I am still not happy that we are running a redundancy package now and not in normal economic times. Why are people that are made redundant now any more deserving of an additional government handout than people who are made redundant in normal economic times?
Sure we can state that it is “harder” for people to get work during a recession, so it is more likely that the redundant person is genuinely unemployed rather than “lazy” – but I just don’t buy that.
I do not think this policy is solving any market failure, and as a piece of fairness legislation I am not sure if it is all that fair. Luckily, its not particularly expensive anyway, so there is little chance of a massive government failure, unless … we don’t have mass unemployment, only a structural change in where labour is most highly valued. In this case, the redundancy payment will prevent the transition between industries, and lead to a longer, more painful, adjustment process for the New Zealand economy.
So do we think that the construction industry needs to be smaller while there are other industries (say exporters) who are now desperate for labour? Or will the global recession cause genuine involuntary unemployment?