New Zealand Executive Government - Policy

Higher Incomes - Better Opportunities

more in work and training, more from work and training

All New Zealanders deserve the opportunity to raise their income and improve their quality of life.

That is why securing a strong, growing economy has been the heart of the GovernmentŐs strategy. Economic growth and a well-functioning labour market through the Employment Contracts Act create jobs and reduce unemployment.

A growing economy leads directly to growing incomes. If we grow at 2.0 per cent a year, per capita incomes in 2010 will be about $4,000 higher than today. Growth at 4.0 per cent would mean per capita incomes around $13,000 higher. Higher growth rates are worth striving for. But they will depend on individuals and businesses continuously exploiting fresh opportunities.

For each of us, getting a job is the first crucial step towards higher incomes. For those in work higher incomes can come from skills, from experience and from being part of an enterprise that is succeeding.

More in work

An average growth rate of 4.8 per cent over the past three years brought unprecedented job growth - 179,500 in the three years to September 1995.

Over 74,000 new jobs were created in the last year alone. Employment growth is now rising more than three times faster than the OECD average. Over 1.6 million people are now in work - more than at any time in New ZealandŐs history.

Unemployment fell from 10.9 per cent in 1991 to 6.1 per cent in 1995. New Zealand is envied by many countries for the size and the quality of this turnaround.

Four out of every five of the new jobs created last year were full-time. But the increase in part-time work is also desirable. It increases employment choices - an important factor for women who make up much of the part-time workforce.

Great progress has been made in many of the areas with greatest need:

• long-term unemployment has fallen by a third in a year - there are now fewer long-term unemployed than short-term unemployed
• Maori employment is increasing faster and the unemployment rate is falling faster than that of Pakeha
• jobs are being created in the regions; some of the highest regional unemployment rates are falling fastest.

These are not jobs created by protection, subsidy and inefficiency. They are created by economic opportunity and are therefore more secure.

For the Government four major concerns remain:

• although the percentage of the population in work or looking for work is rising, it is still below levels of the mid-1980s
• for some groups - Maori and Pacific Island people for example - unemployment is still high
• numbers receiving the unemployment benefit are falling; however numbers on other benefits continue to rise; some 37 per cent of people on major benefits in December 1995 have received benefits for two years or more
• productivity is growing too slowly.

The Government can influence at least three of the factors that reduce the incentive and opportunity to work by:

• increasing the difference between benefits and take-home pay
• reducing the share of pay going to the Government through taxation and benefit abatement
• reducing barriers to entering the workforce.

It is fair that people in work see more reward for their efforts. The value of being in work rather than on a benefit must be reinforced where it matters most - in the pay packet. The Government can do this through reducing the tax burden on working families.

However, the Government also recognises that some groups and individuals need help to overcome barriers.

The Government supports the Employment Task Force's view that incentives and opportunities to work must be strengthened.

In response to the Employment Task Force we are spending $496 million over this and the next two years to improve employment opportunities.

A thorough overhaul of the benefit abatement system will see people on the Domestic Purposes, Widows and Invalids benefits keep more of their earnings from part-time work.

Specific initiatives will reach groups with greater needs:

• young people - school leavers up to age 20 - who have been unemployed for 13 weeks will receive intensive personal help to find work
• all people unemployed for over two years will receive intensive personal help to find work through the Job Action programme
• local employment coordinators will improve local employment assistance
• programmes designed to address the particular problems of groups disadvantaged in the labour market, for example, Pacific Islanders and Maori.

More From Work

This Government has always emphasised the value of being in work and the gains that education and training bring - hence the focus on improving the economy and our education system.

The Tax Reduction and Social Policy Programme reflects the simple fact that the most direct way the Government can help people get more from work is to lower taxes.

Lower taxes make it more attractive to work now and look to higher incomes in the future. They provide a real and immediate benefit to almost all employed New Zealanders.