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Opportunity, Capacity, Participation

Hon Steve Maharey
22 March 2001 Speech Notes

Opportunity, Capacity, Participation:
The Government's employment strategy

Address to a public meeting on employment. New Brighton Working Mens Club, Christchurch.

Introduction

Let me start by thanking the Christchurch East LEC for taking the initiative of convening a public meeting on employment. Let me at the same time congratulate the people of Christchurch East for having the very good sense and taste to elect a person of the calibre of Lianne Dalziel to represent them in the New Zealand Parliament.

I applaud the initiative of the LEC to take the issues like this out to the community.

In days gone by political parties, and particularly the parties of the left, saw it is a central part of their role in society to provide opportunities for debate, discussion, and indeed education. I very much hope that this kind of initiative will be picked up by other electorates ¡V the Labour Party needs to have a presence in the communities of this country that extends well beyond supporting the election of competent women and men to the New Zealand Parliament and local authorities. Those Labour Party members here tonight may want to consult the summary of the objectives of the Party on the back of their membership cards.

Indeed the back of the membership card ¡V the summary of our Party's Objectives, also confirms the centrality of employment when it states that the objectives of the Party include:

To build and sustain an economy which can attract and retain the intelligence, skills and efforts of all citizens

But let me start with the inverse of that ¡V with unemployment.

I find unemployment offensive ¡V deeply offensive. I am a member of a political party and of a movement that was founded out of a desire to ensure that people were in work ¡V well paid, decent work.

This evening I am joined by Party colleagues who share the deep distaste for the waste of human potential and economic potential that unemployment represents, and share the commitment ¡V a traditional Labour Party commitment, and one that we share with our colleagues in the Alliance ¡V to growing the economy and providing work for all.

Let me quote what a much-loved son of Christchurch once had to say about the centrality of employment:

"It is accepted everywhere in every civilised and organised country that it is the prime function of Government to follow such economic and social policies as will bring about the maintenance of stable and balanced conditions in the country, to ensure that full employment is maintained, and to pursue such policies as will confer upon the people the highest standard of living consistent with the level of productivity"

Does anyone here know who said that and when?

The speaker was one Norman Eric Kirk, at that time the Member of Parliament for Lyttelton and he said it in the New Zealand Parliament in 1960.

I could cite a number of similar statement from men and women of the labour movement ¡V from Michael Joseph Savage, whose photo still graces the walls of sitting rooms in this neighbourhood and this city, from Peter Fraser, from Bill Rowling, and indeed from Lianne Dalziel, Ruth Dyson, Tim Barnett, Clayton Cosgrove and Jim Anderton.

Employment and Unemployment - Then and Now

I am going to be very political for a moment ¡V while it might be said that in the post war period there has been a commitment across the political divide to the maintenance of the highest levels of unemployment, I firmly believe, and indeed there is evidence to support my belief, that the Labour Party, in policy and in practice, has typically placed economic growth and employment at the forefront of its economic programme.

The Labour Government lost its way in the late 1980s (I am sure that some would say that the Party never did) ¡V there can be no excuse for that, nor for the damage that was done to the fabric of New Zealand society by those politicians and policies that devalued employment, and simply viewed labour as yet another commodity to be brought and sold in the market. Happily those who visited that blight on our Party and on the Fourth Labour Government have taken their neo-liberal ideas where they belong ¡V to the parties of the right.

Our record on employment and unemployment since coming into power is a record that the Labour Party can be very proud of. I am not going to suggest that as politicians in government we can claim all the credit for the economic and employment growth that we have seen ¡V that would be the height of arrogance ¡V but we can claim some of the credit, and we should not be backward in reminding our people how well we have done.

Lets look at what we have achieved in our first year in Government.

„h In September 1999 unemployment stood at 6.8%, it is now 5.6%.

„h For the year ended December 2000 unemployment dropped by 9.2% (a decrease of 11,000 people).

„h Unemployment peaked in 1991 at more than 175,000 ¡V there are now 67,000 fewer people unemployed than there were in 1991. Lets not forget who was slashing benefits in 1991.

„h Long term unemployment has decreased from 41,700 in December 1999 to 32,400 in December 2000 (a decrease of 22%).

„h The total number of people employed has gone from 1,748,000 to 1,805,000 ¡V an increase of 57,000 people ¡V that's more than Jade Stadium could hold when it was called Lancaster Park and folk were jammed onto the embankment.

„h Full time employment increased by 37,000 over the year from December 1999 to December 2000.

„h The participation rate has gone up from 65.2% to 65.9% - its now at it highest level since September 1996. This means that the total labour force has grown by 25,000 over the last year.

„h The rate of Maori unemployment is down from 14.8% in September 1999 to 13.0% (it was 19.5% at the end of 1998) ¡V 13.0% is still way too high, and I am quite comfortable to couch the objective in terms of closing that gap.

„h Unemployment among Pacific peoples has gone from 15.0% in September 1999 to 11.4% - again still too high, but tracking in the right direction.

We are doing well, but there are no grounds for complacency.

I think that there is a real risk of our society becoming desensitised to the realities of unemployment.

Unemployment is not all that apparent on Queen Street, or Lambton Quay, or Fendalton Road. It tends not to surface in the mainstream media ¡V another reason for encouraging events of this kind.

Unemployment isn't a particularly democratic phenomenon ¡V in this country, as in others, it tends to pick out particular regions, and in those regions we find high levels of Maori unemployment, we find pockets of extremely high youth unemployment.

Within cities it picks our particular suburbs and neighbourhoods.

And we need to keep in front of us the consequences of that unemployment ¡V unemployed people have higher rates of physical and mental illness. And I am convinced that there is a causal relationship between unemployment and crime.

The fact, indeed even the threat of unemployment ¡V which in turn says something about insecure work ¡V has a corrosive effect on well-being.

And at the level of the economy, unemployment is simply wasteful. In aggregate we know that a given level of unemployment represents GDP foregone ¡V the only debate is what the ratio is. But even at the lower bounds, what are now accepted as modest levels of unemployment are incredibly wasteful.

So, what to do about this?

I am a member of a Party and a Minister in a coalition Government that places employment squarely at the centre of its programme.

We want macroeconomic policy to make its contribution to sustainable, job-rich, and non-inflationary growth.

We want to play a partnership role in the development of industries and in regional development.

We want to address skill shortages ¡V and we want to do that at both ends of the spectrum, with responsive tertiary institutions producing graduates and scientific research that meet the needs of industry, and with an education system (and a second chance education system) ensuring that our people have a well-rounded education, and that they can read, and write and count. Our record on literacy and numeracy is appalling.

Two recent reports have signalled the way forward. The second report of the Tertiary Education Advisory Commission ¡V 'Shaping the System' ¡V that is about ensuring that decisions about our education and training needs are demand driven (ie communities and businesses tell the providers of education, training and research what their needs are), and is about putting the Government in a position where we can steer the tertiary education and training system.

The other report is a Public Consultation document on industry training ¡V that document asks a number of searching questions and is seeking public comment on how we can lift our participation in industry training; how we can get more of our young people apprenticeships; how we can best avoid the skills bottlenecks that place a mortgage on the growth of firms, and the growth of jobs.

We want to ensure that what we do coheres around a strategy ¡V that we have what my colleague Jim Anderton refers to as a 'whole of government' approach to the issue.

The Government has an employment strategy. We published it last year ¡V 'Opportunity, Capacity, Participation: Government Employment Strategy 2000'. That strategy is informed by a simple but very effective model that we use to illustrate the challenge that faces us ¡V in technical terms it is called a human capability framework, and it consists of three elements ¡V capacity, opportunity, and the matching of both to grow our human capability.

„h Capacity building: policies and programmes that encourage the development of skills that are valued in the labour market.

„h Opportunity creation: policies and programmes that maximise employment opportunities through a steady growth in the demand for labour.

„h Matching: policies and programmes that facilitate a well-functioning labour market by minimising barriers to the matching of skills and jobs. This includes the adoption of measures that facilitate participation in the labour market and assist adjustment to changed circumstances.

The level of economic growth has put pressure on the labour market to meet the added demand for labour. Accordingly capacity building initiatives have become more crucial to meeting emerging skill shortages. A number of policy initiatives have been established to meet that challenge including Modern Apprenticeship, the Industry Training review and the work of the Tertiary Education Advisory Commission.

In addition major capacity building initiatives have been developed with Maori and Pacific peoples including the Ministry of Pacific Island Affairs capacity building project and the Department of Work and Income Maori and Pacific strategies.

Changes in immigration policy have also been made to supplement the supply of labour in areas where shortages are evident.

Priorities over the coming period will focus on how best to meet longer-term labour market needs and how it is best to identify those needs. Major work will include enhancing the contribution of tertiary education to a higher skilled economy, and reducing employment disparities for those with lower levels of skill through enhancing the effectiveness of second chance learning. Literacy requirements will be a major focus in that regard.

With regard to opportunity creation a range of industry and regional development initiatives and projects have been put in place to support the current economic growth, and to assist the longer-term development of the knowledge economy and society.

This has included the establishment of Industry New Zealand and the Tairawhiti Development Taskforce. This taskforce has demonstrated the value of inclusive mechanisms for solving particular industry or regional development issues through involving all the key players required to resolve issues of common concern.

These initiatives have been supplemented by a range of programmes aimed at enhancing the capacity of communities to take advantage of development opportunities.

In relation to matching an increased level of Government activity is evident in assisting with the placement of job seekers. This reflects in part the current strength of the economy. Emphasis has been given to greater regional flexibility on the part of the Department of Work and Income in the delivery of assistance programmes to allow for solutions that are better suited to the needs of the local labour market. The focus over the coming period will be on:

„h providing a clearer focus on achieving employment outcomes, rather than simply on the delivery of employment programmes

„h the more efficient provision and dissemination of information on skill requirements, careers, and jobs and

„h moving people more effectively from being welfare dependent into work, what I refer to as 'making work pay'.

In short, as a Government we want to work at both the capacity and the opportunity end of the equation.

Setting goals and building partnerships

Last year I hosted a function at the Beehive to mark the launch of a Memorandum of Understanding between central government and the Mayors Task Force for Jobs. I should note that someone else with a connection to Christchurch East, Garry Moore, has been the driving force behind the Mayors Task Force.

The Memorandum of Understanding sets out the goals of central government, and of the Mayors Task Force. It states that the Mayors task Force is committed to two goals:

"Goal one: By 2005, no young person under 25 years will be out of work or training in our communities

Goal two: By 2009, all people in our communities will have the opportunity to be in work or training"

Now one response to goals of this kind - the risk averse response - would have it that, for central and local government, these goals are heroic, but irresponsible ¡V there are too many variables that can't be controlled, the influence of external factors unknown etc etc.

This response would have it that any progress towards meeting these goals, however significant, would constitute a failure if the goal had not been fully realised.

This response would have it that it would be somehow dishonest to invite the community to participate in a project of this kind if there was any risk of the goal not being achieved. It might also have it that setting a goal that is not credible risks alienating those that you are seeking to work in partnership with.

I disagree. I think that these are good goals.

There is nothing wrong in setting the sights high. There is nothing wrong with building in some stretch. There is most certainly nothing wrong with seeking to advance a goal or a mission that has the power to excite, and indeed the power to empower.

The goals will extend us, but the development of partnerships between central and local government, and between different levels of government and the community will be key to growing the economy and growing jobs.

Governments are elected to govern, and they are elected to lead ¡V in the case of economic and employment growth, and indeed social and community development, leadership means acknowledging that local people often are best placed to develop and implement local solutions. Wellington doesn't know best, and one size doesn't fit all.

Conclusion

What is the outlook for employment and unemployment?

There are risks, and a great number of these are on the external front. We are a trading nation, and when those with whom we trade encounter economic difficulties, we can expect to feel the effects within our economy.

The outlook is positive. Recently the Reserve Bank released their March Monetary Policy Statement. The projections contained with that statement have unemployment staying around 5 and a half percent, inflation remaining low and stable, and real wages increasing over time - a period of sustained, non-inflationary growth, with decreased unemployment and real wage increases.

On the employment and unemployment front some projections are more optimistic, and others are not. BERL for example, predicts solid employment growth with unemployment falling to 5.2 per cent by June of this year, 4.9 per cent next year, and 4.5 per cent by June 2003.

The New Zealand Institute for Economic Research, on the other hand, predicts an increase to 5.7 percent for March this year, reaching 5.8 percent next March, and 6.3 percent in March 2003.

I am not going to say at this stage which is the most accurate projection ¡V only time will tell.

But I will say that I very much hope that we can see employment continuing to track down, inflation remaining low and stable, and skill shortages and bottlenecks avoided.

How low can New Zealand's unemployment rate go?

The present rate of unemployment is the lowest since mid 1988 before restructuring of the economy and stabilisation of inflation through tight monetary policy led to increasing numbers of unemployed.

Such a rapid fall in unemployment raises the question, can the unemployment rate fall further in the next few years? This would not have been thought possible, even recently, as the unemployment rate fell to only 6.0 percent at the height of the previous boom in the economy in the mid-1990s.

While there may be some uncertainty about the outlook for the New Zealand economy - flowing on from uncertainty about the world economy - there is increasing evidence that the unemployment rate may be able to fall further. Many analysts are forecasting further falls in the unemployment rate in the next few years. As increases in the number of jobs depend chiefly on the level of activity in the economy, these forecasts are dependent on the performance of the New Zealand economy - and the world economy.

The usual concern that the unemployment rate may not continue to fall - even in a time of strong economic growth - is that some people's skills do not match the needs of employers and that it may be more difficult for these people to move into employment, even if the jobs are there.

One group of people in this category is those who have been unemployed for a long time. If a person has been without paid work for six months or more, it may be a sign that they do not have the skills which employers are seeking and that they will find it increasingly difficult to move into employment.

The number of people in this category has begun to fall recently. During 2000, the number of people unemployed for six months or more decreased from 44,700 to 36,400 according to the Department of Statistics Household Labour Force Survey, the official measure of unemployment in New Zealand. The number of people in this category also fell as a proportion of total unemployment from 39 percent to 36 percent over the same period.

Trends in other economies in the past decade also lend support to the idea that our unemployment rate might fall further. Britain, the United States, Ireland, Sweden and Finland have all had rapid falls in their unemployment rates in this period. One of the key reasons for the fall in unemployment in these countries has been the positive economic conditions brought about by a combination of a sustained growth phase and technological or structural changes in their economies. These falls in their unemployment rates below what was previously thought possible suggest that New Zealand's unemployment rate may also be able to fall further over the next year.

However, any further fall is chiefly dependent on the strength of the local economy which depends in large part on the strength of the world economy and that is increasingly uncertain.

I very much hope that we do see a further fall in the unemployment rate ¡V 5.6% is the lowest rate for 12 years, and we should celebrate that. But there is still some way to go.

Events like this are an important part of building our understanding of the challenge and shaping a shared vision of, and commitment to policies and programmes that will deliver jobs, grow the economy, and nurture our communities.

That is the commitment of this Government. That has always been the commitment of the Labour Party and by committing ourselves to a shared project we honour the tradition of our Party and the women and men who have gone before us.

ENDS

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