Unemployment Insurance?

Thursday, 10 February 2022, 4:22 pm
Article: Keith Rankin

The government's latest scheme is a form of government unemployment insurance. Interestingly, both the anti-poverty groups and the neoliberal New Zealand Initiative think tank see this scheme as problematic, very much as a 'solution looking for a problem'. In other words, its ideology. In this case it's not capitalist ideology; it's labourist ideology. Indeed the scheme has been cooked up with the collaboration of the CTU (Council of Trade Unions) and is fully supported by the E tū union.

Some history.

New Zealand and Australia both played key roles in the formation of 'the twentieth century welfare state'. But different roles. In Australia, with a longer and more entrenched unionised labour movement, and with Labour Governments a generation before New Zealand, the dominant cry was for a workers' welfare state. In New Zealand, on the other hand, where the debate was more informed by the realities of the Great Depression (1930-35), the call from the electorate in 1935 – and answered by Michael Joseph Savage – was for a citizens' welfare state (universal 'social security'). Hence the key phrase associated with Savage: 'from the cradle to the grave'. The citizens' welfare state explicitly included women, all older people, the self-employed (many of whom were unemployed in all but name, in the Depression), and all others who for whatever reason were neither capitalists nor principally attached to the labour market.

Essentially, in the first half of last century, Australia got its workers' welfare state, and New Zealand got its (universal) citizens' welfare state. But the Labour Party in Aotearoa New Zealand always struggled with the concept of a universal welfare state, Savage notwithstanding.

In the years in which Robert Muldoon was Minister of Finance, 1967 to 1972, two major – but divergent – welfare reports were published: the Woodhouse Commission on workers' compensation and the McCarthy Report on social security. The McCarthy Report was in tune with the times, in fully recognising the full citizenship of women; ie independent of their then secondary status in the workforce. In 1972, equal pay laws were passed. And, as a result of the McCarthy Report, the Domestic Purposes Benefit gave dignity to single parents.

The Labour Government (Dec 1972 to Nov 1975) was most interested in the earlier Woodhouse Report; the result was ACC (Accident Compensation) that explicitly provided benefits to workers, with higher-earning workers getting the lions' share of those benefits. ACC conformed with a worldview full of masculinist assumptions about labour market roles. The major champion of such workers' welfare was the then junior minister, Roger Douglas. Following in the same vein, Douglas introduced a contributions-based New Zealand Superannuation scheme (became effective, 1975) which fully followed this already outdated masculinist labourist world view, as a government supported workers' retirement scheme.

Fortunately for the upholders of the citizens' welfare state – of whom Robert Muldoon was prominent – this legacy project of the Third Labour Government was immediately abandoned in 1976, and replaced by the citizen-welfare-based National Superannuation (now called New Zealand Superannuation). Contributions to the Douglas workers' scheme were refunded.

The Helen Clark led Labour government of the 2000s continued the labourist line that workers (and capitalists) were superior kinds of citizens to everyone else. This was fulfilled – for workers – in extended the Working for Families targeted income support, which built upon an earlier 1980s' Labour Government policy (means-tested 'Family Care') to replace the universal (ie citizens') 'family benefit'. The universally-minded Child Poverty Action Group has always railed against Working for Families as a form of family income support that largely excludes beneficiaries.

The proposed Unemployment Insurance is simply this Labour Government's tilt at this labourist ideological windmill; the workers' welfare state.

The Workforce as it Actually Is

For a brief period from the 1950s to the 1980s, the predominant model of work (in New Zealand and in the world) was that of fulltime employment. The feminist solution to this initially masculine reality had been for women to join what they couldn't beat, and this century a typical salaried worker may indeed be a white collar working woman, a demographic that the CTU and the Labour Party now strongly represents. The workers' state only became inclusive to women once they took the Hobson's choice to embrace it.

In Guy Standing's seminal work on the twentyfirst century labour force, the key distinction is between 'the salariat' and 'the precariat'. The present Labour government makes policy for the salariat, just as the second (late 1950s) and third (early 1970s) Labour governments made policy for a male unionised labour force.

In history – and not according to Marx – labour has always been dominated by either a precariat (not a proletariat), or (as in pre-modern times) a forced-labour workforce (slaves). We still don't understand the Great Depression of the 1930s, because we still want to know what the 'unemployment rate' was; this concept cannot be applied, meaningfully, to the precariat. (In an important sense, and following today's definition, the unemployment rate in the depression was zero. Many people – especially 'married women' – were deemed unavailable for work; other demographics were precariously self-employed in huge numbers.) The middle-middle-class salariat is largely a product of the twentieth century post-war world.

Since the New Zealand Employment Contracts' Act of 1991 – and similar directional shifts in other countries – the salariat has been progressively dismantled in favour of fixed-term labour contracts, variable-hour contracts, and the 'gig economy'. Ask any young person.

The reality of the labour force is that it is a spectrum from permanent fulltime salaried (or waged) positions through to 'free-lance' self-employment. Various parttime options come within the spectrum – options sometimes favoured by workers, but more generally suited to the flexibility requirements of employers. Generally, those people we use to call workers we now call contractors.

It's further muddied by the new reality that much of the new salariat – eg managers in larger corporatised organisations, and the smaller 'nimble' professional organisations that provide services to these large organisations – are in fact the beneficiaries (in the original sense of the word 'beneficiary') of the new capitalism. Labour has become capital.

(Just watch the brilliant Australian satire 'Utopia' on Netflix to get a sense of the productivity of the new entitled workforce.)

Nowadays, old-fashioned workers have become the cost-accounted precariat. And the remaining salariat are their bosses and managers.

Unemployment insurance is a new benefit that will mainly be paid to the salariat; that is, the new beneficiary salariat.

It will be largely funded by the precariat. In this respect the new social insurance levy will be like the unemployment tax that all working women and girls paid during the Great Depression, even though they did not quality for the benefits. Another analogy is the taxes paid by New Zealand working denizens in Australia; taxes that fund benefits only payable to Australian citizens. For the new scheme, many precarious levy-paying employees will not qualify for payouts; their work will not be structured in a way that allows them to qualify for benefits. And those low-paid workers who do quality will receive only a small share of the total paid-out benefits.

New Zealanders have to focus – and focus hard – on how to redirect welfare policy to a citizens' path (with citizenship broadly defined), and away from its present workers' path (with workership narrowly defined). The new salariat can and should find their own market-based income insurance.

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Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Unemployment Insurance Will Mean More Tax - NZ Initiative Report, 11 November 2021

The Labour Government's Proposed Social Insurance Scheme Will Entrench a 2-tier Welfare System, Auckland Action Against Poverty, 2 Feb 2022

Next Steps for Social Unemployment Insurance, E tū Union, 2 Feb 2022

Social Insurance Proposal Would Likely Bake-in Existing Inequities And Drive Inequality, Says Anti-poverty Organisation, Child Poverty Action Group, 2 Feb 2022

The Wage Earners' Welfare State Revisited, by Francis Castles (1994)

A Decade of Confusion: the differing directions of social security and accident compensation 1969 – 1979, by Margaret McClure (2003) [Victoria University of Wellington Law Review]

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Keith Rankin

Political Economist, Scoop Columnist

Keith Rankin taught economics at Unitec in Mt Albert since 1999. An economic historian by training, his research has included an analysis of labour supply in the Great Depression of the 1930s, and has included estimates of New Zealand's GNP going back to the 1850s.

Keith believes that many of the economic issues that beguile us cannot be understood by relying on the orthodox interpretations of our social science disciplines. Keith favours a critical approach that emphasises new perspectives rather than simply opposing those practices and policies that we don't like.

Keith retired in 2020 and lives with his family in Glen Eden, Auckland.

Contact Keith Rankin

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