GUEST BLOG: Ian Powell – Proposed Income Insurance Scheme


The proposed ‘New Zealand Income Insurance Scheme’ (‘the scheme’) has attracted strong debate among the more left-wing and liberal groupings, within New Zealand-Aotearoa.

This debate should be seen as a positive rather than negative tension because of the opportunity to consider and learn from the implications and sharpen advocacy.

The proposed scheme is outlined in a report jointly developed by the Government, Business New Zealand and Council of Trade Unions (CTU) published on 2 February. They describe it as “a new way of better protecting workers and the economy”:    income insurance scheme.

It has been strongly opposed by economist Susan St John, Associate Professor at the University of Auckland and spokesperson for the Child Poverty Action Group, in an article published by Newsroom (13 February):  Questioning income insurance.

On the other hand, on 9 February, Stuff published a powerful defence from women union leaders Rachel Mackintosh (CTU Vice President & E tū Assistant National Secretary), Kerry Davies (Public Service Association Co-National Secretary), Laures Park (NZ Educational Institute Matua Takawaenga), Glenda Alexander (NZ Nurses Organisation Industrial Services Manager), and Sandra Grey (National Secretary, Tertiary Education Union): Scheme good for workers and country.

The problem it is trying to solve

So is this scheme is a solution looking for a problem or the other way around? It is clearly the latter. Every year, more than 100,000 New Zealanders are made redundant, laid off, or have to stop working because of a health condition or disability.

Around 64% of New Zealand’s 5 million population are between 14 and 65 years (around 3.2 million). In other words, give or take, around 3% of the workforce every year lose their jobs for reasons other than dismissal.

This is a sizeable number of workers thrown annually into vulnerability. But their protections are few. Some are entitled to redundancy payments usually if they are covered by a collective employment agreement but this is a small number (and not guaranteed if the business goes under). Some, not all, become eligible for welfare benefits. A relatively small number of high income earners might have income protection.

TDB Recommends

Proposed solution

As proposed, the scheme will support workers with 80% of their income for up to 7 months if they lose their job through no fault of their own. The intent is to give them the time and financial security to find a good job that matches their skills, needs and aspirations, or retrain for a new career.

Some of these over 100,000 workers each year will have a health condition or disability forcing them to stop working or reduce their hours, be supported to take time off work to recover fully, work reduced hours, or retrain.

Funding the scheme would be like ACC for accidents. It will be funded by levies on wages and salaries, with both workers and employers contributing.

The scheme’s key features are:

  • broad coverage for different working arrangements;
  • coverage for job losses due to redundancy, layoffs, health conditions and disabilities;
  • a four-week notice period and four-week payment, at 80% of salary, from employers;
  • a further 6 months of financial support from the scheme, at 80% of wages or a salary (capped at 80% of $130,911);
  • option to extend support for up to 12 months for training and rehabilitation;
  • a case management service to support people’s return to work;
  • administered by ACC;
  • funded by levies on wages and salaries, with both workers and employers paying an estimated 1.39% each; and
  • workers would become eligible after 6 months of levy contributions in the previous 18 months.

Genesis of income insurance scheme

Although some of the construct of the scheme has origins in the social insurance approach to welfare in western Europe (eroded since the 1990s). But the immediate genesis can be found in the 2019 publication of the Welfare Expert Advisory Group Report (WEAG): Whakamana Tāngata (Restoring Dignity to Social Security in New Zealand) Welfare Expert Advisory Group Report.

WEAG Report recommended revamped labour market including income protection


The Report observed that:

Support for displaced workers is particularly weak. Compared with OECD best practice, New Zealand has an inadequate system of dealing with job loss, redundancies and labour market shocks (OECD, 2017). Redundancy pay is not required by law, the stand-down provisions between work and benefit entitlement see many workers and families plunged into poverty. In addition, eligibility for income support is based on family income, and workers may be ineligible for income support following job loss and redundancy if they have employed partners. This means a household can find itself losing more than half its income due to one partner losing their job but having no income support available through the benefit system. For many low-wage families, two incomes are required to get by and cover rent and other living costs. To alleviate this problem, the Welfare Expert Advisory Group recommends that workers made redundant or who lose their jobs should be entitled to welfare support for 6 months without regard to their partner’s income (up to some cap…) This would help families affected by redundancy where they have no (or too little) redundancy entitlement.

The Report went on to recommend (36) a revamped active labour market including employment and training policies across government to make them more coherent and effective. This would be the overall responsibility of the Ministry of Social Development (MSD).

Then, in more detail, the Report recommended

Establish a short-term (for example, 6 months) benefit for partnered people who lose their jobs or incomes (for example, due to redundancy) through an earnings disregard of their partner’s income (up to a cap).

Essentially the Government-Business NZ-CTU scheme builds on the Report and fleshes it out more, but shifts the emphasis from income protection to income insurance and its administration from MSD to ACC.

The Criticisms

Susan St. John opens her Newsroom article (linked above) with her view that “The welfare state should ensure there is always adequate income in the event of loss of employment, ill-health, old age, childhood and at other stages of citizen’s lives.”

Economist Associate Professor Susan St. John: aspirational only; other measures better


She then observes that “New Zealand achieves this ideal with varying degrees of success.” For her the most successful part of our welfare state is the universal flat-rate pension provided by the New Zealand Superannuation Scheme (covering over 700,000 people and increasing each year).

Her beef is that the scheme’s discussion document is highly aspirational but with little detail over how it work to the benefit of those to whom it is targeted. She questions the role of ACC in running the scheme both from the point of its capacity to do so and to manage the contradiction between accident compensation being based on ‘no fault’ (including when it is the worker’s fault) and social insurance requiring that loss of the job is ‘no fault of the worker’.

St. John warns against the complexity of the scheme and instead proposes the alternative of reforming benefits (increasing levels and accessibility); extending access of all seriously disabled without regard to cause to the level of rehabilitation and medical treatment currently provided only to accident victims; and fully paying tax credits for children in all low-income families.

The defence

The strong response of Rachel Mackintosh et al (see above link) is firm. Her colleagues represent unions primarily involved in the state sector. But, as well as being CTU Vice President, Mackintosh is also a senior leader of Aotearoa’s largest private sector union. This is significant.

Rachel Mackintosh: scheme will revolutionise support for workers


They describe the scheme as revolutionising support for workers linking it to the impact of unexpected economic change. In noting that protecting workers from a sudden loss in income is something done well in New Zealand, they cite the absence of statutory redundancy, statutory income protection, or statutory notice periods.

Further, they assert that the scheme “will most support those workers most likely to be made redundant”  who are most like to be workers on low income including women, young people, Māori, and Pasifika.

These union leaders also focus on the importance of economic security, training opportunities and wrap-around support. They note the experience of the “painful restructuring of the 1980s” and the effects on workers of the international economic recession of the late 2000s. Such a scheme, they argue, would protected workers during these times of upheaval and help the economy to regenerate.

What to make of it all

Susan St. John makes some very telling critiques that deserve serious consideration and following through on. The difficulty with her cogent advocacy is that it requires a transformational left-wing  government to follow their direction and that is exactly what this government is not.

This government is incremental at best, not transformational. It is social liberal and technocratic (leading it to be elitist) rather than left-wing. To the extent that endeavours to be transformational it focusses on restructuring through centralisation as well described by Max Rushbrooke in Stuff (23 April): Centralising restructuring isn’t transformational.

Unfortunately the Government’s horse is on a different political track to the horses of St. John and Rusbrooke

Curative and preventive

St. John is right to highlight the failure of this government to implement the kinds of measures they highlight that would help bring many people out of poverty. But there are two equally critical dimensions to addressing poverty – curative and preventive.

The scheme, which has origins in the WEAG Report, falls within the latter dimension. Keeping 100,000 people each year out of poverty can’t be sneezed at. It is significant and potentially transformational for them.

The same applies to workers who would otherwise be victims of economic shocks. These are not annual events but they do happen. The transition of the economy from dependence on fossil fuels and other climate change threats pose financial risk for these workers.

Improving the scheme

But the scheme does need improvement. It would be better to call it, as WEAG suggests, income protection because of the sharper focus on protection and the negative connotations of insurance. Even better, call it ‘employment protection’. Shifting its administration from ACC to MSD should be considered.

I’m troubled by the fact that, unlike superannuation, the scheme links payment to income levels (subject to the cap) rather than a flat rate. The term insurance takes the scheme down this path.

The rationalisation for this income levels linkage appears to be that is what income insurance is and that people tend to spend according to their income. Further, higher income earners would have contributed more to the fund in absolute terms.

There is truth in this as far as it goes but a flat rate has a stronger equity dimension. The scheme is more about protection than equity but these should not be seen as alternatives. The problem with a flat rate is that New Zealand has a low wage economy and it would be odd to have a scheme payment higher than some wages.

Nevertheless, equity is territory for further work including knowing more about the incomes of the over 100,000 that the scheme is targeted at. Whether it is a flat rate or not, however, it is time than the living wage becomes the minimum wage. This might help consideration of a superannuation-type flat rate or variant of it.

It will be also important that the aspirational retraining envisaged in the scheme has a strong material mandatory and entitlement basis. Mandating and entitling are not synonymous with the potential negativity of prescription. Accessible, relevant and quality retraining is as critical to the scheme’s success as income protection is.

Further actions are justified (more than just increasing the minimum wage to the living wage). These includes legislating for a minimum redundancy entitlement (the lack of a legislative entitlements risks the scheme becoming an excuse for employers not to provide redundancy) and significantly improving the accessibility and levels of welfare benefits. The CTU should be more on the front foot advocating these measures.

But these actions are not a justification for opposing the scheme. The scheme’s both transformational and poverty preventive potential is commendable. It is a good achievement as a starting point for further development.

This is especially the case when working with a largely non-transformational government. The buy-in of Business NZ helps ensure the scheme’s endurance in the event of a change to a government more of the right.

Blending revolutionary heart with a strategically pragmatic brain?

In over 35 years working for unions I negotiated over 100 collective agreements (including predecessors) through collective bargaining (possibly a record of some sort). Each one was an improvement of what it replace and each one did not achieve all that I wanted. But each settlement provided a stepping stone to the next negotiation.

I like to think I have a revolutionary heart which interacts with a strategically pragmatic brain (a contestable view).

This is the context in which I see this scheme especially if it replaces its insurance focus with income or employment protection.

Ian Powell was Executive Director of the Association of Salaried Medical Specialists, the professional union representing senior doctors and dentists in New Zealand, for over 30 years, until December 2019. He is now a health systems, labour market, and political commentator living in the small river estuary community of Otaihanga (the place by the tide). First published at Political Bytes


  1. Keith Rankin offers some historical context for Grant Robertson’s unemployment/income insurance. He puts it in the same category as Roger Douglas’s contributory superannuation scheme of the 1970s (mercifully slain by Robert Muldoon, then reborn decades later as KiwiSaver), as the Accident Compensation fund also of the 1970s, of which unemployment insurance will be an extension, and as Working for Families, which replaced the universal family benefit available to employed and unemployed alike:

  2. More money patches! Ins, heating money, etc, etc. Classical, neoclassical, neoliberal economics are proven failures. If economics were a science it would accept that as they have failures, the theory would be rejected. If people get old and frail before they die, they can only look back and hopefully feel their life was worthwhile. This need fails too many people. As work/job/employment should be seen as a right, if business cant provide a useful worthwhile job with a living wage, then we through our government should provide that. Lost time as unemployed can never be recovered. The government rather than use money patching should provide guaranteed employment with a living wage. Good jobs provide social benefits, working together for a useful purpose benefits the worker. Good jobs provide physical activity that is essential for good health. Good jobs provide mental activity which benefit our brains. Good jobs provide a purpose for living. There must be plenty of mature experienced unemployed that could be leaders with groups of young people not yet employed. These groups should be employed for public purposes that do not undermine commercial activities. Such work needs to have variety even if only clearing roadsides, parks and public property, trapping noxious animals, clearing wilding pines and noxious introduced plants. Exploited labour may be attracted to this work which will be safe and worthwhile. Business will benefit with these people having money and be new customers. If I were a paraplegic, then I would like to be usefully used and have social contact with someone who brings me useful work to do, only if phoning people from a provided list for some useful function. We know there are things of a social purpose out there because of the existence of many voluntary organisations at work. Money patches are not the way to a good society with some of them being quite demeaning.

    • If we are to reconcile the pros and cons of Dr Susan Saint John and Rachel McIntosh then it follows that there should be a public insurance scheme that leverages public hospitals and so on, and a private insurance scheme that leverages private hospitals and so on.

      Public being funded out of taxes so all back to work stuff so to speak.

      The Private insurance could be where people get sex changes or sports stars needing knee reconstructions or what ever. Oh and better food, perhaps even military health care.

      The issue is Beef prices jumped $5 higher generally in the last year or so and for a number of reasons one being that the farming incentives has produced some farms we probably shouldn’t have done in a warming climate.

      Far from leaving tens or hundreds of thousands of kiwis out of a job and destitute, the regulatory landscape oigjt to promote the values and ideals that make up an MMP environment.

  3. 80percent of lowpaid/partime/gig wages is nowt….once again ‘socialism for the bourgeoisie’ haven’t we had enough of that?

    treating disability as a thing rather than an evidential process would be a step forward, just like an accident disability should be an automatic ‘no fault’ system based on needs not the ability(well inability actually)to jump through hoops.
    They need to sack some winz managers who have a screwed up belief system no matter the legislation they will see to it beneficiaries are humiliated…’s their mindset we need to be rid of them.

  4. The principle of the Income Insurance Scheme is consistent with the principle of the Accident Compensation Scheme, the KiwiSaver Scheme and virtually all the policies of successive Labour governments since 1984. So it should come as no surprise.
    But we still need to properly understand its implications.
    Since 1972 Labour Party theoreticians (notably Sir Keith Sinclair in the early days) have been struggling with the problems (from their perspective) caused by New Zealand’s tradition of egalitarianism. Their goal has been to create a less equal and therefore more just and efficient society. Once that goal had been largely achieved through the economic reforms of the Lange/Douglas Labour government it became necessary to attend to the somewhat shaky foundations of inequality.
    Misfortunes such as accident, old age and unemployment tended to bring all down to the same basic level, and therefore provided all with a continuing incentive to keep that basic level above the poverty line thus subverting the ideal of an unequal society.
    Hence the Accident Compensation Scheme, the KiwiSaver Scheme and now Income Insurance were necessary “fixes” if New Zealand and the Labour left, including the public sector unions, were to keep egalitarianism at bay and protect the foundations of an unequal society.
    Universal superannuation (New Zealand Superannuation) remains a problem, but we can expect it to be phased out or wound down as the left energetically proceeds to complete the “unfinished business” of Sir Roger Douglas.
    However we can also be confident that the working people of Aotearoa will see exactly what the left is up to here, and will be making their own plans for their own future.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.