The Post: Hypocrisy at heart of how New Zealand treats the unemployed

Read the original article in the Post

Necessary, but disliked: the way that unemployed people are regarded in this country, especially by centre-right politicians, continues to be a paradox.

This truth sprang to mind on Wednesday, when Statistics New Zealand revealed that unemployment had risen again, hitting 5.4% last December. Around 40,000 people have lost their jobs under this government.

To qualify as unemployed, one must first be actively looking for work. And it is precisely this subtlety that reveals the depths of this Government’s mismanagement. As Ganesh Nana, a former Productivity Commission chairperson, pointed out this week, people are so discouraged by National’s economy that over 80,000 have taken themselves out of job-hunting entirely.

If New Zealanders were still seeking work with the same enthusiasm they had two years ago, the official unemployment rate would now be 6.3%. And it’d be higher still if thousands of Kiwis hadn’t left for Australia.

The unemployment rate there is just 4.3%, and it’s lower yet in many developed countries. Our Government can’t blame its woes on global conditions, difficult though the latter are.

Meanwhile, our “underutilisation” rate – which includes not just the unemployed, but also people who need more hours of work – is 13%, and Māori unemployment is twice that of Pākehā. We are profoundly failing to make the most of this country’s ample talent.

This is not entirely an accident, however. For the last 40 years, economic policy has abandoned the idea of maximising employment, instead engineering joblessness as a means of restraining inflation.

Our current situation derives from the Reserve Bank’s having only one tool to curb price rises: a hike in interest rates, which hamstrings business investment and leads to mass redundancies. More generally, and among centre-right politicians in particular, it has long been thought useful to have a reasonably large body of unemployed people.

This generates ample competition for new positions, keeping wages down, and also probably discourages those in work from demanding pay rises, lest their employer find a way to replace them with someone from this reserve army of labour. This is not a conspiracy theory but a concept embedded in orthodox measures such as the Nairu, the non-accelerating-inflation rate of unemployment, which holds that too much employment leads to intolerable price rises.

This approach is doubtful at the best of times, but appears downright hypocritical when one considers how centre-right governments treat the unemployed. If it is necessary, on this view, to maintain a reasonably high level of unemployment, the obvious implication is that unemployed people are playing an essential role – a structural function – in the economy.

One might think, then, that those unemployed people would be treated well, their sacrifice noted and rewarded, by centre-right governments. Quite the contrary.

Despite significant increases under the last Labour Government, the core unemployment benefit, Jobseeker Support, is just $360 a week for a single adult, who might get another $100 a week in Accommodation Supplement. Given rents are still sky-high, this person could easily be left with under $200 a week to pay equally extortionate power, grocery and other bills.

It’s not much of a life. It’s now how you treat someone you respect. And National has no plans to improve it.

Indeed our “wealthy and sorted” prime minister once infamously described struggling New Zealanders as“bottom feeders”. In online comments sections, right-wingers often disparage the unemployed in similar terms.

In their defence, centre-right politicians sometimes claim that, although a brief bout of joblessness is a necessary evil, they don’t want anyone to be long-term unemployed. But this is something of a fantasy: in September 2025, for instance, over 20,000 people had been unemployed for over a year.

And even short-term job loss can leave deep scars. Motu research has found that New Zealanders made redundant are, five years later, earning up to one-fifth less than their peers.

The wider solution, surely, is to invest more in training and work-readiness initiatives for the unemployed, so that when jobs do become available, people can move into them as quickly as possible. The average developed country spends twice as much as New Zealand does on such schemes.

Underlying such investments would be a political commitment to keeping unemployment as low as is feasible – perhaps just 2-3%, virtually all of it short-term, with long-term joblessness all but eliminated. Any inflationary pressures could be handled by giving state agencies a wider range of tools to curb price rises.

And for the – hopefully brief – period that people spent out of work, we could ensure their income was sufficient to allow them to live with dignity. Research suggests that in countries that combine strong work-readiness investments with higher benefits, people spend less time on welfare than they do in countries with weaker skills programmes and lower benefits.

A different system, in short, would benefit us all – and represent a less hypocritical way to treat people whose position is often a function not of individual choice but of economic forces.