|No.172||13 September 2002||Essential Information on an Essential Issue|
of key events over the last few weeks.
STEVE MAHAREY — THE NEXT THREE YEARS
BRIEFING PAPERS FOR THE GOVERNMENT
OVERHAULING THE WELFARE SYSTEM
SKILLS SHORTAGES RESTRAINING THE ECONOMY
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Index to Features
22 August 2002
Over the past 27 months, the US stock markets have lost about $US5.5 trillion, nearly three times the annual expense budget of the US government, according to The Christian Science Monitor.
Treasury Secretary Alan Bollard is appointed as the new Governor of the Reserve Bank of NZ. The government says it will negotiate a new inflation policy agreement with the bank that will probably be more in line with the Australian central bank, which has a 2% - 3% inflation rate target.
Retiring director-general of the World Trade Organisation Mike Moore says that trade restrictions by rich countries, especially on agricultural products, are holding poor countries in poverty. Moore says that having exploited developing countries for generations, rich countries now keep the products of developing countries out of their markets, betraying the principles of free trade.
23 August 2002
NZ Dairy Foods says job losses are inevitable as it merges its food and beverage divisions.
25 August 2002
Community Trusts next year will be reducing the amount of money they allocate to sports groups, charitable trusts, the arts, and schools. The Trusts have seen their foreign invested asset bases erode over the past year due to falls in international stock markets.
Minister of Finance Michael Cullen is dismissive of lowering the corporate tax rate as a driver of domestic growth. While he agrees that the measure would increase company profits, he points out that most NZ companies withdraw their profits rather than reinvesting them in their businesses.
26 August 2002
The UN organised World Summit on Sustainable Development, also known as the East Summit, begins in Johannesburg. It is attended by over 70 heads of state and representatives of 182 nations as well as corporations and non-governmental organisations. South African president Thabo Mbeki calls for an end to "global apartheid" which he characterised as islands of wealth surrounded by a sea of poverty.
28 August 2002
Treasury Briefing Papers say the government should focus on increasing business productivity by investing in research infrastructure and improving connections to overseas markets. The papers say there is little scope for change in monetary or fiscal policy, nor is there room for significant new spending or tax cuts in the next three years. The papers say that for NZ to achieve 4% growth, worker productivity would have to increase 2%. However, over the last seven-year cycle, worker productivity averaged just 0.8% annual growth.
Developing nations at the Earth Summit call on rich nations to scrap farm subsidies and eliminate tariffs that exacerbate hunger and hamper trade from Africa and Asia. A World Bank official notes that the average cow in the US and Europe is supported by three times the level of money as a poor person in Africa.
29 August 2002
An initial sample of the 15,600 cases in which Winz used the wrong criteria to determine eligibility for a benefit found that 7% of them need further investigation. The Dominion Post estimates that at this rate the government may have to reimburse up to $25.2 million to people who were wrongly denied a benefit between November 1996 and December 2000.
A National Bank survey finds that business confidence has fallen for the fifth consecutive month. 31% of business managers expect the general business climate to deteriorate next year.
30 August 2002
Advocacy groups criticise Winz for asking the 15,600 people who had their benefits cut to make a claim by the 15th of December. Tina McIvor of the Wellington People's Centre says it took the government six years to acknowledge their failure but is only giving people four months to respond. tv
The sacking of 381 Carter Holt Harvey maintenance workers at the Kinleith pulp and paper mill is on hold after an Employment Court judge tells the company it had to seriously consider alternative proposals by employees and their unions. The judge ruled the company had not consulted in good faith as it put into action plans to restructure the maintenance aspect of the mill.
In Hong Kong, where the unemployment rate is 7.8%, a new TV game show "Win A Job" is being screened. Contestants compete with on another to "win" a job. A similar programme is screening in Argentina called "Human Resources".
1 September 2002
At the Earth Summit a peaceful demonstration of about 10,000 people march toward the venue singing anti-apartheid songs and carrying banner criticising capitalism, farm subsidies and GM foods. NZ PM Helen Clark arrives and will attend the conference for three days.
2 September 2002
35 jobs are to be created at a new sawmill in the Coromandel at the partly Malaysian-owned Blue Mountain Timber company.
3 September 2002
The new Associate Minister of Energy Harry Duynhoven says the $37 million investment in the GRD Macraes' gold mine on the West Coast, creating 80 direct jobs and 120 indirect jobs, was "good news in anybody's language". The mine has a seven to nine year life span.
The NZ Minerals Industry Association calls for improved mining access to private land and to low-value conservation land. An NZ Institute of Economic Research report says that increasing the amount of land in NZ used for mining by seven-fold could create 22,000 jobs and contribute as much as 2% to GDP, primarily to the mining industry.
The Earth Summit has reached agreements and set targets on all issues except boosting renewable energy sources. Oil exporting countries and the US and Japan insist on including the promotion of fossil fuels and nuclear power in the final document. The World Wildlife Federation, Oxfam and Greenpeace are appalled and issue a joint statement: "The Johannesburg World Summit will go down in history as a missed opportunity to deliver energy to the 2 billion people with no access to energy, and as a failure to kick-start the renewable energy revolution that is require to protect the climate."
4 September 2002
The US unemployment rate drops to 5.7%.
US Secretary of State Colin Powell is jeered at the Earth Summit as he claims the Kyoto emission restrictions were too costly for the US to implement. Powell also criticises Zambia for not accepting GM grain to ease its famine.
5 September 2002
The Social Security (Working Towards Employment) Amendment Bill is the first piece of legislation presented by the new government. The Bill eliminates work-testing of people on the Domestic Purposes Benefit in favour of a case-management system. United Future says it will support the bill although leader Peter Dunne opposed it when it was introduced last year.
ACT Social Welfare spokesperson Muriel Newman says the Working Towards Employment Bill is a flawed piece of anti-family legislation that will see further disintegration of the family unit. National deputy leader Roger Sowry says legislating against work-testing deprives young parents of the aspiration and opportunity to work and educate themselves so that they and their children can have a better shot at success.
The Earth Summit ends.
7 September 2002
Fonterra, NZ's largest company is accused of draining South Taranaki of its trades people. Communities are facing shortages of trades people and locals put it down to Fonterra offering starting pay packages of $45,000-$50,000 luring people away from their trades to become plant operators. Local businessman Andrew Lloyd says the company seemed to be looking for trades people not to utilise their trade skills but because they had a good work ethic.
8 September 2002
The Fabia shoe factory in Te Kuiti is to close with the loss of 50 jobs.
There are now 2,045 people on the artists-on-the-dole scheme.
The Inland Revenue Department is doing a feasibility study on allowing students and non-custodial parents to pay their debts through their credit card. Spokesperson Colin MacDonald says this would make it easier for people with student loans who are overseas to make repayments.
MINISTRY CALLS FOR AN OVERHAUL OF BENEFIT SYSTEM
In the Briefing Papers, the Ministry also says:
Too many New Zealand low-income families do not have enough money to meet everyday basic needs and rely heavily on discretionary hardship assistance on top of their benefits or wages.
Many working people on low incomes are not getting the financial help they are entitled to from the social assistance and tax systems. Some who do receive help find that the amount is not enough. Many New Zealanders who are eligible for tax credits, the Community Services Card, Accommodation Supplement or Disability Allowance are not receiving this assistance.
We need to remove or reduce the disincentives and barriers that people face when they go off benefit and into work. Too many people are not better off from working once they have covered childcare and transport costs. We need to make work pay.
Encouraging people on benefits into education and training is vital if people's wellbeing is to be improved and New Zealand is to meet the demands of the labour market in the future. We need to do more to help young people with the transition from school into work or other opportunities.
Work and Income case managers spend too much time on income support administration. They need to be freed up to focus on clients' employment outcomes and to take a wider view of their wellbeing.
The Ministry proposes a list of ten priorities for "social investment" activities (see below). Top of this list is the need to address child poverty acknowledging that more children in New Zealand live in poverty now than in the 1980s. Depending on the measure used (which is an issue of ongoing debate), between 6% 29% of New Zealand children (63,000 to 285,000) are living in poverty.
Also high on the Ministry of Social Development's priorities is "ensuring that young people are active in employment and post-compulsory education". Latest figures: about 14% of young people aged 16 21 yrs are reported to have spent between two and five years neither in employment nor education.
With the cost of New Zealand Superannuation now consuming 40% of welfare spending and 14% of total government expenditure, the Ministry cautions the government against spending more on older people. It says that young people are the more urgent need, but concedes that they traditionally lack political clout. "We have a window of opportunity to make progress before the full effect of an aging population starts to bite from 2010 onwards..."
"Improving Wellbeing for all New Zealanders" Briefing to the Incoming Minister from Ministry of Social Development, September 2002, available from the Beehive website at www.beehive.govt.nz/Documents/Files/ACF56.pdf
Sources "Improving wellbeing for all New Zealanders" Briefing to the Incoming Minister from Ministry of Social Development 8 September 2002; Sunday Star-Times 8 September 2002 "Children most at risk of poverty" by Nicholas Mailing; The Dominion 9 September 2002 "Ministry calls for benefit overhaul" by Tracy Watkins; New Zealand Herald 8 September 2002 "Child Poverty top of Maharey's list" and "The Ministry of Social Development's priority card (edited)" by Audrey Young.
SKILLS SHORTAGES ARE LIMITING THE CAPACITY OF ONE-IN-EIGHT BUSINESSES
Geographically, the shortages are most acute in the South Island and the upper North Island. And by sectors, the shortages are being most felt by manufacturers, wholesale and retail merchants, builders, forestry, mining and healthcare.
The LMPG says there are many reasons why the labour market is not adjusting to these shortages. These include:
employers and employees do not know exactly what skills are available or required by the labour market;
employers and employees have expectations that most jobs are based on a long-term view and so it takes a long time for adjustment when there has been a change in the demand for skills;
peoples' choice of occupation are based on a long-term view and when there are changes in demand for different skills, it takes a long time for the labour market to adjust;
both employers and employees adjust their expectations slowly about wage in response to labour market conditions;
skill shortages are only one of many relevant factors in determining wage and employment decisions;
on-going shocks, such as technological change or in the demographic of the population, may continually create or exacerbate skill imbalances.
While there have been large increases in the labour force recently (due to a high participation rate and increased immigration) LMPG warns that the current labour shortage may be with us for some time to come. The demand for labour is expected to remain high and training programmes are unlikely to provide relief in the short term.
Carlaw suggests two short-term strategies:
allowing people who are in training to be exempted from being paid the minimum wage, thereby encouraging employers to hire them while they are training;
and opening the doors to more skilled immigrants.
In the longer term, Carlaw says the government should reconsider where it places the emphasis in its education and training budgets. $90 million goes into industry training, but this is just 5% of the $1.7 billion that goes into institutional tertiary education. He recommends diverting some of those tertiary education funds into Industry Training Organisations and Private Training Establishments, and into secondary schools in order to lift literacy and numeracy and reduce the number of those leaving school without qualifications.
Goulter's view is that NZ'ers are simply not paid enough to motivate them to be more productive. Goulter: "Much of the skills discussion in NZ misses this obvious point. We focus on all sorts of other issues around skills, but maybe pay levels are so low that there is little reason for people to want to acquire and use new skills."
Source Labour Market Policy Group 22 August 2002 "Skills shortages June 2002 quarter"; Press release Business NZ 30 August 2002 "Fixing skill shortages requires workplace training and immigration"; The Dominion Post 31 August 2002 "Skills shortages constrains growth" by James Weir; New Zealand Herald 2 September 2002 "Labour drought starves growth, alarms employers" by Kevin Taylor; Press release from the Employers and Manufacturers Association 2 September 2002 "Lack of skills inhibits growth; New Zealand Herald 3 September 2002 "Government working with industry" by Steve Maharey; New Zealand Herald 3 September 2002 "Central planning not the only remedy" by Simon Carlaw; New Zealand Herald 6 September 2002 "Time for workplace training, better pay" by Paul Goulter; the EMA office and website.
MORE JOBS THAN WORKERS
Sullivan worries that the average age of farmers is rising and they are failing to attract new people in. He says the high cost of getting into farming and the increased level of skills needed to farm appear to be going unnoticed and that farming will suffer if these issues are not addressed. Sullivan's view is that farmers need to boost farm wages and find innovative ways of sharing their wealth.
Source New Zealand Herald 02 September 2002 "Hunger for fresh graduates" by Phillippa Stevenson; The Dominion Post 6 September 2002 "Rural skills shortage `critical'" NZPA