Return to Jobsletter Home

To the last Jobs Letter

To the next Jobs Letter

To this Letters Diary

To this Letters Features

To the Index







    Essential Information on an Essential Issue

    Letter No.77

    27 April, 1998

    The Community Wage

    No Work -- No Wage.
    This is the clear message of the last week's announcement to replace the unemployment and training benefits with a community wage on October 1st. It is all a part of the reforms of NZ's social welfare system in which any money a beneficiary receives from the State will be seen as close as possible to "wages" for doing a job.

    The community wage announcements are a long-awaited "second leg" of Employment Minister Peter McCardle's employment strategy. The first element of the strategy was the announcement (last December) of an integrated super-department and "one-stop-shops" merging the operations of the NZ Employment Service and Income Support. The final element is scheduled to be announced later this year: the appointment of Regional Commissioners who will be drawing up regional employment plans.

    The community wage measures represent the most far-reaching reforms effecting the unemployed in a generation. They also represent a significant personal triumph for Peter McCardle who says this is what he came into politics and joined two political parties to achieve. The tests now: can the coalition government provide the real resources to back up this initiative? Will enough community organisations step forward to organise work opportunities for the jobless? And how will the new army of "community workers" influence the wages and conditions of the real jobs in the marketplace?

    How the Community Wage will be implemented
    On the Community Wage

  • Under the community wage programme, from October 1st, the unemployed will have to make themselves available for community work or training for up to 20 hours a week. The wage is to be set at existing benefit levels, plus a $21 "top-up" for participation, and up to another $20 for "actual and reasonable costs incurred".

  • The scheme will immediately effect the 187,000 people who are registered as unemployed, and it is likely that sickness beneficiaries, widows, invalids, and solo parents will be covered by a similar scheme to be announced in the Budget in two weeks time. This could see the scheme affecting as many as 350,000 people. For most of these "working-age beneficiaries", participation in the new regime will be compulsory: if you don't turn up for community work or training, or perform unsatisfactorily, your "wages" will be docked or withdrawn.

  • The logistics of getting as many as 350,000 people involved in this programme will be an immense challenge for a completely new government department which will only be opening the doors of its new "one-stop-shops" on October 1st. The pressures on a new system will be potentially enormous, particularly if there are not enough training programmes or community work positions to meet the demand.

  • But don't expect the full register of unemployed people to be placed in community work or training on October 1st. In fact, McCardle is only expecting a modest jump in the numbers of unemployed people already actively taking part in community work or training.

  • At the moment, McCardle estimates that there are 51,000 unemployed involved in community work, training or other activities. He sees this as rising to only between 63,000 and 65,000 people in the coming financial year. His long-term view is that only 30-50% of the unemployed will be involved in the programme at any one time.

    Although new job-seekers will be brought onto the new regime immediately, those already on the unemployment register will be introduced to the scheme gradually. McCardle says all unemployed are expected to be "on call" after October 1st, but the first priority of the programme will be those "at risk" of losing the work ethic, like school-leavers and the very long-term unemployed. Participation in the programme will also not be compulsory for unemployed people over 60 years of age.

  • The community work will not be provided directly by the new super-department. This will be organised by community organisations and, in some cases, private businesses. These organisations will be expected to supervise participants and provide necessary safety equipment and project materials. McCardle is promising some support with supervision costs to those organisations that take on more than four unemployed people, but the details of this are still forthcoming.

  • "Workfare" proposals have been dismissed by government in the past because of the costs involved in organising it properly. Whether community groups or businesses can be persuaded to take on a major share of these expenses is still yet to be proved.

    The sorts of costs community organisations can expect: expenses in finding placements for job seekers, monitoring these placements in order to avoid job displacement rates, matching and referring the job-seekers to the work or training opportunities, monitoring compliance as a result of the compulsory aspect of the scheme and administering work-test sanctions, processing claims for "actual and reasonable costs incurred" by the participants, providing the various work-related expenses, and compliance costs such as ACC and OSH, participating in appeals processes for any disputes, and evaluating the ongoing progress of the scheme.

  • Critics of the community wage concept point to one major flaw: it doesn't create any real jobs for the unemployed, and in fact may even threaten existing employment. Research done by the State Services Commission during the 1996 coalition talks estimated that the displacement rate under the community wage scheme to be some 26%. This means that for every four beneficiaries taken on to the scheme, one real worker would lose their job.

    Peter McCardle disputes this and says that measures will be in place to ensure that the community work positions will be for jobs that would not otherwise be done in the marketplace. He points to his experience at the Upper Hutt Employment Trust (where jobs are vetted by local contractors whose work may be affected) and the Community Taskforce programme (which was expanded in the last Budget) to show that the programme will not result in job losses.

    Our Media Watch however reports widespread concern on this issue. Several painters and builders interviewed say that it will be only a matter of time before the unemployed will be competing for their work -- for example, in school maintenance contracts.

  • Despite it being called a "wage", the new army of community workers will not be covered by the Employment Contracts Act. Nor will they be eligible for sick or holiday pay. But they will receive ACC cover for work-related accidents, paid out of the ACC non-earners' account.

    The workers will not be able to take personal grievance cases under the Employment Contracts Act because doing community work is not an employer-employee situation. A spokesperson for McCardle says that people who feel they have been harshly treated can talk to the new super-department. An appeals committee is apparently also being established.

  • Pat Hanley, president of the Federation of Voluntary Welfare Organisations, says that many of his 130 members will not support the community wage programme, saying they were very properly consulted about it, and want nothing to do with it. Hanley: "The voluntary organisations do not wish to be agents of the Crown. We already have many people who are unemployed working for usWe value their contribution, but we do not in particular accept a compulsory programme -- we regard that as ethically and morally unacceptable."

    Hanley says that the government has yet to prove to the voluntary agencies that their concerns are being listened to seriously: "They complain about the voluntary sector being negative, but how the hell are we supposed to be anything but negative when they do not engage this sector We're talking about a sector that's worth something in the order of $6 billion a year. We're not talking about a rinky-dinky bunch of cheery do-gooders"

  • Veteran employment activist Sue Bradford last week renewed her call to all community and church organisations, schools and unions to join a boycott of "workfare" programmes and the Community Taskforce. She says the community wage scheme is unworkable, even if the community sector was willing to support it, because resources for the necessary support and supervision were not being made available.

  • Bonnie Robinson, the executive officer of the Council of Christian Social Services, is concerned that "working age beneficiaries" will be pushed into work that is inappropriate to their other responsibilities, or into jobs that lead nowhere, and then be punished if they turn them down. The Council, which is made up of the six major Christian welfare agencies, says it might support the community wage scheme if it helped people into meaningful jobs, and met the NZCCSS minimum standards for employment programmes (see The Jobs Letter No.69, on our website).

  • Trade Union Federation acting secretary Michael Gilchrist warns that the scheme will have an unprecedented effect on wages, conditions, and the employment security of all workers. He predicts a huge displacement of real workers, driven out of genuine paid employment and on to the dole.

    Gilchrist: "The scheme will transform the unemployed into a very much larger group the working poor. If the scheme takes hold we will be confronting a Third World situation, where unemployment has ceased to be a meaningful category and replaced by chronic, widespread poverty"

  • CTU secretary Angela Foulkes says that the scheme violates the International Labour Convention, to which New Zealand is a signatory. She says the convention urges governments to "suppress the use of forced or compulsory labour in all its forms". Forced labour was defined as "all work or service which is extracted from a person under the menace of penalty and which the person has not offered himself voluntarily"

  • Steve Marshall, the chief executive officer of the Employers Federation says there is nothing wrong with the concept of compulsory community work, as long as it led to " full sustainable productive employment."

  • Another main criticism is that the compulsory aspect will be used by the new super-department to artificially reduce the official numbers on welfare support. Similar "workfare" programmes run in Britain have seen a significant reduction in the numbers on the official unemployment register after participants failed to turn up to interviews, or refused to take the community work or training that was offered to them.

  • ACT's Muriel Newman is critical of the community wage programme -- because, at only 20hrs a week in work, it doesn't mirror the demands of a real job.

    Newman: "The US Wisconsin experience is that when those on the dole realised they have to work 40hrs, a third of them cancelled their benefits. There were two reasons. The first was that once they had to work 40hrs, a significant number decided to get their own jobs, The second was that large numbers of beneficiaries were already working for cash in the black economy and were simply not available to participate in the work-for-the-dole scheme"

  • The New Zealand Herald last week contacted representatives of various local authorities in the upper North Island, to gauge their response to community wage programme. It reports "a cautious response", with local councils contacted "keeping an open mind' until they heard more details.

    The district council at Opotiki, where it is estimated that a third of the workforce is unemployed, says it has always steered clear of community work schemes. The chief executive, Peter Guerin says that there are significant costs involved in meeting the requirements of the ACC and the Occupational Safety and Health Acts to equip workers with expensive safety gear, as well as providing transport.

    The city manager for Manukau City Council, Colin Dale, can see no benefits to his council from this scheme. Manukau once had a thousand PEP workers on its books in the late 80s, but these days has no voluntary workers. At a time when the Council is contracting out services and shedding staff, Dale also doubts whether it can carry the overheads needed to take on community wage workers.

  • The Christchurch City Council, however, has been running an community work scheme for the unemployed since 1995. And after more than a thousand people have gone through the scheme, it has found permanent jobs for 63% them at the end of their six-month programme.

    The scheme's co-ordinator Brigid Lenihan believes the Christchurch initiative is a model for the sort of one-stop service the government is endeavoring to set up. The major difference with the Christchurch scheme is the level of co-operation and co-ordination of the local agencies involved, and the amount of money people get for being on the scheme is considerably more generous than what the government is proposing in its own community work programme.

    Under the Adult Community Employment (Ace) programme, people who have been on the dole for over six months can apply for placement in community or school-based schemes. Their dole is topped up to $266 a week (compared to the $147 for a single person's benefit).

    This money starts with Taskforce Green funding from NZES which boosts the standard benefit to $214 a week. The rest comes from a subsidy from the Christchurch City Council and the Trustbank Canterbury Community Trust, which has been putting $500,000 a year into the Ace programme. Brigit Lenihan says that the financial framework for Ace means that for every dollar the council contributes is matched by six dollars from other sources.

    While on the scheme, the Canterbury Development Corporation monitors the progress of participants and screens the organisations that receive free workers. And after the six months, the Canterbury Employers' Chamber of Commerce agrees to "market" prospective workers by sending out fliers around its private sector membership.

    Sources -- The Dominion 23 April 1998 "Ultimatum to jobless: no work, no money" and "No legal cover for dole workers" by Nick Venter, and "Agencies reject work scheme" by NZPA; New Zealand Herald 23 April 1998 "Job scheme net set to widen" by Patricia Herbert, "Little support for `workfare' plan by NZPA, Pilot project shows scheme can work for the good" by Rosaleen Macbrayne; The Daily News 23 April 1998 "Benefits to have strings attached" by Nick Venter; New Zealand Herald 24 April 1998 "Small firms fear jobs to go under dole move" by Bernard Orsman, "Christchurch has Ace card in work-for-dole schemes" by John Goulter, The Dominion 22 April 1998 "How work will replace dole" by Nick Venter, and 23 April 1998 "Redefining welfare at home and abroad" by Simon Kilroy; The Christchurch Press 23 April 1998 ""Displacement of jobs feared" by Kevein Taylor, 24 April 1998 "Peters hits back at critics of dole plan" and editorial "Working for Welfare";


    For leaving a permanent job voluntarily or being dismissed:
    A minimum of four weeks stand-down, maximum of three months, depending on your past work record.

    For refusing a suitable job offer:
    "First offence" one week's suspension,

    "Second offence" a stand-down of 1-3 months

    For refusing to accept community work or training :
    "First offence" _ the community wage is stopped, but resumed if you comply within seven days. If you do not, you go straight to a 1-3 months stand-down.

    "Second offence" _ the community wage is stopped for a week regardless of whether or not you comply within that time, followed by a stand-down of 1-3 months if you continue to refuse work or training.

    "Third offence" automatic stand-down of 1-3 months.

    For "unsatisfactory performance" in community work or training, or other work-test activities :
    A 40% reduction in your community wage.

    For households with dependent spouses and children :

    If the community wage-earner has had their "pay" withdrawn for various offences, then the households with dependents will continue to receive about half the normal community wage rate. This will be about $130 a week for an unemployed household, but even this will be paid in terms of a "special needs grant".

    For an amnesty from penalties :
    Previous offences will be "wiped from the books" after a year and a half of "good behaviour".


    Registered unemployed at January 1998
    187,582 people
    116,590 men and 70,990 women

    90,280 people registered for less than six months
    71,850 people registered for between six months and two years
    25,450 people registered for more than two years
    11,000 people registered for more than four years
    1,080 people registered for more than ten years

    25,625 people aged under 20 years
    68,030 people aged 20-30 years
    74,880 people aged 30-50 years
    17,761 people aged 50-60 years
    1,286 people aged over 60 years

    Unemployment Benefits
    for single person aged 25 and over : $147.34 per week
    for married couple with two or more children : $260.94 per week

    sources: NZ Employment Service, Income Support Service

    To the Top
    Top of Page
    This Letter's Main Page
    Stats | Subscribe | Index |
    The Jobs Letter Home Page | The Website Home Page
    The Jobs Research Trust -- a not-for-profit Charitable Trust
    constituted in 1994
    We publish The Jobs Letter