Robertson on Future of Work

February 10th, 2015 at 7:00 am by David Farrar

A thoughtful speech by Grant Robertson to Labour’s Future of Work conference. A part that struck me was:

In November received a visit from the joint winners of a prize I give to a local secondary school.  They had won the prize in 2013 and arrived at the end of 2014 to thank me and tell me how their year at university had gone.

It had gone well each in their respective disciplines of marketing and design. I asked them about their plans for the summer and holiday work. Thinking back to my glory days as an assistant in the fruit and veggie section of the local New World I expected to hear tales of bar work and retail.  Instead I was presented with two business cards, and a link to their design business that they had established during the year.  The summer was shaping up well with a client found through their on-line presence, and a sideline in stunning digital depictions of Wellington icons for sale at various market stalls.  

These two very capable young women did not see any boundaries between their study, commencing work, pursuing their interests or passions. They had the attitude, the skills and the security to do just exactly what they found interesting.  The future of work is bright, flexible, diverse and stimulating for them- and they will be a complete handful for anyone here trying to teach them.

I love this story. It is one of the things I love about the digital age, that so many young people are embracing the opportunities to do what they are passionate about, and are not dependent on an employer, or a degree. Such a story would have been near unthinkable 15 years ago.

The Commission’s mandate is to undertake a two year programme to develop a comprehensive understanding of the changing nature and experience of work and its impact on the economy, and to develop the policy responses required to meet the challenges and grasp the opportunities presented by these changes.

We believe that in order to be responsible leaders we must look to the future and prepare now. We owe to the next generation of New Zealanders that we are giving them the best possible chance to succeed.  We owe to a current generation of workers who feel insecure about their future and income that they can make transitions to new and fulfilling types of work.  We owe to businesses, small, medium and large that we have a plan for sustainable diversified, economic growth.

There is no room for complacency in such a period of rapid change, and by 2017 we must be in a position to tell New Zealanders what we are doing to face the future of work with confidence.  The Commission will be open to new and different ideas, to challenge our assumptions and policies. We will be prepared to change.  Our commitment is that with our core values firmly in mind, we are open to each and every idea that is put forward.

I will admit to a degree of scepticism that Labour will come up with anything more than their normal policies of payoffs for unions, extra costs on employers and less flexibility and choice in the workplace. But I hope to be wrong.

What Labour is doing with this two year programme of consultation and development on this issue is exactly what a good opposition should do. If they do it well, they’ll build credibility with stakeholders, show they understand the environment and issues, and come up with some genuinely new policies and solutions.

J is for Jobs

May 2nd, 2014 at 2:00 pm by David Farrar

The NZ Initiative hits J in their series on economics:

During the last American presidential election, Mitt Romney bragged that he had created around 100,000 jobs. The Obama campaign claimed Romney had actually destroyed jobs. Regardless of which was true is irrelevant; both feed into a common mistake in voters’ understanding of economics. That is, the belief that government should create jobs.

Jobs in this case refer specifically to job creation as opposed to productive employment and the labour market. Jobs are, and always have been, a critical concern across the globe. Whether young or old, skilled or unskilled, for billions of people jobs are essential for their economic and social development.

It is perhaps not surprising then, that job creation is often touted as the main impetus behind myriad government policy initiatives.

However, contrary to such popular opinion, job creation is not – and should not – be the goal of government policy.

This is a critical fallacy; a misunderstanding that government should be responsible for job creation and that job creation should be pursued as primary evidence of ‘economic growth’.

In The Myth of the Rational Voter: Why Democracies Choose Bad Policies, prominent economist Bryan Caplan identifies the ‘rational irrationality’ of this ‘make-work’ bias. There is indeed a tendency to underestimate the economic benefits of actually conserving labour rather than creating more jobs for the sake of more jobs.

In the early 1930s, the Soviet Union proudly declared itself the world’s first country to put an end to all unemployment. While the Bolsheviks ardently claimed unemployment was a disgraceful product of capitalism, what they failed to divulge was how they attained their zero-unemployment figure. Everyone was given some job or function, no matter how mundane or unproductive. The USSR may have succeeded in eliminating unemployment, but it came at the cost of reduced efficiency and productivity.

Ironically, the public often believe labour is better used than conserved; that producing more with less labour is a danger, rather than progress. This is a very real belief among the majority of non-economists, who interpret efficiency gains as the destruction of jobs while economists see real growth manifested through the production of more with less. 

Government policy should be focused primarily on achieving real economic growth, growth that is attained via increases in labour productivity. The creation of jobs should not be the overarching goal of fiscal expenditure, but rather a by-product of stimulating economic growth.

Government may not be good at creating good jobs, however, they are certainly capable of destroying them. But that is an entirely different matter.

The previous letters can be found here.

Any Government can achieve full employment if they want to. They just create make-work jobs for everyone. But that is never sustainable. The best way to create jobs, is to have a growing economy and a private sector that needs to and can afford to hire more staff,

Rewriting history

October 27th, 2012 at 9:00 am by David Farrar

Clare Curran said yesterday that:

Another 50 Kiwis will join the ever-lengthening dole queue after today’s announcement by state owned enterprise Kordia that it will outsource its Auckland call centre, says Labour’s Communications and IT spokesperson Clare Curran.

Orcon’s 50 Auckland call centre positions will be outsourced to Manila, as the company integrates its two New Zealand telecommunications businesses, Kordia Networks and Orcon.

“This is part of a worrying trend for businesses to make cost cutting decisions at the expense of Kiwi jobs,” says Clare Curran.

“The fact that it’s a state owned enterprise making the decision reinforces the lack of commitment by the National Government to investing in Kiwi jobs.

“National has removed the social responsibility clause which ensures SOEs have to take into account community interests and this is the result.

That last line is now missing from the web version – gone as if it never was included.

The reasons is it is factually incorrect. National has done no such thing. In fact Curran scores an own goal by highlighting that the social responsibility clause in no way hinders SOEs acting to become more efficient.

Personally I think the issue with Kordia, is why do we own it? It nationalised Orcon when it purchased it. Do we want government owned ISPs competing with others?

Stuff reports:

 The Labour Party has acknowledged Kordia is still bound by the “social responsibility clause” of the State Owned Enterprises Act

Hard not to acknowledge reality. And also worth noting:

Orcon chief executive Scott Bartlett, who will take up an expanded role at Kordia as head of its new merged telecommunication division, said yesterday that many affected call centre staff would probably find jobs at Australia’s second-largest broadband provider, iiNet, which operates a 300-person call centre in Auckland servicing its customers in Australia.

Now you can take a view that no NZ company should outsource its call centre overseas, but this also means that you are arguing against NZ companies picking up business from overseas companies.


NZ Herald on Labour xenophobia

October 23rd, 2012 at 12:00 pm by David Farrar

The NZ Herald editorial yesterday:

Labour’s xenophobic employment restrictions will not resonate with most.

Appeals to patriotism seek to tap the most accommodating of instincts. They can also be the most dangerous of tools. Too often, politicians talk of it when they want to beat the populist drum without much regard for the potentially dire consequences. So it was with a speech by Labour leader David Shearer last week, during which he set out policies that promised to give New Zealanders the first crack at jobs by making it harder for businesses to bring in migrant labour. Helpfully, Mr Shearer underlined the dismal nature of this approach by using the word “patriotic” as many as five times.

It must have tested well with a focus group!

The Labour leader said the current requirements for employers to try to find New Zealand workers before migrants were lax, often requiring a boss to show only that a job had been advertised. Labour would require companies to work with agencies, industry groups and Work and Income before approval was given to employ a migrant.

What this means is more hoops and bureaucracy for a business just wanting to get the best person for a job.

Mr Shearer placed his policy in the context of the rebuilding of Christchurch. This was an opportunity to employ and train New Zealand workers but there was a risk it would be squandered because of cheaper migrant labour, he said. Such talk may impress those still harbouring xenophobic tendencies, but Mr Shearer is mistaken if he thinks it will strike a chord with most New Zealanders. Least impressed of all will be the business community. It will be appalled by Labour’s intrusiveness and red tape that will serve only to stifle initiative. It will also point out, quite rightly, that government has no business interfering directly in staffing, as would be the case under a policy requiring companies with government contracts to train one apprentice for every $1 million investment.

 So few people in Labour have ever owned a business, or worked in the private sector in a senior role, that they have no idea how impractical their policies are.
Appeals to patriotism are usually a port of call for politicians desperate to win popularity. But the changed face of New Zealand and an appreciation of the important economic role of immigration has deprived this approach of much of its impact. Making it harder for migrant workers to enter the country will only hinder development. Most New Zealanders understand that. So should Mr Shearer.
He should leave this stuff to Winston.

Labour’s job plan

October 18th, 2012 at 4:00 pm by David Farrar

As far as I can tell most of Labour’s so called job plans, is to have more inflation and have prices go up. Here’s the speech, and my comments.

Our policies will ensure our high and volatile dollar doesn’t undermine the competitiveness of our exporters.  We’ll give them the best possible opportunity to succeed.

We are a trading nation. We can only grow wealthy if we export.

That means an independent Reserve Bank that’s given a wider mandate to support exporters and jobs, not just focus on inflation.

Make no mistake – this is the deluded belief that having more inflation will lead to more jobs. I thought the 70s killed off that idea. Any gain in jobs from more inflation is temporary. It’s like a quick sugar fix. You feel good at the time, but get bloated.

We’ll pursue pro-growth tax reform that includes a capital gains tax to take pressure off house prices and ensure people invest in businesses, not the Auckland property market.

Umm, are you seriously suggesting taxing the capital gains people make from their businesses will lead to more investment into businesses? There are some sound reasons to have a comprehensive capital gains taxs – but it is snake oil to try and suggest it will lead to more investment into businesses.

And a research and development tax credit that rewards ingenuity and encourages innovation in our businesses.

Actually, they encourage people to reclassify their expenditure as R&D. National does R&D grants, Labour prefers tax credits. The difference is not going to impact jobs much.

President Obama brought in a “25% rule” for stimulus projects. Unless a foreign company is 25% cheaper making a product, the work should be contracted to a US company.

Australia has other checks for local contracting as does Singapore and many other countries.

That’s why we’ll ensure government agencies contract New Zealand businesses wherever possible. To build businesses, jobs and skills.

Note that Shearer has not said he will bring in such a rule. He has just said Obama has. He knows under CER such a rule would be illegal. He is trying to con people into thinking Labour will have such a law.

Labour will also introduce a ‘one in a million’ target for significant government contracts.

It would require companies that are awarded major contracts to take on one apprentice or trainee for every $1 million contract it receives.

Oh Good God, and they’ll sack an employee at the other end if they don’t need that many staff. The Government can’t dictate staffing levels to a business. Again this is pure snake oil – sounds good, but won’t do anything.

We’d raise the threshold so that businesses need to prove they’ve engaged with WINZ and Industry Training Organisations before they get approval.

We’d require Immigration NZ to consider the competitive impacts, particularly on wages and conditions when it considers granting an approval to bring in temporary workers.

I’d also like to see conditions about wages and working conditions attached to the employer’s approval. And, where it’s appropriate, to require the employer to offer apprenticeships to young New Zealanders.

Finally, an actual policy that may impact jobs. But there are no details. Anyone can say raise the threshold. I do not disagree that work permits should only go to people, when no NZer can be located.

Manufacturing jobs

October 9th, 2012 at 1:00 pm by David Farrar

This graph of of the number of manufacturing jobs, as reported by the Household Labour Force Survey, from the beginning of 2009.

This is what Russel Norman hysterically claims is a crisis.

Women’s workforce particpation

April 15th, 2012 at 10:18 am by David Farrar

The SST report:

A generation of young, educated New Zealand women is being lost to the workforce because they can’t afford childcare.

Many tertiary educated and trained mothers are deciding to retrain as teachers or nurses, professions that offer more flexible work options. …

New Zealand has one of the lowest workforce participation rates for women in the 25-34 age group compared to the rest of the OECD.

Labour’s early childhood education spokeswoman Sue Moroney said the government’s reluctance to look at the issue was causing skills and talent to be lost to the workforce.

Nordic countries such as Norway and Sweden had the highest participation rates, and also spent the most on childcare, and had generous paid parental leave provisions.

I went looking for research on this, and found this paper. It’s 40 pages long and has every stat you can think of on workforce participation by women, written by a (then) Treasury boffin.  One thing he noted was:

The previous section has shown that differences between countries can be attributed in part to differences in the participation of, and prevalence of, different types of families. At least some of the difference between countries, however, might simply be due to the definition of “participation”. We illustrate this by comparing participation rates in New Zealand to those in the highest-participating countries in the OECD, the Nordic countries.

In official statistics, women on paid parental leave should be counted as employed, even though they are not working.21 Nordic countries have amongst the most generous paid parental leave provisions in the OECD

That is worth remembering. In these statistics, you are counted as still being in the workforce if on paid parental leave, so there is no surprise there is a correlation. They modeled for this impact:

The maximum effect of these differences in paid parental leave can be modelled by assuming that women take the maximum leave available for all their children and adjusting the reported participation figures to reflect this. Figure 24 shows that after this adjustment there is a marked ‘dipping’ in participation rates in the Nordic countries. When adjusted, the profile of women’s employment rates in these countries loses its n-shape, and becomes much more like the profile in New Zealand. The difference in participation rates of women aged 25 to 39 years is also markedly reduced after adjustment.

So extending paid parental leave makes the stats looks better, because women on paid parental leave are counted as being in the workforce. But whether it actually makes a significant difference to the number of women actually being in paid work, is far less clear. Some other interesting stats:

Among New Zealand women, the presence and age of children, being a sole or partnered mother, and level of qualifications have a strong effect, and each factor has an effect which is independent of the other two. Mothers with different combinations of these characteristics have widely varying participation rates. At one extreme, for example, sole parents with a pre-school child and no school qualification have a participation rate of only 32%. At the other extreme, partnered mothers with a child aged 10-17 and with a post-school qualification have a participation rate of 91%.

And for the 25 – 34 year old age group:

Compared to other OECD countries, New Zealand has a relatively high overall female participation rate. Yet, participation rates for women between the ages of 25 and 39 are conspicuously low by international standards. Few other countries show a dip in participation rates in the peak childbearing ages. This point of difference seems to be driven by a combination, in New Zealand, of relatively low participation rates among mothers with young children and sole mothers, together with high fertility rates and high proportions of sole parent families.

So arguably the welfare reforms which will discourage sole parent families to have further children, will increase the participation rates, as well as the increased work-testing requirements.

The research also notes (and this was done in 2005 when Labour was Government):

Differences in participation between countries may also reflect differences in government policies (such as tax and benefit policies) or social norms (such as the attitudes towards, and expectations of, women working compared to looking after their children). OECD countries can be grouped according to their pattern of women’s participation across ages, and these groupings to a considerable extent reflect similarities in the countries’ values, social conventions, institutions and recent histories. Not surprisingly, New Zealand’s profile is most similar to Australia and the United Kingdom: countries with whom we share a common heritage. The participation profile of New Zealand men, relative to the OECD, is also similar in many ways to that of New Zealand women, with relatively high participation rates for younger and older people, but relatively low rates for people aged around 25-39. These similarities support the case for the existence of particular “country effects”, which affect both women and men.

I think cultural issues are always significant.

The paper concludes:

How does all this inform the public policy question of whether, and how, to encourage the greater participation of women in New Zealand? Some initial thoughts are be hazarded here. Firstly, since different groups of women, and mothers, have widely differing participation rates, any policies which aim to increase the participation of women would need to be carefully focused. One type of policy is unlikely to work for all women. Also, since some groups of women already have high participation rates, policies which aim to increase this participation even further may incur high deadweight costs.

A very interesting paper. The issues are far more complex than paid parental leave.

The Greens jobs initiative

September 22nd, 2011 at 9:00 am by David Farrar

I’ve noticed that this election that the Greens have billboards and slogans along the lines of “Vote Green to grow the economy”. This is radically different slogan from their rhetoric of a few years ago when the Greens would denounce economic growth as evil and actually argue against growing the economy.

I’m not convinced that their policies have changed, just that they have a better advertising agency. The so called policy to create 100,000 jobs  in fact has less substance than an anorexic Leptotyphlops carlae. Take their claim of 47,000 to 65,000 new jobs from renewable energy. They said:

The global market for renewable energy technology is forecast to reach an annual value of $590–$800 billion by 2015.6 If we can secure just 1% of this market, we can build a new $6–8 billion export industry here at home, creating 47,000–65,000 new cleantech, high-value jobs

Translation provided by a financial analyst:

So if the global market for green tech gets to an incredibly high number and if we could secure 1% of this incredibly high number and if those were highly-paid jobs and if they didn’t replace any other jobs in the economy then hurrah – we would have 65,000 jobs!

If the Greens were promoting a prospectus, you could get them jailed for securities fraud. But it doesn’t stop there. ACT candidate Stephen Whittington points out their massive mistake, which would have them fail NCEA Level 1 Maths. He explains:

I honestly cannot believe that the Greens have made such a simple mistake, in a document which is intended to set out how they will finance their plans to significantly increase Government expenditure.  

The Greens predict that increasing minimum wages will increase tax revenue by $519 million.  Even assuming that people don’t lose their jobs, which they will, increasing the minimum wage will reduce tax revenue.

Increased wages will increase the amount of PAYE collected by the Government.  But wages are also a deductible expense to businesses.  Given that the marginal personal income tax rate is lower than the corporate tax rate, increased minimum wages will decrease revenue from corporate income tax more than will be increased from PAYE, even assuming no increase in unemployment.

In the Green fantasy world, increasing the cost of Labour doesn’t decrease profits and hence taxes on profits. I am amazed they are not lobbying for the minimum wage to be immediately raised to $50/hour as this will cause employers to become more productive to be able to afford to pay the wages. No I am not kidding – this is what they actually argue.

Now in case you think it is only nasty right wingers using evil weapons such as mathematics and logic to attack the Greens policy, let’s look at the comments by Idiot/Savant at No Right Turn. He supports their policies but slams their advertising:

I’ve spent the morning reading through the Greens’ “Green jobs initiative” [PDF]. The short version is that the Greens are promising to “create 100,000 new green jobs through business incentives and government leadership”, specifically through increased investment, building a clean energy sector, and increased support for a green economy. But when you look at it, its not really about jobs at all; rather its about greening our economy, with jobs as a byproduct. Political marketing means that that byproduct is being highlighted, in a way which is at times outright deceitful.

He continues:

 The “big idea” in the policy is government support, through our energy SOEs, for a major new renewable energy industry:

“The clean energy sector is booming internationally. Currently, renewables supply only 15% of the world’s primary energy demands but its share is growing rapidly. The global renewable energy market grew by 6.8% in 2010 alone to reach a value of $389 billion. It is forecast to reach an annual value of $590–$800 billion by 2015. By securing just 1% of this market, we’d create a $6–8 billion new export industry here at home, creating 59,000–81,000 new jobs.”Which is a nice dream, and something we should aim for. Our economy is not very diverse (basically, we export butter and bungee jumping), and if it is to grow we need to start doing other things. Exporting wind turbines, geothermal technology, and smartmeters, and the technology, services and IP related to these is a good idea, and something that potentially fits well with what we already do. But a $6 – 8 billion export sector is enormous – bigger than meat; it would be our third-largest export industry after tourism and dairy. And that’s not something that’s going to happen overnight. Its a good idea, its something we need to do, and its something government needs to help with (after all, pretty obviously the market isn’t going to do it if left to itself), it will benefit New Zealand in the long run. But pitching it as an immediate job-creation plan, and implicitly suggesting we’ll have those jobs by 2015 (rather than in 20 years time) is deceitful and misleading.

I/S concludes:

This isn’t just wrong, it is a mistake. Quite apart from raising questions of the Greens’ honesty and integrity, one of their chief selling points, it undermines the policy itself. This is a perfectly good policy, and it can stand on its merits (hell, even MED agrees that we need active government intervention to build new export industries, up to and including direct investment in growth areas). Fudging things like this hands a gift to detractors, allowing them to dismiss it out of hand: “100,000 new jobs? Yeah, right”.

So, a good policy, but very disappointing marketing around it. Deceit is not the green way, and if you use it to sell your policies, then people will start treating you as liars, just like all the rest.

At the end of the day, the Greens are politicians seeking power. They’re just like all the other politicians – neither saints nor sinners. Just politicians.But politicians who can’t even do simple maths.



Labour’s old new policy

September 1st, 2011 at 2:53 pm by David Farrar

Labour announced:

Labour today announced its youth skills and employment package which gives all teenagers the opportunity to be earning or learning within three years.

Now does this sound familiar? Let’s go back seven years:

A $56.9 million package of new and expanded initiatives in Budget 2004 will cement in the government’s commitment to provide all 15 to 19 year olds with a kick start to their working lives. …

In October 2002 we also signed a formal memorandum with the Mayors’ Taskforce for Jobs adopting the formal goal that by 2007, all 15-19 year olds will be engaged in appropriate education, training, work or other options which will lead to long term economic independence and well-being.

And back a further year to 2003:

Budget 2003 contains a comprehensive package of initiatives to ensure all 15 to 19 year olds are involved in education, training or work or other options by 2007, Prime Minister Helen Clark announced today.

So Labour announced in 2003 the same goal and policies, and declared by 2007 they would have worked.

But hey this policy is even older than that. Go back to 2002:

Government plans to ensure all 15 to 19 year olds are in education, training or work by 2006 could save taxpayers more than $1 billion, Associate Education (Tertiary Education) Minister Steve Maharey said today.

So the goal was 2006, then 2007 and now it is 2014. This is like Lucy v Charlie Brown.

But it gets even better. Let us go back to 2000:

No young person will leave school without options in education, training or employment within three years, Associate Education (Tertiary Education) Minister Steve Maharey said today.

So in fact they promised they would achieve this by 2003!!

And turning to their latest change of clothes:

“However we will reprioritise $80 million from existing schemes, with $58 million going to the apprenticeship subsidy instead of dole payments, giving a net total cost of $171 million over four years.

This will be paid for from revenue from Labour’s fairer tax plan.

This is absolute bullshit. By their *own* calculations their tax plan requires extra borrowing and a bigger deficit for the next seven years. Their tax plan does not generate any extra revenue until at least year seven – and even that is doubtful.