OECD calls for tougher line on jobless

By BRIAN FALLOW economics editor

The Organisation for Economic Co-operation and Development (OECD) has called for stronger policies to encourage welfare beneficiaries into paid employment.

Raising productivity growth is the foremost challenge facing New Zealand, an OECD report says, but the second is boosting employment among marginal groups.

The proportion of New Zealanders of working age who are employed is well above the OECD average, but matching the OECD's best performers would go a third of the way towards the goal of returning New Zealand to the top half of the OECD's income rankings.

"The labour market works well for the easily employable majority but outcomes are less favourable for marginal groups such as the young, the less skilled and especially single parents, who have one of the lowest employment rates in the OECD," the report says.

"About 9 per cent of the working-age population has been on a benefit for more than a year."

The OECD also notes the wide gap between different ethnic groups, which it says partly reflects low average education levels among Maori and Pacific Islanders, who are expected to make up a quarter of the working age population by 2020.

"The wedge between income for welfare and work needs to be increased but the Government has ruled out benefit cuts because of their potential impact on poverty."

The alternative, the OECD says, is more use of benefits to those in work.

"A time-limited back-to-work benefit, as has been used in Ireland and Canada, is worth considering" - as is a rise in child-care subsidies.

The OECD says countries such as Denmark, Sweden and the Netherlands have shown that financial incentives work best when combined with stronger job-search obligations.

New Zealand prefers to use case management to help people become more self-reliant but the system remains too passive, it says.

New Zealand has moved against the international trend by relaxing requirements on sole parents to look for work.

The OECD welcomes moves towards a firmer application of the work test for the unemployed and the introduction of a work test for the unemployed aged over 55.

Finance Minister Michael Cullen said: "The Government's approach to getting beneficiaries into paid employment relies more on the carrot and less on the stick than the OECD would prefer, and we are stronger on workers' rights."

The OECD detects a clear trend towards greater rigidities in the labour market and higher labour costs.

Organisation for Economic Co-operation and Development:

Economic Survey - New Zealand 2003 summary

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