Labour’s income insurance proposal

The Labour government has published a more detailed proposal about an income insurance scheme that was first signaled in Budget 2021. This would add to the ACC’s personal injury scheme to cover income lost due to redundancy or due to illnesses not already covered by ACC. The key aspects to it are income support on 80% of previous earnings (with a 6 month max.) and a retraining programme.

Labour’s proposal was immediately attacked from both sides. National says this is a new tax that we can’t afford. Indeed, the proposed levy would be $1.39 per $100 of your pay (plus employers’ contributions). This is in addition to the current ACC levy on earners. It’s up to you to decide (not the National Party) if you consider this ‘affordable’ in return for wider income insurance cover and retraining if you lose your job. Employers actually quite like the idea because it would make it easier for them to initiate redundancy processes and terminate jobs, as the state would be covering the costs of redundancy compensation.

From the other side, the Greens have attacked the proposal because it ‘bakes in’ the income equalities that exist in the labour market by paying out at 80% of previous earnings, rather than a needs-based rate, as in the welfare system. Note that a lot of workers who lose their jobs end up with no financial support from government at all, as the mean-testing for welfare-benefit eligibility includes spouse’s income.

Neither the Greens nor National have anything constructive to say about the retraining and re-employment services that will be provided – which is the really important aspect of the proposed scheme. From a worker’s point of view, it does mean a new levy to cover the risk of losing your job(s), but it also means income protection and retraining at a much lower price than you’d pay to a private insurer. Do you want this or not?

Before the present detailed proposal was released, I published an article on the idea here, if you want to read more.