Commission calls for improved income security

Commission calls for improved income security | Insurance Business New Zealand

Commission calls for improved income security

The Productivity Commission is calling for improved income security to help people affected by labour-market change.

Its second draft report, “Employment, Labour Markets, and Income,” noted that the country is stuck with low wages due to low productivity and low technology adoption – so the challenge is to encourage labour market dynamism and the flexibility of the economy to create new jobs while also providing security for workers when jobs are lost.

“Countries that have adopted policies that promote income security over job security – known as ‘flexicurity’ – tend to be more open to technology adoption on both sides of the employment relationship,” said Commissioner Andrew Sweet. “There is a case to improve income security for displaced workers with measures that cushion the financial shock of job loss.”

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The commission has identified solutions to improve income security in New Zealand, including mandating unemployment insurance.

“For example, all OECD countries except for Australia and New Zealand have a mandated unemployment insurance scheme of some form. Not having insurance, combined with strict means-testing of benefits, means that many New Zealanders face a significant and immediate drop in income on job loss, and can struggle to meet their financial commitments, such as a mortgage,” Sweet explained.

Other solutions included introducing portable individual redundancy accounts and making changes to benefits and tax credits.

The report is being issued for public review, with submissions welcome until February 07, 2020. Three further draft reports will be released in December, while a final report will be presented to the government in March 2020.