A Tsunami of layoffs will happen – the government must respond

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Working people in Aotearoa New Zealand will be hit by a Tsunami of layoffs over the next few months like has never been seen before in this country.

Hundreds of thousands of workers who are currently part of the 1.7 million workers receiving a wage support payment from the government will be fired.

This will be the decision of businesses large and small.

The only workers who are safe for the moment are those employed by the central government and those in public health and education services.

The big companies Unite Union deals with in the hospitality sector are refusing to apply for the wage subsidy that is available from next week for businesses that have lost 40% of their income. This is true for the Casino with a 1000 layoffs, hotel chains (MCK 1000), and cinema chains (400). Big retail chains like Bunnings and the Warehouse are announcing massive redundancies.

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This is being repeated across the entire economy. Air NZ, a company with a majority government ownership, announced 4000 layoffs and have said they will probably need to sack 2000 more to reduce their size in half. It expects tom return to profitability in only two years. No thought is given to whether New Zealand even wants a climate and job destroying airline carrying 13 million passengers in two years in order to achieve that goal.

All these companies are taking these steps to restore their profitability. This is the nature of the economic system we live under – capitalism.

Capitalism is a dog-eat-dog system based on the pursuit of profit. For private owners of capital, labour is only employed to enhance the profit of a particular enterprise or business. If that labour is no longer needed it is discharged without a second thought.

Because it is a competitive system, capitalism must produce winners and losers. Businesses that produce their goods in the cheapest way possible will get an advantage through higher profits. They will be able to capture a bigger share of the market. Eventually, there are too many goods being produced for the market and a crisis ensues that forces the closure of the excess capacity. Losers will be taken over by winners at a cheap price.

Workers are simply tools in the process. They can be replaced by machines at any point when that becomes more profitable. They may be unlucky to be employed in businesses with too much labour and too much capacity for the current market and they are forced to close. The workers will simply be tossed aside without a second thought no matter how many years of service they have given.  In New Zealand,, these workers can’t even access redundancy pay usually.

Capitalism also allows capitalists to accumulate vast wealth to be deployed across the globe in pursuit of the highest rate of profit. For instance, new technology can be introduced that for a time is able to command a very high price for their goods and a very high rate of profit. Capital will flow into these sectors until production and demand are more or less matched and only an average rate of profit can be expected. Often the passing of one phase to another is accompanied by a crisis of overproduction that drives out the least efficient. This has been true for the production of cellphones, for example over the last decade or so.

Capital operates in various forms. We have industrial capital (factories, mines), merchant capital (transport, warehousing) and finance capital (banking, insurance). Some capitalists operate in all three spheres whilst others specialise in one of the other. But profit is the sole motive.

Capital flows in search of profit and profit alone. It does not search to create jobs, be environmentally friendly, promote health, education and welfare unless that aids the search for profit. If a capitalist has a crisis of conscience about producing nuclear weapons or oil and wants to stop, they won’t shut down the oil well or bomb-making factory they will simply sell it at the best price they can and allow another owner of capital to take on that painful duty.Finance capital plays a central role in allowing expansion to occur through the provision and expansion of credit. They are often in the background organising and disciplining this chaotic accumulation process.

For very small businesses like a restaurant, there will also be an element of personal commitment to the trade or profession. But in the end, the presence or the absence of profit will decide its fate.

It is possible for society to make a choice as to whether their economy is ruled by commodity production for profit or not. Even when commodity production is dominant, like New Zealand, some sectors like education and health care can be done as a not-for-profit service. In the United States, by contrast, health care and much of education remain in the for-profit sphere of commodity production and sale. This is true even though, for the US, this makes the system vastly less efficient and cost-effective than a largely state-provided system as we have in New Zealand.

As a society, we could make the decision to run any sector we wanted as a publicly provided service. Currently, we have three main cinema chains that compete with each other, for example. If this industry was taken over by the government and run as a public service, we could ensure that all the blockbusters were shown, but also that every centre had a good range of documentaries, art films, a socially conscious cinema that is less profitable but is a necessary and useful part of our lives. Breaking even in terms of money would be enough rather than the desperate search for more and more profit from the lowest common denominator film. The cinema complexes could be part of a broader art and cultural centre in each town that gave access to communities to produce and perform their own film, music, dance other performing arts.

And, of course, workers in this industry could be paid a living wage and have the right to representation in management structures. Each community centre could be part of a range of non-profit community services and be governed by an elected board that empowered local communities rather than disempower them as at present.

Under capitalism, capitalists have no choice but to slash jobs during a crisis. If the did not do that, they would lose access to credit and soon be forced out of business. In a socialised economy that needs not be the case. Cuba’s economy is largely state-owned. Whatever criticisms people may have of Cuba, this allowed them to make choices to keep everyone employed, even if often only working nominally when the Soviet Union collapsed and Cuba lost most of its trade partners. Their economy declined by 25%, rationing was imposed, but everyone was kept employed. Foreign income to buy necessary goods was lost and real stress was imposed on Cuban society. The US escalated its economic war to aggravate the hardship. The average calorie intake declined significantly but no one starved. Education and health services actually expanded. Cuba became a medical superpower supplying thousands of doctors around the world whenever help was requested. This includes doctors across many Pacific Islands and Timor in our own region. Cuba made choices to save the people because they were able to do so. Today they have been able to use that experience to combat and defeat the economic and health impacts of the Covid virus in a similar manner.

New Zealand does not have a socialist economy, but there are some immediate things we need to do to protect working people during this crisis. The government can’t and won’t stop capitalists laying off workers. It appears they won’t even do that to Air New Zealand which is a company they have majority ownership of. The Air NZ board chief executive just talks about sacking staff to return to profitability as soon as possible.

The most important first step form the government is to have a more generous system of income support for those already unemployed or being made unemployed as a consequence of the crisis.

Two tax-free Covid 19 Income Relief Payments (CRIP) have been established for those losing their jobs after March 1. This is a tax-free $490 a week payment for people working 30 or hours a week and $250 for those working 15-29 hours a week. The pluses are that the payment is not affected by marital status if your partner earns less than $100,000. It also applies to people regardless of age unlike the current benefit with a punitive and discriminatory reduction from $250 to $213 net for 18-24-year-olds. It is also tax-free. But we now have another complication. If a person has a child and is in a relationship with someone in work they can still access the IWTC payment of $75 a week and the CRIP does not even count as income for Working for Families abatement purposes. However if you are single and on the CRIP you lose access to the IWTC because in order to access the CRIP you cannot have any paid work- hence cannot have the IWTC. Ironically if you are on the much lower jobseekers or sole parent support even if you re working 20 hours a week you still cant have the IWTC. (Thanks to Susan St John for clarifying this stupidity for me)

If people were working less than 15 hours a week they have to apply for a normal unemployment benefit from WINZ with an after-tax value of $250 which is similar to the part-time rate for the new income support payment for those aged 25 plus.

Beneficiaries can also access the weekly winter energy payment of $40.91 for singles and $63.64 for couples. This payment also goes to national superannuation recipients.

The government has attracted a lot of criticism, including from me, for creating two classes of beneficiary – those who lost their jobs before March 1 and after March 1. The level of support is radically higher for full-time workers and there are fewer sanctions for having a partner and they are able to access the working for families tax credit. There is currently also the absurd situation that a person can lose the entire payment if the get any kind of work.

The government deserves credit for going fast to establish the income support systems for people in work to encourage all employers to maintain the employment relationship during the first stages of the crisis and lockdowns. Employers with 1.7m workers were supported. It was easily accessible and 12 weeks were paid upfront which assisted businesses with cash flow during the immediate seizing up of credit markets at the beginning of the crisis.

Unlike the USA, the UK and Australia the payments were also made accessible for workers on visas, self-employed and casual workers. This was much fairer and comprehensive.

The new 12-week income support payment and the new wage subsidy for those with a 40% loss of business, will end just at the time of the election is scheduled for on September 19. Come election day the whole society will be looking for the longer-term solutions, rather than temporary band-aids.

Hundreds of thousands of people will have lost lose their jobs and the support payment will be their only means of support.

In the first instance, we need a tax-free payment equal to the current full-time Covid Relief Payment of $490 a week available for all the unemployed. This should remain an individual entitlement and be extended to current beneficiary recipients.

We need a new tax system that incentivises people who are unemployed to get work or set up small businesses, become an artist or performer, or volunteer in some way. Workers may choose to job share as well. No one getting the new income support payment should lose any income until they are getting at least the living wage – currently $800 gross weekly or $650 net. A tax-free threshold of $8500 would allow that to happen.

Those receiving a universal income payment should also have all additional income over $8500 taxed at a special rate. It could be 40 cents in the dollar, for example, and any additional benefit from the $490 universal payment would be eliminated once someone was earning $72,200, which is a little above the average wage. This could even be merged with the current national superannuation payment which is similar to the current tax-free payment of $490 once the energy supplement is included.

This new support system would have to be part of a more equitable tax system that targetted all forms of income not just wages. Wealth. In particular, including accumulated wealth must be brought into the tax net.

We also need a strengthening of the public provision of services that are not under the thumb of a perpetual-growth for-profit commodity production system. We need to radically expand the provision of health care and education and bring it all into the public sphere, including rest homes and preschool education which was effectively privatised in the past.

We need to empower communities to reconnect with each other and be given the resources needed to ensure no one is isolated, cold, hungry, lonely, without access to work, leisure, education and culture.

Tens of billions of dollars have been given to employers by the government to pass onto workers. This has kept them in business when they may well have collapsed without that support as a consequence of the merging of a pandemic crisis with a normal cyclical capitalist crisis of overproduction that we see every decade or so.

A global cyclical crisis was unfolding already in late 2019 and early 2020 which was particularly affecting durable goods like automobiles which were already effectively in recession. Then there was a credit crisis in mid-September 2019 in what is called the “Repo market” which required the US Federal Reserve to intervene on a massive scale. When the Repo market freezes the system is in meltdown as it is saying that no capitalist is willing to trust another when making trades in a daily market worth trillions of dollars. It happened again in March this year. The Covid virus simply enveloped and accelerated the crisis. It was at that point that the US Fed said it would spend trillions of dollars to buy any form of debt on offer, including corporate debt for the first time, to keep the market liquid. The gyrating stock market simply reflects the initial crisis, then the Federal Reserve (and other Central Bank action almost everywhere in the world) rescue and soon we will have a crisis again.

The shockwaves of this crisis have sent unemployment in the US to around 20% of the workforce, the UK and European economies are nosediving, Japan is paralysed and Covid 19 remains uncontrolled in most of the world.

We will most likely be seeing a capitalist crisis on a scale as great or even greater than the Great Depression of the1930s when unemployment hit 25% over some years in most major capitalist economies.

To support the radically reformed and more generous income support package, to have a more equitable tax system that targetted all forms of income not just wages. Wealth, in particular, including accumulated wealth must be brought into the tax net.

We would also need to prioritise the provision of publicly provided services as of right including access to quality education and health care, new welfare agencies for the vulnerable, as well as access to cheap power, public transport and state housing.

If private for-profit businesses collapse their assets should be taken over by the state without compensation and repurposed where possible for socially useful and necessary services or goods. We don’t need any more rescues without guarantees around workers’ rights and pay and radical curbs on executive and shareholder compensation in the future.

The state should also step in with the provision of work directly in socially useful transformative economic programmes that do not seek to exploit either labour or the planet for private profit. We need a Green New Deal that puts people before profit. This would include a government guarantee of the right to a job for a living wage for everyone who wants one.

The government has almost boxed itself into a position where the need to have a universal income support system ready for an announcement before the election on becomes obvious to everyone. All the current support systems are due to expire around that time. By then the current levels of unemployment will be between 10 and 20 percent of the working population. Timidity and half measures on the big questions around climate change, employment and income inequality will no longer be acceptable.

13 COMMENTS

  1. Well said Mike. It takes a careful reading of your piece because you have packed a lot into it.

    For example; “Hundreds of thousands of people will have lost lose their jobs and the support payment will be their only means of support. In the first instance, we need a tax-free payment equal to the current full-time Covid Relief Payment of $490 a week available for all the unemployed. This should remain an individual entitlement and be extended to current beneficiary recipients.”

    “individual entitlement” means in effect that WINZ/MSD would have to drop their sadistic witch hunt methods based on people’s relationships with others, or do you see IRD handling such a payment? That would make a lot of sense.

  2. Please bear with…
    “We need to empower communities to reconnect with each other and be given the resources needed to ensure no one is isolated, cold, hungry, lonely, without access to work, leisure, education and culture.”
    You just described farmers, farm workers and small towns who service farming communities and you know about farmers, right? They’re the ones who grow the foods we eat and the clothing fibres we weave in to clothing and who, as if by some miracle, produce an abundance of materials and foods to export so a nice little fellow in a pretty suit and driven about in a BMW can apportion foreign revenues earned to the fancy cities where the fancy people live false-narrative lives in busy irrelevance.
    I drove through Invercargill recently for a project I’m working on and as I did so, I drove past the massive wool stores packed to the roof with bales of wool. ‘Wright Stevenson’s Ltd was painted along one such building in large, proud lettering though now faded and peeling.
    The wool in those buildings is no longer of the farmers silly little concerns. The farmers who farmed the sheep from which the wool was shorn have their +/- $2.00 a kilo so bye bye suckers. Back to work.
    Now, slither into the Merc and head to any retailer and buy a pair of $40.00 socks, a $140.00 singlet, a $300.00+ plus jersey and just recently I bought a medium weight winter coat which has a thin lining of wool but the rest is a slavers cotton with a plastic Chinese made zipper. Retail cost? $230.00. Materials costs? About $10 if I were being generous.
    The deathly swindle that is our primary industry needs exposing. It needs to be dragged out into the public domain and stripped bare for all to see.
    There’s no need for AO/NZ to be anxious at past and present recent events. We’re loaded. We have mountains of foods, sundry vital raw materials including LPG, natural gas, timbers, concrete and highly trained person power and all and every luxury you can name. We could as easily watch on as the rest of the world slides down into deep shit as we’ve just done by holing up in our paradise while a deadly nasty little fucker of a virus has the rest of the world quivering in terror.
    The problem with we AO/NZ’ers sits with an institutionalised con job involving farmers and farming spanning generations . The swindles are so deeply entrenched within our very heart and soul that it’s invisible because of its size and scope.
    We AO/NZ’ers have the very most enviable market advantages imaginable to enable is to profit from exportation. ( Aye Boys? )
    We have the very most skilled, modern, and tech savvy farmers in the world.
    We have a small urban population on a large land area surrounded by very fishy oceans.
    We can get our product to a winter bound northern hemisphere.
    Our customer base must eat and we produce food.
    Let me write that again lest some of you missed the importance of that sentence…
    We make food. Right? Got that? Patronising? Yep. And that’ll learn ya.
    Next? Can you guess what else we humans must do?
    Buy a new black shiny V8 4×4? Nope.
    Get a $200 hair cut? Nope.
    Buy a pet Labraspoodledoodlewirehairdyapperscratchy ? Nope. Not unless you intend to pop it on the barbi.
    What must all humans do?
    We must eat. There’s your answer.
    So then, why are we worried? We’re rich as fuck and we have poverty? Homelessness? People dressed in The Warehouse plasti-clothing?
    WTF? Is a question many of you should be asking.
    P.S. The Greens, right?
    While farmers are loathed and abhorred for allowing their animals to piss and shit ( Like, we don’t) The Greens could be taking a keen interest in encouraging our farmers to take a more sustainable, holistic and regenerative approach to them supplying us with our food, but no.
    Why is that, do you think? Could it be to do with keeping the institutionalised lies hidden away?
    Read and learn.
    If you don’t need to eat then don’t bother.
    Regenerative agriculture: How a dairy farmer learned to trust his instincts
    https://www.rnz.co.nz/news/country/416143/regenerative-agriculture-how-a-dairy-farmer-learned-to-trust-his-instincts
    Americans turn to home-farming as they fear for their food supply
    “You’ve suddenly got a middle class looking at being food-insecure.”
    “In all this craziness, hopefully something positive will come out. Small farmers are the soul of this country and every country. This is not a machine of mass-production, it’s a livelihood, and I hope the world is catching up on that.”
    https://www.theguardian.com/world/2020/jun/06/food-insecure-americans-are-home-farming-as-covid-wreaks-havoc-on-agricultural-chain
    Well, I know who’s caught up on [that]
    The dirty little foreign banksters, that’s who. I see a Japanese company is trying to buy ANZ’s UDC for $762 M
    Must still be ‘good coin’ to make out of us then. Aye jonky?
    https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12336561

    • +1 Countryboy – especially why are we selling off the farm instead of the milk?

      “The deathly swindle that is our primary industry needs exposing. It needs to be dragged out into the public domain and stripped bare for all to see.
      There’s no need for AO/NZ to be anxious at past and present recent events. We’re loaded. We have mountains of foods, sundry vital raw materials including LPG, natural gas, timbers, concrete and highly trained person power and all and every luxury you can name. We could as easily watch on as the rest of the world slides down into deep shit as we’ve just done by holing up in our paradise while a deadly nasty little fucker of a virus has the rest of the world quivering in terror.
      The problem with we AO/NZ’ers sits with an institutionalised con job involving farmers and farming spanning generations . The swindles are so deeply entrenched within our very heart and soul that it’s invisible because of its size and scope.
      We AO/NZ’ers have the very most enviable market advantages imaginable to enable is to profit from exportation. ( Aye Boys? )
      We have the very most skilled, modern, and tech savvy farmers in the world.
      We have a small urban population on a large land area surrounded by very fishy oceans.”

  3. While I disagree with the solution I am pleasantly surprised some are acknowledging the economic sh*t sandwich coming our way and how the issues it will create will dwarf the health based crisis.

    The irony is the hardest hit won’t be the workers – these jobs will come back when demand increases again. It will more be middle management corporate roles – the very people who have switched their allegiance to Labour over the past 90 days. The same that are petulantly selfish and vote based on who gives them the most for nothing. This will be the defining issue of the election – How Labour deals with this crowd that are used to taking home $1,250 a week, now taking home $450 a week and sometime reducing to $230 a week.

    Enjoy Jacinda

  4. The coming wave of lay offs will hurt, badly. Employers know exactly what to do with mass unemployment which is to cut wages and benefits and cut hours, and increase productivity because the bosses know that there is a pool of unemployed who can replace those working people on below minimum wages who have gotten fed up.

    I read Chris Trotters blog today and we do require a heavy handed government regulator. New Zealand’s capitalist entrepreneurs, politicians and bureaucrats have agreed to sell its manufacturing to China and this has created a very dangerous national myth of some how China being underhanded.

    Under the corona virus massive government spending will try and restart the industrial sector and the public will enjoy a few months of relative stability but as soon as that spending evaporates and everyone knows National enjoys cutting spending it will bring on the greatest economic depression of them all and New Zealand’s foreign investors will rush in demanding repayments. Once New Zealand’s creditors fore close on the country will signal the coming of an uncompromising populist political party.

    The conditions for a minor party to be given complete control of the government, bureaucracy and military are there and the Nazi like suppression, the secret police, mass surveillance and police brutality is also there too but the country must be directed to more noble goals and tackle the unemployment problem.

    Instead of trying to distort unemployment numbers we have to raise the minimum wage to a living wage there by bankrupting other shady tactics such as classifying migrant students as full time workers or forcing woman into domestic duties to artificially move statistics towards full employment. Anyone who assumes full control of the government will inherently know all the tricks.

    How ever strong the Nazi economy was growing because they kept faking employment numbers by engaging in massive deficit spending to finance there dreams and the New Zealand government today can issue bonds that avoid hyper inflation but that will only last for a time. The mind set of Nazi Germany was that if it invested in tanks and planes that it would all be repaid by the plunder of conquered land, and the Nazis had no plan to boost manufacturing outside of a war economy and had no plan to boost trade and with no economic plan for the entire country the national debt will ballon.

    As the New Zealand economy is not yet ready to face a Great Economic Depression we have had to fabricate a variety of excuses to justify selling out the country to foreign business interests and foreign powers and as a result New Zealand’s logistical deficiencies are ignored. New Zealand’s low wage economic base, relatively small industrial sector, and narrowly selective education system means a shortage of technical talent and places limits on the extent to which the New Zealand economy can imagine, commission, operate, and maintain complex machinery and economic systems.

  5. Businesses like The Warehouse group Bunning’s, Burger King and the Bauer group have shown.that we have lived a false economy for so long. Covid-19 has been used as an excuse when in reality the truth is now being shown that their business models are not sustainable. 25 years ago we destroyed industry in NZ for cheaper products. We are now paying the price for those decisions.

    • @ Funny how many of the low wage jobs being dumped seem to be our imported essential services jobs…. how is it, that these employers can demand more overseas labour only to dump them shortly after with zero consequences or risk controls, which government has allowed to happen. The ponzi has been out of control for years…

      Temporary worker numbers continue to grow

      “At 152,432, the number of temporary workers present in New Zealand on 30 June 2017 was 16 per cent higher than the year before.”

      “Occupations of people granted essential skills visas, per cent of total
      Food trades workers 8.9
      Hospitality, retail and service managers 7.1
      Labourers 17.6
      Community and Personal Service Workers 11.9
      Machinery Operators and Drivers 4.4
      Sales Workers 4.7
      Clerical and Administrative Workers 3.2
      Sub-total 57.8
      When the labourers make up 18 per cent of those getting Essential Skills visas, I think people might reasonably conclude we’ve been sold a pup. ”

      https://croakingcassandra.com/2018/03/31/work-visa-numbers-soar/

      Friend of mine went to work in the Middle East, they were expected to pay for their own health care and kids education that went along with the job….. unlike NZ where for every temp permit there can be love interests, present and future kids, relatives, parents that get free NZ services, care and voting and benefits on top of skills that could easily be filled by a kiwi citizen already in NZ like labouring, support workers and retail managers… with a country of 5 million, getting worse and worse skills into NZ, and more and more brain drain out of NZ, we can’t afford it…

  6. Mike
    just to clarify the bizarre situation with the CIRP and the IWTC: The IRD say
    “The Covid-19 Income Relief Payment (CIRP) doesn’t come under the definition of “income-tested benefit” which precludes a family from receiving the IWTC under s MD 8 of the Income Tax Act. This means that a two-carer family could continue to receive the IWTC if one was receiving the CIRP and the other was still in employment. For sole-carer households the payments are mutually exclusive – CIRP recipients cannot be employed and IWTC recipients must derive some income from employment, so someone could not satisfy both requirements at the same time. “

  7. We need to use this opportunity to distance our economy from China. The further we can remove ourselves from the influence of Dr Xivil’s sick and twisted CCP the better

  8. agree with what you say here.
    but CHECK THIS OUT: US economists who are publishing on alternatives to neoliberal economics.
    a JOB GUARANTEE policy – http://www.levyinstitute.org/publications/guaranteeing-employment-during-the-pandemic-and-beyond
    imagine that anyone unemployed can choose to become a public servant, paid a living wage same as other public servants and be available for training or work. perhaps managed at a regional or council level as a pool of workers that local communities could hire from. precarious and minimium wage jobs would disappear since people could go work for the public service for a living wage etc…..
    and for anyone who starts saying “we cant afford it” there is Modern Monetary Theory https://www.linkedin.com/pulse/tackling-deficit-myth-steven-hail/
    which seems to be Keynesian economics updated to work with the way the financial system operates now.
    im finding hope in those ideas…..

  9. The health system in NZ has ripped us off. All they have done is filled their own pockets. Elderly lives matter.

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