Unemployment Insurance Scheme: Backward or Forward Step

February 3rd, 2022

Government sees the unemployment insurance scheme as a social security package for redundant workers but is this a threat to employment security?

Finance Minister Grant Robertson announced details of the proposal which the Government is seeking feedback on. He said there were important lessons to be learned from the impacts of Covid-19, and the value of the Wage Subsidy and Resurgence Support Payment schemes.


The intent is that people who suddenly lose their jobs through redundancy or illness would receive through the new scheme 80% of their usual income for 6 months.  Though permanent employers would be required to give four weeks' notice, and provide four weeks pay at 80 percent after the job ends, after which the scheme would kick in for up to six months.

However, will this incentivise a proliferation of unjust redundancies and medical incapacity terminations?

It is a high trust model that the employer will not improperly use the provisions to mitigate its culpability for ending an employment relationship for improper reason. 

The scheme has deliberately been designed to focus away from retention of jobs. However, when viewed holistically security of ongoing employment is paramount. 

Once you have been outside of the workplace it is hard to get back in.  

Making retraining a part of the package is commendable, but  it doesn’t beat training whilst still employed or being able to seek alternative employment whilst still employed.

The labour market tends to judge adversely those seeking employment when outside of employment. 

Six months is not that long in the grand scheme of things when you are staring down the barrel of potential perpetual unemployment. Making the existing job viable isn’t maybe the better approach rather than putting it on the scrap heap and employees out to pasture albeit a fallow pasture.

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