A new report has linked New Zealand's stubbornly low productivity and wage growth to Kiwis' fear of losing their jobs to technology.
The Productivity Commission's latest draft report, Employment, labour markets and income: Technological change and the future of work, says economic growth in recent years has "been mostly through more people participating in the labour market, rather than through the adoption of productivity-enhancing technology".
But firms aren't investing in technology unless "the adjustment costs they face, including labour-related costs, are low relative to the benefits they anticipate from technology adoption".
"Labour-market settings, particularly those that favour workers' job security, can increase these costs. "
The Productivity Commission is instead proposing New Zealand ditch job security for income security, giving people made redundant thanks to technology a chance to spend time finding suitable new work without taking a huge financial hit.
"There's really good evidence that in other countries that provide such security, workers - and the population as a whole - are much more open and welcoming to the introduction of new technologies," Productivity Commissioner Andrew Sweet told Newshub.
"Workers know if their jobs are lost as a result, they'll be looked after. That's one of the key benefits - a very big one for us, because new technology ultimately underpins productivity."
The report recommends rather than having to rely on a welfare system targeted at the poor, the Government should set up:
- portable individual redundancy accounts, which workers can draw on should they lose a job
- an unemployment insurance scheme, either Government-run or a regulated commercial market
- or make changes to benefits and tax credits that provide increased, time-limited, income support after job loss.
"Countries that have adopted policies that promote income security over job security - known as 'flexicurity' - tend to be more open to technology adoption on both sides of the employment relationship," the report says.
And this leads to productivity growth.
"What this report is trying to do is encourage increased help for the labour market and people who are displaced from jobs in order to manage redundancy, and also manage retraining and re-skilling up so they can adapt," Milford Asset Management senior analyst Frances Sweetman told The AM Show on Thursday.
"People have to change and adapt over time, of course. Retraining is a massive part of that. If you've been made redundant from a manufacturing job and a machine has replaced you and there simply are no more jobs in that area for you, then you have to change and adapt."
A flexicurity system would also help people in the gig economy, she said, who might not qualify for traditional welfare. Sweet suggested a system similar to that used in Austria.
"People are basically required to pay into an account a little bit like KiwiSaver, but they can access that money if they're made redundant to support themselves while they look for a new job."
New Zealand wages are about 75 percent of Australia's, and below many others in similarly advanced economies, the report said. Almost all our economic growth since 1996 has been thanks to population growth.
"More workers can and do grow the economy, at least in absolute terms," the report said. "However, this approach is a bit like recruiting more people to push a broken-down car rather than fixing its engine. More people might move the car faster, but it is not a great way to get to one's destination."
The Productivity Commission is seeking feedback on its proposals.
