NZ Limits Unemployment Benefits, PM Tells Affected People to Look for Work

Christopher Luxon has utilized social media to caution beneficiaries that his administration plans to implement strict new sanctions to compel them to seek employment.

Amid the release of disheartening new unemployment figures, indicating a surge in the number of jobless individuals to a four-year peak, New Zealand’s Prime Minister Christopher Luxon has chosen social media as a platform to alert beneficiaries that they risk losing government assistance if they fail to actively seek employment.

“My message to those facing benefit sanctions,” he posted on X. “Create a resume, attend job interviews, stay in touch with your case manager, and your fellow New Zealanders will assist you in finding employment.

“You have a responsibility to actively seek employment and engage in work, and failure to do so will result in the suspension of your benefits.”

An additional 29,000 individuals are now unemployed since the government assumed office, with many being laid off from the public sector as the government sought savings to finance tax reductions.

Some economists observed that numerous individuals lack a clear path to employment, with the Ministry of Business, Innovation and Employment (MBIE) reporting a 31.4 percent decline in online job postings over the year leading up to the September quarter.

This decline was observed across all sectors, with the most significant annual drops occurring in the IT, healthcare, manufacturing, business services, and construction industries. There have been eight consecutive annual declines since the December 2022 quarter.

StatsNZ data reveals that the annual unemployment rate for the three months ending in September rose to 4.8 percent, up from 4.6 percent in the previous quarter, resulting in 148,000 individuals currently unemployed. While slightly below financial market predictions, this rate is the highest since December 2020. The Reserve Bank of New Zealand (RBNZ) had anticipated a 5 percent rate.

This marks the first instance in 37 quarters where employment in New Zealand has decreased, equating to a million fewer hours worked this year.

Young individuals are disproportionately impacted, with 20 percent of 15-to-19-year-olds and 8.4 percent of all 20-to-24-year-olds unemployed. Maori unemployment stands at 9.2 percent, while Pacific Islanders face a 9.9 percent unemployment rate.

A recent report from the Ministry for Social Development revealed that young individuals could remain unemployed for up to 20 years, while individuals of all ages are likely to be dependent on welfare for an average of 13.6 years (although not necessarily continuously).

Listless Economy

The rise in unemployment can be attributed to diminished demand for labor in a sluggish economy and previous surges in migration aimed at addressing labor shortages.

There has been a 57,000 increase in individuals exiting the labor force, encompassing those pursuing education, retiring, experiencing disabilities, or simply giving up on job searches.

The underutilization rate, which combines unemployed and underemployed individuals, now stands at 11.6 percent, involving 367,000 people.

Despite the focus on upskilling the unemployed, demand has dwindled across all skill levels, affecting highly skilled individuals as severely as those lacking skills.

“While net employment remained constant, shifts in employment occurred last year, as 45,700 previously employed individuals became jobless,” noted StatsNZ labor market manager Deb Brunning.

Economist and Council of Trade Unions (CTU) Director of Policy Craig Rennie highlighted that while unemployment did not reach 5 percent, “the underlying data indicates that the labor market is as fragile as feared. Layoffs have occurred at various sites nationwide that may not yet reflect in this data. The only proposed solution for New Zealanders seems to be welfare sanctions, which are unlikely to alleviate the situation.”

Despite the prime minister’s firm stance, predictions suggest that unemployment will continue to deteriorate.

The RBNZ’s recently released semi-annual Financial Stability Report indicated that the weakening of domestic economic activity had become more pronounced, and a combination of sluggish global growth and high interest rates had dampened demand.

“The escalating unemployment is starting to present severe financial challenges for certain households,” the report stated.

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