Monday, 11 May 2009

9 Day Fortnight a Waste of Money

The Government's "Job Support Scheme" (aka 'the 9 day fortnight) was this week slammed by the NZ Institute of Economic Research as a waste of taxpayer money, and useless at fighting unemployment.

I quite agree with the NZIER report which concludes that subsidies to artificially protect jobs should be avoided, and says money would be better spent on targeted training programmes, and promoting business investment.

The 9 day fortnight scheme was the flagship policy from the Job Summit held earlier in the year. It gives companies a wage subsidy of $12.50 per employee for 5 hours a fortnight, provided no more workers are made redundant while the company is part of the scheme (although it can dump workers before signing up to the programme, as was the case with Japanese-owned company Summit Wool Spinners in Oamaru).

The NZIER report calculates that only 2 out of every 20 jobs created by the subsidy are really "new" jobs...
"For every 20 jobs that are 'created' after the subsidy is in place, twelve would have happened anyway, five are just replacing unsubsidised workers, and one is due to displacement. Only two are genuinely 'new' jobs."
So far just three companies have formally signed up to the scheme (Fisher & Paykel Appliances is the biggest), but the Government insists dozens more are considering joining up. The scheme was recently expanded to include smaller firms with 50 employees or more.

NZIER's report lists Job search assistance as the most cost-effective initiative for fighting unemployment, but warned that while training programmes can deliver "long-term benefits", they can also be expensive, and should be focused on goals like raising productivity.
The most cost-effective of possible unemployment-fighting initiatives is job search assistance, concludes the report.

It notes that “Work and Income New Zealand has a well-honed routine of getting unemployed people into work before they even get to draw the unemployment benefit” but right now there is a sheer lack of jobs and also a mismatch between skills and location of the unemployed and where job growth occurs.

Training programmes have the potential to deliver “long-term benefits” but are expensive and should be targeted carefully; NZIER says they should also focus on raising productivity.

* NBR: NZIER slams nine-day fortnight as 'artificially' protecting jobs

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