The full impact of Covid is on vivid display in a report of the Ministry of Social Development today, which shows that last year nearly half of all New Zealand businesses received the wage subsidy.
In other words, half of all New Zealand businesses in 2021 have at some stage been dependent on the taxpayer to survive.
The subsidy was the central plank of the Government’s economic strategy to counter Covid.
But last year’s figure is lower than the 2020 wage subsidies, where 62% of all jobs were supported by at least one of the 2020 wage subsidies.
Of the jobs that received a 2021 wage subsidy, 65% were supported by two or more wage subsidies.
The subsidies have been paid out of the $74.1 billion Covid Response and Recovery Fund, which ACT leader, David Seymour, has labelled a “slush fund” and which the ASuditor General has said will impact Government finances and debt repayments for years to come.
The accommodation and food services industry had the highest proportion of jobs supported by at least one 2021 wage subsidy; the arts and recreation services industry had the highest proportion of jobs supported by more than one of the 2021 wage subsidies.
Employees in Auckland had the highest proportion of supported jobs in 2021 (54%).
Of all jobs in Auckland that were supported by a 2021 wage subsidy, 82% received two or more 2021 wage subsidies – this rate was much higher than the next highest region (65% in Northland).
Nearly 10% of all jobs supported by a 2021 wage subsidy in Auckland were supported by all nine 2021 wage subsidies –3 times higher than any other region.
The Ministry’s report says these results reflect the fact that Auckland spent much longer at higher Covid Alert Levels throughout 2021 than all other regions.
A greater proportion of employed males were supported by a 2021 wage subsidy (54%) than females (41%)
The report says this appears to be a function of industries where males and females tend to be highly represented.
“For example, males made up the majority of people employed in some industries that had a high proportion of jobs supported such as construction and wholesale trade,” it says.
“Whereas females made up the majority of people receiving support in some industries with very low proportions of jobs supported such as health care, social services, education, and training.”
The proportion of jobs supported by a 2021 wage subsidy was highest for younger employees.
“This may be due to the types of jobs that young people are more likely to be employed in,” the report says.
“However young people aged under 20 only made up 107k out of the 1.17m jobs supported (9.2%).
“In general, 6% of all jobs in New Zealand employ young people aged under 20 .”
A greater proportion of Asian employees were supported (57%) than other ethnic groups.
“This is due at least in part by Asian employees making up a much higher proportion (37%) of jobs supported in the accommodation and food services industry, where nearly all jobs were supported than they do in any other industry,” the report said.
“ Additionally, 64% of all Asian employees supported were in Auckland, the region with the highest proportion of all employees supported.
Jobs from small businesses were much more likely to be supported. “Employees of small businesses (those with 1-19 employees) were more likely to have received a 2021 wage subsidy than employees from larger businesses.
“This likelihood decreased as business size increased.”
Social Development and Employment Minister Carmel Sepuloni says the report shows that the wage subsidies served to protect jobs and support businesses that might otherwise have been lost.
“While we have seen the number of people receiving a Main Benefit rise due to COVID-19, interventions like the wage subsidies and Government investment have meant the numbers are well below what was forecast,” she said.
“We know that businesses right across the motu are what makes Aotearoa New Zealand tick. The wage subsidies have been an important tool in our toolbox in supporting them and protecting people in nearly half of our jobs.”
The wage subsidy scheme was unique in terms of Government assistance to business in that it was run on a “high trust” model with the aim being to get the money to businesses as fast as possible.
In a report last year, the Auditor General said this opened the door to fraudulent claims.
He found that the Ministry of Social Development had to decline tens of thousands of applications because the information provided did not match the Inland Revenue Department’s (IRD)information about the applicant or their employees.
Both the Ministry and IRD investigated payments after they were made, and as a consequence, as at 5 March 2021, payments totalling $703 million were voluntarily paid back and $23 million compulsorily recovered.
The Auditor-General <john Ryan warned that the frequency and significance of crisis events were increasing.
“New Zealand might need another subsidy or similar scheme at any moment,” he said.