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Productivity Commission suggests improved income security to help those affected by labour-market change

Draft report 2
21 November 2019

New Zealand is stuck with low wages because of low productivity and low technology adoption. The challenge is to encourage labour market dynamism and the flexibility of the economy to create new jobs, while also providing security for workers when jobs are lost.

In its second draft report, Employment, labour markets and income released today, the Commission has looked to other countries for answers to help promote technology adoption.

“Countries that have adopted policies that promote income security over job security – known as ‘flexicurity’ – tend to be more open to technology adoption on both sides of the employment relationship,” says Commissioner Andrew Sweet. “There is a case to improve income security for displaced workers with measures that cushion the financial shock of job loss.”

“For example, all OECD countries except for Australia and New Zealand have a mandated unemployment insurance scheme of some form. Not having insurance, combined with strict means-testing of benefits, means that many New Zealanders face a significant and immediate drop in income on job loss, and can struggle to meet their financial commitments, such as a mortgage,” says Mr Sweet.

The Commission has outlined three options for improving income security in New Zealand and is seeking public submissions on the options. These are:

  • Introducing portable individual redundancy accounts
  • Mandating unemployment insurance
  • Making changes to benefits and tax credits

Today’s report is being issued for public review. The Commission is calling for submissions until 7 February 2020. Three further draft reports will be released in December: Training New Zealand’s workforce, Firms, innovation and labour markets and Educating New Zealand’s future workforce. A final report will be presented to the Government in March 2020.