Income insurance scheme proposal should be scrapped - National

The government's income insurance proposal is a jobs tax that should be abandoned, National says, as the Greens warn it risks embedding a two-tier system.

Finance Minister Grant Robertson today announced details of the scheme, which was designed alongside Business New Zealand and the Council of Trade Unions and would pay up to 80 percent of wages to workers who lose their jobs.

It would be administered by ACC with workers paying 1.39 percent of their pay into a levy and becoming eligible after six months of contributions over the previous 18 months.

In a written statement, National's leader Christopher Luxon said the party was concerned the scheme could make the cost of living crisis worse.

"Calling this new tax a 'levy' or a 'contribution' doesn't disguise the fact that this will be yet more money flowing from hard-working New Zealanders and businesses to this big-spending Labour government," he said.

He said with high inflation and Covid-19, businesses were struggling to keep the doors open and neither they nor workers could afford the additional expense.

"New Zealand historically has very good labour market outcomes and a welfare system that, at least until Labour took office, did a good job of acting as a social safety net to help those who had fallen on hard times get back on their feet ... but the government wants to impose yet another centralised, bureaucratic welfare scheme on top of the one we already have.

"The government should just call this what it is, a jobs tax, and then they should abandon it."

The Green Party had a different concern, that pinning the redundancy payout to 80 percent of wages would further entrench inequities.

Social development and employment spokesperson Ricardo Menéndez March said the priority should be on ensuring everyone had enough to live on, including those not in paid employment.

"Under the government's current proposals support will be available to people based on their current income and work history. This means lower levels of support for those who have been earning less, including those in casual or seasonal work, and/or those with caring responsibilities," he said.

"Because of who predominantly does this type of work, we know that it will be young, female, and Māori and Pacific people who will get the lowest payments from this long-awaited new scheme."

He was also concerned about the cost of contributing to the scheme for people on lower incomes.

"For the thousands of families struggling right now to put food on the table, the 1.37 percent contribution that will have to come from their existing earnings could be the difference between making ends meet or not."

The party also called for a broader overhaul of the welfare system, including guaranteed minimum income, individualised benefits, and a boost to income support.

University of Auckland economics professor Susan St John warning of the complexity involved in setting up the new job insurance scheme.

"I don't think we should underestimate the scale of it and just how complex it's going to be," she told Checkpoint.

"In scale it is rivaling the size of ACC."

She also told Checkpoint the scheme looked like it would not help low-income earners.

"Those of us that are working in the welfare sector would argue that the biggest problem is ... This scheme looks like it's designed to meet the needs of the higher income earner... stable jobs. In fact it seems like it's designed for 20th century conditions rather than 21st century conditions. So that's a big worry."

Figures out today showed record-low levels of unemployment.

That would have helped boost wage growth to 2.8 percent, its highest level in more than 12 years, but still lagging well behind the 5.9 percent inflation for the year ended December, the highest in more than three decades.