Whanganui MP Steph Lewis says the Government's unemployment insurance plan would provide a sense of security for workers in New Zealand.
The plan was unveiled by Finance Minister and Deputy Prime Minister Grant Robertson this week.
"It is something that Labour has been wanting to introduce for a long time," Lewis said.
"The Covid pandemic has highlighted the need for people to have a cushion when they find themselves suddenly and unexpectedly unemployed."
The policy, dubbed New Zealand Income Insurance Scheme (NZIIS), was announced at the Budget last year. The details were negotiated between the Government, Council of Trade Unions (CTU) and BusinessNZ. The plan was released on Wednesday in draft form and will go out for consultation before any final decisions are agreed upon.
Under the proposed plan, people who are laid off may soon be able to claim support worth as much as 80 per cent of their former income, and someone who loses their job will be given payments worth 80 per cent of their former income (capped at salaries of $130,911), for up to seven months after they lose their job.
Lewis said it was aimed at smoothing the transition in and out of unemployment and would help people survive periods of not having a job, without it damaging a person's career prospects.
The scheme comes at a cost - a levy of 1.39 cents on every dollar earned by employees and businesses - a similar model to ACC levies.
Someone earning $880 a week would pay $12.23 a week in levies and receive $704 a week if they lose their job. A person earning $2000 a week would pay $27.80 in levies and receive $1600 a week in insurance if they were laid off.
Workers' unions have voiced support for the plan and E tū union's Annie Newman said the minister's announcement was welcome news to members whose jobs have been affected by the Covid pandemic.
"Our members have been discussing the idea of social unemployment insurance as part of our Decent Work campaign," Newman said.
"There is a lot of enthusiasm for the concept – it makes a lot of sense to workers. While Aotearoa has so far managed to avoid catastrophic levels of unemployment, the pandemic has reminded many of us that pay insecurity could be just around the corner."
Newman said members in industries like aviation and hospitality had been hit hardest and many had to find other jobs, sometimes paying much lower wages.
National's Rangitīkei MP Ian McKelvie said although there was some merit to the plan, he believed it would penalise lower-paid workers.
"There will be a lot of people who pay that 1.39 levy and never receive any benefit from it," he said.
"Grant Robertson has been talking about this plan for a while and I don't think it will benefit enough people.
"I would rather see a plan for people who can't earn enough to make a decent living due to health conditions that are not covered by ACC. People with deteriorating bone conditions and things like that - those who don't have options to retrain for other work. We should be looking after them."
Employers and Manufacturers Association (EMA) chief executive Brett O'Riley said the NZIIS was a new tax on business that was unexpected.
"No one would argue that better skills-matching in the workplace, career advice, and enabling displaced workers to get back in the workforce quickly were good things, particularly after the experience through Covid-19," he said.
"But our involvement in the development of this was on the proviso that it was cost-neutral and would be balanced by reducing liabilities for business elsewhere."
Whanganui Chamber of Commerce chief executive Helen Garner said the business network was planning to make a submission to the Government.
"Whanganui Chamber is currently reviewing the proposal for the NZ Income Insurance Scheme and welcomes the opportunity to provide feedback via the public consultation process," she said.
"We will be making a submission once we have had time to assess the proposal more fully, consider the implications for our community and gain feedback from our members. Submissions are open until April 26, and we encourage our businesses and the wider community to take some time, learn about the proposed scheme, and then have their say."
Garner said it was early days and it was important not to "jump straight to judgment" when considering the NZIIS plan.
"If New Zealand is going to proceed with this scheme, or something similar, it is important for all of us that we get it right. Informed feedback that tests the current thinking is vital to this."
Lewis said local individuals and small businesses who were interested in making submissions or finding out more about NZIIS should contact her Whanganui office.
The Government is accepting submissions on the NZIIS scheme until April 26.