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Insights 33: 10 September 2021
NZ Herald: Roger Partridge on the Ministry of Health and pandemic policy
 
Podcast: David Law on the Government's unemployment insurance proposal
 
Newsroom: Oliver Hartwich comments on the virus in European politics

A visionary dream
Dr Oliver Hartwich | Executive Director | oliver.hartwich@nzinitiative.org.nz
I had a dream. It is November 2021, and I have just tuned in to the Prime Minister’s daily press conference. But something in her speech sounded both different and familiar:

“I would like to share with you our national plan …. Our goal is simple: To safeguard the health of the citizens … and the economic future. … We will do everything to avoid lockdowns, which – to livelihoods, the economy and the education of our children – are destructive tools. Lockdowns are only a last resort.” (Naftali Bennett, Prime Minister of Israel, 14 August 2021)

“Everyday life is fortunately back in most places, and we have the clear expectation that we can avoid major lockdowns in the future, because we have the super-weapon in place: the vaccines.

It is voluntary whether you roll up your sleeve and get a jab in your shoulder. But I’d like to say very clearly to those of you that have yet to get vaccinated: you risk getting infected, and you risk passing those symptoms on to others.” (Mette Frederiksen, Prime Minister of Denmark, 23 August 2021)

While we are still dealing with the virus, we must never forget we have other work to do, not least in education.

“[D]isadvantage is not destiny: We have a responsibility to every child … to deliver to them the highest quality education. [N]othing matters more than the quality of teaching to the improvement of educational outcomes for those children. …

I acknowledge that not every decision [will be] popular or easy to accept for long-time advocates of public education.

Delivering this reform agenda involves working together to confront hard truths and overcome a status quo which has accepted the underachievement of some children for far too long.” (Julia Gillard, Australian Education Minister, 27 March 2009)

To achieve our policy objectives, we need a strong economy.

“Communications and commerce are global; investment is mobile; technology is almost magical; and ambition for a better life is now universal. We earn our livelihood in peaceful competition with people all across the earth.

Profound and powerful forces are shaking and remaking our world, and the urgent question of our time is whether we can make change our friend and not our enemy.” (Bill Clinton, US President, 20 January 1993)

“In the long run, stability and growth can only be achieved in a functioning market economy. Effective competition, both internally and externally, is and remains the surest guarantee for the performance of an economy. We reject all protectionist tendencies at home and abroad.” (Willy Brandt, West-German Chancellor, 28 October 1969)

In proposing this national renewal, I am reaching out to the opposition and indeed to everyone in this country.

“So let us begin anew — remembering on both sides that civility is not a sign of weakness, and sincerity is always subject to proof. Let us never negotiate out of fear. But let us never fear to negotiate.

Let both sides explore what problems unite us instead of belabouring those problems which divide us.” (John F. Kennedy, US President, 20 January 1961)

It was just a dream. But it does not have to remain one.
 

A Primer on Unemployment Insurance
Dr David Law | Senior Fellow | david.law@nzinitiative.org.nz
Work is underway to design an unemployment insurance (UI) scheme for New Zealand. Details are limited, but a more complete policy proposal for consultation is expected later this year.

In the meantime, you may be wondering what UI is, and is not.

Programmes that offer financial support for people who are unemployed while they search for a job are common worldwide. All OECD countries, including New Zealand with Jobseeker Support, have them in one form or another. Unemployment insurance is but one way to support those in unemployment.

So what features might a typical UI system have?

UI benefits are individual specific and tied to past earnings. An individual receives a given share of what they earned when they were employed – the replacement rate. This means some people receive more than others.

For example, assuming an initial replacement rate of 80% of gross income, an individual who had been earning $60,000 per year would receive a monthly benefit of $4,000 from unemployment insurance before tax. On the other hand, someone who had been earning $120,000 per year would receive a monthly benefit of $8,000.

Support is time limited. There is a maximum duration for which UI benefits will be paid – the potential benefit duration.

There are eligibility criteria to meet. Minimum previous work experience or contributions to the UI system are common. The reason for unemployment can be a deciding factor – redundancy will certainly mean one qualifies for UI benefits but voluntary resignation may not.

While receiving benefits, people must be ready and available to work. Monitoring of job search activities is also common.

Participation in UI programmes is compulsory for most people and you should expect to pay. They are typically funded through taxes levied on both employers and employees in equal measure and are not cheap. Top ups from general taxation are also common.

And what is UI not?

Despite the name it is not insurance. At least, UI has virtually nothing to do with actuarially fair insurance. Workers and firms individual risk profiles with respect to unemployment are seldom accounted for.

The term insurance is used because benefits are conditional on an event occurring. Welfare programmes, on the other hand, usually focus more on need and are means tested in some way.

Finally, unemployment insurance is not designed as an instrument for income redistribution. Although some benefits do go to poorer households, most tend to go to middle- and higher-income households, particularly once lifetime income is considered.

The exact design of unemployment insurance programmes varies greatly across countries, but there are many similarities. There are also common pitfalls, which we’ll discuss over the coming weeks.

The art of political goal-setting
Dr Bryce Wilkinson | Senior Fellow | bryce.wilkinson@nzinitiative.org.nz
The recent passing of Sir Michael Cullen, the former Minister of Finance, has been widely covered.

The Super Fund, KiwiSaver and “Working for Families” are among Sir Michael’s lasting contributions to New Zealand - whether we like them or not.

Well, I didn’t. However, I am still in awe of Sir Michael’s political and rhetorical skills.

Whatever your political viewpoints, Sir Michael had a sparkling sense of humour. He was admired and loved for his quick wit – and feared by those who got caught in its crosshairs.

Few politicians today are of Sir Michael’s calibre. That is a shame because today’s politicians now cannot even learn the art of political target setting from the great master himself.

Sir Michael was a wise and worldly politician. He knew the first rule of politics was to not set too tight a deadline for achieving your goals.

Following that rule would have kept Phil Twyford in office. Sir Michael would never have made such a rookie mistake as KiwiBuild’s ‘100,000 homes in 10 years’ pledge.

So how did Sir Michael set targets? And how did he accomplish them?

As an example, he promised to restore New Zealand’s per-capita income to the top half of the OECD, that club of the world’s richest nations.

New Zealand had long been in the bottom half of OECD countries when Sir Michael became Finance Minister in 1999. We were ahead of 17 OECD members – but behind 20 others.

Older New Zealanders felt insulted by that. As late as the 1950s, New Zealand had the third highest per capita income in the world.

With Helen Clark and Michael Cullen leading the Labour Party, they promised to get New Zealand back into the top half of the OECD.

Wisely, they did not set themselves a deadline. That would have been unnecessarily risky.

As of 2008, 22 of the 38 OECD countries were ahead of New Zealand, two more than in 1999.

But then the Global Financial Crisis and the Euro Crisis came to New Zealand’s rescue.

Greece, Spain, and Italy saw their real incomes plummet. Standing still, we could pass them.

In doing so, we moved into the top half of the OECD. Just. On current prices and purchasing power parity exchange rates, at least.

The outcome would have pleased Sir Michael. A goal achieved against the odds, and the naysayers confounded.

Sir Michael’s chortle still echoes in my ears. May he rest in peace.

 
On The Record
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