As workers prepare for further grim unemployment data tomorrow, a discussion document is warning against the Government's introducing job subsidies.
The paper, by the New Zealand Institute of Economic Research (NZIER) also advises that the Government's ReStart policy, a time-limited unemployment top-up for those made redundant, and the nine-day fortnight, should be removed as soon as the economy picks up, or it risks removing incentives for people to find jobs.
NZIER warned an extra 50,000 people could be unemployed within a year, while bank economists expect tomorrow's March-quarter household labour-force survey to show a lift in unemployment from 4.7% in December to 5.3% or 5.4%.
This followed more bad news this week, when Statistics New Zealand data revealed demand for labour declined for the first three months of this year, the second consecutive quarterly decline.
NZIER chief executive Jean-Pierre de Raad said employment policies should focus on preparing the labour force with skills and training for when the economy recovered while also assisting with business capital to push for long-term productivity growth.
"With the peak in unemployment approaching, attention needs to shift now to the challenge of getting the unemployed into work. The temptation will be to artificially protect jobs, but this is short-sighted. The economic imperative should be to ensure New Zealand has the human capital to prosper when the economy picks up."
The most cost-effective initiative was assisting people with job-seeking and training, to prepare for when the economy recovered but which had the added benefit of improving productivity.
While training was expensive, the NZIER report said initiatives should meet the needs of individuals and the local labour market.
Job subsidies were viewed as an expensive way to get a small reduction in unemployment, and it was difficult to determine which jobs were genuinely created and which would have been created anyway.
NZIER also warned that subsidised jobs could be in the wrong areas. "That would undermine necessary structural change and long-term job and income growth," the report said.
Future labour demand was likely to be in different areas from today's demand. "For example, there may not be the same amount of jobs in manufacturing or housing construction, or in the locations [where] people live now."
While New Zealand's employment law rated highly by international standards, NZIER said there was scope for changes to the policy in addition to the 90-day trial period.
It suggested removing "the bias towards multi-employer collective agreements" as they created impediments to local conditions, and the cost of employing labour should also be lowered by reducing the effect of the Holidays Act, health and safety legislation and ACC levies.
The discussion document said proposed employment initiatives should follow the principles of positioning New Zealand for the inevitable upturn.
