New Zealand’s overall labour market performance is good by OECD standards and has been particularly impressive in the past few years. Employment legislation and the industrial relations framework both contribute to a labour market that has been able to painlessly absorb a significant influx of working-age migrants over the 1990s. The flexibility of the framework has made it easier to cope with significant changes in working practices, including greater use of part-time and temporary work and a shift towards higher skills. It has also given more scope to small firms to tailor employment conditions to their specific needs. In terms of basic outcomes, this framework has delivered above-average employment rates for men and women, and an unemployment rate below 4½ per cent of the labour force. The incidence of long-term unemployment, as measured by the labour force survey, is also low in comparison with other countries. However, a broader measure of joblessness that includes people only marginally attached to the labour force – e.g. those without a job but who want one – is considerably higher (Table 15). Thus, there is still a significant number of able-bodied people who are permanently or frequently out of work and who may be able to be brought into the labour force if particular blockages are removed. This Chapter reviews the labour market position of such people and focuses on social assistance reforms that may help the jobless move from welfare to work while minimising any negative impacts on poverty or social outcomes more generally. It also discusses the importance of maintaining labour market flexibility...