Social and economic goals of labour market policy
Hon Steve Maharey
Minister for Social Development and Employment
Speech notes
Introduction
Good morning
I would like to thank my colleague, Jim Anderton, for inviting me to address you.
The focus of this conference is regional economic development; but as Minister for Social Development and Employment, I am here to remind everyone that economic and social development are inseparable.
Social and economic development are interconnected
The days of seeing economic and social policy as conceptually removed are over. No longer do we have on the one hand economic growth goals and on the other hand social goals- we know these goals overlap and we know that achieving our objectives will require innovation, and a more inclusive way of doing business.
The most fundamental way of achieving positive social and economic outcomes is through the labour market and employment. This morning I am going to talk about three labour market imperatives for both economic and social development: participation, work life balance and productivity.
With New Zealand's unemployment rate the lowest in the developed world at 3.6 per cent, we may be tempted to pat ourselves on the backs and then sit on our hands and say "well we've solved that one".
This is totally incorrect.
Think about how unemployment is measured. It does not include those who are not available or looking for work.
Amongst this group of people who are not participating in the labour force there are many who do want to work but either face barriers to employment or lack of incentives to work.
Participation
This government sees participation as a priority - all who are willing to work, are able to work. We recognise too that getting people into work has an equity function - paid employment is the one of the most important mechanisms for sharing economic growth. Individuals benefit from economic growth through work, through getting a share of that growth by participating in the labour market.
This time of high economic growth is the perfect opportunity to get groups that have been marginalised in the labour market into work. We are addressing barriers to participation through improving skills, providing career services aimed at youth, mature people and people with disabilities. We are improving childcare to allow women who wish to participate the opportunity to do so. We are working on getting more people into better jobs. We are also talking to employers and encouraging them to consider employing groups of people that are underrepresented in the workforce.
There are a multitude of social benefits arising from people participating in the labour market. One specific example is child well-being, with research showing better achievement for children who have a parent in the workplace.
It's the government's responsibility to make it worthwhile to participate. In particular we need to make sure that beneficiaries don't lose income by entering work. We have to make work pay. This is a key goal of our Working for Families package which provides more incentives for working families.
We also have to look at the quality and sustainability of work that is provided to stop the disillusioning poor work/ no work cycle.
But for some people these initiatives will not be enough. They will require assistance at an even more fundamental level. We cannot expect people to participate in the economy without addressing underlying social issues such as family violence and drug abuse.
Economic costs of social problems
In New Zealand, half of all female homicides are the result of domestic violence. Ten children are killed every year in acts of domestic violence. The non-financial cost of family violence is inestimable. The financial cost of family violence in New Zealand is between four and five billion dollars. And this is a conservative estimate calculated ten years ago. This cost is partially comprised of greater use of health services and police and court time. But it also includes loss of income and work for employees due to family violence.
Drug abuse is another area where it is easy to see how a social problem translates into an economic problem.
A manager at a major metropolitan council recently reported that following the introduction of drug testing for jobs which required high safety standards, 60% of candidates who got through the initial interview process could not be employed because they tested positive to either marijuana or meth amphetamines.
What we're finding is that the more we delve into seemingly obvious problems in an effort to solve them, the more they reveal themselves to have extremely complex socio-economic connections. Importantly, they also reveal gaps in our understanding and the importance of not only a whole of government approach, but also of involving a range of stakeholders from the private and non-governmental sectors in trying to untangle these issues.
For example, when we embarked on the PATHS project, which aims to remove, reduce, or manage the health problems that can prevent a person from working, we thought we would be providing hip replacements and cataract removals. Instead we found that muscular and skeletal problems were extremely common. On further investigation we found out why- this was due to obesity.
One in five New Zealand adults is obese. If the current trend continues, this number will be closer to one in three in just five years' time. There are also significant social equity issues related to obesity, with higher rates of Maori and Pacific Islanders suffering obesity. Currently, half of Pacific Island women are obese. Obesity is a risk factor for many chronic diseases, and more than 1,000 New Zealanders dying each year from obesity-related diseases: this is double the annual road toll.
In light of this, it is particularly absurd that eating fries at a fast-food take-out is recorded as economic "growth" and progress, while the time we spend cooking our own- hopefully more nutritious- meal has no value in our conventional measures of progress. This highlights the dangers of measures of progress based solely on the GDP. The GDP records the value only of paid work.
If we hire someone to clean house, the GDP goes up. Pay a stranger to look after your child, and the economy grows. Take care of your own child, and it has no value in our measures of progress. In fact, much of what is recorded as "growth" is simply a shift from the unpaid household economy to the market economy.
A further limitation of the GDP measure is that it gives no value to equity - the economy can grow as inequality and poverty increase. Indicators are very powerful- what we measure reflects what we value as a society and determines what makes it onto the policy agenda.
Flexibility and new thinking on participation
Let me move on to the second point that I would like to make with regard to the labour market. We need to divide work up differently. We need to share it amongst more people and be responsive to individual needs in order to ensure that balance between paid work and life outside of this work suits each individual. We need this flexibility and responsiveness in the workplace to maximise positive social impacts of increased participation such as the value of spending time with family.
For some people who want to join the labour force, flexible or part time work hours will be a prerequisite to participation.
Some people gain immense satisfaction from working long hours. There will be others who require more leisure time or time for elder or child care. People should be able to make choices that suit their lifestyles.
It is a fact that New Zealanders, on average, tend to work very long hours. Amongst OECD countries our hours are second only to those of Japan. In some cases, these long hours can result in poor social outcomes- for example poor health or a decline in social capital - that is, the weakening of the links that we have with family, friends, and our communities. Many people would relish the opportunity to work fewer hours. Fathers seem to be one of these groups.
According to an EEO Trust survey, eighty per cent of fathers wish they could spend more time with their children. Not only then would reduced or more flexible work hours benefit fathers, but research shows that children who spend time with their fathers have better educational outcomes in later life.
Increasing productivity
Naturally, most of us would prefer to achieve work life balance without sacrificing income. And you will be pleased to know that this is entirely possible provided- and this brings me to my third point- that we increase productivity. In other words, we need to increase the value of what we produce so that can achieve growth without increasing the hours worked by individuals.
Productivity growth is one area in which New Zealand is not doing particularly well- we rank towards the bottom of the list of OECD countries. The good news is that we have plenty of opportunity for gain, we have a work plan in place and productivity gains can be achieved in a relatively short space of time.
The bottom line of increased productivity is more income. Let me give you an example:
The New Zealand average output per hour worked is currently $33,16 (I'm using figures from the June 2004 quarter).
A 2% growth in employment and, in line with our work/life balance objectives, no growth in hours worked per employee, would see about 40,000 new employees enter the workforce, and a total of 3,677 million hours worked.
This growth in participation together with productivity growth would produce a GDP of $125,625 million which would be 5,1% GDP growth on the year to June 2004.
Social development, social reporting and a regional context
Before I close, I would like to talk just a little more about the importance of social reporting. Social reporting tells us which areas the government needs to address and promotes open and transparent government and transparent debate. The Social Report, published annually since 2001, provides a social report card.
In recognition of the importance of social indicators, Cabinet recently gave policy approval to introduce a Bill which will make it mandatory for a social indicators report to be published at least every two years. I expect to introduce this Bill in July of this year.
Local government legislation already requires reporting against more than just economic indicators. It requires quadruple bottom line reporting of economic, social, cultural and environmental indicators. This method of reporting is vital in that we can measure progress towards regional and local aspirations reflected in the Long Term Council Community Plan. These indicators and goals can feed into central government policy and planning. Not only that, but they can attract growth to the regions by providing valuable regional information.
When talking about regional development it's easy to focus exclusively on what makes good economic sense. If you take one thing away from my address today I hope it's this: what makes good economic sense for your region must make also make good social sense.
It is absolutely fruitless to confront regional economic challenges in isolation from social challenges. Those of us involved in social policy have fully accepted that the economy largely drives social progress. But while progress has been made in making economic planners more fully aware of social issues, there is concern that the reverse lesson has not yet been fully absorbed.
Putting more of a social development focus into regional development does not mean recreating the wheel. I realise that local government resources are already invested in important, valuable work and that expecting all local government agencies to become heavily involved in social development is wholly unrealistic.
It's important, however, that everyone involved in developing local economies understands that social development does not require a major refocusing of your efforts. It just means thinking creatively about how the good work you are already doing on the economic front can be linked into groups and agencies that have the expertise and knowledge to translate it into social progress.
To provide one example, industries across the country have been looking at how they can address local and national skill shortages which threaten their growth. At the same time, record-low unemployment has allowed Work and Income to focus on moving unemployed people into skilled professions where they can achieve long-term financial independence.
The result of this situation has been Industry Partnerships where Work and Income links directly with key industries in local communities across the country. Job seekers are provided with training and employers are provided with a much-needed boost to their capacity. And most importantly, communities win by addressing the social problem of unemployment and the economic problems of skills shortages and low employment. To date, eight industry partnerships have been launched, covering a wide range of industries from bussing to hospitality.
I can announce for the first time today that the partnerships are proving to be very successful. We set a goal to have 45 per cent of the people participating in industry partnerships to exit the benefit after 9 months. Our initial figures show us that we have eclipsed this and are seeing a 60 per cent exit rate with 516 people moving off the benefit and into a career. This is very good news for the people involved and the local communities that are reaping the rewards of this success.
Concluding remarks
People's decision-making processes, especially in a high growth economy, now prioritise social benefits along with economic ones. This carries though to firm level where corporate surveys show that companies in knowledge-based sectors, base relocation decisions on quality of life indicators such as crime rates, recreation, environment, education and health care. Cities in the United States which invested in quality of life and social infrastructure in the nineties have retained the best and brightest people.
So to sum up - we need to have a realistic view of development that includes both economic and social development. We need to recognise that social problems such as unemployment, poverty, inequality and family violence carry economic costs of health care, crime, and loss of innovation potential by waste of human assets.
Ensuring that the economy continues to grow through increasing productivity and participation, and enabling New Zealanders to determine their work life balance priorities will contribute to an inclusive society where all people have the opportunity to fulfil their potential, prosper and enjoy social and economic well-being.
Thank you.
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