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    Essential Information on an Essential Issue

    Letter No.61

    30 May, 1997

    NATURAL CAPITALISM -- Paul Hawken believes we can create new jobs, restore our environment, and promote social stability through a new approach to business.

    The Accident Compensation Corporation (ACC) plans a radical shake-up of its work capacity assessment procedures, aimed at dumping long-term claimants who have been deemed fit for work. It has just released a document for public consultation (available at ACC offices) on the tough new rules.

    At the moment, many claimants continue to receive their compensation at 80% of their former wages, even though the ACC says they are fit enough to work. Its main concern: that an increasing number of people are remaining on their scheme after their expected recovery time.

    Under the proposed new rules, those capable of work, even in a position outside their field, will have three months to find a job. Claimants will also have to take jobs that pay less and have less status than the positions they held when they were injured. If there is no work in their area, they will be expected to move town to find employment. Those who refuse to comply with these rules face being switched from ACC payments to the unemployment benefit, which in most cases would be a substantial income drop.

    Source - New Zealand Herald 19 May 1997 "Work-fit claimants face loss of compo" by Leanne Moore.

    Skill shortages. Labour Minister Max Bradford believes that NZ is losing jobs and industry to new competition in Asia because we are running out of workers with applied science and technology skills. OECD figures show that exports of "high-end" manufacturing such as electronics and engineering were growing up to 40% per year. In contrast, less than 5% of tertiary students were entering these professions. The number of technology, science and engineering graduates has declined in NZ over the past decade, along with the number of qualified maths and science teachers. Bradford: "Skill shortages have become a critical issue for employers relying on specialist skills to develop products and services for export..."
    Sources - The Dominion 17 May 1997 "Kiwis underskilled in maths, science"; The Independent 23 May 1997 "Our schools turn out too many litigators, too few wealth creators" editorial by Bob Edlin

    The battle-lines are being drawn over the work-for-the-dole scheme. Employment activists, church and union groups, and opposition political parties are planning campaigns of opposition. At the same time, many other community groups are trying to influence government policies by coming up with their own proposals.

    The Auckland Unemployed Workers Rights Centre is producing two detailed booklets on workfare, one aimed at trade unionists and one aimed at people working in church and community organisations, with the purpose of educating people as to why both sectors should unite to make work-for-the-dole inoperable. The AUWRC would like to see all community groups sign a pledge committing themselves to refusing to undertake workfare schemes.
    Source - Common Ground Vol 4 Issue 2 May 1997 "The campaign against workfare"

    Employment Minister Peter McCardle has given a very warm reception to the proposal by 23 employment-related groups in Christchurch (the Community Employment Initiatives Group, or CEIG) for their own design of a work-for-the-dole scheme called Communityworks (as described in the last Jobs Letter). McCardle told the Christchurch Press that he was "absolutely delighted" with the proposal which he believes is innovative and "advances possible work-for-dole plans further than any other proposal."

    McCardle has also started to hear proposals from other regional groups, including one from Hamilton City Council staff. He says that the Hamilton and Christchurch proposals they were effectively "issuing a challenge" to the rest of the country which he hoped would be met by other communities.

    Mature Employment Service co-ordinator Cora Baillie has been involved in developing the Communityworks plan. She says that community groups basically have two options with the coalition Government's "work-for-dole" plans : fight it or try and make it work. Baillie: "We concluded that the idea is rather like a tank where you can either lie in front of it and try and stop it or get on top and try to help drive it. We decided to try and drive it ..."

    How many people could a Comunityworks-style programme cater for? The Christchurch community groups looked at what they thought was their maximum capacity and have decided that 500 people was their maximum. (This compares with the 17,900 official unemployed in Canterbury region). CEIG estimates the total cost of the project would be $5,109,146 with $665,125 of this involving one-off establishment costs. Their plan would call for 67 full-time jobs to be created to supervise, co-ordinate, and administer the project.

    Source The Christchurch Press 24 May 1997 "Work plan for Canty" by Greg Jackson.

    Labour's employment spokesman Steve Maharey believes that a compulsory work-for-the dole scheme is finding few supporters. Maharey: "The unions don't favour it because they can see it will undermine the labour market. The employers don't like it because they can see that since the deregulation of the labour market, many of the jobs Mr McCardle might want for workfare are being done by the private sector. The public sector is not keen on the idea of workfare recipients staffing hospitals and schools. The community sector wonders how it is supposed to pay for the overheads of a workfare worker when there is not enough money to run their services now ..."

    Peter McCardle would not comment on the details of his scheme, which is still being drawn up by a steering group of officials who are considering the consultative feedback from community and sector groups. McCardle: "Everyone I speak with, including interest groups, the unemployed, employers and the general public, understand that it is a nonsense to pay fit and able job-seekers to lose touch with the work ethic, lose their motivation, their dignity and their self-esteem..."

    Sources - The Dominion 21 May 1997 "Dole-work legality questioned"; National Business Review 16 May 1997 "NZ First's dole policy has few supporters." Enterprise and Equity column by Steve Maharey

    The displacement effect of workfare schemes is one of the major stumbling blocks to their implementation. A paper prepared by the State Services Commission (SSC) during the government coalition talks (and issued under the Official Information Act) cites evidence from a Swedish study showing that for every ten subsidised full-time jobs provided for the unemployed, nearly seven other workers lose or miss out on a job.

    The McCardle scheme will see the unemployed working for about two days a week. This would reduce the displacement effect somewhat ... the SSC estimates that for every 10 jobs created under this scenario, up to 2.6 people will either lose their job or miss out on work they might otherwise have had. The displacement effect can be further reduced by using the voluntary, community and environmental sectors as the main source of workfare jobs.

    Source - The Dominion 23 May 1997 "Scheming to make people work for the dole"

    Alf Kirk, chairman of the interdepartmental committee drawing up the workfare scheme, acknowledges that the spending constraints imposed by the coalition government $60m in 1997-98, and $80m in 1998-99 will in itself determine many of the features of the scheme. He told the Dominion that one cost-saving move could be to limit the scheme to those registered as unemployed for six months or longer. Kirk: "The point is to avoid creating jobs for those who are going to find work anyway, as two-thirds of the unemployed are off the register within 26 weeks of joining it ..."
    Source - The Dominion 23 May 1997 "Scheming to make people work for the dole"

    How would the Labour Party do workfare differently? Steve Maharey points to Labour Party policies which call for the development of a "social economy". Labour's community-based employment enterprise programme also seeks to move people off income support and into employment and training, but it will be done by establishing community enterprises. These enterprises would operate as small businesses in areas not covered by the private or public sectors. The unemployment benefit would be available to be used as the base for a wage.

    Employees would work for wages not the benefit and would work under the same conditions as anyone else in the labour market. According to Maharey, the formerly unemployed would therefore find it easier to move in the private and public sector when jobs become available.

    Source - National Business Review 16 May 1997 "NZ First's dole policy has few supporters." Enterprise and Equity column by Steve Maharey

    "If Tony O'Reilly (the chief executive officer of HJ Heinz) walked down the road and kicked a cat and broke two of its ribs, there would be a public outcry. But he does this to 172 lives and nobody wants to say anything. There's been so little public comment about it, I've been sickened. The key issue is that its nothing to do with losing money but everything to do with making money. The social effects and the people effects are really disregarded. People will go from having reasonable jobs to becoming beneficiaries. There are few prospects of jobs in Gisborne ..."
    -- Dave Burland, United Food and Beverage and General Workers Union advocate at Heinz Wattie, which is closing its pet and prepared food operations in Gisborne with the loss of 172 jobs.

    More on Eco-tax reform (see last issue). UK Chancellor, Gordon Brown, is considering a radical overhaul of the tax system and is likely to announce in his first budget the setting up of a commission to study ways of greening the tax system, making cuts in employment taxes, and raising taxes on polluters. The Economist credits the British think-tank Institute for Public Policy Research (IPPR) as being influential in arguing the case for environmental taxes. Its report, "Green Tax Reform", published last year, claims that a major shift from taxes on employment to taxes on pollution could raise £21 billion a year and create 700,000 jobs by 2005 if the money saved were used to cut employers' national insurance contributions. The IPPR's package of proposed green taxes includes a tax on commercial and industrial energy, a real annual rise in fuel duties of 8%, a landfill tax, a levy on quarrying, and a tax on car parking at work.

    The green tax route is a path already well trodden by several other European countries. Denmark, Sweden, Norway, Finland, Belgium and the Netherlands have all established green tax commissions and are levying taxes on pollutants such as carbon, sulphur, toxic waste, fertilisers, water pollution, aircraft noise and batteries.

    Source The Economist 24 May 1997 "Brown's Bite"

    The French are halfway through their two-part election process which will be completed on June 1st. Already the centre-right government has taken a beating at the first poll, and French PM Alaine Juppé has been forced to resign. This is an important election, not only because it may determine France's role in Europe. But it may also determine the future of the French welfare state, and how it will address its massive unemployment rate.

    When Juppé was elected two years ago in the wake of Mr Chirac's presidential victory, both men promised to reduce the number of people out of work and to cut taxes. Instead, the jobless figure has risen from 11.5% in mid-1995 to 12.8% (3.3m people) at last count. Taxes have risen just as relentlessly, from 44.1% of GDP in the year before Mr Chirac became president, to a record 45.7% last year. The centre-right government went into this election promising to slash spending on welfare, reform the education system, and privatise major government business interests. Above all, they are determined that France will meet the conditions for joining the common European currency.

    French Socialist leader Lionel Jospin is promising a plan to create 700,000 new jobs, half of them in the public sector, and to lower the standard work week from 39 to 35 hours with no loss of pay all without increasing overall taxes. Media reports say that his plans are uniting the French left, but few of even his own supporters believe he can deliver it. His job creation measures are also being met with incredulity elsewhere in Europe the plans would almost certainly make it harder for France to sign up to Europe's single currency.

    Sources The Economist 24 May 1997 "Chirac and Juppe hope for change"; The Washington Post 22 May 1997 "French Welfare State at stake in Sunday's national election";

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