Blog Bits
A quick roundup:
- Tony Milne at Just Left ponders how should Labour deal with the Maori Party – shoild it try to have a constructive relationship with them, or should it try to attack them and win some seats back off them? This is a big decision for Labour, with potentially very significant consequences long-term.
- No Right Turn is upset that Treasury complained about the increasing number of pages of legislation, and sees this as focusing on quantity not quality. I think what he overlooks is that the more pages of law there are, the harder it is for citizens or businesses to know what the law is to comply with. Not everyone can have a law firm on retainer. NRT has a point that it is not just about quantity, but quantity is actually important.
- Russel Norman congratulates Christchurch couple Matthew and Waveney for finishing their waste-free year. I’m amazed at how they managed it. Reducing waste is one of those win-wins generally. Better for the environment and cheaper. Since all my bills got converted to e-mail instead of snail mail, I must have saved a few trees!
- Peter Cresswell isn’t impressed with National’s RMA changes.
- Steve Pierson at The Standard speculates on what National will do with the minimum wage, with some useful numbers.
- Vibenna calls for a freeze on the minimum wage, to protect low-paid jobs.
I tend to side with Vibenna, in that this is probably the worst possible time to be increasing the minimum wage. Businesses are going under and laying off staff all over the place and the calls by some to increase the minimum wgae by 25% to $15 would be devastating to businesses already hit with reduced access to credit, reduced income and higher import costs due to the low dollar.
I wouldn’t have a problem with the minimum wage at least moving in line with inflation, and think in normal circumstances National would do at least that. However whether one can afford the likely impact on employment, when we are facing the worst recession in 70 years is a real dilemma. It is a different environment to when employment growth was so strong that any impact on minimum wage movements was minimal.
It’s also worth remembering that one can not legislate your way to improved living standards through the minimum wage. Otherwise we’d just make it $30 overnight. It all comes back to producivity.
February 2nd, 2009 at 3:20 pm
But if it moves in line with inflation, does that mean it should reduce if we have deflation?
February 2nd, 2009 at 3:26 pm
We have a minimum wage – its called the unemployment benefit. Legislating for something else for workers is just plain goofy, like having a minimum price for bread.
February 2nd, 2009 at 3:26 pm
Of course, vibenna. However, should the economy slide into deflation we’ll have much bigger problems than legislating a fair minimum wage.
February 2nd, 2009 at 3:27 pm
“Otherwise we’d just make it $30 overnight. It all comes back to producivity.”(sic)
Which leaves those on the minimum wage where?
David, please tell me how a minimum wage cleaner can improve his productivity. The vacuum head can only cover so much carpet in any given shift.
How about a hairdresser? What innovation has decreased the time it takes for a perm to set? or a colour to take? How many more braids can one pair of hands do in an hour?
maybe you could ask your barrista how he can brew more long blacks on the same machine?
Productivity gains in low wage industries rarely make it to the wage packets of the workers.
[DPF: There have been massive increases in productivity in the cleaning sector. It says more about you that you think productivity increases are impossible. Technology has sped many things up.
Incidentally I've worked as a cleaner. Have you?]
February 2nd, 2009 at 3:28 pm
“Peter Cresswell isn’t impressed with National’s RMA changes”
All that bloke ever does is whinge.
February 2nd, 2009 at 3:29 pm
There is only one way to structurally increase low wages, and that is by getting employers to compete for quality labor and providing them with means to expand production, or rather removing barriers to expansion.
The solutions therefore are education/training and ongoing education, reduction of low skilled immigration, reduction of taxes and compliance costs. The first is mainly a cultural aspect, which can be stimulated by some intervention, while the second is fiscal (in the sense of reducing government intervention altogether).
I am not certain whether the current government is at all on the proper course here, as they are displaying some worrying centralist tendencies rather than moving towards a hands-off approach as was to be hoped.
February 2nd, 2009 at 3:38 pm
No minimum wage = No unemployment…problem solved!
February 2nd, 2009 at 3:39 pm
From:
“The cruel dark side of the minimum wage”
by Phil O’Reilly
31 January 08
“One of the tenets of economics is that an increase in the price of something causes less of it to be purchased. It’s a tenet that’s central to the minimum wage debate. The danger for those on the minimum wage is that they can be priced out of the market if the level of the minimum wage gets out of kilter with their level of productivity.
This danger has increased over recent years with successive increases in the level of the minimum wage. This is unfortunate given that the minimum wage was instituted with the noblest of intentions.
At the end of the nineteenth century New Zealand was one of the first countries in the world to introduce a base level below which pay rates were not permitted to fall. It was doubtless one of the reasons for our early reputation as a compassionate and progressive country. But now it’s apparent that the minimum wage is more likely to undermine job opportunities than create them.
Now it would be more compassionate to adopt different methods to help low-skilled workers improve their income levels. The obvious way is to increase skills, rather than arbitrarily increasing income levels without reference to skills.
Our need for more and better skills is manifest. In survey after survey conducted by Business NZ in recent years the overwhelming difficulty cited by employers has been their inability to source relevant and adequate skilled labour.
It’s wrong to have this huge unmet need while paying for an incomes policy that bears no relation to skills. Meanwhile, the minimum wage now appears to set the floor for collective bargaining. Where there was once a considerable gap between the lowest collective agreement rate and the minimum wage, today the difference is much smaller.
Another recent change is the virtual disappearance of the youth rate, its application limited to those in training and to roughly the first 3 months of a 16 or 17-year old ‘new entrant’s’ employment. The youth rate in its previous form – applying to all 16- and 17-year olds – was an aspect of the minimum wage policy that did at least have some logic. But getting rid of (most) youth rates – while retaining the minimum wage overall – makes it comparatively harder for young people to get their first job.
This is borne out by OECD research that indicates a 10% increase in the minimum wage leads to a 3% increase in youth unemployment. This should be a concern for us, as youth unemployment in New Zealand is around four times higher than overall unemployment.
Getting rid of youth rates affects firms’ internal relativities, since an arbitrary increase in pay for those on the first rung of the employment ladder has a knock-on effect raising other wages, with inflationary effects overall. And removing youth rates for most, while retaining them for trainees, is a disincentive for young people to undergo training.
People don’t stay on youth rates for long. The evidence is that as they pick up skills, they move quickly into normal pay bands. Youth rates are therefore similar to a probationary period at the beginning of employment – they are useful in allowing an employer and employee to try each other out with not too much risk to either party, potentially providing a basis for a strong future employment relationship……
“……if the cost of employing low-productivity workers rises, fewer will be employed. Employers are more likely to look for employees with higher productivity potential than to take on workers in need of greater help or supervision, and in the light of the current economic downturn this effect will be exacerbated……”
February 2nd, 2009 at 3:43 pm
From:
“Reviewing the Minimum Wage”
By Muriel Newman
1 Feb 2009
“…….While high minimum wage laws are usually touted by politicians and unions as being good for disadvantaged workers, this is simply not true. High minimum wage laws are bad for disadvantaged workers – in particular young people without work experience, women returning to the workforce, the unemployed, and those with a questionable work history like former prisoners – because they lock them out of the workforce.
Nobel Prize winning economist Milton Friedman railed against minimum wage laws: “Minimum wage laws are defended as a way to help low-income people. In fact they hurt low income people”. He regarded the minimum wage laws as one of the most – if not the most – racially discriminatory laws on the statute books, severely disadvantaging black teenagers by ensuring their unemployment rate is significantly higher than that of others. In his words, “The high rate of unemployment among teenagers, and especially black teenagers is both a scandal and a serious source of social unrest. Yet it is largely the result of minimum wage laws. The government first provides schools in which so many young people, disproportionately black, are educated so poorly that they do not have the skills that would enable them to get good wages. It then penalises them a second time by preventing them from offering to work for low wages as a means of inducing employers to give them on-the-job training.”
And that is the core of the problem – minimum wage laws force employers to discriminate against those with low skills. They cannot offer an unskilled and inexperienced worker a job unless they are prepared to pay them $12 an hour (or $9.60 if they are trainees or a 16 or 17 year old new entrant). That means the minimum wage laws prohibit employers, who have jobs available that are not worth $12 an hour, from offering them to the unemployed. In other words, under the present minimum wage laws, the government would rather leave someone unemployed and on the scrap heap than allow them to work in a job that pays less than $12 an hour.
There will be literally tens of thousands of people who are presently unemployed who would jump at the chance to work for a lower hourly rate than the minimum wage, knowing that having any job is better than having no job, and that basic jobs can grow into good jobs if you work hard. Equally, there will be tens of thousands of small businesses who desperately need another pair of helping hands, but simply can’t afford to pay $12 an hour.
Given the dire state of the economy and the bleak future outlook, shouldn’t we be changing the situation so that people who want to work for lower wages can do so? Isn’t it better that someone who is willing can be employed for say $9 an hour, rather than relegating them to unemployment and dependence on state benefits? After all there are a range of social support mechanisms available to help boost household incomes of working families, including In-Work Tax Credits, Minimum Family Tax Credits, Parental Tax Credits, Temporary Additional Support, and the Accommodation Supplement. These can be worth many hundreds of dollars a week to low paid workers.
These are all issues that we would expect the new government to have thoroughly canvassed ahead of the annual minimum wage review, to be announced on Monday. Their decision will demonstrate just how strong their commitment to jobs really is. With New Zealand’s recession deepening, unemployment rapidly rising and many small businesses in a parlous state, bold measures are surely called for.
Some would say that in light of the grim economic outlook the government should go further, back to first principles to challenge the theory of why a minimum wage is needed at all. First introduced by Premier Richard Seddon in 1894, minimum wage laws have been supported by well-intentioned governments convinced that they were needed to combat the evils of low wages and discriminatory employers. The relevance of that assumption nowadays however, needs to be challenged, given the rights of workers to enter into individual wage bargaining, the mobility of the work force, and the various rights of redress against what could be considered to be unfair practice.
When Labour became the government in 1999, the minimum wage was $7 an hour. This was just under 40 percent of the average hourly wage. Now, at $12 an hour, the minimum wage has risen to 49 percent of the average hourly wage. This compares with the situation in Britain where the minimum wage in 2007 was at 41 percent of the average hourly wage and in the US where it was at 33 percent. To match the situation in Britain, New Zealand’s minimum wage would have to be set at $10 and to match the situation in the US at $8.
In a free market economy, wages rise in line with increases in productivity: the more productive the worker, the higher their pay as the more goods and services they help to create for consumers. But over the term of the Labour Government it has been taxpayer funded public sector wages, rather than increases in productivity that have been the driving force, with government wage growth outpacing wage rises in the private sector. This has pushed the minimum wage to an artificially high level that no longer reflects productive output. In fact, since 1999, the minimum wage has risen by 71 percent while general wages have increased by only 40 percent.
In their 2007 minimum wage review briefing papers the Department of Labour recommended increasing the minimum wage to $12 from $11.25 in spite of concerns that doing so may constrain employment growth, increase inflation, cause the cost of goods and services to rise, and impose additional compliance costs on business which may force them to cut back on hours worked or even close their doors. Treasury also noted that “economic impacts are likely to be more significant if current buoyant economic and labour market conditions soften”. In other words, what seemed like a good idea last year can now be seen to be disadvantaging the very people it was purported to help…..”
February 2nd, 2009 at 3:49 pm
They are “equal opportunity haters” over there, as I once read. Which does indeed to kinda just whinging about everything, since the two centre parties both represent a similar sort of orthodoxy.
February 2nd, 2009 at 4:12 pm
I don’t see the point of the minimum wage. If it were $10 an hour, say, and the dole was $7 an hour, then everyone whose productivity was between $7 and $10 an hour would end up having their income reduced to $7 an hour. How is this a good thing? It might push up viewer numbers (and hence advertising revenue) for day time television and relieve some pressure on rush hour public transport, but I would have thought those advantages were marginal compared with the loss of income for unskilled people and recent school leavers.
February 2nd, 2009 at 4:45 pm
the economic-stimulus arguments for raising both minium-wage and welfare rates..
..are that any monies paid out in this way churn straight back into the economy..
..spent..as they are..on the basics/necessities of life..
..and are therefor guaranteed to stimulate said economy..
..the counter-argument is proven by the fact that after shipley/richardson gutted the spending power of the poorest..
..the sucking of that money out of the economy…
..sent that economy into a recession..
..but no..o’reilly/you righties..
..sees these challenging times as just reason/excuse to put the boot into the poorest..
..you all just ‘do’nt get it’..
..eh..?
phil(whoar.co.nz)
February 2nd, 2009 at 5:01 pm
Prosperity does not bring about an increase in production, an increase in production brings about prosperity. This is one of the flaws of Keynesian economics. As production per capita increases the real cost of goods decrease. During the great depression, the cost of many manufactured goods should have fallen because of increased production, inflation brought about by the New Deal caused this decrease in price to be minimised or reversed. Minimum wages only entrench unemployment as a benefit gained by a union for it’s members means another group of people have to lose out.
During a deflationary recession wage prices should be allowed to fall with other goods. Deflation is a good thing as it removes mal-investment caused by easy credit expansion during a boom, prices adjust downward to their real value. Allowing wages to fall and keeping your employees is better than keeping a minimum wage and having to fire them. No employer likes to lose good staff. When the recession is over there is competition for staff and wages again increase.
Before the Great Depression, recessions normally only lasted for a year. The Keynesian policies used for the New Deal kept the recession going from 1929 to 1941, twelve years, it was only World War Two that saved America.
There is an excellent book on the subject. America’s Great Depression by Murray Rothbard. If you are at all interested in economics and history you will love this book. Here is the link, I will paste the blurb below the link.
http://www.mises.org/store/Americas-Great-Depression-P63.aspx
Applied Austrian economics doesn’t get better than this. Murray N. Rothbard’s America’s Great Depression is a staple of modern economic literature and crucial for understanding a pivotal event in American and world history.
The Mises Institute edition features, along with a new introduction by historian Paul Johnson, top-quality paper and bindings, in line with the standard set by The Scholars Edition of Human Action.
Since it first appeared in 1963, it has been the definitive treatment of the causes of the depression. The book remains canonical today because the debate is still very alive.
Rothbard opens with a theoretical treatment of business cycle theory, showing how an expansive monetary policy generates imbalances between investment and consumption. He proceeds to examine the Fed’s policies of the 1920s, demonstrating that it was quite inflationary even if the effects did not show up in the price of goods and services. He showed that the stock market correction was merely one symptom of the investment boom that led inevitably to a bust.
The Great Depression was not a crisis for capitalism but merely an example of the downturn part of the business cycle, which in turn was generated by government intervention in the economy. Had the book appeared in the 1940s, it might have spared the world much grief. Even so, its appearance in 1963 meant that free-market advocates had their first full-scale treatment of this crucial subject. The damage to the intellectual world inflicted by Keynesian- and socialist-style treatments would be limited from that day forward.
February 2nd, 2009 at 5:04 pm
philu – Your argument assumes that there is no relationship between wages and employment. I don’t think that is true at the moment. (BTW, what Ruth Richardson cut was benefits.
February 2nd, 2009 at 5:10 pm
vibenna..you have obviously ‘missed the point’..eh..?
btw..under national last time..the minimum wage went up by 87 cents..
..yep..!..a whole ’87 cents’..
..and guess what..?
that meagre/miserly increase was screwed out of them by peters/nz first..in a coalition agreement..
..so don’t give me any crap about national giving anymore than a rats-arse for the welfare of the worst-off..
..as a class/political-grouping..
..you are just greedy/self-serving arse-wipes..
..it’s as simple as that..
..and your record makes any protestations to the contrary..
..just so much horseshit..
..eh..?
phil(whoar.co.nz)
February 2nd, 2009 at 5:26 pm
@philu
If the Keynesians are correct then every dollar spent by the government has a 1.4 multiplying effect. The known benefits of tax cuts however give 3 dollars back to the economy for every dollar in reduced taxes.
If you REALLY want to help the poorest in the economy, reduce taxes and tariffs.
February 2nd, 2009 at 5:51 pm
“It all comes back to productivity” a point that will only be learned when all processing is transferred to China.
Prosperity is not realised by general wage orders as ultimately they only drive the value of the dollar lower.
February 2nd, 2009 at 6:09 pm
Ahh, phil
It’s always great to have your well-informed contributions to a discussion.
No wonder so many people take your views seriously with weighty argument like the one below.
..as a class/political-grouping..
..you are just greedy/self-serving arse-wipes..
..it’s as simple as that..
..and your record makes any protestations to the contrary..
..just so much horseshit..
February 2nd, 2009 at 6:17 pm
Mr Norman flew from Wellington to Christchurch yesterday (I didn’t see any wings so I assume by commercial airline), traveled ( again an assumption) by internal combustion engine powered car to the Linwood area to party with these people (his description) then traveled back to the airport by petrol powered car (No assumption this time, fact) and flew back to Wellington (He told me of that plan).
Most likely his trips to and from Wellington airport were also in taxis as well.
My point is not that this completely unnecessary trip was at tax-payers’ expense (which it certainly was) but that Mr Norman, like all of his cohorts, pays lip service to saving the planet and reducing carbon emissions and eliminating unnecessary travel and constantly demands others sacrifice their pleasures to do just that but in fact does the opposite himself.
Mr Norman would be the least impressive MP I have ever had the chance to chat with, coming across as embarrassed by his position.
As I mentioned in another thread, having met him I now almost feel sorry for the deluded few who actually voted Green.
February 2nd, 2009 at 7:06 pm
MT_Tinman, I would suggest you research you case before going public.
The Greens consider that it is a part of a MP’s job to travel to meet with people and to do media interviews. Green MPs prefer to do meetings and interviews by videoconferencing or teleconferencing where they can, but to make an impact sometimes it is necessary to travel.
What you clearly don’t know, MT_Tinman, is that when Green MPs travel by air they pay an amount compensating for their carbon emissions towards forest regeneartion on forest denuded land equivalent to offset the carbon footprint of their flight.
It’s obvious from your blogname MT_Tinman, that you have no heart, but from your comment above, I suspect you also lack the same anatomical feature as the Scarecrow!
February 2nd, 2009 at 7:31 pm
Toad do the Green MPs pay for this carbon credit themselves or do they make sure its included in the cost of the ticket, which is paid for by yours truely and other taxpayers?
February 2nd, 2009 at 9:10 pm
Obviously Toad you don’t read or comprehend well.
Look up “necessary” in the dictionary, it may help.
I also notice you made no mention of when Green MPs travel by other methods than aircraft.
February 2nd, 2009 at 9:19 pm
MT Tinman
Go easy on Toad, he has one saving grace in that he is a cricket fan, mind you, I doubt I have ever seen him this pissed off, you must have struck a raw nerve there.
I do happen to agree with you, Comrade Norman makes all sorts of noises about saving the planet when it is not exactly his top priority yet he is happy to continue being a hypocritical Green by making unnecessary trips at the tax payers expense siimply to receive press coverage.
February 2nd, 2009 at 9:21 pm
Is the anyone out there who voted National or righter and believes in the minimum wage? If so, why?
February 2nd, 2009 at 10:11 pm
Tinman – what a mingy, scrimpled, mole-dropping of a post yours was! You’ve met Russel Norman and found him ‘embarassed by his position’ – you must be the poorest judge of character we’ve heard from to date (D4J exempted). Having a pot at a Green MP for travelling by air ( GASP ) is lamer than lame and worse, you weren’t up to speed with the party’s carbon footprint policy. You did though, bestir the irrascible Big Bro and set him off on his predictable arm-flailing rant about his much despised (pick the name of any Green MP here) villian, so at least you provided us with some light relief. Here’s a clue Tinman, say something about Catherine Delahunty and send Big Bro into paroxisms of rage that will light up the night sky! (My favourite BB sport is counting the number of times he uses ‘comrade’ in his diatribes – oh joy!)
February 2nd, 2009 at 10:16 pm
>>Green MPs travel by air they pay an amount compensating for their carbon emissions towards forest regeneartion on forest denuded land equivalent to offset the carbon footprint of their flight.
You say “they” pay. prove that the money is not paid by tax payers.
what conscientious people they are. tell us how to live our lives, do the opposite themselves and then make us pay for some fictional panacea so they can keep doing what they want, all the while lecturing us on how to live.
the greens, now the most useless group in parliament, since winnies gone.
February 2nd, 2009 at 10:27 pm
Grendel – they pay personally. Yes, I suppose you could argue it is paid by taxpayers ultimately, because their salaries, as are those of all MPs, are paid by taxpayers. But it is not out of some dodgy expense account, as you seem to be implying.
February 2nd, 2009 at 10:28 pm
DPF: “pages of legislation … quantity is actually important”.
You’re saying effectively that the quality of a government is influenced in inverse proportion to the number of pages of law it passes. No wonder you love the MACTional gummint!
DPF: “I wouldn’t have a problem with the minimum wage at least moving in line with inflation, and think in normal circumstances National would do at least that.”
That’s interesting. For 4 or 5 years during the 1990s, the previous Nat-led gummint TOTALLY FAILED MOVE THE MIN WAGE in line with inflation. Correct me if I’m wrong, but weren’t you working as an analyst or pet nerd or summat for the then PM? I’m surprised you don’t remember.
February 2nd, 2009 at 10:45 pm
Hagues said: Toad do the Green MPs pay for this carbon credit themselves or do they make sure its included in the cost of the ticket, which is paid for by yours truely and other taxpayers?
I can assure you it is not built into the cost of the ticket. In my previous employment I have booked airfares for them on occasion, and nothing like that has come up. It is a voluntary contribution they make to offset their carbon footprint.
I suppose someone will be on a hunt here trying to find a Green MP who has inadvertently fallen behind in his or her voluntary carbon offset.
Well, I guess that’s politics, and shit occasionally happens, but my bet is that because they are all very passionate about reducing carbon emissions, you won’t find any of them dragging the chain.
February 3rd, 2009 at 12:37 am
Oh I love it when I read that people offset their emissions by paying into some credit fund that puts up more trees… I have yet to see any evidence where these extra “trees” have been planted – on top of all the regular planting that goes on every year.
These voluntary contributions should be looked into a little bit. No Greens own any of these “offsetting” organisations do they?
This fad reminds me of the Greens gimmick to save the trains, and yet never used them themselves apart from their promotional photo shoots!
February 3rd, 2009 at 4:13 am
London could do with some “Global warming” right now. I can look out the window right now and see for myself what a con AGW is.
February 3rd, 2009 at 8:07 am
This fad reminds me of the Greens gimmick to save the trains, and yet never used them themselves apart from their promotional photo shoots!
Richard Prebble was a Greenie? Wonders never cease.
February 3rd, 2009 at 8:19 am
clintheine said: This fad reminds me of the Greens gimmick to save the trains, and yet never used them themselves apart from their promotional photo shoots!
That’s just not true Clint – I’m a Green and I catch the train to and from work every day.
Jeanette Fitzsimons, Catherine Delahunty, Metiria Turei, Sue Bradford, Kevin Hague and Kennedy Graham are not likely to use trains all that often because there are no trains running anywhere near where they live and no trains between Wellington airport and Parliament – hardly their fault.
But when the Greens held a conference in Masterton a few years back, all the Green MPs (and many of the others attending, including me) caught the train to and from it. Well, Metiria actually caught a bus replacement to it because the rail line was closed due to poor maintenance when she had intended to travel.
February 3rd, 2009 at 10:22 am
One thing I did not mention about the Book, America’s Great Depression is the Austrian school of economics believes economics is a philosophical subject not a mathematical subject. There is almost no mathematics another hallmark is clarity, books by Rothbard, Ludwig Von MIses and FA Hayek to name a few are very well written and easy to understand.
Another book to look for is Causes of the Economic Crisis by Ludwig Von Mises. This is a series of essays from before, during and after the Great Depression warning of the problems to come and what needs to be done to fix it.
http://www.mises.org/store/Causes-of-the-Economic-Crisis-The-P323.aspx