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    Essential Information on an Essential Issue

    Letter No.70

    22 December, 1997

    More details on the Christmas Eve announcements.

    Prison Inmate Work Policies.New government report.

    BERL says 9% unemployment to come This Christmas Eve has seen a rash of job losses all over New Zealand ... with over 800 lay-offs announced in the last month alone (see Diary).

  • BERL (the Business and Economic Research Ltd) is predicting continuing job losses in NZ next year as a result of the sluggish economy. They predict that the unemployment rate will rise to 8.3% by June 98 and stay at 9% for the following two years. (This compares to the Sept 97 official figures of unemployment at 6.8%).

    Their predictions forecast a loss of 30,000 jobs in the year to June 1998; 8,000 in the following year; and 22,000 job losses in the year 2000.

    Source Sunday Star-Times 14 December 1997 "Unemployment looks set to rise" by Garry Sheeran

    One-stop announcement. Employment Minister Peter McCardle was trumpeting it as "the most far-reaching reform of employment policy in New Zealand's history." But what was looking like a "re-announcement" of his coalition government employment strategy in Wellington last week ... has indeed turned out to contain some significant surprises.

    Major winner: the dominant role that the Department of Social Welfare and its "welfare to wellbeing" ideology will have on the design of the new one-stop-shops.

    Major disappointment: still no concrete strategy in place for the Employment Commissioners and the funding of regional initiatives. Also no new details on the replacement of the dole with a community and training wage, nor on the introduction of a work-for-the-dole programme.

  • Instead of the new one-stop-shops housing only the unemployment benefit section of Income Support, it now turns out that the whole of Income Support as well as NZES will be absorbed into a new (and as-yet-unnamed) super-agency. This represents a significant and radical shift in power-sharing between two of NZ's largest government services and will effect 14% of the NZ public service or about 4,600 staff.

  • Instead of the focus of the new super-agency being just on job seekers and the unemployed, it will now focus on the needs of all "working-age beneficiaries" which will include all sickness and invalids beneficiaries, widows and people on the domestic purposes benefit, students, and the unemployed. The latest official numbers (Nov 98) registered with NZES is 173,270 people. Officials estimate that the new agency will be dealing with 900,000 people.

    This re-focussing is all part of the coalition government view that "... for all working-age beneficiaries, re-entering the workforce where appropriate is a key route to financial independence and income support should be seen as providing transitional assistance whilst a person is without work...".

    Last week's announcement was cloaked in the language and terminology now associated with the government's proposed Code of Social Responsibility. Whether the new super-agency can indeed maintain an "employment" focus in the face of having to deal with such large numbers of people with other pressing concerns will be a primary test of this whole re-structuring.

  • The main purpose of creating the one-stop-shops is to put all the government's resources of income support, job search, employment and training referrals into one place. All working-age beneficiaries will receive their registration, eligibility and work capacity assessment, placement and support services from this one venue.

    There were many restructuring options considered in the last year ranging from "virtual" integration (low structural impact, higher collaboration between existing services) to limited integration ... on through to full integration (full re-structure, re-housing under one new boss). The Ministers have chosen the last option, and will no doubt need to weather the criticisms that they have taken the most expensive and disruptive choice.

    The Minister's view: "It was considered that a single organisation, with clear accountability and no duplication or overlap of activities is the logical extension of the convergence of areas of focus between NZES, CEG and Income Support..."

  • The new stand-alone entity will be up-and-running by 30 September 1998. The name of the new organisation, who the new CEO will be, and whether it will indeed be a government department or a crown-owned entity ... are all items still under consideration by officials. We'll know early next year.

    (In the meantime Wellington is abuzz with faxes and emails with many pre-Christmas tongue-in-cheek suggestions of A.C.R.O.N.Y.M.S for the new entity.)

    The entity will be organised under one government Minister with also no indication yet as to who this will be. Peter McCardle is clear that he wants the job ... but there remains the possibility that the Minister of Employment could be sub-ordinated under the new structure in favour of the Minister of Social Welfare. Watch this space.

  • The Employment and Training Support Agency (ETSA) has survived the earlier proposals to absorb it into the new one-stop-shops. Instead, 65% of its Training Opportunities Programme (TOPS) money will be transferred into the new agency. Officials are still making recommendations to Ministers on the future relationship between ETSA and the new one-stop-shops.

  • Virtually all beneficiaries make up the government's concept of "working-age beneficiaries". (War pensioners and superannuitants do not form part of this group). The government is giving perhaps its clearest signal yet to the beneficiary population that they are only to consider government income support as being part of their wider personal goal of moving into paid employment.

  • Social Welfare Minister Roger Sowry at the announcement did not specify new work-testing measures for invalids and sickness beneficiaries. But he told the New Zealand Herald that "under the one-stop-shop we will be in a position to work test a wider range of people..."

    At present, recipients of unemployment benefits, widows benefits, and domestic purposes benefits with children over the age of 14 years can be required to demonstrate that they are willing and able to work. Sickness and invalids beneficiaries are not. If the government extends work testing, these beneficiaries could also be required to undertake community work and training and attend job interviews.

  • The figures: In the year to June, the numbers receiving the invalids benefit increased 8.6% to 46,099 people. About 34,000 people were on the sickness benefit. Sowry: "There are many people on those benefits who do have the capacity, given the right work environment, to work particularly part-time. We have to encourage them ... and there will clearly be a focus in engaging those people with the workforce."

    To qualify at present for the invalids benefit, people must undergo a test to measure their degree of incapacity. Sowry: "We will be able to move to a position where we can assess people on what they are capable of doing, not what they are incapable of doing..."

  • The Ministers were quick to say that "it is not known yet" that there will be any redundancies from the restructuring. The official line: "Any decision concerning staff numbers will be the responsibility of the Chief Executive of the new agency." The Word in Wellington is that the new structure will obviously not need the same number of staff as presently employed by the various agencies being combined together.

  • The new CEO will also have to sort out just how much they are going to pay the front-line staff of the super-agency. At present, Income Support staff are paid at a rate generally lower than staff at the NZ Employment Service.

  • Social Welfare is looking at contracting out the payment of pensions to superannuitants. The job may go to a non-government organisation, such as a bank, which will be bulk-funded to administer the pensions. This would mean this task would not be loaded onto the workload of the new one-stop-shops. It is unclear, however, just how the new agency would cope with add-ons to income support, such as the accommodation supplement.

  • What happened to the Employment Commissioners? The announcement simply said that more details will follow (probably March next year). The official word is that Regional Employment Commissioners will perform "a regional management function" within the new agency.
    Sources press statements from Peter McCardle and Roger Sowry 17 December 1997; "First Big Employment Strategy Decision Sees New One-Stop-Shop for Job Seekers"(McCardle), "One-Stop-Shop Logical for Unemployed"(Sowry); "Background Information and Summary of Employment Policy" (Q&A); McCardle Speech to Press Conference "Announcement of Employment, Income and Training One-Stop-Shop"; Press Statement from Rod Donald 17 December 1997 "McCardle's One Stop Shop will go nowhere"; The Daily News 18 December 1997 "Govt unveils welfare one-stop shop reform" by Astrid Smeele; The Dominion 18 December 1997 "Beneficiaries may have to work" by Nick Venter; New Zealand Herald 18 December 1997 "New agency to work-test invalids too" by Audrey Young; TV1 Breakfast News 18 December 1997 Steve Maharey and Peter McCardle intervied by Mike Hosking.

    Minister of Employment Peter McCardle also last week announced the reversal of an earlier decision on the $20 payments for the work-related expenses of people on Community Taskforce (CTF). Earlier this year, Cabinet changed the payment to be one paid only on actual costs (usually requiring a receipt) rather than paying participants a flat $20 per week. This was to bring the allowance into line with the rules by which travel costs are paid to other people in training.

    The decision was widely unpopular both amongst community sponsors of the CTF, and the NZES officers who had to administer it because it involved creating yet another layer of bureaucracy in order to assess the payments. It has also been identified as one of the key reasons why community groups have been reluctant to come on board as CTF sponsors.

    Last week McCardle says he has "listened to the feedback" and Cabinet agreed to change back to the policy of a flat payment of $20 per week to cover work-related costs.

  • Alliance Employment spokesman Rod Donald has been pestering McCardle with Parliamentary questions on the $20 payments ever since the rules were changed last July. He reports on an informal survey he took of NZES managers which showed that most of the managers were simply refusing to implement the new policy. Donald: "Peter McCardle deserves credit for finally persuading his cabinet colleagues to reverse their stupid policy ... but in the face of almost universal mutiny, the government had no choice but to back down ..."
    Source based on press statement from Peter McCardle 15 December 1997 "Minister Listens to Feedback and Reverses Earlier Policy Change" and press statement from Rod Donald 16 December 1997 "Minister congratulated for reversing stupid policy"

    The Be Your Own Boss programme (BYOB) is not going to be axed after all. The popular programme runs business skills courses for unemployed people who want to become self-employed. The Community Employment Group (CEG) has announced that funds will be trimmed to $2m for the next two financial years (down from $3m this year). CEG senior management adviser James Glover says it was never the intention of Government to withdraw completely from the BYOB programme. He says they are trying to revamp the process of delivering BYOB to their "target groups" which are Maori, Pacific Islanders, women and under-privileged rural people.

    Commissioner for Children Laurie O'Reilly, has announced his resignation after battling terminal cancer for several months. He gave his parting shots at a NZ First meeting in Christchurch saying that future commissioners should be given proper funding to do the job, and that the Children's Commission should be separated from the Social Welfare Department.

    He reported that homicides of children by parents are now running at one a month and that new incidents of children being abused was "miles more" than the recent estimate of 17 children a day.

    O'Reilly saved some stern words for criticisms of the priorities of the public service when it came to children : "The director-general of Social Welfare has said her prime obligation is to the Public Finances Act. How can you be a business manager and discharge your obligation for the care and protection of children in your care? You can't. I ask: what value do you put on children in New Zealand?"

    Source The Dominion 15 December 1997 "O'Reilly makes stinging attack"

    The "Social Responsibility" Conference being held at Massey University Albany on 12-15 February 1998 has already received a large number of registrations. The previous conference "Beyond Poverty" had to turn away a hundred people because the venue has a maximum capacity of only 300 ... so the organisers are encouraging people to register early.

    The conference will include over 50 speakers and workshop presenters including Jonathon Boston, Jennifer Pitcher, Rodger Spiller, Bonnie Robinson, Anne Else, Bill Bradford, Celia Briar, Garth Nowland-Foreman, Dave Tollich, Jane Higgins, John Stansfield, Keith Rankin, Leah McBey, Liz Gordon, Prue Hyman, Steve Maharey, Toni Allwood, Vicki Terrell, Bruce Hucker, Will Low and Ruth Dyson.

    There will be a mixture of keynote speeches, workshops and also smaller focus groups. Part of the conference will be held at the Hoani Waititi marae, where participants will be hosted by the Te Whanau o Waipareira Trust. Contact: Social Responsibility Conference, P.O.Box 3813, Auckland 1 phone 09-302-2496 fax 09-377-4804 email

    Source Social Responsibility Conference notices

    Labour and economic officials from the G7 industrialized nations (plus Russia) gathered at Kobe, Japan, late last month for a 2-day conference to further discuss issues in tackling unemployment and promoting structural reform of the G7 economies. Top concerns: finding solutions to the problems of joblessness among young people and maintaining socio-economic vitality as populations age.

    While the world's media was focussed last month on the Kyoto Climate conference, our Media Watch reports that the Kobe Jobs Summit almost completely passed by the attention of the international press. The conference followed up on the 1994 Detroit jobs summit and the 1996 Lille summit. And for the first time, the gathering included observers from the International Confederation of Free Trade Unions (ICFTU) and International Organization of Employers (IOE)

    Each participating country gave presentations on how their governments were tackling these issues, including working closer with the business community in relation to the promotion of internships and on-the-job training programs. Non-government representatives at the conference called for greater flexibility and co-operation between trade unions, corporations, and governments. Their advice: flexibility that allows for technological change is the key to retaining high levels of employment.

    The Japanese media reports that, as host country, Japan has been eager to lead discussions on how to encourage elderly people to keep working. It has one of the world's fastest-growing graying populations: by 2015, people aged 60 or more will represent 20.6% of the overall work force, up from 13.1% last year. Compared to other participating countries, Japan's unemployment rate is low (3.3% last year). About 20% of Japanese workers, however, are employed on a part-time basis and are eligible for fewer benefits.

    Sources Asahi Evening News, 27 November 1997 By Kimie Itakura ; and Japan Times 29 November 1997 by Eric Johnston.

    The recent stockmarket shocks and "corrections" in the Asian economy have a familiar bottom line: job losses. Asia's currency crisis, which touched off bankruptcies, has also halted spending and slowed economic growth. And Business Week predicts that layoffs throughout Asia could reach as many as 2 million workers.

    These jobs will not just in the Korean financial sector, but also in Thai assembly plants, retail stores in Hong Kong, and construction sites in Indonesia all of which are firing workers by their thousands. Migrant workers who fueled Asia's building boom are also likely to be sent home. And the Japanese are reporting that their long-sacred lifetime employment system is shriveling.

    Business Week: "An unemployment crisis is gathering force in Asia, and layoffs are soaring to levels not seen for more than a decade... If these workers take to the streets in force, the region's political calm could be shattered. "

    David C. Roche, an economist at London's Independent Strategy Ltd., notes that Mexican living standards fell nearly 30% after the peso shock three years ago. Roche: "That kind of drop in Asia would produce nothing short of a revolution." Compounding the risk is that most Asian countries lack unemployment benefits. International Labor Organization's predictions: a lot of unrest in Thailand, Indonesia, and Korea.

    Business Week : "The layoffs will change Asia's labor markets for decades. Asia's miracle used to mean that just about every employee would have a job for life. The image of Asia's workers may now change from salaryman in a starched white shirt to banner-waving protesters ..."

    Source Business Week 22 December 1997 "Jobs Shock in Asia" by Mark L. Clifford in Hong Kong, with Moon Ihlwan in Seoul, Michael Shari in Bangkok, and bureau reports

    Financial analysts Deutsche Morgan Grenfell (DMG) estimate that the Asian crisis will reduce NZ's growth rate by 0.8% or more over the next year. Hardest hit: the NZ tourism industry, which until recently had double-digit growth rates, boosted by high-spending Asian tourists.

    Thirty-six percent of NZ exports primarily dairy products, meat and timber also end up in Asia. DMG predicts a drop of 4.5% in exports next year, than would otherwise have been the case.

    Source The Dominion 6 December 1997 "Asian crisis will reduce NZ growth"

  • The Asian financial storms have already hit the shores of the United Kingdom. In recent years many British local authorities have been competing with each other to offer South Korean firms cheap sites and tax holidays in exchange for setting up business and creating jobs in their local areas. What the South Koreans were bringing to Britain was not necessarily new technology, but instead, cheap capital. We now learn that much of this capital was illusory, or simply did not exist. And now, after the "corrections" ... nor will the British jobs.
    Martin Woollacott, columnist writing in the Guardian, comments: "In part, the East Asian firms may have been operating on the basis of loans that ought not to have been made, by institutions which did not actually have the money... We have a truly serious situation which, even if it does not lead to a crash, already means that ordinary people in many countries will have more difficult and more uncertain lives paying the price of lost savings, lost jobs and lost services..."
    Source The Guardian Weekly 7 December 1997 "Capitalism for some is a zero-risk game" by Martin Woollacott.

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