Income insurance scheme: nice idea, shame about the inequity

A scheme that protects workers from the slippery slope into poverty in the event of being laid off or made redundant, or being unable to work because of ill health or disability. Sounds good! In theory. But not in practice, if the proposed income insurance scheme released for consultation by Government yesterday is adopted without significant change.

The New Zealand Council of Christian Social Services (NZCCSS) has a number of concerns:

The proposed scheme is fuel for a two-tier welfare system
The scheme as proposed makes support available to people based on their current income and work history. The winners are high income workers. The losers are those who earn less – those in unskilled jobs along with casual and seasonal workers will receive the least support. The proposed scheme is thus structured to fuel the emergence of a two-tier welfare system – unless the Government also concurrently addresses the urgent need to lift benefits to the levels identified by the Welfare Expert Advisory Group in 2019.

The proposed scheme’s weaknesses reveal a lack in the diversity of thinking
A more inclusive pool of thinkers may have avoided the negative social consequences of the proposed scheme prior to consultation. Instead, the development of the scheme was closely held, with a noticeable lack of diversity of opinion, viewpoints and humans. It requires the rest of us to put a lot of faith in the consultation process to address the weaknesses.

The impact on household budgets of low-mid income earners
Right now, Aotearoa is in a spiral of rising costs. As always, inflation impacts the low-mid income households the most.  Already, many families are struggling to keep a roof over their heads and food on their tables. How would these families find the 1.39% contribution from their existing earnings?

The impact on Not-for-Profit/Community sector employers
The proposed scheme would also financially squeeze those of us who are employers in the Not-for Profit/Community sector. We’re largely Government funded and characteristically we run lean operations. How would we pay our employer portion without funders (aka the Government) committing to raise funding by at least the same percentage?

Everyday, NZCCSS member organisations work to support New Zealanders experiencing hardship and poverty. We are keen to seen initiatives that result in fewer people finding themselves needing that support. But, to genuinely lift wellbeing, those initiatives need to promote equity rather than diminish it.

For comment:
Nikki Hurst, Kaiwhakahaere/Executive Officer, NZCCSS