Maori Unemployment Still a Serious Problem

“Unemployment is unacceptably high in New Zealand. Although it is now falling sharply, on the latest figures 8.4 percent of the reported labour force is still without employment. Adding those who would return to the labour force if job prospects were brighter, and workers who would prefer to work longer hours, yields a degree of under-utilisation in the labour market which is both economically wasteful and socially damaging. Persistent unemployment, particularly where joblessness is concentrated among certain groups in society, may lead to the emergence of a permanent underclass and a situation where unemployment appears to be transmitted from generation to generation.”

This is the opening paragraph of a report Towards Full Employment in New Zealand by Judith Sloan, then Director of the National Institute of Labour Studies at Flinders University in Adelaide, published by the Business Roundtable in 1994.

At the time, attitudes towards unemployment were still pessimistic. Government ministers were saying New Zealand could not hope to get the unemployment rate down to much below 6-7 percent of the labour force. Professor Sloan’s view that it could be as low as 4 percent by 1998/99 given political will was greeted with disbelief.

Today the general unemployment rate is down to 3.6 percent yet the Maori unemployment rate remains over 8 percent, the same as the general rate in 1994. Worse, the Maori youth unemployment rate is a tragic 18 percent. Yet how rarely do we hear politicians and commentators saying this is unacceptably high?

It is true that progress has been made since 1994 when the Maori unemployment rate was around 20 percent. As a paper for last year’s Hui Taumata noted, “Since 1991 [when the labour market was freed up with the Employment Contracts Act] Maori employment has been growing fairly steadily, with many of us who had been experiencing unemployment finding jobs, and other people choosing to come back into the workforce.”

Yet the paper was unjustifiably fatalistic in wanting to target a 5 percent Maori unemployment rate by 2025. This is far too unambitious. The male Maori unemployment rate was no higher than 2.5 percent in the early 1950s and 1960s, and for females it was even lower. There is no reason why it could not return to these levels, and within a few years.

As Professor Sloan went on to say, unemployment is essentially a political choice, not a phenomenon of unknown origin and cure. “The causes of unemployment are well understood, with labour market inflexibilities and perverse welfare incentives being the main culprits.”

The Kahui family tragedy recently highlighted the problems of intergenerational joblessness and welfarism. Yet current political debates are pointing in the wrong direction.

On joblessness, Professor Sloan’s report stated: “The overseas evidence is very clear: strong employment protection laws are associated with high rates of unemployment, particularly long-term unemployment”. Sadly, the Maori Party seems set to defeat Wayne Mapp’s member’s bill (creating a 90-day probation period for new employment) which would modestly relax New Zealand’s unusually restrictive regime.

The report also noted that “The other impediment to greater labour market flexibility relates to minimum wages and their potential harm to the employment prospects of the lowest paid and least productive members of the workforce.” Regrettably, the government has substantially increased this barrier to employment and proposes to increase the minimum wage further to $12 an hour. From March 2001 it applied the adult wage to 18 and 19 year olds, and Sue Bradford’s current member’s bill would abolish lower youth minimum rates entirely.

Why should young Maori be deprived of their freedom to offer their labour on terms they are willing to accept and that their initial productivity justifies? The government should get out of the way.

Finally, on welfare, Professor Sloan noted that “Income support of indefinite duration induces persistent unemployment and weakly applied work tests are likewise associated with persistent unemployment.” Since the report was written, President Clinton enacted his commitment to “end welfare as we know it” with his welfare reform legislation of 1996, the tenth anniversary of which is being marked by widespread recognition of its success.

Other things like job placement programmes, education, intact families and a sound economy also matter for Maori unemployment, but job opportunities and welfare – including the problems associated with the DPB and sickness and invalids benefits – are the central issues. Potential income from employment – the return on human capital – vastly exceeds the benefits to Maori of Treaty settlements.

Sir Apirana Ngata repeatedly warned of the consequences of joblessness and welfarism for Maori. Unemployment is indeed a political choice, and he would have been disappointed with the unwillingness of today’s politicians to face up to it.

Rob McLeod is the chairman of the New Zealand Business Roundtable.

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