http://clubtroppo.com.au/2007/12/20/australia-v-new-zealand-ideology-to-the-rescue-the-essay-and-part-three/

Are some of you forgetting one small point,
competitors in business have a nasty habit
of also raising their productivity.
Which leads to pressure to drop prices.
So it is a big assumption to tie productivity to
wages.
Politicians get paid well in NZ, how do you
rate their productivity?

Labour is a commodity, and like all
commodities you will pay more for if those
with the skills you need are in short supply

I understand entirely that land prices have been kept artifically high. They will continue to be so kept until the whole thing collapses. Then, because it is the middle class contented that suffer when pyramid schemes like that fall, we will see all sorts of government bailouts to insulate the casualties from the consequences of their own mania. When it is the people who don’t onw homes crying for assistance there is a lot of talk and no action. Everyone knows that land is overprice because supply is strangled. No one will do anything about because councils, parties, are controlled by people who are part of the aforesaid class. The wonder of modern politics is that the lower classes have learned not to waste their time bothering to effect change.

As for having a government that doesn’t penalise hard work. Look at uni graduates nowadays. They invest in themselve instead of a house – no laqc’s for that! They get paid pitifully initially and then when they finally get to a higher salary they are immediately hit with ridiculous taxes so although they still have nothing they end up paying more tax than the guy who has got a 150,000 equity in a house he brought when the graduate was still finishing Uni. Where is the incentive to better oneself there.

Why should your wages go up if there hasnt been an increase in the value of your labour? Just because you want it to? Get real.

Fair point, but what if I said to you that certain aspects of the curent economic system operate to ensure that increases in the value of labour are kept low while increases in the value of assets are kept high.

Take migration. One fifth of NZ’s population is overseas. Largely they are replaced with immigrants from developing countries or countries that lack our desirable social democracy. That’s right, when a kiwi says screw this I can’t get ahead here and leaves, what does the government do? It opens the floodgates of immigration into NZ. Now you might think that that is fine. Kiwis leave and new people come into to replace them. But ask yourself why the Kiwis leave – do they love the idea of being in another country? Do they think oh hey England or Australia are so much better places to live. No they don’t. They leave for one reason and one reason only. Money. Now the immigrants coming in are frequently moving here not just for money (remember they come from less developed countries) but because it is a nicer country. You could let that immigration thing continue forever. Then we can be like Mexico and have the world’s richest man while most of the populace live in poverty. Take doctors for example. All the young doctors flee overseas. Now if the government refused to bring in foreign doctors then the wages and salaries for NZ doctors would skyrocket and there would be a reduction in the nunber going overseas. But you won’t see it that way will you.

Yuu guys and your property rights. Like property rights are a holy grail. Property rights are a boon when they allow for a stability that lets peole get ahead from the results of their own hard work. They are a tool of oppression however when they operate to deny much of the population the right to own anything. The trouble with your point of view is that it denies the existence of society at all. As far as you are concerned we are all just individuals in a rat race and however we do is a perfect reflection of how hard we worked.

Increases in value are an incident of ownership. But, to a large degree, ownership is passive. If the increases in value accruing to owners continue over a long term to exceed the increases accruing to wage and salaries then that is a recipe for social disaster.

Now if, and it is a big if, hard work and conscientious saving are the keys to getting oneself in an ownership position how can that be reconciled with an environment where increases in value are routinely greater than increases in wages and salaries – in such a scenario someone who trys to save up to buy an asset is doomed to fail. In order to get on the bandwagon they must borrow and then pray that the rises continue. Now even if such a system is supportable (and long term I doubt it but as Keynes said in the long term we are all dead) is it desirable? Is it desirable that assuming debt is a necessity to get ahead in this world?

The right hold firmly to the idea that life is basically a meritocracy. The left are more skeptical of this. For my own part I don’t think this is always calculated by the right rather I think that the importance of a leg up is down played in their minds.

As for calling my statements idiotic I can only say that I have known National party supporters who believed ideologically that the minimum wage was a bad thing and yet themselves affirmed that they would never work for so little.

I understand the right very well. They truly believe that everyone could get a high paying job making 100K a year if they only truly wanted to. In that regard the right are no less loopy than the left.

But, hey, if you think that the reason is largely political, then don’t let me stop you.

I’m surprised you righties (and very,very occasional human rights advocates) haven’t started blaming the EFB for the gap yet.

Secondly, you state all these things about those on the Right, but they are the same old tripe we see all the time from people who really dont understand our view at all.

“They cannot seem to raise any empathy for the guy (or girl) who lives week to week, paycheque to paycheque.”

Quite frankly if you persist in idiotic statements such as this you will be labeled an idiot. The meme that only the Left truly cares about poor people is absurd, if you even knew the first thing about centre right thinking you would understand this.

Not only are you comfortable in your ignorance you arent even willing to give the Right the benefit of the doubt and assume that they are just wanting the same outcome, just via a different method.

“But my rent has gone up, house prices are through the roof, and you own a house so you are worth a lot more than you were. Maybe we should all share in that prosperity. Put my wages up”.

Well, why dont we do away with private property altogether, everyone owns everything?! Why should you share in my prosperity? Simply because you want to? Get real.

“But I deserve the increase in value of my house whereas you don’t deserve an increase in wages.” No reason why. Just a statement and happy confidence that all is right with the world.”

Bullshit. My response is, the value of my house has absolutely nothing to do with you. The gains in the value of my property fall to me, as I own the damned thing. Why. The. Fuck. Should. My. Profits. On. My. Fucking. House. Go. To. You. When. You. Didnt. Contribute. A. Fucking. Thing. To. Its. Purchase. Maintenance. Or. Servicing?

What right do you have to demand that of me? Do I have that right to demand YOUR labour without paying for it?

Why should your wages go up if there hasnt been an increase in the value of your labour? Just because you want it to? Get real.

If you stopped working would I still have to increase your wages? Would I be able to reduce them? If I can reduce them because you dont work for me, then why cant I keep them the same if you are doing the same amount and quality of work?

Repeat Media Release.

From the Centre for Resource Management Studies.

The media release below was first released on the 25th November.

However, given that the new Housing Minister, Maryan Street, has introduced the “Enabling Territorial Authorities Bill” to Parliament, it is necessary to present it again.

Ms Street claims ““The Bill, which is based on tried-and-tested schemes in place in the United Kingdom and the United States, will enable local authorities to address imbalances in the supply of new homes through a combination of requirements and incentives for developers.”

Unfortunately the most recent research from the US confirms that such affordable housing mandates have proved a failure in every way. Over a ten year period, in US markets where the mandates had been applied, supply reduced, on average, by ten percent and house prices increased, on average, by twenty percent. This does nothing to make housing more affordable and indeed only makes things worse. (The most up to date information is through the link to the 2007 paper.)

Also, the restraints on resale actually made those “lucky” enough to acquire a “below market” house ended up much worse off than the rest of the population.

There is no need for New Zealand to repeat this failed experiment.

The officials who advise Ms Street are fully aware of this research and its damning findings but have chosen to ignore and exposed the Minister to ridicule.

Owen McShane.

09 431 2775

The Centre for Resource Management studies

Chairman, Dr Don Brash

Director, Owen McShane

Phone (09) 431 2775 – Mobile 0274 767 814 – Email – omcshane@wk.planet.gen.nz

Media release (immediate) 25th November 2007

CRMS warns that forcing developers to supply houses at below-market prices actually reduces housing supply and raises prices.

New Zealand should learn the lessons from California.

“The Government should abandon any plans to force ‘affordable housing’ on to land developers “, said Owen McShane today.

Mr McShane has recently returned from presenting a group of papers to an international conference, in San Jose, California, with the theme “Recovering from Smart Growth”.

“Many of the conference speakers focused on means of achieving affordable housing within the high-priced housing markets in California, and the other highly-regulated markets in the US, and in other countries round the world. Papers from urban economists provided persuasive evidence that forcing developers to provide ‘affordable housing’ as part of their resource consents actually reduced the supply of housing and increased prices,” he said.

“Sadly, recent statements in the media indicate Government is considering requiring land developers to provide a percentage of their housing at below-market prices in return for consent to proceed with large scale residential subdivisions. Furthermore, a Government invited ‘expert’ from the UK has recommended such schemes.

“In England” said visiting Professor Bramely, “if developers want planning permission they have to provide affordable housing within projects.”

“However”, Mr McShane points out, “four visitors from the UK attending the San Jose conference pointed out that the UK was a housing “basket case” with some of the least affordable housing, with the worst standards, and the lowest build-rate, of any country in the developed world.

“These presentations indicate that seeking advice from a proponent of UK housing policy is like asking President Mugabe to advise us on how to manage inflation,” said Mr McShane.

“In their 2004 paper, Housing Supply and Affordability: Do Affordable Housing Mandates Work? Benjamin Powell and Edward Stringham concluded that “By restricting the supply of new homes and driving up the price of both newly constructed market-rate homes and the existing stock of homes, ‘inclusionary zoning’ (forcing developers to provide below market-priced homes) makes housing less affordable.”

“At this 2007 Conference Tom Means, Edward Stringham, and Edward Lopez presented Below Market Housing Mandates as Takings: Measuring their Impact a DRAFT chapter from a book on takings” said Mr McShane.

“A California court recently rejected the notion that ‘inclusionary zoning’ is a ‘taking’ without compensation, and found that such zoning ‘necessarily’ makes housing more affordable. This paper shows why the court was wrong. The three economists have updated the 2004 findings and present more rigorous and detailed statistical analysis. Once again their conclusions should kill off any thoughts of forcing developers to provide a percentage of below market priced housing in return for development consents in New Zealand’ said Mr McShane.

“The three University economists conclude:

Over a ten-year period, cities that impose a below-market housing mandate on average end up with 10 percent fewer homes and 20 percent higher prices. These results are highly significant. The assertion by the Court in “Home Builders Association v. Napa” that “the ordinance will necessarily increase the supply of affordable housing” is simply untrue.

Dr Don Brash, Chairman of Centre for Resource Management Studies, supported these findings, saying “We have been warned, and before any government forces New Zealand home builders and land developers to provide houses at below market prices someone will need to demonstrate why these findings regarding supply and price will not apply in the housing markets of New Zealand.

“That will be a difficult task” said Dr Brash, “because both papers are based on the simplest and most firmly established economic principles linking supply, price and demand”.

ENDS

The URL for the 2007 paper is:
http://www.independent.org/publications/policy_reports/detail.asp?type=full&id=27

For further information contact Owen McShane
09 431 2775
ENDS

You lefties seem to have been born with some sort of brain malfunction so that you just cannot grasp elementary realities. Or is it envy pure and simple? “I have come to believe that reason supported by evidence is insufficient to dislodge from the human heart, a lie grounded in desire”.
(David Horowitz, “Left Illusions” – the ONE book all lefties SHOULD read if they could be persuaded to read ONE book).

It is a betrayal of the way you people think, that the EB “secret seven” in any way represent “the super rich”. Ooooooh, the ENVY, LOOK at that “sprawling villa in Mount Eden” that the office fitout guy who employs 20 people, owns!!!!!!!!!!!! And that lawnmower and chainsaw shop owner, and the guy who makes hydraulic fittings!!!!!!!!!!!!

Having a taxation and government spending regime that REWARDED thrift, enterprise, and hard work, and making sacrifices for better longterm outcomes, rather than PENALISING them, just might make more than a little difference to how well the whole country eventually does. And THAT’S what the Exclusive Brethren represent – thrift, enterprise, hard work…. NOT “the super rich”. But admit it. You still hate them.

The bargaining power argument is important, as a weak workforce can be taken advantage of. Ultimately the best solution depends on the industry, in some industries giving people skills will give them sufficient power to be paid fairly, and in other industries we may require some type of external employee power. This is the type of question the government needs to look at, but it is hard to decide what is right and what is wrong.

Wage increases will be inflationary if production rises as firms will increase prices. Increasing nominal wages without increasing the amount that can be consumed is the same as throwing money at people (proportional to there income). As there are only limited resources, the price of those resources will be bid up, until people can only buy what they could have before.

Unions obviously can be too powerful at times but it seems to me that employees without unions are too weak. Maybe I am unduly cynical but I think that the merits of individual bargaining for employees are over-sold by business interests in order to divide and conquer. It must surely be well known that human nature is to view oneself with rose tinted glasses – which I surmise extends to about 70 to 80% of employees thinking that they will be the ones who benefit from individual bargaining.

Are unions the best way? I don’t know. There are serious problems with unions. I can see the appeal of award rates systems although I understand the objections to them too – although isn’t that what we effectively have for the nurses, teachers, police, and fire services? Why not for people in homogenous jobs in private industry? I am an ardent supporter of the minimum wage. I have always considered the arguments against minimum wage a little specious and am unclear on whether empirical studies support the many right wing objections to the minimum wage.

Question. Wages and salary increases are supposedly inflationary but if there are wages and salary increases without increased production doesn’t this simply mean that the money ends up in different hands (i.e. as wages and salaries rather than as profits)?

Pete: “Any price increases will be smaller than the wage increases since wages are not 100% of GDP.”Any price increases will be smaller than the wage increases since wages are not 100% of GDP.”

If the wage pressure is uniform across the economy then we have a uniform impact on prices, as wages are what consumers spend, if all prices were perfectly flexible (and as capital is fixed in the short-run) this would lead to straight inflation. The relative impact on output and prices depends on the stickiness of prices and the responsiveness of output. As some prices are stickier than others our relative prices are going to get all messed up in the short term, worsening the allocation of resources and moving us further away from our efficient frontier.

Ross K: “You would think that they would see strikes as the ultimate expression of the labour market in operation”

You make some interesting points, but I have to take issue with this. There is a difference between refusing to work because your wage is below your reservation wage and refusing to work in order to increase your share of the pie. The first one is people who do not participate in the labour market, the second type are people that strike. I agree that employer-employee bargaining positions should be relatively even in an equitable society, however are unions the best way to achieve this?

Comparisons are adjusted for PPP.

“You dont produce any more than you used to. Therefore we will not pay you more”

to which I respond:

“But my rent has gone up, house prices are through the roof, and you own a house so you are worth a lot more than you were. Maybe we should all share in that prosperity. Put my wages up”.

And your answer to that is . . . “But I deserve the increase in value of my house whereas you don’t deserve an increase in wages.” No reason why. Just a statement and happy confidence that all is right with the world.

Asset values have been appreciating more quickly than wages and salaries. House are the prime example of this but I doubt that they are the only example. It is fairly widely accepted that wages and salaries, in real terms, over the last 20 years have stagnated in the higher earnings ranges (leaving aside of course the top 1%), and decreased in the lower and medium earnings ranges. I don’t know how much clearer I can make that for you.

You seem to assume that there is an equality of bargaining power between the employer and the employee. Frequently there is not. For skilled workers, in short supply, there is equality (or even greater power than the employer). For the bulk of the population there is not, particularly when there is a mortgage to pay and mouths to feed.

Nevertheless you make a valid point – workers can leave. And they do. Many go to Australia, some go even further afield.

How does debt feed capital appreciation? Look at houses. From 20 year loans where you had to put down a 20% deposit we have reached 30 year loans with no deposit. Partly that is a result of popular hysteria about not being able to afford a house and partly a result of wages and salaries not keeping up with prices but if the banks had retained their lending policies of old we would not have house prices now that are seven rather three times the average wage for an average house. The effect of the change though is to make people slaves to debt. While any one or some of them could opt out of that servitude they couldn’t all opt out (that would cause prices to crash and leave them in negative equity positions in their houses). High interest rates are also part of the cause of high house prices.

You take issue with my comment that “One of the depressing consequences of the increasing gap between returns to labour and returns to capital is that it does make it seem like working is a bit pointless.”

Surely you can understand that for a low earner, the knowledge that their $12 an hour will probably take 5 to 10 years to rise to $15 an hour, while everything else is costing more and more all the time, makes them feel excluded from society. Now the guy working in the factory or cleaning buildings, or driving buses, does an important job but his earning are made to look ridiculous against the ever increasing cost of anything he might want to buy. His rent is wiping out any ability to save.

Should he persist with his slow death? Or should he do something illegal to make a bit of seed money? Or should he borrow and buy a business secure in the knowledge that he has nothing to lose anyway (casting away any worries about creditors who might suffer if the business goes belly up?

The right lives in a world where everyone is sitting comfortable before they start which enables them to (a) wait for the right things to come along,and (b) negotiate without fear of such severe consequences if they miss out on something.

They cannot seem to raise any empathy for the guy (or girl) who lives week to week, paycheque to paycheque. They can’t seem to understand that it is much easier for people who have something to grow it than for people who have nothing to accumulate anything at all.

Yup, envy means you dont have to eat. Wistfulness provides christmas presents too.

“The real irony here is that the appreciation in capital returns is fed by debt.”

*blink* *blink* … BAHAHAHAHAHAHAHAA!

“Gosh, I’m so much wealthier – I guess I will have to increase the wages and salaries of my staff”

That is just plain adorable.

“…strikes as the ultimate expression of the labour market in operation.”

No, we would see it as the labour market being impeded from operating efficiently.

“You won’t pay us enough. Therefore we will not work”

Mmmm thats fine. I will find someone that will work for me. Oh wait I cant, because the striking workers are blocking the gate. Damn, I guess I will have to pay their ransom.

The correct quote in reference to a strike would be, you dont pay US enough so we wont work and we will prevent YOU from making any money too, so either pay us more or you starve.

The correct quote in reference to the labour market would be, you dont pay us enough, we will try to find another better paying job elsewhere, or we will increase our skills so we are more valuable to an employer and therefore can get higher wages.

“In recent years returns to capital have increased at a far greater rate than returns to labour”

You really need to explain what you are on about here.

“When the argument is about higher wages the right”… will say that wages will only go up if the work improves, otherwise why would it be deserved?

Owners ARE taking extra risk, so the gains from that risk ARE rightfully theirs. No one else has any right to them.

Look you fcked it up right from the start,

“higher profits will lead business owners to increase wages and salaries.”

By this, you seem to think that a business will make profits and then decide, if they are feeling nice enough, to maybe give a little bit back to the grubby workers.

Business will not make profits without its workers. They dont want to pay too much because that will leave less for the return on capital (assuming they even make a profit). They dont want to pay too little because they need to entice workers to come work for them so they can stay in business. They will find a middle ground. They will even pay closer to the too much level if they want to avoid the risk of high turnover.

Workers arent slaves. They are mobile. They can change jobs at whim. When a boss says, if you dont like what I am paying you can always find another job, they arent being mean and spiteful, they are describing that persons real options.

“You won’t pay us enough. Therefore we will not work”

“You dont produce any more than you used to. Therefore we will not pay you more”

In recent years returns to capital have increased at a far greater rate than returns to labour so it is understandable that your average joe is skeptical of claims that increased productivity will see his pay packet rise. The average Joe’s experience is that increased profits for the business have little effect on his wages.

One of the depressing consequences of the increasing gap between returns to labour and returns to capital is that it does make it seem like working is a bit pointless. This holds true for anyone who doesn’t already have capital assets. Now for many of us it is true that when our parents pass away we will inherit considerable wealth. Of course having to wait around to inherit wealth rather than living in an environment where you can go out and make it (which is the experience the 50 years olds of taoday lived through) makes working too hard seem a bit pointless. The real irony here is that the appreciation in capital returns is fed by debt. Everyone knows this and everyone knows that it can’t go on forever. This is one of the reasons that during the last 10 years when property prices have skyrocketed business owners (who are invariably property owners) have not said to themselves “Gosh, I’m so much wealthier – I guess I will have to increase the wages and salaries of my staff” – because they know it is not real wealth.

Of course one of the inherent contradictions in right wing thinking is that is is obssessed with markets and the rational man but only when it suits it. Take employers and employees. When the argument is about higher wages the right will bleat about how you have to have employers to pay employees and they are all in it together, in the good ship prosperity. When it comes to explaining the disparity between the business owner’s wealth and the paltry pay packets of his staff then it is all about how the owner is putting himself at risk and takes on greater responsibility, needs to be incentivised, etc.

Similarly the right descries strikes. You would think that they would see strikes as the ultimate expression of the labour market in operation. “You won’t pay us enough. Therefore we will not work”.