Boosting productivity and economic growth
Steve Maharey: Address to Papakura Business Breakfast, Papakura
Introduction This morning I want to talk about some of the things this government is doing to get more New Zealanders -
including young New Zealanders - into employment.
As many of you will know, we have recently announced reforms that will re-focus the entire benefit system on work
outcomes for all beneficiaries.
I want to talk briefly today about how those changes are relevant to business, and indeed, how they will play a part in
addressing the problem of skill and labour shortages faced by many New Zealand businesses.
I also want to mention some new programmes that will help us to achieve our goal of getting all young New Zealanders in
work, education or training by 2007. I know Papakura has a highly successful transition programme for young people,
which in many ways is setting the standard for other programmes that are rolling out around the country.
Good time to be doing business
As Minister for Social Development, this is a great time for me to be talking to business.
When the Labour Government first took office in 1999, our priority was to work with New Zealanders to kick-start the
economy and get more people working. The results after five years of careful economic management and good economic
progress are hugely encouraging.
New Zealand’s economy is firmly on the front foot and out of the doldrums of the 80s and 90s. Economic growth has been
above the OECD average for the past five years, and is currently at 4.6%.
More than 2 million New Zealanders are now in employment – an increase of more than 264,000 people since we took office
in 1999.
At 3.6%, we have the lowest unemployment rate in the OECD, and the lowest rate for the 19 years that we’ve been keeping
records.
Labour force participation has jumped to 67.7%, with the rate for women at an all-time high of over 60%.
These achievements are the result of sustained efforts by business and government to boost our economy and to support
New Zealanders into work. Getting more people working is vital to increasing productivity and helping business and
industry grow.
Challenge of skill and labour shortages
With record lows in unemployment, we are of course facing a new challenge of skill and labour shortages in a number of
key industries.
Employers tell us this is now the biggest factor constraining their growth. Research from the NZIER, shows skills
shortages are at their highest since the mid-1970s.
Not long ago, the challenge was to find enough jobs for the workers. Now, we need to focus our efforts on providing
skilled, work-ready people for the jobs available in a growing economy.
To address skill and labour shortages the government is working with industries and regions to improve levels of
participation attract and retain skills and talent develop skills, and improve overall productivity
Key initiatives include: The Regional Partnerships programme – which provides training in key industries Modern
Apprenticeships – extra funding will see the number of apprenticeships go up from 6500 to 8000 Increased investment in
industry training which has seen a 10 percent increase in numbers in industry training in the last year
A reference group drawn from industry nominations will follow through on the Workplace Productivity Report released late
last year. The group will identify concrete actions to drive productivity improvements in the workplace, with a report
expected by mid-year.
Work-focussed benefit system – part of the solution
In addition to these efforts, a major reform of the welfare system over the next two years will form part of the
solution to New Zealand's labour shortages.
The Single Core Benefit will remove the current raft of entitlements, categories, and administrative requirements.
It will roll seven existing benefits into one, with add-on assistance for things like housing and childcare. Case
managers will have the time and resources to provide targeted employment assistance focussed on work for everyone who is
able.
A simplified benefit system and expanded employment services will have an important part to play in boosting the number
of workers available to employers, and assisting employers to address labour shortages.
The new benefit system will focus on work outcomes for all beneficiaries, not just the 20 percent of beneficiaries on an
Unemployment Benefit.
The changes recognise that the majority of people on a benefit want to work but can often find the current system a
barrier to getting off a benefit and into a job.
The focus will shift from people’s barriers to work to their potential to work.
In addition, the new system will provide enhanced services for employers by matching clients' skills and experience to
the needs of employers and industries.
From May this year, Work and Income will trial a new service model in 11 locations around the country.
The trial will pave the way for a smooth implementation of the Single Core Benefit. As part of our preparatory work,
we’re also developing employment programmes that are more responsive to employers’ needs and regional circumstances.
Targeting new groups of working-age clients
New Zealand has seen a dramatic decline in the number of people receiving the Unemployment Benefit over the past five
years, with numbers falling from 158,619 in December 1999, to 65,210 in December 2004. That’s a drop of over 58%.
The overall number of working-age adults receiving a benefit fell 20% in the same period, from 401,415 in December 99 to
just below 320,000 in December 04.
This huge drop in the number of unemployed is enabling us to focus more of our efforts on clients who have not, in the
past, received the same level of employment support. This is particularly the case with Sickness and Invalids Benefit
clients, a client group that has traditionally been seen as not able to work at all.
We now know that this assumption is false. Many Sickness and Invalids Benefit clients do want to work, and can work with
the right support. The new Service provides targeted and integrated services that provide support for a return to
full-time, part-time, or intermittent work, while still ensuring clients receive their benefits and entitlements.
Again, the success of this new Service depends on convincing businesses, industries, and employers of the value to your
business of hiring someone with ill health or disability. We need to learn what you need, so we can add the best value
possible.
Next week, we’re holding an Employers Summit to start the process of engaging with employers and finding out what you
need from us. We’re also developing a handbook that sets out the facts about things like employment subsidies and OSH
regulations. I hope to get some ideas from the Summit about the other kinds of information and support employers will
find useful.
The new Service for Sickness and Invalids Benefit clients is just one part of the government’s focus on a creating a
much more simple, and proactive social assistance system.
Young New Zealanders
Another important focus in my employment portfolio is on young New Zealanders and the transition from education to work.
It's estimated that up to 45,000 15 to 19 year-olds do not enrol in tertiary study or get a job after leaving school.
To address this problem the government, in partnership with the Mayors Task Force for Jobs, has set a goal of ensuring
all 15 to 19 year-olds are in work, education or training by 2007.
A key initiative for achieving this goal is the Youth Transition Service - part of the government's $56.9 million
package that will make sure young people have the tools to become productive members of their communities.
Later today I will be launching a new Youth Transition service in Waitakere service. This is the first of 14 Youth
Transition Services to be rolled out around the country by 2007.
Programmes like the Youth Transition Service are vital to ensuring all young New Zealanders get a good start to their
working lives
Youthworks Papakura
Here in Papakura is one such programme. Youthworks Papakura, a partnership between Work and Income, Papakura District
Council, and the Tertiary Education Commission, has produced some stunning results, and is a credit to every person and
organisation involved – not least the young people themselves, and the employers who have taken them on.
Since it began in January last year, Youthworks Papakura has provided transition services to 225 at-risk 14 to 19 year
olds, already exceeding its target of 200 by June this year.
Of these 225 young people, more than half are now in full-time work. Thirteen are in part-time or casual employment, or
are gaining work experience. Forty-four are attending a training course, four have returned to school, and eighteen are
receiving social support services.
Youthworks has a high-risk client base. Eighty-five per cent of its clients left school before they turned 16. Many have
been adversely affected by unemployment and other issues within their family. Some were already in trouble when
Youthworks picked them up; the referral network includes Child, Youth, and Family, the Youth Offending Programme, marae,
schools, health providers, and families and whanau.
That Youthworks has successfully supported almost 80% of these young people into employment, training, or a return to
school, is phenomenal. Its success is credit to a number of factors; not least the skill and commitment of its two Work
and Income specialists, who have created and can now tap into a great wellspring of community support.
Community support is an essential feature of every successful transition. Youth transition services must involve the
community, reflect the nature of their community and be shaped by their community, so they can achieve real solutions at
the grassroots level.
Youth transition pilots
Community involvement is the basis of the 14 Youth Transition pilots that received funding in Budget 2004. Each pilot
involves a lead provider, selected by the community, integrating employment, training, mentoring, and support services
to 15-17 year olds seriously at risk of missing out on employment or training.
Five pilots are now getting started in Whangarei, New Plymouth, Rotorua, Waitakere, and Porirua. We’ve identified the
sites for the next five pilots, and will announce the final four later this year.
Each pilot begins with a community planning process that identifies what the service will look like, how the community
can support the service, and who the lead provider will be. This ‘ground-up’ development means that every pilot will
look slightly different, reflecting local circumstances, and will have the flexibility to develop and change over time.
A collaborative enterprise between government and local authorities, the pilots contribute to the goal of the Mayors
Taskforce for Jobs: that by 2007, every 15 to 19 year old will be in work, training, or other activity. Or, as one of
the Mayor’s Taskforce web page succinctly puts it, the ‘zero waste’ of all New Zealanders.
Overall, Budget 2004 gave a $56.875 million boost to youth employment initiatives like youth transitions, Modern
Apprenticeships, and Gateway. Late last year, the government’s Skills Package committed a further $8.9 million to Modern
Apprenticeships. Already over 7000 young New Zealanders are now working as modern apprentices in 31 industries and
businesses, well on track to our target of 8,500 by June this year.
Additional funding for Industry Training will provide for around 5,000 additional trainees this year, while the Gateway
programme will provide workplace learning opportunities to around 6,000 senior school students this year.
Gateway at Papakura High School is another of your local success stories, with 46 students participating last year and a
94% placement success rate. Meanwhile, 63 Modern Apprentices in Papakura are gaining experience in the construction,
aeronautical, engineering, horticultural, and electrotechnology industries.
Business involvement is crucial
Clearly, the success of all these initiatives requires the involvement of business. In the immediate and obvious sense,
business creates the jobs that provide a future for young people. You pump resources into the local economy and help
build a strong, thriving community.
You have the ideas, energy, and experience to feed into the development of programmes and services that support people
into employment. Perhaps most crucial to that development, you know what skills you need from your workers – skills that
will enable your businesses to grow, and create further employment opportunities.
The government is committed to closing the skills gap that is constraining business expansion. We’ve signed eight Job
Partnerships with Industry so far, with the hospitality, plumbing, retail, transport, track maintenance, meat
processing, roading, and trades industries.
The partnerships are equipping hundreds of New Zealanders with the skills they need to take part in the workforce.
Industries play a central role, identifying where skills gaps are the greatest, defining the training that job seekers
need, and providing real jobs at the end of the process.
In the first six months of the programme 58% of participants had moved off a benefit, twice the amount forecast.
More Partnerships are soon to come, with the brewing and distillery, energy, and construction industries.
Conclusion
Getting more New Zealanders into work is crucial to lifting our productivity and further boosting our economic growth.
While our rate of growth over the past five years has been higher than the OECD average, we are still in the bottom half
of the OECD. Lifting our labour productivity will sustain and improve on the progress we’ve made in the past five years.
The government is committed to working with business to see this happen. You are the drivers of the New Zealand economy.
Your vision and your willingness to take risks and test new ideas, your experience at the coalface of the modern economy
and the modern labour market, your commitment to growth and opportunity, are all vital to achieving the Government’s
vision of a strong, revitalised economy with opportunities for everyone.
Equally vital is that the government doesn’t pursue a solely economic agenda, with no regard for social outcomes. Our
investments in health, education, and housing all contribute to productivity by helping create a healthy, educated,
work-ready population.
The short-term fiscal cost of these investments is more than repaid by the long-term gains in employment and economic
growth – gains that provide the resources for further social investment, reduce the need for future social assistance,
reduce antisocial activity like crime, and result in strong, resilient, resourceful communities, with a thriving
economic and social base.
This is the government’s vision. We can achieve it by working with you.
Thank you.