is deliberately designed to favour the position of working families, and he defends the low gains to unemployment and domestic purposes beneficiaries from the tax cuts. Birch: "If we improve the position of low and middle income working people, then automatically we also transform the situation of beneficiaries. The gain they make by getting back into the workforce, either on a part-time or full-time basis, improves considerably..."

  • Bill Birch is still confident that there will be jobs available for people, despite the flattening off of job growth trends as shown in the recent release of employment statistics. His optimism is because strong economic growth "the main generator of jobs" is still forecast for the future.

    As part of this programme of increasing the rewards people get from paid work, the government is introducing an entirely new family tax programme which is only available to low-income families who are not beneficiaries or on ACC weekly compensation. The Independent Family Tax Credit (IFTC) is controversial in that it discriminates between families whose parents work and those whose parents who are reliant on state benefits. Labour's Michael Cullen criticises the package, saying that the government was penalising the one in four children who, through no fault of their own, were dependent on benefit income.

  • The IFTC is separate from the changes to income tax rates, and the increases in Family Support. It is aimed at those beneficiaries with children who want to move into full-time work but are discouraged by the extra costs involved in working, or by receiving little more from a low-paid job than they received on the benefit. In some cases, families were financially worse off by working, and could improve their situation by leaving their job and going on a benefit. The IFTC will be a single amount per child that does not depend on the age of each child: initially, $7.50 per child per week (from 1 July 1996) rising to $15 per child per week (from 1 July 1997).
    Sources - Bill Birch "Tax Reduction and Social Policy Programme - Details" 19 February 1996, and The Dominion 16 February 1996 "Labour says benefit kids to get raw deal"

    Irony: If the government is successful in its drive to get beneficiaries thinking more about getting a job, the proof of this may be seen in a rise in the rate of unemployment. Patrick Smellie, columnist in the Independent, points out that if the government is right about its tax cuts package, and encourages the unemployed to try harder to find a job by raising the rewards for working, then the first thing we will see is a drop in the official "jobless" rates.

    Smellie: "If many of those people do decide to tell Statistics NZ they are now active jobseekers rather than simply jobless the key to being counted as officially unemployed in the Household Labour Force survey then the labour force participation rate will rise. If the participation rate rises faster than the rate at which new jobs are being created, then that will raise the rate of unemployment."

    Source - The Independent 23 February 1996 "Tax package cuts Kiwi values to the quick"

    Our Media Watch reports that most church groups who were interviewed for comment after the Tax Cuts announcements were cautious in their support, and almost universal in their view that the money spent on tax cuts would be better spent on improving government programmes in housing, health and education. Major Peter Savage of the Salvation Army says that the Tax Cut package will give low income earners the chance to "get on their feet but not much more..." The Anglican Social Justice Commission says that while it recognises the need for relief for low and middle income earners, the reduction in taxation "did not return the beneficiaries the income taken from them in 1991..." The Catholic Church is reported as saying the government was misleading people in promoting the cuts as being aimed at low and middle-income earners: "People on above-average incomes would gain more than those on below-average incomes, and many beneficiaries would miss out altogether..."
    Source - The Daily News 21 February 1996 "Tax programme under fire"

    The Alliance points out that over 200,000 beneficiaries are likely to miss out on any benefit from the tax cuts. Dave Macpherson, Alliance Social Security spokesman calculates of the 345,126 benefits being paid as of 30 June 1995, only 144,095 of these beneficiaries will actually see more cash in their hands each week because they are also supporting children. Macpherson: "... most of these people are already hit hard by increased user charges in health, education and other privatised services."

  • Macpherson also disputes Bill Birch's claims that the changes in abatement rates allowing beneficiaries to earn more part-time income, before losing their benefits, was likely to help many people. Macpherson: " Most beneficiaries will get little or no benefit from this package, as they already receive supplementary allowances to top up their benefits to a livable level, and will lose much of these allowances dollar for dollar with any extra earnings..."
    Source - faxed Alliance Press statement from Dave Macpherson to the Jobs Letter 14 February 1996

  • Alliance leader Jim Anderton describes the tax package as "yet another upwards redistribution of wealth" in NZ. He calculates that 30% of the cost of the tax cuts is going to the top 10% of income earners those earning $50,000 a year. Anderton: " The government's determination to punish beneficiaries is so extreme it has even created an entirely new tax rebate only available to people in work with families, called the `independent family tax credit' in order to exclude beneficiaries from increased family support..."
    Source - faxed Alliance Press statement from Jim Anderton to the Jobs Letter 14 February 1996

    This address takes you to the internet links associated with the Minister of Finance and the NZ Treasury. It includes a summary of the recent tax cuts announcements, and a tax-cut calculator where you can calculate the effects of the changes on your own income. This homepage also links to other resources for economists on the internet, and other countries' budget pages.

    First-year university enrolments are being tipped to fall again this year, after dropping in numbers for the last two years. NZ University Students Association President Grant Robertson says that high fees and a lack of student allowances were acting as a deterrent for some people. Robertson: "At a time when there are supposed to be more school leavers than ever, the statistics show that university education is out of reach for many people..."

    Last year, total first-year enrolments was down 7.1%, and the drop in first-year New Zealand students was 8.6%. In comparison, international student numbers last year increased in all universities except Waikato, making up 6.4% of all first-year enrolments.

    Source - Sunday Star-Times 11 January 1996 "High fees deter first year uni students..."

    The Reserve Bank governor, Don Brash, says he will resign if an MMP-style government required the bank to focus on targets other than low inflation. He says that under the Reserve Bank Act, a government could require the bank to target some other objective, such as higher economic growth or lower unemployment. He says he would resign, not because he regarded these objectives as undesirable, but because he had long maintained that it was impossible for monetary policy as such to deliver them.

    Brash says that any decision to over-ride price stability as the target of monetary policy would inevitably lead to sharply higher interest rates, and it would be seen by the markets as indicating that the government was less concerned about inflation.

    Source - New Zealand Herald 14 February 1996 "Brash's resignation would follow any policy change"

    The Police Association reports that officers are leaving the job in record numbers. It says that nearly 300 left the job on medical grounds last year, double the number who left in 1984. Most cited stress and other medical reasons for leaving. The association says that the officers quitting included the most experienced, with an average 10-15 yrs on the job, and their departure had lowered morale. It says the biggest reason for people leaving was frustration at being unable to do the job properly because of lack of resources.
    Source - New Zealand Herald 15 February 1996 "Police quitting in their hundreds"

    The immediate teacher crisis has been solved, but not the long-term problem of staffing shortages. Most schools have found temporary teachers this year with only 25 vacancies throughout the country "uncovered" far fewer than the 188 predicted by the Ministry last month. But the underlying number of vacant positions, excluding temporary cover from relievers, is 562 teachers, with about one in seven schools surveyed by the Ministry saying they were short of teachers. The long-term predictions for teacher shortages are disturbing. The Ministry revealed at a government select committee earlier this month that NZ faces a shortfall of 7000 teachers over the next five years.
    Source - New Zealand Herald 15 February 1996 "Temporary teachers plug gaps but 562 needed long term"

    Up to 40,000 tertiary students are struggling to make ends meet because their unemployment benefits have been stopped, but their student allowances do not start until April. Anamika Vasil reports in the Dominion that many of the students did not find jobs during the summer holidays and about 20,000 of them had received the unemployment benefit during the university break. This benefit stops as soon as they students enrolled at varsity, so for the next 4-6 weeks they have to survive without an allowance, which is paid through the Ministry of Education. The Ministry says that applications cannot be processed until a student enrolled and processing is "a complex exercise which involves many applications".

    Question: Why can't student allowances be paid as part through the Income Support Service, removing this 4-6 week break in payments when unemployed students return to studies?

    Source - The Dominion 26 February 1996 "Tertiary students stuck without living allowances"

    The Lampen Workchoice Day trust is canvassing for many more employers in the Auckland area to help host school children for their work experience day on April 30. The Workchoice Day was launched at a special function for employers and schools held at the Ellerslie Convention Centre last week. The charitable trust was set up three years ago to help young people plan future careers, and over the past two years more than 15,000 students in Auckland, Christchurch and Wellington spent the day learning about employment options available to them when they leave school. The companies host two groups of about 20 students and are given tours of the company premises and are encouraged to ask questions.

    The commissioner of Nga Tapuwai College, John Graham, who was guest speaker at the Ellerslie launch, believes that the Workchoice Day gives many benefits to a generation of youngsters who are "more cynical than in the past" about career choices ahead. Graham: " It is critical that careers advice comes from a variety of sources particularly from business houses themselves. They can impress upon young people the qualifications required and at the same time talk of the personal qualities required of them as employers..."

    Source - New Zealand Herald 27 February 1996 "Doors open to reveal work choices"

    The concept of a Universal Basic Income (UBI) will be featured at a national conference in Wellington (1-2 July 1996). It is sponsored by UBINZ, a research and advocacy network whose aim is to promote the concept of the tax-free UBI as "the most straight-forward, simple, efficient and effective means of delivering social justice ..." The groups says that with the increasing casualisation of jobs and the inability of employment to supply the population directly with an income to live on, some other means is needed of giving individuals and families sufficient financial security to enable them to participate in society in a meaningful way.

    Registrations and offers of papers or presentations, contact Ian Ritchie, UBINZ, c/- Private Bag 11-042, Palmerston North phone 06-350-6316 or fax 06-350-6319.

    Source - faxed Press Statement from UBINZ, 21 February 1996

    "We have ploughed the land, sowed the seed, and raised the crop. Now for the first time the people of NZ begin to see the shape and size of the harvest..."
    -- Jim Bolger, at the Tax Cuts announcements

    "This package will increase the rewards of employment, effort, skill, education and training. More people will want to work, and those in work will get more for their efforts..."
    -- Bill Birch, on unveiling details of the Tax Cuts package.

    "It is the longest fiscal striptease in history..."
    -- Helen Clark, commenting on the Tax Cuts.

    "The Tax Cut package is one of the most socially divisive policies ever placed before a NZ parliament. It is nothing more than a National Party election bribe combined with yet another upwards redistribution of wealth."
    -- Jim Anderton, commenting on the Tax Cuts.

    "It remains to be seen whether the `carrot-and-stick ideology driving the tax package really works. Will the offence that virtually ignoring the poorest in society gives to traditional NZ values be outweighed by the equally traditional NZ values of thrift and hard work?"
    -- Patrick Smellie, writing in the Independent

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