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    Essential Information on an Essential Issue

    Letter No.116

    24 January, 2000

    Last Thursday, beneficiary advocacy groups had their first meeting with Social Services and Employment Minister Steve Maharey and staff from the Ministries of Social Policy and Winz. Represented at the meeting were the Auckland Combined Beneficiaries' Union, the Wellington People's Resource Centre, the Unite! union, the Downtown Community Ministry, the Auckland People's Centres, the Christchurch Beneficiaries Advocacy Service, and Te Huinga o Te Whanau advocacy service from Petone.

    According to Catriona Ross, of the Wellington People's Resource Centre, a variety of suggestions were put forward at the meeting. These included ending the Winz corporate culture, work-testing, the work-for-the dole scheme, the sanction scheme, as well as improving people's rights to benefit reviews and lifting supplementary assistance grants.

  • Steve Maharey says the meeting signals a change in attitude towards groups that are critical of government's social policy. He intends to hold similar meetings nationwide to tap the collective skills and expertise of advocacy groups in order to improve services.
    Source Newsroom, 21 January, 2000 "Government to harness benefit advocacy groups expertise _ a press release", and verbal report to The Jobs Letter from Robert Reid; The Daily News 22 January 2000 "A beneficiary by any other name" by NZPA

    The first cabinet meeting of the new government has brought changes to the minimum wage. From March, the adult minimum wage will rise from $7 to $7.55/hr, and the youth minimum wage rate increases from $4.20 to $4.55. This rise will affect 28,606 adults and about 1,500 young people.

    The Alliance did not succeed in its call to abandon youth rates but the government has promised to hold a review of the minimum wage. Youth Affairs and Associate Labour minister Laila Harré says the review will, among other things, look at dropping the age at which the adult minimum wage rates applies from 20 yrs to 18yrs. Harré: "There is a simple point of principle at stake with the youth minimum wage. No one should be paid less for doing exactly the same work as someone working alongside them doing exactly the same work."

  • The Manufacturers Association's CEO Simon Carlaw says his organisation is pleased that youth rates have been retained but says that lifting the minimum wage may deter job creation.

    Council of Trade Union president Ross Wilson commends the "modest but very welcome increase." He counters arguments about the impact of the minimum wage rise on jobs by quoting 1999 OECD report which shows that a rise has no significant impact on overall wage levels. A study of French youth rates showed that, over 20 years, youth unemployment rose 18.2% but only 0.3% could be attributed to the French minimum labour standards.

    Source The New Zealand Herald, 21 December 1999, "$22 rise betters minimum wage pledge" by Vernon Small, The Dominion, 23 December 1999, Praise and condemnation for rise in minimum wage by Roeland van der Bergh

    Cabinet has also changed the interest schedule for student loans. Full time students, and part-time students who earn less than $14,768/yr, will now be able to take out interest-free loans. Interest payments will be waived altogether until a student earns $25,000/yr. Full commercial rates will apply once the student is earning $30,000.

    Minister of Tertiary Education Steve Maharey says he has called for a report on the student loan scheme that will address issues like loan repayments by ex-students and students being able to borrow to pay for compulsory student union membership fees.

    Source The Dominion, 23 D December 1999 Students and low paid big winners" by Andrew Laxon, The Daily News, 21 December 1999, Christmas bonus for low-paid workers" by Victoria Main

  • Green co-leader Rod Donald has called for a guarantee from Maharey that Winz will not bungle the handling of student finances this year. Student leaders have been critical of Winz for delays with summer allowances and problems getting through to the special 0800 number for student services. But Maharey says senior management at Winz have assured him that the situation is under control and gives his personal assurance. Maharey: "I will step in to fix any problems which emerge, but I'm happy to say there are none at present."
    The Daily News, 13 January, 2000 "Winz on top of processing student loans, says Maharey"; The New Zealand Herald, 13 January, 2000, "Fears of debacle on student loans"; The Dominion, 12 January, 2000 "Green call for guarantee on Winz unheeded"

    "One of the things I am impressed with is that this is a person who is open to the new government, who is keen to be a servant of the people of this country and who understands the climate has changed. I'm looking at a good public servant here."
    -- Steve Maharey after his first meeting with Winz CEO Christine Rankin

    "I know you would like to think it was a truly horrible meeting, but in fact it wasn't The minister's been very clear about his expectations, and I'm going to be working very hard to ensure that every one of those is met to the letter."
    -- Christine Rankin, talking to media after her first meeting with Steve Maharey

    "This minister campaigned hard against Winz and its chief executive. Suddenly, when he can not only talk tough but act tough, he goes all weak in the knees."
    -- Belinda Vernon, National's social services spokesperson commenting on Steve Maharey

    The Social Services Select Committee includes Taito Philip Field (Labour, chair), Mahara Okeroa (Labour, deputy chair), Jill Pettis (Labour), Helen Duncan (Labour), Sue Bradford (Green), Liz Gordon (Alliance), Muriel Newman (ACT), Katherine Rich (National), Bob Simcock (National), Belinda Vernon (National).

    There is no employment select committee.

    Source The Dominion, 27, December 1999, Select committees

    The Winz Wairakei aircraft scandal continues as the employment court says the sacked managerwas "wronged". Newspaper reports last week quoted employment court Judge Tom Goddard in his ruling that he accepted the argument that the manager Christine Rankin blamed for the controversial chartered flights was "not a wrongdoer but a person who had been wronged."

    Minister Steve Maharey has confirmed that an out-of-court settlement has been reached with the manager, who was suing the department for unjustified dismissal. The settlement, reached just before the election, was confidential. But the New Zealand Herald quotes an unconfirmed source putting the settlement at more than $100,000, and included an apology from Christine Rankin.

    The Crown Law Office says that it would have had to have been involved if the deal was over Christine Rankin's $50,000 spending limit. However, in another case settled just four days before the general election, a senior Winz manager received a golden handshake worth over $110,000, of which $50,000 was paid in cash and the balance paid as `study leave' after the person had effectively finished working.

  • Meanwhile, following the Employment Court ruling, the Act party has called on Steve Maharey to "back or sack" Rankin. Act social welfare spokeswoman Muriel Newman says that Maharey has to justify his confidence in the Winz Boss.

    Rod Donald agrees. He says that the secret settlement shows that Ms Rankin is out of her depth. Donald: "Either she was wrong to suspend the manager, or handled the suspension badly, or both. In either case, Ms Rankin had made a serious blunder." Donald also says that Maharey should revisit his public endorsement of Rankin after his first meeting with her: "If she was as good as he claims, she would have briefed him about this at their first meeting. That she didn't is outrageous"

  • Winz will come under fresh scrutiny under the government's planned inquiry into management practices at the department. State Services Minister Trevor Mallard is soon to announce the terms of reference for that inquiry.
    Source New Zealand Herald, 14 January, 2000, "Secrecy on cash payout at Winz"; Weekend Herald 15-16 January, 2000, "Rankin has had her time say Greens" by Vernon Small; The Daily News 24 January 2000 "Act wants Maharey to move on Rankin

    People borrowing money from Winz are being pushed further into poverty, according to a new report by the Wellington Downtown Community Ministry. The report, entitled "Too Poor To Help", analyses the effects of the social policy changes, including the benefits cuts, of the 1990s. The report challenges Winz to reconsider its organisational culture and reflect the `true purpose of social security" and it recommends that core benefit levels be increased to reflect the cost of living.

  • Downtown Ministry is highly critical of Winz' extended use of loans rather than grants. It says that Winz has become "a major moneylender to the poor", a situation which is causing people to become trapped in poverty.

    Winz provides "recoverable" grants to people on low incomes who find themselves with expenses they couldn't have budgeted for. The report says that by providing these loans, rather than non-repayable grants, the people who are most in need eventually become too indebted to Winz to qualify for further loans. Downtown Ministry: "In a perverse but all too real way, the person becomes too poor to help."

    Source The New Zealand Herald, 23 December 1999, "Winz condemned for driving poor further into debt", NZPA

    NZ'ers going to Australia will no longer have preferential treatment at the dole office. NZ'ers will have to be resident there for two years before they are eligible for an unemployment benefit or for most other social welfare payments.

    The Australians have co-ordinated the change with NZ officials who will have the same rules for new Australians coming here. The stand-down does not apply to families with dependent children or people on government superannuation or disabilities pensions. Over 35,000 NZ'ers moved to Australia last year, while about 12,000 Australians moved here.

    Source _ The New Zealand Herald, 24 December 1999, "Dole wait gets longer for those moving to Australia" by Greg Ansley.

    Getting more jobs in the fishing industry for Maori was one of the objectives of the Waitangi Fisheries Commission and the commissioner reports it has been successful. There are now 63 iwi-operated fisheries businesses in NZ and while Maori make up 8.4% of the total workforce, 22% of the fishing industry workforce identify as Maori.
    Source The Dominion, 4 January 2000, "Iwi ownership needed to hold fishing jobs: Hapi"

    Owning a house is becoming increasingly unlikely for many NZ'ers on low incomes according to a recent study that is part of Auckland's Regional Growth Strategy. The report, entitled "Affordable Housing in the Auckland Region", says the problem is nationwide but is especially acute in Auckland, where a third of NZ'ers live.

    Houses at the bottom end of the Auckland market now average $212,000. For a low-income family, saving 20% for a deposit means saving 2.5 times their total annual income. Even a 5% deposit on a $180,000 house leaves the borrower having to make repayments of $1,283/month.

    Chris Kingham, a business manager for Apex Financial Services, points out that this is over $15,000/yr which may work for young professionals, but is outside the range of low income earners. He warns that home ownership for low-income people will not be an option in the future. Kingham: "If you're earning $21,000 or less, I would categorically say you're not going to be buying a house in Auckland."

    Source The New Zealand Herald, 29 December, 1999, "Home dream out of reach for poor", by Scott Cara

    The traditional belief among economic policy makers has been that if unemployment falls below 5% - 6%, then inflation will rise. But, in the United States, unemployment has been below 5% for three years and wages and prices have not escalated. Our Media Watch reports that many policy-makers are now beginning to doubt the `fact' that employment levels and inflation are so closely related ... although few commentators seem to be able to confirm their assertions.

  • The Economist points out that many of the `new' people joining the US workforce are often desperate for work and are at the low end of the pay scale. These include the rising number of women working to bring in a second income to support their family, solo parents forced off welfare roles, and the millions of illegal foreign workers.

    US Federal Reserve Bank chair Alan Greenspan points to job insecurity as a contributing factor to wage stability. Greenspan is referring to workforce surveys that say that Americans are more insecure about their jobs now than they have been in over a decade. Greenspan's view is that when workers feel insecure in their jobs, they don't rock the boat by asking for more money. Their willingness to accept lower wages helps keep inflation in check.

  • The Economist also speculates that the strong US dollar is part of the answer to low inflation. The high dollar has held down the cost of imported consumer goods, which takes the upward pressure off wages because workers can afford their standard of living with the pay packet they are now getting.

    Professors Lawrence Katz from Harvard and Alan Krueger of Princeton say that unemployment is not nearly as low in the US as the official figures suggest. They point out that structural unemployment figures have been dislocated by the fact that 2% of American men are in prison and don't appear in the unemployment statistics. Katz and Krueger say that if these people weren't in prison, many of them would be unemployed.

    Katz and Krueger also surmise that wage inflation is being kept in check by the fact that 10% of all new jobs in the US are filled through temp agencies with millions of just-in-time workers waiting in a queue for work.

    Source The New Zealand Herald 18 January, 2000, "America's amazing jobs puzzle"

    Hong Kong has gone through an immense economic upheaval since the 1997 Asian economic crash that has left 6% of the Hong Kong workforce unemployed. The once thriving manufacturing sector that peaked at 900,000 workers has now been reduced to 250,000 workers as the jobs have drained away to China where labour is cheaper.

    There are few prospects for these redundant workers in the new Hong Kong economy. Yet ironically, there are thousands of job vacancies on offer but these new jobs are for software engineers, information technology specialist and web designers, and are unlikely to be filled by former machinists. The Hong Kong economy looks to be entering a low growth period due to this lack of skilled labour, the continued high unemployment, and the flow-on result of reduced consumer spending.

    Source The New Zealand Herald, 18 January, 2000, "New jobless hamper Hong Kong's resurgence" _ Bloomberg


    With the advent of the new millennium, many social justice groups have been rallying around the call for a "jubilee year", in which debts to the poor would be forgiven. Five years ago, aid agencies and development groups found it very difficult to get politicians interested in the effects of third world debt. But all this changed with the formation of Jubilee 2000, which has forged an international grassroots movement to change the thinking on complex issues around debt.

    Drawing on Old Testament ideas (Leviticus 25), Jubilee 2000 called for a once-and-for-all loan write-off to the world's poorest countries, to coincide with the new millennium. The proposal caught the public imagination and turned the debt debate from tedious technical discussions into a moral argument about justice between rich and poor.

    Last September, Pope John Paul II joined many other anti-debt campaigners to appeal to world leaders to take urgent and decisive action on the debt crisis. The Pope: "Debt relief is urgent and a precondition for the poorest countries to make progress in their fight against poverty. This is something that is now widely recognised, and credit is due to all those who have contributed to this change in direction"

  • Last June, the Jubilee 2000 process started to bear fruit with the G7 group of leading industrial countries promising to reduce the debt of the world's most severely affected states by $100 billion. And just last month, Britain announced it will join the Jubilee efforts by writing off all the debts owed to it by the 41 countries which the World Bank says are most in need of debt relief.

  • The Aotearoa Jubilee 2000 _ Debt Action Network is active here in NZ, and has put much effort into lobbying the NZ government to play its part in "positive debt cancellation". The lobby group has met with the Ministry of Foreign Affairs and Trade, and produced a briefing paper, for the previous Treasurer Bill English, on the steps NZ could take to support the international campaign. The group intends to follow up these initiatives with the new government over the next month.

    Jubilee 2000 co-ordinator Robert Reid: "New Zealand has an opportunity to take a leading role on the issue of third world debt cancellation, as it has done on international issues such as nuclear weapons, land mines or global warming. The moral argument for debt cancellation has been won with the richest and most powerful countries in the world. The problem now is to ensure that the practical application of this demand provides real relief to the people and countries of the third world "

  • Not all commentators agree with the long-term effectiveness of these debt relief measures. John Pilger, writing in the New Statesman, argues that the "cancel third world debt" campaign has been a propaganda triumph with too many strings attached. He says that the poorest countries, as a condition of their relief package, will now be obliged to accept both the IMF and World Bank guidance on "how macro-economic, structural reform and anti-poverty programmes can together bring less poverty and more growth".

    Pilger: "Not a single example exists where macro-economic, structural reform has alleviated mass poverty. Throughout the developing world, these programmes imposed by the IMF and the World Bank have destroyed jobs and public services, while shaping local economies to the demands of international capital"

  • Meanwhile, the grassroots Jubilee 2000 campaign has had some very welcome outcomes here at the local level. In Wellington's Island Bay, the Catholic Sisters of Compassion have marked the millennium by writing off a $100,000 debt owed to them by neighbouring Tapu Te Ranga Marae. Their decision to write off the remainder of the mortgage on land which they sold to the marae 10 years ago will enable the marae to go ahead with seeking planning consent for a village and urupa (cemetery) on the site.

    Marae elder Bruce Stewart told the City Voice that he was "speechless" when the sisters told him of their decision. Stewart: "Nobody comes up and forgives someone debts. People, when you owe them money, they inch it out to the lastThere is all the story about the Church taking a lot of the Maori land. This was a whole different thing them giving the land back to the Maori."

  • Jubilee 2000 resources.
    On the internet:

    Videos and other educational resources are available from Caritas, P.O.Box 12-193, Wellington, or the Christian World Service at P.O.Box 22-652, Christchurch.

    Aotearoa Jubilee 2000 _ Debt Action Network can be contacted at P.O.Box 50-216, Porirua phone 04-237-9147 email

    Sources City Voice, 22 December, 1999 "Sisters forgive marae's debt"; Guardian Weekly 6-12 January, 2000, "Spark that lit global revolt against poverty" by Charlotte Denny and Larry Elliott ; New Statesman, 10 January, 2000, "Don't be fooled by debt relief; it's just another way of reshaping the third world to the demands of capital" by John Pilger; The Common Good (Christmas 1999) "Jubilee 2000 _ Freedom from Debt" by Robert Reid.

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