A new report claims that the Government's wage subsidy will "insufficiently protect" New Zealanders from the worst to come during the Covid-19 pandemic.
The report, put together by think tank The New Zealand Initiative, compares the wage subsidy schemes of 26 OCED countries. Germany is ranked as the country with the best financial support package available during the pandemic, followed by Denmark and then Britain.
New Zealand's fiscal response to the virus is ranked middle of the pack. New Zealand's fiscal response of US$1983 per capita is somewhat below average, the report states.
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The New Zealand Government estimates its wage subsidy scheme, which enables employers to access $585 per week for every full-time employee and $350 for every part-time employee, will cost between $8 billion and $12b, depending on how many organisations and employees sign up.
So far, more than 15 per cent of the population has accessed funding from the scheme.
As of Thursday, $4.5b had been paid out to more than 750,000 New Zealanders, about 115,000 of which were self-employed.
When the scheme was first announced there was a cap of $150,000 limit accessed by a single employer. This has since been adjusted to have no cap.
Employers are eligible if they have recorded a 30 per cent drop in revenue attributable to Covid-19. The subsidy is paid out in a lump sum of $7029 for a period of 12 weeks. Businesses accessing the wage subsidy scheme are required to do their best to pay employees 80 per cent of their income, or $585 or $350 at a minimum.
While the removal of the subsidy cap is good news for more businesses, Dr David Law, research fellow at The New Zealand Initiative, says the wage subsidy on offer in New Zealand significantly lagged behind the benefits of its peers' announced around the world.
Workers in New Zealand can receive up to 46 per cent of their median wage over 12 weeks through the scheme, while in Canada, wage subsidies for companies of all sizes cover up to 75 per cent of a worker's wage. The subsidy equates to C$847 per week per employee.
Australia has introduced its own version of the scheme, called "JobKeeper payment", which equates to about 70 per cent of the median wage lasting for six months beginning on March 30. The JobKeeper payment is a payment of A$1500 per fortnight per employee.
"In this crisis, well-designed wage subsidy schemes are an important tool to minimise the economic consequences of Covid-19," Law said.
He said New Zealand could afford to be more flexible and "generous" with its subsidy scheme, and should follow the lead of European countries such as Germany, which are offering financial support of up to 12 months.
Law said the removal of the subsidy cap brought New Zealand's subsidy scheme more in line with Germany's, Canada's and Australia's.
"We were a third of the way there when we first introduced it and are about 75 per cent of the way there now following a couple of changes," Law told the Herald.
"In terms of design of our scheme, we could have been a little bit smarter around targeting it more and making it more flexible, a little bit earlier on. It definitely has improved as without the cap larger firms can access it more."
New Zealand's scheme favoured sectors such as retail and hospitality, where more of their workforces were earning the minimum wage or close to it, he said.
"If you think about it as the subsidy as a proportion of a company's wage bill, then companies with staff who are on average paid more closely to the rate of the minimum wage, then it is going to cover more of their wage bill than say companies who have staff who are paid more," Law said.
"For companies that are labour-intensive versus companies that are capital-intensive, it is probably better for those labour-intensive firms whereby labour is the bigger portion of their costs."
Rates reductions or holidays and deferral or reduction in student loans for firms and employees would make the scheme more favourable, he said. "Government efforts to ensure firms are ready for rapid re-start after the crisis eases could involve further increasing wage subsidies or alleviate firms' other fixed costs."
While other countries' schemes provide greater support to workers, they may not enable workers to remain tied to firms, like New Zealand's does, Law said.