Wellington, 7 April - The Government’s current wage subsidy scheme may insufficiently protect Kiwis from the worst effects of the Covid-19 crisis, according to a new report from the New Zealand Initiative.

Comparing New Zealand with Australia and Canada, the report Relief measures: comparing Covid-19 wage subsidy schemes by Dr David Law shows significant differences between the three in the construction of wage subsidy schemes.

Workers in New Zealand can receive up to 60% of the median wage over 12 weeks. Initially the total possible amount of funds for each stricken company was capped at $150,000, but that ceiling has since been removed.

The Government projects the scheme will cost between $8-12 billion, depending on how many firms and employees sign up.

In Canada, wage subsidies for companies of all sizes cover up to 75% of a worker’s wage, or 80% of the average Canadian weekly wage of $C1050 ($1255). The subsidies are also backdated to March 15 and will apply for three months.

While the Canadian Government is in parallel going to create a verification system to catch anyone trying to take advantage of the scheme, it expects the scheme will cost about $C72 billion ($86.06b).

The Australian Government has also introduced its own version of the scheme, called “JobKeeper payment,” which equates to about 70% of the median wage lasting for six months beginning on March 30.

Crucially, this sum constitutes about 100% of the median wage in the sectors most hurt by the pandemic such as tourism. It is expected to cost the Australian taxpayer $A130 billion ($133.5b).

“In this crisis, well-designed wage subsidy schemes are an important tool to minimise the economic consequences of the Covid-19 outbreak,” said Dr Law.

However, New Zealand’s assistance package lags both Australia and Canada’s schemes and he shows that it can boost its present scheme to match, or closely align with, their relief packages.

“New Zealand could be more flexible and generous in its wage subsidies, especially now that better information about how other countries are proceeding is available,” Dr Law said.

Read more:
Relief measures: comparing Covid-19 wage subsidy schemes is available here.

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