Govt unveils unemployment insurance plan

People who are laid off may soon be able to claim support worth as much as 80% of their former income, under a government unemployment insurance plan unveiled today.

Under the scheme, someone who loses their job will be given payments worth 80% of their former income (capped at salaries of $130,911), for up to seven months after they lose their job.

The Government reckons it can smooth the transition in and out of unemployment, and help people survive periods of being out of work.

The scheme comes at a cost - a levy of 1.39 cents on every dollar earned by employees and businesses.

That would mean someone earning $880 a week would pay $12.23 a week in levies and receive $704 a week if they were laid off.

A person earning $2000 a week would pay $27.80 in levies and receive $1600 a week in insurance if they were laid off.

The policy, titled New Zealand Income Insurance Scheme (NZIIS) was announced at the Budget last year. The details were negotiated between the Government, the Council of Trade Unions and BusinessNZ.

The plan released today is in draft form, and will go out for consultation before any final decisions are agreed.

ACC will collect the levies and administer the scheme. Like ACC, levies could change over time, but would be frozen at 1.39 cents for the first two years of the scheme.

Finance Minister Grant Robertson said lessons learned from the Covid-19 economic response guided the creation of the scheme, which shifts the focus of government support from keeping people in their existing jobs, to supporting people to find new and better jobs.

"During Covid-19, the Government protected livelihoods with the Wage Subsidy Scheme and Resurgence Support Payment. This was primarily done through keeping people in their existing jobs and supporting businesses most directly affected by the pandemic."

Robertson said the scheme is a more "enduring solution" to the problem of managing unemployment during a downturn.

"Our proposed scheme provides economic security to individuals directly, and supports them to transition into a good, new job, as opposed to economic support packages which keep people in their existing job even if that role is no longer viable," Robertson said

CTU president Richard Wagstaff said the scheme would help the 100,000 Kiwis who lose their jobs every year.

"A job loss often results in a significant income shock that can affect wellbeing and earnings, even when a person finds new work. That's because finding a good job takes time. Many people accept lower-paid jobs that don't match their skillset because of the financial pressure to get back to work quickly," he said.

The total annual cost of the scheme is estimated to be $3.54 billion, made up of $1.81 billion for displacement and $1.73 billion for health condition and disability claims.

The scheme promises broad coverage for different working arrangements, and covers job losses due to redundancy, layoffs, and health conditions and disabilities.

Coverage includes a four-week notice period, and a four-week payment at 80 per cent of salary for employment, plus six months of financial support from the scheme, paid at 80% of wages or salary.

The scheme also pays for case management that will help guide people to rejoining the workforce.

The Government reckons the cost of "displacement" from the workforce can be substantial. Analysis suggests the costs of unemployment could amount to $15.4 billion a year over the first five years following job losses, assuming the displacement of 100,000 working people.