Getty Images/Tina Tiller
Getty Images/Tina Tiller

OPINIONPoliticsMay 26, 2021

In defence of social unemployment insurance 

Getty Images/Tina Tiller
Getty Images/Tina Tiller

A new scheme to pay the wages of those who fall out of work has come in for some sharp criticism. But it’s an idea worth engaging with, argues Sam Gribben of the union E Tū.

Along with the headline-leading increases to core benefits in last week’s budget, the government presented a meaty new policy idea for us to digest: social insurance. It’s described it as an ACC-style system that would cover a large chunk of wages for a period of time when people lose their jobs and are looking for other work.

While the scheme is still to be designed, the government has said it could replace around 80% of a person’s normal income for several months. Everyone in paid work would be covered.

Many countries levy separate payments to fund unemployment benefits. Their design varies greatly. Like some others, ours would sit alongside other unemployment support, funded from general taxation. That current support system has its own characteristics and many serious flaws – as lived experience and the Welfare Expert Advisory Group (WEAG) report make clear. Even after last week’s announcements, beneficiaries will continue to struggle to make ends meet and to wrangle their entitlements from the state. The WEAG proposed a new purpose for the Social Security Act:

The purpose of the welfare system is to whakamana tāngata and ensure a dignified life by:

  • providing financial security and social security sufficient for an adequate standard of living 
  • supporting people to achieve their potential for learning, caring or volunteering, and earning through good and appropriate work.

Budget 2021 falls well short of that goal. Could a social insurance scheme help to further it?

The reality is that there is a political unwillingness to introduce a fairer tax system that funds truly liveable benefits. Perhaps the government does not agree with the WEAG purpose, or perhaps it thinks achieving it is politically impossible. Either way, it has to come up with something that it can live with, that it is willing to sell.

Prime minister Jacinda Ardern and finance minister Grant Robertson make their way to the house on budget day on May 20, 2021 (Photo: Hagen Hopkins/Getty Images)

Let’s focus first on what social insurance will do, rather than what it won’t. It will undoubtedly strengthen the social safety net for the newly unemployed. That much is straight forward. There is an obvious benefit to those individuals. Some argue it comes at the expense of other beneficiaries, that the money directed at this super-safety net should be distributed equally. That’s a completely valid position but ignores the reality that, frustratingly, the government has mostly rejected raising more revenue to raise benefits to the kind of levels and terms being considered for social insurance payments.

The criticism also ignores the connections of families and communities who rely on the current welfare system to people in paid work. These are the people who are helping beneficiaries to survive. When those providers and helpers lose their jobs, the momentum towards poverty picks up the pace. Social insurance might put a stick in the spokes of that wheel.

Entire communities can be devastated when a local workplace closes. Currently, mills in both Whakatāne and Kawerau are on shaky ground. A social insurance program would not stop the mills closing, but it will mean hundreds of workers, and all the people who rely on their wages, are much better off for much longer if they do close and is a step towards the ‘just transition’ unions have been advocating.

The status quo will see them urgently competing for scant jobs or going straight onto a benefit (if their partner’s incomes don’t disqualify them). Some breathing room to seek, or even create, meaningful local employment, seems like a good idea.

The same goes for the precarious hospitality workers left high and dry when their employer goes under. Maybe they didn’t even get the wages they already earned. In the cut and thrust of a ruthless free market, any relief for the workers who suffer most would make a huge difference.

The Covid crisis reminded us that it is not the privileged who bear the brunt when things go belly up. Even in a country where we managed to avoid the social and economic catastrophe of others, it was, as usual precarious and vulnerable workers, and notably women, who ended up worst off.

Solutions then were the wage subsidy, the income relief payment, and other extra support that maintained incomes closer to usual wages than usual welfare benefits. These payments were necessary because our benefit levels were (and still are) too low. Social insurance would be more than a Band-Aid. It’s more like fixing a broken arm and giving it a better chance to work again, even if you are not doing as much as you might to repair old fractures.

Under a social insurance scheme, higher paid workers would get more than lower paid workers when they lose their jobs. That is unequal, but it’s unequal in part because wages are unequal. Addressing wage inequality where it starts, at work, is the important task. We won’t fix it by making everyone equally poor when they are out of work. Besides, there are several ways that a social insurance scheme can be made fairer than the wage system, all of which is why engaging with this proposal on its own merits makes sense.

Having said all that, addressing the compassion-founded arguments against a social insurance scheme must be central to the design process. This is a huge opportunity for co-design – not just including unions and business associations, but beneficiaries, people in precarious jobs and the communities trapped in intergenerational poverty, along with their advocates. Take the risk of further stigmatising longer term beneficiaries, and ask “how might we design a social insurance scheme without increasing stigma?”

The government should take the design process into communities like Kawerau and Whakatāne, places where the policy could have the most immediate impact, and ask “how do you think we should raise revenue to protect us if the mill closes?”

Social insurance is not a policy that will solve poverty or bring justice for all beneficiaries. It will not solve income inequality in or out of work. We have to keep up those fights. In the meantime, it could seriously improve the lives of most people when they lose their jobs, and the lives of the people who depend on them.

As someone who has seen two “once in a lifetime” global economic downturns in the 15 years that I have been working, it’s an idea I can engage with.

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