Redundancy: End of the Road or a Fresh Start

Have you lost your job or are you worried about doing so? You no doubt had a rush of hope after the Job Summit – everything was going to beokay. At one stage I was expecting to see our unemployed diligently hacking outa cycle track worthy of Wellington’s mountain biking elite. I pictured John Keyat the front of the line, pick and shovel over either shoulder, singing "HiHo, Hi Ho, It’s Off to Work We Go…", with Paula Bennett, our very own SnowWhite, bringing up the rear.

Apparently we couldn’t afford to implement that one completelyas planned, probably due to costume shortages. But that was okay, because for awhile it looked like the green shoots of economic recovery were going to takethe pressure off the Government. Now the higher dollar and slumping dairy pricehas poured Roundup all over those dreams. So John and Sideshow Bill are coming underpressure to come up with something better to stem the queues of unemployedturning up at Work and Income. Over 50,000 people are now on the dole, and it’sincreasing by about 1,000 per week. As an emergency measure Labour aresuggesting that all those made redundant should receive the unemploymentbenefit. John Key helpfully retorted that there are no pixies printing money atthe bottom of the garden. Should he have added "like they have in America?". Political panic is in the air, but surprisingly everyone is talking aboutwelfare, and no-one is talking about these times being a chance to retrain.

In truth, the Government can do little to stem the flow ofjob losses. Their infrastructure spending may take the edge off the ills facingthe construction industry, but has anyone bothered to think there are differentskills required to plaster a house than build a motorway? Keynesian economistsargue that Government should spend more to prop up the economy, and it doesn’tmatter too much what they spend it on. Just get the money in people’s pocketsand get them spending, which is probably behind Labour’s idea.

This devil may care approach to fiscal policy may have somemerits in a crisis, but it is always worth asking if there is a better way tospend the money. We could view this current crisis as an opportunity – somedowntime to retrain and prepare ourselves for the future. Recessions have alwayshad a cleansing effect on the economy, much like winter has on the land. Theyare painful, positively awful for those that lose their jobs and even homes,but it recycles resources for the economy to head in a new direction whenspring arrives.

And boy do we need a new direction. As Don Brash will tellyou, every hour you work here creates 1/3 less money than if you were in Oz. Weneed to boost our quality of investment to catch up, including investing in humancapital – skills. This current recession provides the perfect opportunity tostart that investment.

Our education system seems to be doing okay – young peopleentering the workforce are more qualified than ever. As a result the proportionof people with no qualifications is falling, down from 40.5 percent of theworking age population in 1986 to just 19 percent in 2006. But those already inthe workforce still have a lot of catching up to do. Over 40% of working age NewZealanders have literacy skills below those needed to participate in modern society.Scary stuff.

In the past we focused on the young and waited for the deadwood to retire. But we already face skill shortages, and with increasingretirement rates there will not be enough skilled young people coming throughto plug the gaps. Around 80 percent of the current workforce will still be inthe workforce in 2020, so we need to encourage people that are working or couldwork to retrain.

So if we want to help people and pump some money into theeconomy at the same time, we could do better than giving them all a handout. Surethere are bits of retraining assistance around, but maybe now is time to thinkbig about training incentives – like a universal training allowance.

We should also not just work with those who have lost their job – now is the time to start talking to those people that are already in jobs but fear for their future. These people could be helped to plan ahead and getthe skills they need before they are made redundant. Industry training andadult education have over 400,000 learners between them so they are the majorsource of training for people already in work. The Government’s recent cuts toboth may have been poorly timed – they could hamstring New Zealand’s ability to seize the opportunities that will arise after this harsh winter ofrecession.

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