City Voice: In search of full employment

In search of full employment

Unemployment is again the number one issue for voters in this election, says a NZ Herald DigiPoll. Simon Collins reports.

FIFTEEN years after Roger Douglas started NZ's economic reforms, almost one in nine New Zealanders - 10.8% - are officially "jobless".

The "jobless" include the unemployed (7%) plus another 3.7% of the potential workforce who were available for work but not seeking it "actively".

From 7.5% when the measure was introduced in 1986, joblessness doubled to 16.2% in March 1992. Consumer spending was hit by high interest and exchange rates and lower benefits.

Joblessness fell back quickly during the economic recovery to 10.5% by March 1996, rose again to 12% last year, and has recently started falling as the economy again picks up.

Only National is proud of this record. All other parties getting over 2% in the polls - Act, Alliance, Greens, Labour and NZ First - profess a target of "full employment". But they differ hugely on how to get there.

National & Act

National and Act believe the best thing the government can do to encourage business to take on workers is to get out of their way.

National says the Employment Contracts Act (ECA) has been "absolutely crucial in creating jobs" - 277,000 extra jobs since the Act was passed in May 1991. The Act abolished the old system where all workers in an industry were covered by a union-negotiated wage structure, whether they joined the union or not. Instead, individual workers or groups of workers can now negotiate their own wages.

Union membership has plunged from 45% of the paid workforce in 1989 to 18%.

The gap between top and bottom wages has widened. The lowest income of the top 10% of income-earners grew from 1.7 times the average income in 1984 to 1.9 times the average in 1997.

Conversely, the top income of the bottom 10% of workers dropped in the same period from 59% to 56% of the average.

National's Minister of Labour, Max Bradford, says this "flexibility" reflects what different employers can afford to pay, or have to pay to get the skills they need.

"Countries with more flexible labour markets tend to have higher employment and less persistent unemployment," he says.

Bradford still wants to "fine-tune" the ECA, and to let workers "trade in" their holiday entitlements for cash.

But he doesn't go as far as Act, which wants to prevent workers from taking personal grievance claims against their employers if they are sacked during an agreed "probation" period of up to six months. National "remains committed to universal access to grievance procedures".

National is also committed to:

¥ The Reserve Bank Act, requiring the Reserve Bank to hold average price increases to between 0-3% a year.

¥ Cutting government spending from 35.5% of the national income to 30%.

¥ Cutting the top income tax and company tax rate from 33% to 30%.

¥ Eliminating import duties. The only remaining protection is now a 15% tariff on clothing, shoes and textiles, which is being held until 2004. But National's election policy says: "Over 95% of our imports are tariff-free. Why should we prop up the other 5%?"

¥ Channelling $36 million of the existing research budget into "high-tech" areas designed to make NZ into a "knowledge-based economy".

Act advocates making wages even more flexible by abolishing the legal minimum wage of $7 an hour. Act would also cut income and company tax to a flat 20% for everyone, partly by setting a two-year time limit on the dole.

Labour & Alliance

Labour and the Alliance believe leaving things to the free market is neither fair nor a path to full employment. Both would strengthen unions' ability to achieve more equal wages. And both propose creating jobs by "adding value" to NZ production, rather than "cost-cutting" by lower wages and taxes.

Labour would provide that only unions could negotiate collective agreements for workers. It would allow unions to strike in support of collective agreements covering more than one employer.

Labour would raise about $400 million by lifting the top tax rate on people earning over $60,000 a year from 33% to 39%.

It would use most of this to boost social spending, but has earmarked $100 million to:

¥ Grants, loans and advice for new businesses and exporters.

¥ Make business research and development spending fully tax-deductible.

¥ Spend more on public science.

¥ Help regions market themselves to potential investors, particularly with growth "clusters" such as Wellington's film industry.

Labour still backs the Reserve Bank Act and the 0-3% inflation target. But finance spokesperson Michael Cullen thinks the Reserve Bank has kept interest and exchange rates too high, and therefore employment too low, for most of the last decade.

In February, he promised "an independent review of the operation of monetary policy and, pending its results, require the Bank to take account of the impact of its actions to achieve its target on the real economy, particularly the exchange rate".

That would change the fundamental tenet of the Reserve Bank Act, which is that interest and exchange rates should be targeted solely at keeping prices stable, because that's all that monetary adjustments can do. Cullen's belief that they actually affect production and employment as well means that he might be more willing to target monetary policy at full employment as well as stable prices.

Cullen says our remaining tariffs on clothing, shoes and textiles should be phased down only gradually, in line with Australia.

The Alliance would raise income tax to 39% above $60,000 a year, 43% above $75,000 and 47% above $100,000. It proposes a 5% tariff increase on imports.

It would create regional development agencies to recommend local projects to an economic development fund, and it would maintain the exchange rate at a level that would make full employment possible.

The Greens

Like Labour and the Alliance, the Greens would replace the ECA, broaden the Reserve Bank's objectives, and stop cutting our tariffs unless other countries cut theirs.

The Greens would also shift tax off income on to pollution, and on to international capital movements - "a small levyÉ to reduce speculation." They favour community banks and a campaign to "buy local", to reduce the energy going into transporting goods around the world.

NZ First

NZ First proposes "export-led economic development to add value to our resources, relying on independent business expertise with government support to encourage economic success".

The party says the employment of New Zealanders is its first priority. It aims to cut taxes and provide "incentives for increased research and development and export growth".

- ATTEND THE City Voice/Scoop Employment election forum, St Andrew's on the Terrace, Thu 28 Oct, 7.30pm.

- first published City Voice Newspaper - republished with permission.

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