The temporary redundancy package

So National got in, and as a result it is their redundancy package that has passed into law (as opposed to the Labour one).

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?

  • The last National government set benefits to a level where they were extremely uncomfortable to live on. But they didn’t mind, because they didn’t foresee National party voters ever having to live on them.

    It seems to me that this redundancy package is a brilliant fix – it tops up the benefit to roughly the pre-Bolger government levels, but only for those educated and skilled enough to have had a long-term job to lose in the recession. Those who for whatever reason haven’t been able to get or keep a job in the good times get to stay on the poverty line.

    So now we have one dole for the underclass, and another for the normal, ‘mainstream’ New Zealanders.

  • Not happy with it aye – if benefits are truly too low we should increase them. I’m not too keen to place it down to certain political parties. For example, I could ask the question why Labour didn’t lift benefit levels to a “comfortable” level during their nine years in power?

  • Yep sure, It would be unfair of me to just blame National. I think it’s more a reflection of mainstream attitudes to a welfare dependent ‘other’, And these attitudes are what National and Labour must work with to get votes.

    I feel that benefits are unlikely to rise in real terms because it is always an election issue to attack the people on them. I can’t remember an election where National hasn’t promised to ‘get tough’ on beneficiaries – along with tax cuts it’s kind of a default policy.

    Because people on welfare make a up a small section of the vote, and one that is unlikely to turn up on voting day, Labour is hardly going to promise to ‘get soft’ in response (they leave that to the Greens).

    Beneficiaries are an easy scapegoat because unlike farmers, workers, businesses or almost any other group – beneficiaries don’t have an organised voice to tell their side. It is easy for middle class voters to get upset with people on welfare because they have little real contact with them and their problems. There’s an asymmetry of information you might say.

    The unemployment benefit was created so that people would have a safety net if they lost their jobs. I agree that if benefits are too low to live on, we should raise them, and by creating this package, the new government seems to be saying that benefits ARE too low to live on.

    But this policy says to me that the new government doesn’t mind leaving an underprivileged family on the current benefit, they just wouldn’t expect a middle class family to do the same.

  • Very true Tono,

    However, some would argue that the level of benefits is supposed to be uncomfortably low in order to prevent welfare dependence. During a recession there is genuine involuntary unemployment, which is why we want to treat it differently.

    Now, this isn’t how I feel – hence why I am against the policy. Furthermore, I agree that if the benefit is to low it should simply be higher, instead of having ad hoc adjustments like this policy.

    But it is important to recognise that the government’s point of view (and a point of view of much of society) stems from the belief that there is a “choice” to not work – and that this choice is something society “doesn’t want to reward”. These must be their beliefs even if they are not will to state it 😉

  • You have a point, but when you think about it, there is no perfect solution for the situation. In fact, no one was able to come up with a decent method for getting rid of this crisis. So, I think that we should go along with the flow and see where it takes us. I hope that the people who are in change know what their doing better than us.

  • “I hope that the people who are in change know what their doing better than us.”

    Maybe, or maybe not. I’m sure after the crisis lots of people will tell us what could have been done better 😛