Unemployment: NZ on par with basketcase Spain

With 210 million people out of work worldwide, unemployment has reached its highest "official" level in history.

But the "Great Recession", as the period of financial crisis is now being dubbed, saw a greater spike in unemployment in New Zealand compared to its drop in GDP than in almost every other country.

An International Labour Organisation paper written late last year concluded that most countries had a "higher impact on GDP growth rates than on their unemployment rates" with two notable exceptions – the basketcase of Spain, and New Zealand.

The Council of Trade Unions' believes that's the result of New Zealand's light-handed, or "flexible" employment laws, which it believes make it much easier to sack employees.

The council's president Helen Kelly said: "It is basically too easy here to restructure and to lay people off."

Not only does that mean the country – and often its most economically vulnerable families – have to deal with the disruption that causes, but there's a growing recognition of the long-term erosion in "human capital" rapid rises in unemployment can bring.

Younger generations are shut out of work for longer, careers are interrupted, ethnic minorities are hit hard, and, it is increasingly often being argued, there seems to be a direct link between innovation and tougher labour market regulation.

The world is haunted by the idea of a virtually jobless recovery – New Zealand has already seen a bounceback from 7.1% unemployment to 6.4% since December 2009 though has not returned to the 4.3% of late 2008 – but there are widely differing schools of thought as to how governments can increase job creation.

The CTU would like to see a ramping up of state-funded employment schemes and help for targeted groups such as the young, whereas the right believes the market is better left to itself and even greater workforce flexibility is needed.

Roger Kerr of the Business Roundtable said there was no reason why the country could not function on near full employment, but it should be achieved by "reforming" the welfare system to make it even less attractive not to work, while at the same time lowering the minimum wage and bringing back permanent "youth rates".

Although many lost jobs in the Great Recession, not all Kiwi workers lost out. In contributing to an International Monetary Fund review of employment experiences during the crisis, data and opinion supplied by New Zealand officials show a belief employers got rid of less productive workers, the result being that the country's productivity figures could well tick up.

- © Fairfax NZ News