OECD Conference - Theme 2 Activation

E nga mana, e nga reo, e te iwi motu,

tena koutou, tena koutou, tena koutou katoa

(To the honoured, to the speakers,

to all the people of this place, my warmest greetings)

I would like to acknowledge my Ministerial and official colleagues present at this meeting - I appreciate your commitment to finding solutions to the labour market challenges we are all facing.

This morning I'd like to outline how New Zealand is responding to the challenges we face because of the global economic climate.

To give you some context, I'm part of a relatively new government.

When we were elected ten months ago the full impact of the global recession on New Zealand was just gaining momentum.

We went into recession earlier than most of you around this table, and it seems we might emerge a little sooner.

While some of our smaller financial institutions have failed, New Zealand's banking sector has remained in good shape and no major banks have fallen over - which means we have not needed the government bail-outs necessary in many other countries.

Overall, New Zealand entered recession on the back of a decade of prosperity.  We had enjoyed strong and sustained economic growth for most of the past 10 years, along with low unemployment - in fact we achieved a record low unemployment rate of 3.5% at the end of 2007.

This left us relatively well prepared to cope with the impact of the global recession. Plus we start from a base of one of the most generous welfare systems in the OECD - we do not require any contribution to social insurance, and none of our benefits are time-limited.

Perhaps this is why - despite the record low unemployment - New Zealand had maintained a solid core of long-term unemployed.  More than 300 thousand people are on three main benefits and are subject to little activation - they are sole parents, sickness and invalids' beneficiaries.

On taking over as Minister I was shocked to discover that throughout a decade of prosperity, these groups of long-term unemployed had continued to grow, and unsurprisingly, the recession is magnifying that effect.

This fact underlines the difficulty of the long-term welfare challenge: if we can't move these people into work during good times, how can we do it when times are tougher?

Which is why our government developed three key objectives:

• - to keep New Zealanders in work by supporting businesses to keep their staff,
• - providing extra support to those who found themselves without work, with a particular emphasis on supporting young, unemployed people and families,
• - while making sure all our policies were fiscally responsible so our credit rating could be maintained.

When it comes to activation policies, I would argue they're as important now, as they were when times were good.

Activation helps us deal with challenges that are bigger than the current global recession, such as: how do we provide support and encouragement to those out of work without fostering a culture of dependency? How do we make work a more attractive option than welfare? And how do we deal with those who have given up trying to break out of a life of long-term welfare dependency?

The New Zealand Government has chosen not to use public service job creation schemes to combat unemployment. In part this was because in the preceding ‘good times' our public sector grew 50% and when times became tough our public wanted to see Government tightening its belt - not expanding.

In addition, we wanted to create natural and sustainable employment growth through stimulating the economy.  It must be noted that we did so on a much smaller scale than some of my colleagues here - New Zealand has spent less than 4% of GDP on stimulus measures - largely bringing forward construction, roading and technology infrastructure projects.

But I believe the most significant feature of the New Zealand system is our strong ‘work first' approach that is designed to get people back into work quickly before they become entangled in the welfare system.  I will come back to this in a few minutes.

But first I'd like to give you a feeling for the other measures we have already brought in.

We began our programme earlier this year with a national employment summit involving employers, unions, the NGO sector and government, working together to generate practical and affordable options for saving and generating jobs.

Initiatives we have put in place include:

• a scheme which allows businesses to put staff on reduced hours, with assistance from the government, giving them some space to work through financial trouble, while retaining staff.

• a package of temporary, targeted support to help the newly redundant which provides extra housing and family income assistance. This 16 week programme is aimed at those on low to middle incomes who need help while they transition back into work.

• We've also changed laws affecting small businesses to make it easier for them to take on new staff.

• We've cut tax rates to stimulate spending,

• and most recently we've introduced several programmes to help the most vulnerable group in the labour market - young people aged 16 to 24.

In a tight labour market, employers looking for skills and experience have plenty of choice on offer. This usually puts young people at a disadvantage and in greater danger of joining the long-term unemployed, because they haven't yet developed the skills and confidence that would allow them to pursue a meaningful career.

Last month I introduced a Youth Opportunities package to help those young people at risk during the recession. This includes a subsidy to encourage employers to take on young people for entry-level jobs, and a subsidy to help employ young people on projects which benefit the community or the environment.

But we have been faced with a very fast growth in unemployment - we went from 3.5% to nearly 6% unemployment in a little over a year. 

A key element of our success is the fact that our employment agency combines benefit payment and job search functions in the one organisation. I know that in many other countries, unemployed people must be receiving a benefit before they can seek help from the public employment service.

We do it differently in New Zealand, and we call it a "triage" system. Basically we ‘triage‘ as many people as possible into jobs before they sign onto welfare.  

 Unemployed people who walk in must do a full one-on-one interview to explore work or other non-benefit options before being considered for a benefit.

Through this process, a high proportion of those who visit the office leave without actually signing up for a benefit, having agreed to take on a job, or training, or something other than a benefit.

This unrelenting focus on work-first is making a huge difference for us.   While it has slowed a little due to the economic situation, we are keeping about 30% of people off welfare - and it was up at 33.5% last month. 

And that strategy is giving us the resources to deal with the huge increase in unemployment, while increasing the focus on those long-term unemployed people I talked about earlier.

Helping us to place those people in work is an increased focus on squeezing every last vacancy out of our labour market.

Last month around 1000 new vacancies each week were available for unemployed people, compared with just over 600 a year earlier. This shows the success we're having in increasing our share of the job vacancies market.

Some of this has been achieved by forming partnerships with industry organisations so that unemployed people can be trained to prepare them for work in those industries. 80 of these partnerships have been formed, covering 48,000 employers in areas like retail, hospitality and construction.

A good example of how these partnerships work is in the aged care and disability support sector - this is a large and growing area because of our ageing population. We are actively purchasing training for this sector so that unemployed people can gain the skills needed to work with elderly and disabled people.

We are continuing to pursue an active welfare system because we believe this is the key to reducing poverty. So despite increasing unemployment, we are discouraging benefit dependency and encouraging people into work.

So to summarise, I am confident that my ministry has the ability to manage the unemployment numbers back down as the economy gains strength.

But the challenge we face is how to shift that solid core of long term unemployed people into work.

I think we would all agree that long-term unemployment is not desirable for any individual or their country. It's destroys souls and it damages society. 

However we face an attitudinal change if we are to successfully tackle the long-term problems and to restore the work ethic across the cohort. 

The great innovator Thomas Edison summed up the problem ...

"Opportunity is missed by most people because it is dressed in overalls and looks like work."

Thank you.