Proposal for personal ‘redundancy’ accounts
The Government should consider providing every worker with a KiwiSaver-like personal redundancy account.
The proposal comes in a draft report from the Productivity Commission into how technology will reshape the workforce.
‘‘With portable individual redundancy accounts, each worker contributes to their own account throughout their working life,’’ the commission said, pointing to their adoption in Austria.
Technological change was key to lifting productivity, the commission said, but governments needed to find ways to promote technological change while providing security and support to people adversely affected by such change.
‘‘In the short run, more rapid technology adoption could lead to increased rates of job displacement,’’ the commission said.
‘‘But, having a dynamic, flexible labour market will minimise the consequences, by offering opportunities for people to quickly find new jobs suited to their skills and preferences.’’
New Zealand was an international outlier when it came to providing income support for people who lost their jobs, the commission said.
Politicians should consider policies designed to create ‘‘flexicurity"a Scandinavian term for a flexible, mobile labour market, but one in which workers didn’t live in constant fear of ruin should they lose their jobs.
Productivity commissioner Andrew Sweet said personal redundancy accounts, unemployment insurance and changes to benefits should be considered by the Government.
‘‘In Northern Europe they have shifted from the idea of job security to income security,’’ Sweet said.
Unemployment insurance, for example, existed in every other OECD country except Australia, and could provide additional support the New Zealand benefit system was not providing.
New Zealanders faced low rates of income replacement in their first 6-24 months of unemployment compared to most OECD countries, the commission said.
Jobseeker benefits were incometested, and people with working partners often found they did not qualify, and the majority of New Zealand workers did not have redundancy packages.
The commission did not say whether it expected employers, or employees, or both, to pay into its proposed personal redundancy accounts, but envisioned people being able to withdraw money to replace a portion of their incomes should they be made redundant.
But, it said: ‘‘A system of portable individual redundancy accounts would require a higher level of savings [and hence higher employer or employee contributions],’’ it said. ‘‘Such contributions increase the cost of labour.’’
In New Zealand, balances in individual redundancy accounts could be transferred to a KiwiSaver account on retirement, the commission said.
‘‘The system could be more fully integrated with KiwiSaver. For example, a person’s individual redundancy account could sit alongside their KiwiSaver account, managed by their KiwiSaver fund.’’
In Austria, personal redundancy accounts were brought in replacing requirements for employers to provide minimum redundancy to employees, and evidence suggested it had improved employment mobility, with people no longer fearing to take a new job because they would lose redundancy packages linked to how long they had been with their current employer.
Unemployment insurance was a more common policy in OECD countries, and in New Zealand it could be run in a similar fashion to ACC, funded by contributions from workers, and/or employers. Or it could create a market for private insurers to provide unemployment insurance.