Plainly, workers are going to be the first people over the side of the lifeboat during this recession. The main policy idea to emerge from the recent jobs summit turns out to be a recipe to cut wages, since the training aspect of the initial idea has now been scrapped. Those workers who choose to go on the nine day fortnight scheme will get a government subsidy for day ten that will be calculated as a one hour subsidy ( paid out at the minimum wage of $12.50 an hour) for every two hours of work lost, plus a promise they will not be made redundant during the six months that the firm is eligible to be on the scheme. Plainly, for anyone to qualify for the full subsidy of $62.50, they would have to be working for ten hours a day.
How big a cut in income and conditions is this ? Well, work it out on the basis of a typical eight working day and an 80 hour working fortnight. This would drop back to a 72 hour fortnight, which is a 10% cut in hours. Eight hours lost would entitle that worker to four hours of subsidy at $12.50 an hour, or $50 before tax. So the scheme in its entirety would typically deliver something like a 10% drop in wages, for which the government would offer $50 before tax, in compensation.
How much is that in lost spending power? Lets assume the worker is on the average wage of $25 an hour. Losing eight hours pay a fortnight would mean a $100 a week drop in wages, offset by $25 a week from the subsidy – which comes to a net $75 a week loss in income, every week.
For simplicity, I’ve left any tax change variations out of the equation, or how this might interact with Working for Families entitlements – but someone in the bureaucracy is going to have do both those calculations, which will add to the compliance costs of the scheme. Obviously, it is unclear at this point how many participating firms would want workers to take the tenth day in one bloc, or to stagger it out over the fortnight in reduced hours each day.
Since the point of the scheme is to save employers money on their labour costs – the ‘saving the job’ bit comes after that – the issue of whether it will do either, to any substantial degree, will depend on how the fine print plays out. Basically, for every worker that a firm can prove it averted a redundancy, it is allowed to have 10 workers on the scheme. Problem : how will firms be required to prove that it saved a genuine redundancy, and to whom will they have to prove it ?
Since a struggling firm can only be eligible for the scheme for six months, there seems nothing to stop employers from cutting wages by 10 % for the first six months, and then sacking the person afterwards. In other words, the job saving ‘promise’ that sweetens the wage cut could turn out to be a fairly transient one. After all, no one is expecting this recession to be over in six months.
The core to the success of the scheme will be whether giving firms a one day a fortnight wage holiday will create enough leeway such that the job can be retained. Given the size of the recession’s impact on global and local demand, this scheme seems unlikely to be a make or break factor. Even at the rosiest estimates of take-up only some 25,000 jobs will (temporarily) be saved, at a total cost to the government of $20 million – less, in all likelihood, than the spending it would otherwise have to make in welfare payments.
Since some estimates reckon a 70,000 annual lift in unemployment – or worse – this scheme will offer even at best, only a partial and temporary solution. Lets hope that the government is putting aside more than $20 million in the coming weeks to cope with the inevitable rise on the welfare rolls.
Calls by some for employers to ‘top up’ the scheme seem to defeat the purpose. Sure, the burden should be being more equally shared. For that reason, I’d rather see any top-up come from a levy on the banking and financial sectors that created this mess. But should employers also be required to supplement the subsidy ? Not really, not if the main intention of the scheme is to save jobs by cutting labour costs.
If the firm’s long term interest – and the national interest – lies in retaining skilled ( and in some cases highly paid) staff in firms that are being punished not by their own incompetence necessarily but by a once-in a century global event, then the banks and the government need to make the wage subsidy a lot more substantial.
In other words, a $20 million price tag seems a paltry response, if this is, as billed, the main practical idea to emerge from the jobs summit. It is less than what John Key is planning to spend on his cycle way.
Israel’s war on children
A recent five part series of articles in the Lancet based on WHO sponsored research over a two year period, has reported on the health impacts of Israel’s policies towards the West Bank and Gaza, and the role of the Palestinian National Authority. The occupation is leading to widespread malnutrition, which in turn is being manifest in cognitive stunting and other forms of physical ill health among Palestinian children.
Tuberculosis in the West Bank and Gaza rose by more than half between 1999 and 2003, with mental disorders up by a third.
Between 10% and 30% of Palestinian children suffer a detriment to their cognitive development and physical health from malnutrition…
The AFP news agency, in its report on the Lancet /WHO study, cited the role of Israeli checkpoints in some of the detrimental outcomes:
Researchers quoted 69 cases of Palestinian women giving birth at Israeli checkpoints between 2000 and 2006 and said 10 percent of women in labour were delayed for two to four hours en route to hospital.
They also highlighted unpredictable access to emergency obstetric care and said mortality rates among the under-fives have not declined significantly since 1990.
As the Lancet report indicates, while infant mortality rates among Palestinians in the West Bank and Gaza fell during the period from 1967 to around 1990, the health outcomes recorded this decade have shown that infant mortality has stalled at 27 deaths per 1,000 live births. The rate in Israel by comparison, the report notes, is 3.9 per 1,000 live births. Within these Palestinian infant mortality rates, some disturbing trends are also noted:
The causes of infant mortality have changed, such that infectious and diarrhoeal diseases are no longer leading causes. The main causes of infant deaths are now prematurity and low birthweight, and congenital malformations.50
As such, additional intervention strategies requiring increased intensive specialist care and financial investments might be needed to reduce infant mortality further. At the same time, the political and economic contexts should be considered—namely, the deterioration in Gaza community health services51 and hospitals,52 and the restrictions on access to tertiary centres in Israel and East Jerusalem for at-risk pregnancies and sick neonates.53
The credibility of the report is enhanced by the acerbic criticism it levels at the Palestinian National Authority. As AFP says:
[The Report] highlighted “the nature of the Palestinian National Authority, which has little authority in practice and has been burdened by inefficiency, cronyism, corruption and the inappropriate priorities repeatedly set to satisfy the preferences of foreign aid donors”.
“Although similar conditions exist elsewhere, in the occupied Palestinian territory they are exacerbated and perpetuated under conditions of military occupation,” it said.
The link to the Lancet article on maternal and children’s health is here, but a free registration process may be needed to get access it, and to the other articles in the Lancet series. The Israeli government response of course, has been that the Lancet series is propaganda. Those children, in some alternative reality, are all fit and well.