• rmacculloch

Last week, DownToEarth Kiwi showed how a policy could be simply designed to end the rationing of Kiwis who wish to return to their homeland. This week, the government is beginning to admit that the current system is unraveling.

Incredibly, some expats returning home are being put up in five star hotels in central Auckland whereas others in way less fancy accommodation. Under a web-based user-pays booking system, wealthier people could self-select into paying for more expensive rooms in a location of their choice. The funds which the government saved from such a scheme could be used to grant fixed rebates to all, as well as to set up more quarantine facilities. As a result, less well off Kiwis who chose the cheaper rooms would end up paying very little. Their rooms would become affordable. And more people could return home.

Contrary to what our mainstream media outlets are claiming, this kind of system would not be too complex to administer since it does not involve means testing. The government has just acknowledged that the present system is "a massive expense currently being footed by the taxpayer. Mr Hipkins says that's not going to last":

The ACT party is advocating for a welfare reform, at least regards to unemployment insurance. They propose dedicating 0.5 percent of income tax at current rates "to a ring-fenced employment insurance fund ... a worker who loses their job would be able to claim 55 per cent of their average weekly earnings ... capped at a maximum amount of $60,000 for a year". The ACT party argue that their scheme "would be fairer than the current system because people get paid out in proportion to what they pay in, rather than a flat benefit rate regardless of their outgoings or previous tax contributions".

The government and opposition are sure to strongly oppose such a policy and even dismiss the debate completely. But our two major parties, unwittingly, have already endorsed a not-too-dissimilar policy, one which was designed in a rush, on an ad-hoc basis. It's called the "wage subsidy scheme"(!) Whereas existing beneficiaries haven't been much helped these past months, those in jobs before the virus crisis blew up were greatly assisted by the government, enabling them to continue being paid at least 80% of their wages. Most of those workers were effectively temporarily laid off, being unable to work during lock-down.

Better to debate how to carefully design the best unemployment insurance scheme that can cope with times of crisis, rather than to implement hasty substitutes that have created all sorts of problems. For example, the wage subsidy was paid to firms, not to workers direct, which has meant that plenty of large firms which didn't need it have still benefited.



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Robert MacCulloch