A social unemployment insurance (SUI) scheme is likely to be regressive and would bake-in existing inequities in New Zealand, according to the Child Poverty Action Group (CPAG).

A discussion document released this morning by the government, Business New Zealand, and the Council of Trade Unions (NZCTU), outlines a new scheme to provide weekly earnings-related payments for the newly unemployed.

However, it will likely contribute to poorer, inequitable outcomes for Māori than Māori would otherwise experience, contribute to inequitable outcomes for other groups likely to receive lower or no wages, or for those who work several jobs, including Pacific, women (particularly caregivers) and those with disabilities, CPAG says.

"Those who stand to benefit most from SUI are those who are in regular, full-time, well-paid work, without dependent children," says Associate Professor Mike O’Brien, CPAG’s social security spokesperson. "Those who are in precarious, part-time, irregular and low-paid work - disproportionately Māori, Pacific and/or women, particularly caregivers - will either qualify for a low rate of payment under a social insurance scheme, or will not be eligible at all."

Further, CPAG is also concerned that the implementation of a social insurance scheme may divert resources from the welfare overhaul that is so desperately needed for many families.

"The Ministry of Social Development has previously highlighted that a social insurance scheme would have ‘significant implications’[1] for the welfare system. Our research shows SUI risks introducing a ‘first tier’ of income support, to which social security benefits become a ‘second-tier’ form of welfare," says O’Brien.

Research indicates that the establishment of a Covid Income Relief Payment in 2020, which had some rudimentary characteristics of SUI (paid at a higher rate than welfare benefits, individualised and only for the newly unemployed), had a "significant, negative impact" on the mental wellbeing of main benefit recipients[2]. Welfare benefit recipients described the establishment of the Covid Income Relief Payment, for which they weren’t eligible, as a "kick in the gut", and a "slap in the face".

"A two-tier welfare system established under a social unemployment insurance scheme would likely exacerbate poor mental wellbeing among welfare benefit recipients and strengthen stigma for benefit recipients," says O’Brien.

CPAG is urging the Government to bolster adequate and individualised welfare payments to address the issue of large income drops as a result of unemployment, and to encourage employer-funded redundancy support and the uptake of private insurance.

Read CPAG's backgrounder, produced June 2021, here: https://www.cpag.org.nz/assets/CPAG_social_insurance_concerns_regarding_inequity_and_poverty_web.pdf

[1] MSD (2020a). Report cover note to Hon Carmel Sepuloni dated 11 June 2020 for REP/20/6/648 - Unemployment insurance models and considerations for New Zealand. Ministry of Social Development. https://www.msd.govt.nz/documents/about-msd-and-our-work/publicationsresources/official-information-responses/2021/january/20210106-request-for-9-reports-held-bymsd-regarding-covid-and-related-benefits.pdf (p.26)

[2] Humpage, L. & Moore, C. (2021). Income support in the wake of Covid-19: interviews. University of Auckland: University of Auckland. Retrieved from https://www.cpag.org.nz/assets/Covid19%2520INTERVIEW%2520report%2520FINAL%252012%2520April%25202021.docx%2520%25281%2529.pdf

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