Details announced for nine day fortnights

March 11th, 2009 at 1:30 pm by David Farrar

John Key has announced details of the nine day fortnight plan to help struggling businesses:

  • Available to 1,600 businesses with more than 100 employees. Those businesses employ 580,000 people.
  • Available from March 27, 2009 through until December 31, 2010 – but only for up to a six month period within these dates.
  • Government’s contribution of five hours at $12.50 will be paid direct to employers to give to the workers it has negotiated a voluntary agreement with to reduce work hours to a nine-day fortnight.
  • Will be available to up to 10 employees for each averted redundancy.
  • Will apply to employees who have been full-time for the two months preceding going into the scheme.
  • Is anticipated to be picked up by between 20,000 and 25,000 workers, making the approximate cost $16 million to $20 million.

I am glad it is targeted and temporary. To some degree this is the Government paying in a bit of money, to allow employers, unions and workers to negotiate some reductions in hours to prevent redundancies. This is a useful reminder of how important flexibility in the labour market is.

If someone earns $30,000 a year and they drop down to nine days a fortnight, then their gross wages will drop from $1,151 to $1,036 a fortnight.  That is a drop of $115 a fortnight. The Government’s subsidy will give them back $63 a fortnight leaving them with a gross income drop of $52 a fortnight. So at $30,000 the Government picks up 54% of your day off, and you pick up 46% and you are guaranteed not to be made redundant.

$52 a fortnight is still a reasonable drop in income. But hey it is less than what the ACC levies were looking to rise under Labour!

What will be interesting is the impact of Working for Families. One of the problems of WFF is the abatement rates for it plus the accomodation supplement means that effective marginal tax rates get close to 90%. So certain families could have the main incoem earner go from $50,000 to $70,000 yet only have net income increase by $1,200 or so (figures off memory). Not that is a very bad thing, but for once it may work in favour of some families – if your income drops by going into a nine day fortnight, then the abatement rates will work in negative and may keep you at close to your old net income.

The Government should get IRD and WINZ to do a online calculator tool where people can work out what happens to their net income if they go onto a nine day fortnight.

Tags: , ,

22 Responses to “Details announced for nine day fortnights”

  1. Murray (8,847 comments) says:

    “The Government should get IRD and WINZ to do a online calculator tool where people can work out what happens to their net income if they go onto a nine day fortnigh”

    The government should do more things that will suck up tax dollars in administration?

    This is being rushed through and not given much thought. It is not going to be the cureall its being sold as and its limited success will be over played like mad while achieving little. you want to save jobs stop free trade with china and get the hell out og Kyoto.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  2. getstaffed (9,186 comments) says:

    Someone else observed that this would National’s first big mistake in government. I agree.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  3. Manolo (14,018 comments) says:

    “you want to save jobs stop free trade with china and get the hell out of Kyoto.”

    I agree with the latter part of the statement, but disagree with the former. To save jobs any NZ government would need to slash corporate and personal tax to the bone, reduce expenditure and overall be prepared to live with the political consequences of these measures, e.g., the initial hike in unemployment, disruption of some services, etc.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  4. ben (2,383 comments) says:

    Q: Who are the firms who will be going into this scheme?
    A: Those who are now paying their staff more than the value of their production.

    Q: Absent this scheme, what would happen?
    A: Those firms would have downsized and their staff would be employed elsewhere in the economy where their production has more value.

    Q: With this scheme, what will happen?
    A: The market signal for reorganization is interrupted, those people’s skills will be under utilized, and their efforts will be directed to things that aren’t worth the cost i.e. the country will be made poorer.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  5. ben (2,383 comments) says:

    I am glad it is targeted and temporary.

    “Nothing is so permanent as a temporary government program.” – Milton Friedman

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  6. gd (2,286 comments) says:

    I can already see the rorts in the scheme without even trying bo find any Will need an army of civil servants and a shit load of compliance costs forms to be filled in etc etc

    as always the devils in the detail and the more details the more cost the more rorts the more cost and so it goes on

    Would have been cheaper and simpler to just cut the company tax rate If they are not paying tax then they are not making a profit therefore they are broke so past any help.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  7. dave (988 comments) says:

    It WONT be interesting to see what happens to WFF abatements for families that earn less than around $35k as they are already receiving the maximum.

    However for families earining more than 60k, their WFF payments will increase. But if families who collect WFF payment during the year have their breadwinner go from $40k to $50k towards the end of the financial year as they have a new job they`ll wont get WFF pahyments as they have exceeded their limit. If they then go on a 10 day fortnight before the end of the financial year they`ll be hid harder until the new financial year, but they wont be able to estimate their income as they may not be told how long their 10 day fortnights will be. If they estimate it as the amount they are going to get unil the end of the year they`ll get more WFF than they should have and have a debt at the end of the financial year.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  8. ben (2,383 comments) says:

    This 9 day working fortnight is based on a mis-diagnosis of what is happening in the economy. This recession is not some cyclic downturn, where things will largely return to what they were before. This is a restructuring of the economy now that the days of cheap global credit are permanently over. Some industries will emerge from this downturn permanently smaller (finance and construction and producers of durable goods), and other industries will become permanently larger.

    So schemes like the 9 day week delays the pain that must happen sooner or later. It interrupts the structural adjustments that are unavoidable. People simply don’t want finance or construction or durable goods like they did when credit was cheap. The 9 day working week throws money at these firms to help make it look like demand is unchanged. But it is.

    In fact, it will make it significantly worse. The government will find the scheme more expensive than it thought, this will make the (political and economic) cost of shutting it down large, and New Zealand will very quickly find itself permanently saddled with a state-subsidised 9 day working week. Two years from now there’ll be debates about moving to 4 days/week.

    Socialist heaven, no?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  9. goodgod (1,348 comments) says:

    haha Ben you nailed it. :lol:

    What’s so hard about giving everyone a tax cut instead? :roll:

    It’s like John Key sitting at the big round table, with a five dollar bill, showing his latest party trick. He folds it once, he folds it twice, he gets Bill English to sign his name on it, then he folds it again. He asks Gerry Brownlee to pick a number betweeen one and ten – he chooses 3. John tells him to remember that number. Then he folds the five dollar bill again. it’s getting quite small by now. Then the onlookers crane forward, waiting for the moment of the great illusion to be revealed…

    John unfolds it…

    and it’s the same goddamn five dollar bill as when he started!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  10. ben (2,383 comments) says:

    New Zealand’s response to the crisis is to have its best and brightest take a state subsidised holiday.

    Madness, John Key. What were you thinking?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  11. MikeE (555 comments) says:

    As per my comment on your last post, the “Government” isn’t paying anything.

    Taxpayers are.

    Why the hell should I be subsidising someones day off again?

    You could give a taxcut to the same effect, and leave it up to businesses to decide if they want the reduced productivity of the day off. Instead we create welfare churn and waste tax money on this.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  12. petal (706 comments) says:

    “$52 a fortnight is still a reasonable drop in income.”

    Hmmm, of course. Although when it was a $26 a week tax cut it was seen as “hardly worth it”.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  13. Paul Marsden (998 comments) says:

    What a complete, utter and total waste of time. 90% of all NZ businesess are comprised of 5 employees or, less. These businesses are usually more vulnerable to complete closure in a economic downturn, than larger enterprises. How the hell is this package going to help them (and when it could just tip the scales in favour of their survival??)

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  14. getstaffed (9,186 comments) says:

    Just tried to post a comment at johnkey.co.nz.

    no joy.

    i’m sure i didn’t get the spam prevention string wrong 6 times.

    looks like comments may have been switched off.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  15. gd (2,286 comments) says:

    Alas the Nats are looking just like the dreaded Socialists. More civil servanst to administer more map cap schemes that take a dollar of tax and waste 90 cents of it.

    Cut the company rate top personal rate and trust rate to 25 cents

    Dump WFF interest free student loans.

    Cut the civil service 10% now and another 10% in 6 months.

    Other wise watch the un employed queues gros to 12/15% on the next year.

    Forget the economists and other experts their theories have been proved wrong.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  16. NickW (1 comment) says:

    FFS Farrar, it isn’t the government paying this.

    It is the government forcing tax-payers to borrow to give to a few other taxpayers. Future tax-payers then spend a few years paying it back with a bit of interest.

    The problem with this country is that far to few people do anything productive and there are positive incentives for people to do nothing (for example, work for the government, get paid more, have to achieve less and have a more reliable income stream.

    We have a whole generation of people who have been brought up to suck on the foreign borrowing teat. How they can ever do anything useful escapes me.

    This just makes it worse.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  17. ben (2,383 comments) says:

    This is a useful reminder of how important flexibility in the labour market is.

    This scheme introduces flexibility in one way and rigidity in another, David. The deal for employers on this scheme is that they can’t lay off workers. Employers feel flexibility in giving their workers a day off – flexibility created by a subsidy and, if I’m not mistaken, breach of contract with their employees. But this scheme adds rigidity by making it harder for workers in a part of the economy that no longer needs their services moving to a part that does. And this is the place it matters most.

    The logical next step in this process is that firms will need to ask permission before shutting down. Used to happen in India.

    [DPF: You make a fair point, but no employer has to take the subsidy. It is a trade off. ]

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  18. gd (2,286 comments) says:

    I fear JK and Be have been captured by the civil servants

    This is the classic Sir Humphries play

    A golden opportunity to create another many headed Department

    “But Minister we will need at least 25 Deputy Secretaries and they will need at least 5 Under Secretaries each. They of course will require a fully staffed office of the standard compliment of administrative assistants and assisitant administrative assistants.

    And then of course we will need a Comms unit a Human Resources unit not forgetting a Department Interface unit.

    All in all and allowing for contingencies I would expect a fully staffed Department of oh lets say a round 500.

    That of course will be for the exploratory phase where we will scope the resourcing requirement for the full roll out of the scheme.”

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  19. Glutaemus Maximus (2,207 comments) says:

    If Economists are so freakin clever, and intuitive?

    Why aren’t they starting their own enterprises?

    It’s like asking a dependable scorer in Cricket to go on as opener in a 20/20 with Australia, and Then India.

    They are Macro Accountants, and are usually wrong.

    Why, its like forecasting the weather over the World on a given day. Quite hard to do actually.

    Also, a typical accountant is the worlds worst CEO. The very commercial types that have worked in a sector strategically can make good Chairmen.

    As for Scientists, and Academics. Keep them locked up in their towers of learning. They haven’t got a clue about P&L and are worse than Journalists for scaremongering.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  20. jacob van hartog (300 comments) says:

    The version I heard was NOT $12.50 per h for say an 8hr day but only $60 per fortnight which works out as $7.50 ph

    Sounds like another PR stunt to me. Since if its announced on TV news as $7.50 ph , everyone will die laughing

    Bet Talleys will be getting rich off this one

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  21. Nigel Kearney (1,046 comments) says:

    Paul Marsden:

    “90% of all NZ businesess are comprised of 5 employees or, less. These businesses are usually more vulnerable to complete closure in a economic downturn, …”

    Yes, but those won’t be on TV and in the newspapers so Key doesn’t care about them.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote