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    Essential Information on an Essential Issue

    Letter No.138

    29 January, 2001

    Robert Reich on the future of success

    Neil Mackay, former managing director of Budget Rent-a-Car, has been appointed chief executive of Industry New Zealand. He will oversee Jim Anderton's "jobs machine" programmes allocating $330m to regional business initiatives over the next three years.

    Mackay has had a career in both the private and public sectors. Before Budget Rent-a-Car, he worked at Internal Affairs as general manager of business services and director of the heritage and identity group. Before that, he was chief accountant at National Mutual (now Axa) and he has also worked in companies in Hong Kong, Britain and Australia.

    Source — New Zealand Herald 22 January 2001 "Industry NZ Head relishes job challenge" by Daniel Riordan

    With the "Closing the Gaps" initiatives now being re-defined as referring to all New Zealanders, a group of academics is urging the government to set its sights on ending child poverty. According to the Child Poverty Action Group, half of all Pacific Island children, a third of Maori and one in 10 Pakeha children "often or sometimes" run out of food because of a lack of money.

    The Action Group has just released a report, entitled "Our Children: The Priority for Policy". It believes that children are under-represented in NZ official data and formal statistics, despite the fact that around 25% of New Zealanders are aged under 15. The report finds "… a disturbing picture of poverty among children as a group, placing New Zealand among some of the least successful countries in the international league of child poverty."

  • Child Poverty Action wants to see
    — a more progressive tax structure similar to Australia and most Nordic countries (they recommend raising the ceiling of the 15% tax rate from $9500 a year to $12,000)
    — an increase in the threshold of $80 a week which can be earned by beneficiaries to $130
    — the Inland Revenue Department obligated to ensure families access their tax credits.
    — free medical and dental care provided for all children up to the age of 18
    — a Winz amnesty on beneficiary debt
    — more generous provision for before and after-school care.

  • The Action Group has also called on government to immediately establish an official measure of poverty. Claire Dale, one of the authors of the 49-page report, says that there has never been an agreed poverty line in this country, "... so trying to discuss this gets very tangled and difficult. We need to make a decision about how we are going to measure poverty so we can track it over time."
    Source — Stuff Auckland News 22 January 2001 "Ease child poverty with tax changes _ academics"; Sunday Star Times 21 January 2001 "Change taxes to help children _ report" by Fleur Revell; The Dominion 22 January 2001 "Bleak report on child poverty"; New Zealand Herald 22 January 2001 "Changes to tax system urged to fight child poverty" by Gregg Wycherley;

    The de-facto measure of poverty in New Zealand can be found in the work of the New Zealand Poverty Measurement Project. In November last year, the Measurement Project released its latest figures showing that a third of all children and a fifth of all New Zealanders are living in poverty.

    The figures, compiled for the Project by Statistics New Zealand, showed that 20% of all New Zealanders lived below the poverty line in 1998, the latest year from which figures were available. Of that 20%, 54% were working age adults, 44% children, and 11% elderly.

    A further breakdown of the figures shows that 38% of Pacific Islanders, 28% of Maori and 12% of Pakeha/Europeans were living in poverty. And a disturbing trend is that about 42% of "other" people — mostly immigrants and refugees — were also impoverished.

  • The Measurement Project research sets the poverty line at 60% of the median equivalent household disposable income. Statistics were calculated both before and after housing costs had been paid, with pre-housing cost figures showing only 15% of New Zealanders living in poverty.

    In a comparison of income levels, statistics gathered from 1984 to 1998 show that the after tax income of the wealthiest 10% of households increased by 43% over that period. The bottom 50% of households dropped by 14%.

  • Social policy researcher Charles Waldegrave has also released the results of a more general survey of low household incomes. Interestingly, the survey dispels the common myth that poor people waste their money on drink and gambling. According to the figures, only 5% drank more than a glass of alcohol a day in the week they were surveyed, while less than 12% had indulged in any form of gambling other than buying a Lotto ticket.

    Other key household results show that
    — 44% paid 40% or more of their after tax income on rent or a mortgage;
    — 40% of households were overcrowded (Pacific Island 60%, Maori 51%, Pakeha 22%);
    — 48% had been unable to provide a meal for their family at least once in the previous three months;
    — 56% had family members who didn't visit a doctor when necessary in the previous year;
    — 47% had at least one member with a chronic illness;
    — 64% were in debt; and
    — households coped through support from family (42%), growing their own vegetables (33%), using community support such as foodbanks (24%), or doing odd cash jobs (22%).

  • Charles Waldegrave is hopeful that recent measures from the Labour/Alliance government will have a significant impact on the poor. His call: "In two years' time when we measure things again you can fully expect to see a substantial decline in the numbers living in poverty..."

    Waldegrave predicts that the introduction of income-related state housing rents last December will be a key component: "Housing is the biggest cause of poverty. Statistics like this have been important in the advice given to government to go for housing in their policy restructuring. It's a costly exercise — they're building up housing stock and making it more affordable — but it will put $20 to $30 extra in the pockets of families per week. "

    Waldegrave also points to the government's restoration of superannuation levels to 65% of the average income in April last year. When the National Government announced superannuation cuts to 60%, researchers calculated the move would put 250,000 elderly into poverty. Waldegrave: "This government has revised that move and, again, it's a very costly policy, but it has prevented 250,000 elderly people going below the poverty line."

    Source — NZPA 18 November 2000 "Third of NZ children in poverty, statistics show""

    Social Services Minister Steve Maharey comments that the child poverty report makes a number suggestions that are currently being considered by the Government. He says the government is already looking into benefit reform and he supports raising the threshold of what beneficiaries can earn before money was deducted.

    Maharey also says that the government is looking at establishing an official measure of poverty. In delivering his inaugural "State of the Nation" address to the Takaro Rotary Club in Palmerston North, Maharey reported that the government is working on a series of indicators which will allow it to chart the social wellbeing of the nation alongside the development of the economy. Maharey: "Still too many people lack basic literacy skills, too many remain in poverty and too many people live isolated lives away from their communities. This must change and we must have proper tools to measure our progress ..."

    Sources — Newsroom 22 January 2001 "Child poverty report" by Matt Rilkoff; "The state we're in: Economic growth and social equity" inaugural State of the Nation address to the Takaro Rotary Club, RSA, Palmerston North 23 January 2001

    Working hours. The average number of hours worked each week by New Zealand employees in 1999 was 38.72 hours, a figure virtually unchanged in the past decade. But if you distinguish between full-time and part-time workers, the average number of hours worked by full-time workers is longer: 45.06 hours.

    The construction sector had the longest hours (44.49 hours), and men worked longer hours in paid work than women — 40.43 hours, and 36.74, respectively. Aucklanders worked longer (39.02 hours) than Wellingtonians (38.05 hours).

  • Council of Trade Unions president, Ross Wilson, agrees that a "rational approach" to redistributing working hours is needed. While he describes the French approach in bringing in a 35-hr working week (see the last issue of The Jobs Letter) as "admirable in principle", he told The Dominion that he is not sure whether it would suit the New Zealand context.

    However, Employers Federation chief executive, Anne Knowles, believes that following France's example would have "a tremendously detrimental effect", and would impose significant costs on NZ businesses. Knowles: "The best way to boost employment is to get the economy performing better, not limiting your view to "there is X number of jobs". Wage costs in France are estimated to have increased more than 11% — a cost that employers in the small New Zealand economy would find impossible to absorb or pass on.

    Knowles suspects the fall in unemployment in France has more to do with an improving world economy than any reduction in working hours: "Probably the biggest increase in employment from reducing hours has come from the increased bureaucracy needed to police it."

    35bromhead.gif - 37209 Bytes

  • Employment Minister Steve Maharey says that proposals for shorter working hours will only succeed in New Zealand if productivity increases at the same time. His view is that "working smarter" and exploiting new technology will have to go hand-in-hand with proposals for shorter hours. Without a productivity guarantee, he is reluctant to see New Zealand follow the French example.

    Maharey agrees that there are specific groups of workers who are working "extraordinarily" long hours, while others have too little or no work ... but he sees the problem is more that work is divided unevenly. Maharey: " We have a work-rich/work-poor divide — but I don't think it as simple as redistributing it by regulating work hours. Often people are shut out of work because they lack skills — which regulating hours would not fix."

    Maharey reports that the "Futurework" project being presently undertaken by the Labour Department is looking at countries and companies (such as Volkswagen) that have shortened working weeks. The project is also looking at trends such as teleworking and the development of family-friendly work-places.

  • Economic Development Minister Jim Anderton believes it is simplistic to say that cutting working hours can also cut unemployment. Anderton: "The challenge for us is to create jobs. Last year we got below 6% unemployment for the first time since 1988 — and that was done by creating more jobs. You can't create more jobs artificially."

    Anderton told The Dominion that, as a businessman, he saw evidence that productivity could actually be boosted by reducing working hours. His business used to extend long weekends three days to four: "Theoretically the employees worked five less days in a year, but production did not decrease. It showed us people can do in four days what they would take five to do in other circumstances..."

    Alliance policy is to extend the existing three weeks' minimum paid holiday to four weeks — in effect, compelling people to take more time off.

    Source — The Dominion 17 January 2001 "Why short week is a tall order" by Helen Bain

    The unemployed in Australia have been put on notice to expect to do more for their welfare payments. The incoming Australian Employment Minister, Tony Abbott, is keen to see them involved in structured activities for two days a week, to prevent them from becoming "work wary". In an interview with the Sydney Morning Herald, Abbott reiterates his often-expounded belief that people who are unemployed need to be treated with a stick rather than a carrot, and that government intervention is needed to ensure that they use their time appropriately. 15poabbott.jpg - 5173 Bytes

    Mr Abbott , who will be sworn in at the end of the month, says he would not tolerate avoidance by the unemployed of what he describes as their "mutual obligations". Abbott: ""The idea of any excuse will do, I reject that. You have to be firm but fair."

    Abbott comes into the job as Australian employment growth is slowing, the existing participation in work-for-the-dole is relatively low, and further changes to the welfare system are looming.

    Under the new welfare guidelines announced late last year, people who have been unemployed for more than six months must do some activity to qualify for full payments, with those under 40 eligible for work-for-the-dole. Activities can range from joining the Army Reserve to training and literacy and numeracy programs.

  • The Australian Council for Social Services (ACOSS) condemns Abbott's plans as illogical and wasteful. ACOSS Deputy President Eleri Morgan-Thomas says a work-for-the-dole scheme is not designed to get people into jobs, and is a political gimmick. She says the government should be giving more money to existing programmes, to provide the unemployed with education, training and job experience that is aimed at individual needs and the local job market.

  • Acting Australian Opposition party leader Simon Crean also attacks Abbott's plans, calling it harsh and "blaming the victim". Crean has called for the major political parties to work together to help lower Australia's unemployment levels, instead of blaming the unemployed for their plight. Crean: "What's really needed to help the unemployed is to widen the gap between welfare and work and also encourage people to actually train while they are undertaking the work experience. But the government has cut the training programs..."
    Sources — Sydney Morning Herald 15 January 2001 "Abbott to take big stick to `work wary'" by Tom Allard and Andrew Clennell; ABC News Online 15 January 2001 "Crean calls for co-operation in tackling unemployment"

    Australia's chief statistician, Dennis Trewin, believes the official measure of employment does not reflect the true jobless rate and he is pushing for his international colleagues to impose a more realistic measure. He says this is needed because the current definition set by the Geneva based International Labour Organisation (ILO) is flawed. Under this definition — used by Australia, New Zealand and most other developed countries — people only have to be in paid work for one hour a week to be classified as "employed".

    Trewin argues that changing the definition of "employed" from one hour of paid work to 10 hours a week would be a better measure. He is aware of the political implications of the change: under such a new definition the unemployment rate in Australia would increase from 6.6 to 9 per cent. Trewin cautions that the international community would have to agree to any change before Australia adopted it … and he expects that the ILO may agree to the new measure within five years.

  • The latest Bureau of Statistics figures show that 212,100 Australians were counted as having a job even though they worked for less than 10 hours and many of these people received unemployment benefits. Under a new "definition" these people would be counted as unemployed, increasing the number searching for work in Australia from the present unemployment estimate of about 640,000 to almost 850,000.
    Source — The Melbourne Age 22 January 2001 "Jobless yardstick wrong: statistician" by Josh Gordon

    Britain. A National Centre for Social Research study, commissioned by the British Government, has delivered an embarrassing verdict on New Labour's £5 billion "New Deal" programme. The study finds that as many as 80% of the jobs filled for six months by the long-term unemployed were likely to have been created anyway.

    The study surveyed 3,209 organisations that hired the long-term young and adult unemployed and found that as many as one in three New Deal recruits were not retained by employers at the end of their six-month period. Almost half the young people participating in the programme were no longer employed by the company within nine months of starting. 72% of employers surveyed reported that their involvement in the programme made no direct impact on their activity and 52% admitted that their main motive in agreeing to participate in the programme was to reduce labour costs. The average gross starting hourly wage paid to young people under the scheme was £3.50 per hour, which is 20p less than the national minimum wage.

    Source — Financial Times 10 November 2000

    Also in Britain, the New Statesman reports that this year, for the first time, more UK women than men got first-class degrees. It notes that female educational achievements are going from strength to strength, in a world where knowledge analysis and interpretation are crucial for economic success.

    Writer Geraldine Bedell speculates that one reason for the success in first-class degrees may be that students are now given greater credit for the year's coursework as a part of their examinations. Bedell: "In the past men have been able to outflank us with the occasional bold flourish [at exam times] … it has been possible for them to survive on 98% laziness and 2% chutzpah …"

    Source — New Statesman 22 January 2001 "When women rule the world" by Geraldine Bedell

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