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    Essential Information on an Essential Issue

    Letter No.73

    10 February, 1998

    Budgeting For Benefits

    For the February 98 quarter

    Despite the big lay-offs before Christmas, latest government statistics show that nearly 6,000 jobs were created in the three months to the end of December. The better-than-expected figures meant a slight 0.1% dip in the unemployment rate, to 6.7%, or 122,000 people.

  • Economists, bankers as well as community groups have greeted the figures with disbelief. The Bankers Trust pointed to the decline in the number of job advertisements, the sharp rise in the number of registered unemployed, and subdued business confidence, as reasons for its surprise at the December statistics. The bankers told the Dominion that they believe there may be statistical errors involved working out seasonal adjustments and the timing of the changes.

    Bancorp says the industry consensus expectation was for a rise in unemployment, " so this figure serves to confuse rather than enlighten Economists become rather agitated when this sort of event transpires, but mostly we hate it when our crystal balls fog over"

    The government statistician, Len Cook, lent weight to this view when he released the December Household Labour Force survey, saying that the "robustness" of the result may not continue into later quarters.

    We include our regular Statistics That Matter feature in this issue. Some highlights:

  • While the official unemployment rate has held steady since June last year, the overall number of unemployed has actually risen 12.4%, or 16,000 people over the full year since Dec 1996.

  • Of the 6,000 new jobs recorded between Sept to Dec 1997, 5,000 were measured to be full-time. A large segment of this increase was made up of part-time workers shifting into the full-time workforce. So this increase may prove to be temporary if this increase in hours was only to cope with the Christmas rush.

  • The biggest winners: increases in jobs in the retail and hospitality sectors. Biggest losses: jobs in agriculture, forestry, hunting and fishing.

  • 41% of the total unemployed are young people aged 15-24 years.

  • Maori continue to have the highest unemployment rate at 16.8% or one in six working-age people. Pacific Islanders have an unemployment rate at 13.7%, while the Pakeha/European rate is at 4.6%.
  • Source _ Statistics from Statistics NZ ; The Dominion 6 February 1998 "Bankers find unemployment figures hard to reconcile" by Alan Samson; New Zealand Herald 6 February 1998 "Shadows falling over `robust' jobless figure" by Patricia Herbert; The Daily News 6 February 1998 "Jobless drop boosts Kiwi, interest rates" by NZPA

    Last week's Budget Statement clearly foreshadowed government plans to shift its spending from welfare payments to its higher priority areas such as education and health. The statement gives guidelines which have been used to identify "areas of fiscal savings" which will almost certainly mean income cuts for NZ's 350,000 beneficiaries. These savings areas include :
    -- reviewing the relative levels of different benefits
    -- tightening eligibility rules and administration
    -- enhanced targeting of social assistance to those most in need
    -- reviewing NZ superannuation, one of the "key drivers" of social spending

  • The statement reinforced the "social responsibility" message that is underpinning its rhetoric in reforming welfare. It says: "Income support provides an important safety net so that people can sustain themselves and their families in times of adversity _ as they look for a new job, exit a dangerous relationship, or recover their health. Income support is intended to help people move from one state to another. It was never designed as a permanent solution "

  • Treasurer Winston Peters says that a review of benefit relativity is appropriate. Some benefits were lower than others "for no apparent reason other than ad hoc historic decisions" and others were "obviously too high". He also says "every NZ'er knew there are numerous others receiving welfare who should not be"

    Watch for: struggles within the coalition cabinet over the introduction of a single generic welfare benefit to cover the majority of beneficiaries.

  • Also watch for: possible announcements in this year's Budget on reducing the Accommodation Supplement to reflect rental movements in the various NZ regions.

  • Social Welfare Minister Roger Sowry has confirmed that the government has its sights on the sickness benefit which is paid to some recipients at a rate higher than the dole. He says, however, that since the government had required applications for the sickness benefit to be signed by two doctors, the numbers were growing more slowly. Growth in the numbers on the DPB have also slowed since the introduction of new abatement rates and the extension of the Compass programme which encourages single parents back into the workforce.

  • The Auckland City Missioner, the Rev Richard Buttle, says any more cuts to welfare will be immoral. He says that before the "mother of all budgets" in 1991, his mission handed out about 50 food parcels a month. By 1993, this had rocketed to 600 parcels, and by the end of 1994 it was 800 a month. The number tailed off with the introduction of the supplementary needs grant, but has begun to rise steadily again.
    Sources The Budget Policy Statement 4 February 1998 by Treasurer Winston Peters; The Dominion 5 February 1998 "Benefit cuts tipped in Budget preview; New Zealand Herald 6 February 1998 "No target for welfare cuts, says Sowry" by Patricia Herbert.

    The Education and Training Support agency (ETSA) reports that the number of people in industry training has doubled in the last two years. Figures issued last week showed that 41,221 people were engaged in industry training at the end of December, more than double the 19,740 people involved in this training at the end of 1995.

    There are now a total of 52 Industry Training Organisations (ITOs), each of which have developed their own systems of national standards and qualifications for their industrial area.

    Source The Dominion 6 February 1998 "Industry training grows rapidly" by NZPA

    Staff cuts have been announced recently at the advertising agency Young & Rubicam and also at Saatchi's Auckland branch. Colenso in Wellington is expected to be the next agency to start cutting, following the recent loss of the Toyota advertising account. Industry analysts are expecting more cuts and redundancies in the main advertising agencies, who are overstaffed and are adjusting to a general downturn in advertising revenues. At their peak in 1986, the main advertising agencies were employing 1,400 people, but last year the figures were down to 975 people.
    Source New Zealand Herald 5 February 1998 "Redundancies indicate fragile condition of advertising industry" by Neville Glaser

    The Irish Farm Relief Service has begun advertising in NZ and Australia in an attempt to attract workers to Ireland to work in the busy spring lambing and dairying periods. Agricultural exchanges between Ireland and NZ began three years ago with more Irish travelling to NZ than vice versa, but at this time of year the Irish Relief Service needs far more workers than are available.
    Source The Dominion 7 February 1998 "ireland's farmers seek NZ workers" by NZPA.

    Are public servants voting with their feet? Recent figures obtained by the ACT party show high staff turnover rates for government departments, some of which are turning over a quarter of their staff every year. Among the worst turnover rates were in the Treasury (25%), and Commerce (25.9%), Creative New Zealand (37%), Womens Affairs and Youth Affairs (both 26%). Other turnover figures: Education (19%), and Labour (13.7%), Maori Affairs (22%), Internal Affairs (15.4%) and Social Welfare (18.5%).

    ACT's Rodney Hide: "These figures are symptomatic of appalling problems of morale in the state sector if these were private sector companies we would declare them sick and ripe for a management takeover."

    Source The Dominion 2 February 1998 " ACT cites high turnover" by NZPA

    By now the government should have decided whether it will put up the minimum wage from $7 to $7.50 as part of the coalition agreement. The reason for the delay: Labour Minister Max Bradford is still waiting on research that may link last year's minimum wage increase (from $6.37 to $7) to lower employment. It is well-known that Bradford believes that a significant increase in the minimum wage has a negative effect on job creation, a view supported by the employers and manufacturers. The Independent reports that Bradford was dissatisfied with the advice he got from his department in November, and told his officials to produce more detailed statistical research. The latest employment statistics certainly are not supporting Bradford's theories, but in the end it will be a political decision: watch this space.
    Source The Independent 4 February 1998 "Does a minimum wage add up to fewer jobs ?" by Graeme Speden

    Reluctant One-Stoppers? Perhaps the most significant element impacting on community groups and action on the employment issue in NZ this year will be the re-organisation of NZES, CEG and Income Support into a new super-agency, or one-stop-shop. Recent papers released under the Official Information Act by Labour Secretary John Chetwin shows that the Labour Department did not support the "full integration" strategy that was finally chosen by Ministers. And many of the reasons enumerated in its (22 November 1997) paper are the same concerns now being voiced amongst community groups facing the down-stream impacts of the restructuring.

  • In the course of the development of an integrated employment service there were two main options under consideration "virtual integration", and "full structural integration". Virtual integration would have seen the closer alignment of both operational processes and the support systems of the different agencies involved, but the agencies themselves would have remained as separate entities. Full structural integration (the option finally chosen by Ministers) meant creating a whole new organisation through the merging of the different agencies.

    The Department of Labour, in its advice/comment to Ministers, supported the "virtual" option. It based this conclusion on the view that the most important issue is the effectiveness in achieving the government's employment outcomes. It also said that it would be "very difficult, if not impossible, to implement successfully the new policies arising out of both the employment strategy and benefit reform work during a period of major organisational change"

  • In pushing its case for the "virtual integration" option, the department also argued:
    -- "the two businesses of DSW and DOL are different, although complementary with distinct core competencies and strengths. A virtual integration allows then to "stick to their knitting" and retain clear accountabilities;
    -- most of the identified efficiency gains of structural integration will be able to be realised through the alignment of systems and process, as agreed between the two organisations.
    -- if regional accountability and devolution is a key driver, it needs to be recognised that there is a tension under full integration. This results from one person being accountable for both a function which is centrally specified and requires consistent application (benefit administration) and another which requires responsiveness and flexibility (employment services)"
    Source Transition Talk by John Chetwin Issue 5 1998, and department of Labour comment paper 22 November 1997

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