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Anderton Column On Unemployment Changes

Why is unemployment lower now than at any time in the last fifteen years? There are probably as many answers as there are economists. In this commentary, Economic Development Minister Jim Anderton offers his view…

About a decade ago when unemployment was sky-rocketing, there were those who used to say it was all the fault of the unemployed who were too lazy to work. Now that unemployment is lower than at any time since 1987, there must have been either a sudden change in the national work ethic, or else some other explanation for why unemployment which rose then, is much lower now.

Blaming the unemployed for unemployment never made sense. But what has changed to bring jobless rates down and create 104,000 new jobs in the last two years?

One claim is that the government has just been lucky.

World dairy prices have been high. There have been two good growing seasons in a row, and our dollar has been at low levels making our exports cheap for other countries to buy. All this has strongly boosted returns to farmers, who have been spending their earnings in local shops and generating jobs from boosted cash flows in the regions.

Certainly the weather, low dollar and commodity prices have been favourable, and helped to produce extra strong growth in the regions. But it’s not the whole story.

It amounts to saying that the main reason so many people have been out of work for the past decade and a half is that it hasn’t rained enough.

Besides, the Government gets the blame when the low dollar pushes up the price of imports like petrol. The Government should also, therefore, get the credit for the positive employment effects of the low dollar.

Over the past two years the Government has made sure that economic policies are better balanced than at any time in the last twenty-five years. In the past economic development has been stifled too often by overzealous rises in interest rates.

Other government policies have also helped to stimulate employment opportunities.

Tariffs have been frozen, which on its own has saved many jobs.

The helter-skelter pace of state sector restructuring has all but ended, but I remember in the eighties and nineties going to one closure of a post office, bank or hospital after another. I haven’t been to any closures this century. I’ve been to a lot of openings though.

Interest rates have been lower than they were through all of the eighties and nineties. Low interest rates are partly a product of the prudent fiscal management of the government, and the absence of wild policy lurches. When interest rates are lower, businesses borrow more to invest in growth and take on more staff while aspiring homeowners borrow to build houses.

The Government has embarked on a state house acquisition campaign. By the end of this year 1,600 houses will have been added to the state rental stock with 2,530 to come over the next four years.

Building houses is one of the most job-rich activities known to mankind. State-owned houses provide much-needed shelter at fair, income-related rents for the tenants.

Along with housing, there has been significant investment in infrastructure such as roads and sewerage. These are job-rich investments that provide vital social payoffs.

The Government has embarked on a proactive economic development strategy. The partnerships the Government has entered with the private sector, local authorities and communities are creating strong regions and creating sustainable, well paid, full time jobs.

One of the most important result of these partnerships is the resulting boost in confidence.

In Southland for example, the community was used to being told by the rest of New Zealand that southern decline was inevitable. Now the Government stands alongside Southland and it is enjoying the strongest growth rate in the country, reaching nearly ten per cent last year. They’re taking out advertisements in papers all over the country because Southland now has a shortage not of jobs, but of skilled workers.

The Government didn’t invest huge sums of money in Southland. But we were willing to work in partnership with business and the community there. The region also benefited from its own very proactive economic development strategy, such as the initiative that saw Southland Polytech offering fee-free study.

Canterbury has benefited from a proactive economic development policy, supported in the region by a local authority that saw social and economic policy as two sides of the same coin. In Canterbury business works alongside local government to build the local economy. As a result, Christchurch has outperformed other metropolitan areas of New Zealand.

In the Ministry of Economic Development and Industry New Zealand the Government now has the machinery to work with communities all over New Zealand as partners, and to invest in job creation. The developmental policies that pushed Canterbury ahead are being applied at the national level, with a resulting push to the economic performance of New Zealand as a whole.

There has been heavy investment in skills and training. The highly-successful new Modern Apprenticeship scheme has found places for 2,648 Modern Apprentices. Polytechs, universities and industry training schemes are working better with their regions to ensure that skills shortages are addressed and that research is commercialised.

No one measure can be described as the sole significant reason that unemployment is now down to its lowest level in fifteen years. I wouldn’t be so ambitious as to claim sole responsibility for the economic development policies for which I am primarily accountable.

However there are four lessons.

The first is that high levels of unemployment are not inevitable. Unemployment under previous governments was not just a problem, it was a policy.

The second lesson is that unemployment won’t come down unless the government plays its part. It cannot provide the jobs itself, but it can be a leader, a facilitator and in the right places, a funder. It can bring communities together, initiate skills training, invest in infrastructure and remover obstacles to job creation.

Thirdly we must make sure that monetary policy helps the growth of employment and does not create unemployment.

The most important lesson of all is that economic and social policies are interlinked. The most job rich initiatives, such as building houses and investing in skills development, also happen to be some of the most socially responsible. More than anything else they take giant strides to lift families out of poverty.

The most important solution to poverty is full employment. We still have some way to go to get there, but at least, for once, we are headed in the right direction.

Jim Anderton
Deputy Prime Minister
Minister for Industry and Regional Development

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