Technology and jobs

January 19th, 2014 at 1:00 pm by David Farrar

The Economist says:

INNOVATION, the elixir of progress, has always cost people their jobs. In the Industrial Revolution artisan weavers were swept aside by the mechanical loom. Over the past 30 years the digital revolution has displaced many of the mid-skill jobs that underpinned 20th-century middle-class life. Typists, ticket agents, bank tellers and many production-line jobs have been dispensed with, just as the weavers were.

For those, including this newspaper, who believe that technological progress has made the world a better place, such churn is a natural part of rising prosperity. Although innovation kills some jobs, it creates new and better ones, as a more productive society becomes richer and its wealthier inhabitants demand more goods and services. A hundred years ago one in three American workers was employed on a farm. Today less than 2% of them produce far more food. 

That’s an astonishing figure.

… it seems likely that this wave of technological disruption to the job market has only just started. From driverless cars to clever household gadgets (see article), innovations that already exist could destroy swathes of jobs that have hitherto been untouched. The public sector is one obvious target: it has proved singularly resistant to tech-driven reinvention. But the step change in what computers can do will have a powerful effect on middle-class jobs in the private sector too.

Until now the jobs most vulnerable to machines were those that involved routine, repetitive tasks. But thanks to the exponential rise in processing power and the ubiquity of digitised information (“big data”), computers are increasingly able to perform complicated tasks more cheaply and effectively than people. Clever industrial robots can quickly “learn” a set of human actions. Services may be even more vulnerable. Computers can already detect intruders in a closed-circuit camera picture more reliably than a human can. By comparing reams of financial or biometric data, they can often diagnose fraud or illness more accurately than any number of accountants or doctors. One recent study by academics at Oxford University suggests that 47% of today’s jobs could be automated in the next two decades.

This got em thinking. Could cleaners be an endangered species? You already had automated vacuum cleaners that you can leave unattended. Could you end up with an automated toilet bowl cleaner? automated floor polisher? The higher the costs of manual cleaning go, the more likely it is that it will become cost effective to invest in automated cleaning.

At the same time, the digital revolution is transforming the process of innovation itself, as ourspecial report explains. Thanks to off-the-shelf code from the internet and platforms that host services (such as Amazon’s cloud computing), provide distribution (Apple’s app store) and offer marketing (Facebook), the number of digital startups has exploded. Just as computer-games designers invented a product that humanity never knew it needed but now cannot do without, so these firms will no doubt dream up new goods and services to employ millions. But for now they are singularly light on workers. When Instagram, a popular photo-sharing site, was sold to Facebook for about $1 billion in 2012, it had 30m customers and employed 13 people. Kodak, which filed for bankruptcy a few months earlier, employed 145,000 people in its heyday.

30 million customers and 13 staff. Incredible.

Anger about rising inequality is bound to grow, but politicians will find it hard to address the problem. Shunning progress would be as futile now as the Luddites’ protests against mechanised looms were in the 1810s, because any country that tried to stop would be left behind by competitors eager to embrace new technology. The freedom to raise taxes on the rich to punitive levels will be similarly constrained by the mobility of capital and highly skilled labour.

The main way in which governments can help their people through this dislocation is through education systems.

Absolutely.

Yet however well people are taught, their abilities will remain unequal, and in a world which is increasingly polarised economically, many will find their job prospects dimmed and wages squeezed. The best way of helping them is not, as many on the left seem to think, to push up minimum wages. Jacking up the floor too far would accelerate the shift from human workers to computers. Better to top up low wages with public money so that anyone who works has a reasonable income, through a bold expansion of the tax credits that countries such as America and Britain use.

It is a fair point. The more you push up the minimum wage, the more you may speed up the decline of entire industries such as cleaning.

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Silly headline of the year

August 2nd, 2013 at 9:00 am by David Farrar

Radio NZ reports in their headline:

Govt not concerned that Australian jobs moving to NZ

Is there anyone out there who thinks the Government should be concerned that we are having jobs move from Australia to New Zealand?

Darien Fenton MP said the trend is deeply worrying.

Oh dear.

Better someone is unemployed than on a job earning $28,000 a year I guess.

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The cost of “Green Jobs”

June 20th, 2013 at 2:00 pm by David Farrar

Jo Nova blogs on the costs of Green jobs. Parties around the world love to talk about creating Green jobs, because who can be against jobs and against being good for the environment? A win-win right?

The trouble is that their Green jobs are almost always reliant on huge subsidies that actually destroy jobs.

She gives five examples:

  • Each green job in Britain costs £100,000 (and 3.7 other jobs)
  • In Spain each Green job cost $770,000 and nine jobs were lost for every four created
  • In Italy each Green job costs 5 jobs from the rest of the economy
  • In Germany the subsidy per Green job is 175,000 Euros
  • Green jobs in Denmark are estimated to have reduced Danish GDP by $270 million

We already have tens of thousands of “Green jobs” in New Zealand. They are the ones that get created when an employer is doing well enough to hire more people in the area they work in (such as tourism). The Green jobs that you hear certain political parties promote are the ones that require huge subsidies and destroy jobs elsewhere in the economy.

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Telecom redundancies

March 23rd, 2013 at 3:00 pm by David Farrar

Stuff reports:

Telecom yesterday declined to scotch claims by Labour communications spokeswoman Clare Curran that as many as 1500 of its 7600 staff could lose their jobs as a result of a restructure first announced by Telecom chief executive Simon Moutter last month.

Telecom spokesman Andrew Pirie said that while job reductions would occur across the board at Telecom, many of the cuts would be to middle management functions in administrative areas such as finance and human resources. …

Even Telecom had been through bigger changes before, he said. That included a plan to shed 5200 staff over four years that was announced in 1993 when Telecom employed about 12,500 people. Prior to its demerger from the Post Office it employed 26,000. Businesses such as the railways had also been through more dramatic changes, he said.

A Telecom manager once joked to me that Telecom wasn’t so much a telecommunications company as a law firm that specialised in telecommunications.

This was in recognition of the fact that much of the actual technical aspects are done by contractors such as Alcatel-Lucent and Yahoo.

Telecom for many years made money through its grip on the monopoly copper lines. We were not well served by that regime.

David Cunliffe and Steven Joyce broke up that monopoly, first by operational separation and then structural separation. Chorus, the monopoly element, is now a separate company.

It has been inevitable that the Telecom of the future would be a different beast. it needs to be a nimble, efficient risk taking competitive company as it now fairly competes against Vodafone and 2 Degrees, plus many minnows.

They have been moving towards this. Their flat rate data roaming rates were a bold move that should win them market share. Their XT network provides so much better coverage than Vodafone, that I swapped over. They are in an environment where you have to work hard to both gain and retain customers.

Such a regime serves us consumers well.

It also means that Telecom’s historic over-staffing (have a look at their rival’s staff numbers) will be dramatically pruned. And for the staff affected, and their families, it is traumatic and awful.  Losing a job, even when you are performing well, is gutting. So on an individual level, those affected have my sympathy.

But at a macro level, these changes are not a bad thing. Our country and economy prospers when companies becomes more efficient, and consumers have choice and competition.

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Occupation Outlook

February 13th, 2013 at 1:00 pm by David Farrar

A useful publication, listing 40 common occupations and showing three dials indicating likely future income, size of fees and job prospects.

The settings are low, medium and high for income and fees and for job prospects are limited, fair and good.

As far as I can see the only occupation with low fees and high income is real estate salespeople. However they have limited job prospects.

Fees, even high ones, tend to be insignificant compared to future income so the two  factors I would look for are high income and good job prospects. Those occupations are:

  • Accountants
  • Financial Advisors
  • Engineers
  • Vets
  • Dentists
  • Doctors
  • Psychologists

Of course more important (for me anyway) is whether you find an occupation interesting and challenging.

They have career sheets on each occupation, such as this one for journalists. Some interestings stats such as average income is $56,000 and 87% of journalists work in print media, and 80% of those work for APN or Fairfax.

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Canterbury job stats

January 14th, 2013 at 11:00 am by David Farrar

The Press reports:

The number of jobs advertised in Canterbury this week would cater for only half of those on the dole.

Even if this stat is correct, that’s a very high proportion. That suggests that if a job stays listed for say a month, then over two months there would be more jobs listed than people on the dole in Canterbury.

About 28,000 Cantabrians are out of work, with 3424 being paid an unemployment benefit, but there are only about 1700 jobs advertised on employment listings website Seek.

The Sep 2012 HLFS says there are 317,000 people working in Canterbury, 17,000 unemployed (5.2%) and 147,000 not in the labour force but of working age.

On top of 17,000 unemployed, there are 9,000 available for work but not seeking it and 3,000 seeking it but not available.

But the rather dodgy stat is using Seek as the indicator of jobs available in Canterbury. It is just one website. Trade Me by comparison has 1,577 jobs. Not all of them will be duplicates.

So how many jobs are there available in Canterbury? ANZ tracks both print and online ads and found in October 2012 there were around 33,000 jobs ads nationwide. If you assume they are proportional to population, then that would indicate over 3,000 jobs advertised in Canterbury.

Overall it is a good story, but the stats used are a bit loose.

Security One managing director Graham Larson, who has been hiring people for more than 20 years, said about a third of all applications he received would be thrown away, especially if they came with a generic CV.

“If I bother to put my name and number on an ad, I would expect to be addressed as more than ‘Dear Sir’ or ‘Dear Manager’,” he said.

“People need to say this is who I am, this is what I can do and this is what I can do for your company – and for goodness sake, clear up your Facebook page.”

Blake Surfacings owner Peter Scott said he had been trying to find someone to take on a $16.50-an-hour “unofficial apprenticeship” with his industrial flooring firm for about six months.

Two people had expressed interest, but after asking them to send copies of their CV, neither replied. The job was “semi-skilled”, but all training would be provided on the job as Scott said he would prefer to hire someone “fresh” to the industry.

No surprise more and more people from overseas are being hired.

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Christchurch jobs

January 8th, 2013 at 10:00 am by David Farrar

There’s been a lot of stories about firms in Christchurch having problems finding employees. One in The Press today is:

Christchurch baker Diane McPherson has had an “absolute nightmare” trying to find staff for the past four months.

One applicant turned up for an interview in pyjama pants, another was texting during the interview and another flicked her tongue piercing in and out of her mouth and indicated she was not prepared to remove it during work hours.

McPherson, who owns the Brumby’s Bakery and Wendy’s Supa Sundaes stores at the Hub in Hornby, said many others did not return messages inviting them for an interview, or, having been offered a job, failed to turn up for work.

How many people in Christchurch are on the unemployment benefit or another work tested benefit?

One applicant for a job at Wendy’s Supa Sundaes decided he did not want the job because he did not want to mop the floors, and another did not want to have to wash dishes. A 22-year-old applicant for a job at Brumby’s Bakery arrived wearing a T-shirt, flannelette pyjama pants and socks, but no shoes.

Obviously trying hard to get a job.

McPherson approached the Christchurch Polytechnic Institute of Technology to see whether any recent graduates were interested, but “not one of them put their hand up”.

The jobs McPherson is advertising all pay $14 an hour or more, with the bakery job starting at $20 an hour.

“I’ve had a couple of guys tell me, ‘Oh, it’s easier on the dole but we’ve got to be seen to be applying for work’,” she said.

And remember some parties want to increase the level of benefits, reducing the incentive to work even more.

McPherson has placed advertisements saying applicants could say when they wanted to work, but has still not found staff.

“There’s a whole different attitude to working. It’s all about themselves and if it doesn’t fit in with what they want to do, they don’t want to do it,” she said.

McPherson is now looking to advertise overseas.

If anyone is on a work-tested benefit in Christchurch for more than say a few months, then there is something wrong.

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Joyce on Economic Development

January 7th, 2013 at 12:00 pm by David Farrar

Adam Bennett at NZ Herald reports:

Speaking to the Herald about economic development prospects that he believes will drive growth and job creation, Joyce said there were significant opportunities in forestry and wood processing.

While the opportunities to add value to the logs produced here rather than simply exporting unprocessed timber had been talked about for years, Joyce said Chinese interest in the industry made the prospect more likely.

The topic had been discussed during the recent visit by senior Chinese politician Liu Yandong.

“Their view is they have to do something about their electricity consumption so they’re looking to offshore effectively some of the processing cost of some of their industries. So they’re looking and saying well, maybe we should invest.

“New Zealand has renewable energy, maybe we should invest there. If it’s competitive it also reduces the amount of stuff we’re bringing into China.”

Sounds excellent. No doubt the xenophobes will oppose anything to do with China.

Joyce believes New Zealanders now “are pretty awake and pretty realistic” about economic development opportunities. That, he says, could prove an increasing problem for Labour and the Greens. “For a start the Labour Party is now scared of its shadow when it comes to oil and gas – it doesn’t know what to say. A year ago they were bashing the hell out of us for it. The Labour Party is embarrassed by the Greens always turning stuff down.”

Joyce says polls suggest public attitudes to development opportunities have moved so far in the past two years that a Labour and Greens coalition that continues to oppose them as strongly as they have will find itself offside with a significant proportion of voters at the next election.

“The punters will turn around in 2014 and say, we’re not that interested because you guys are actually anti-jobs.”

Can anyone name a commercial development opportunity they have not opposed?

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One good stunt deserves another

October 12th, 2012 at 2:05 pm by David Farrar

Today’s “jobs” conference organised by Labour Party affiliate member EPMU was of course a media stunt. I did however expect they would have pre-arranged something of substance to merge from it, but instead it is just another stunt – an inquiry by Labour, Greens and NZ First into the manufacturing sector. This inquiry will of course shock horror conclude that their policies to increase prices and inflation are what NZ needs.

I’m glad Labour, Greens and NZ First are all working together to support a policy of printing more money.

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Now job growth is a bad thing

April 19th, 2012 at 3:00 pm by David Farrar

I thing politics has got to a farcical level when the Opposition complain about jobs moving from Australia to New Zealand. The SMH reports:

HUNDREDS of Australian jobs have been shifted to New Zealand as local producers try to avoid the impact of high wages, a soaring Australian dollar and restrictive labour laws.

Woolworths is the latest to transfer jobs across the Tasman. It transferred 40 contact centre jobs to Auckland this week. Imperial Tobacco has also announced it will move cigarette manufacturing from Sydney to New Zealand.

The companies are following in the footsteps of the food production industry, which has been shifting jobs out of Australia to take advantage of New Zealand’s lower wages.

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Heinz Australia recently scrapped more than 300 jobs across three states in favour of its large plant in Hastings, New Zealand’s largest food processing and food producing centre.

The International Labour Organisation says Australian manufacturing workers earned more than $US35 an hour in 2008. In New Zealand the rate is under $US20 an hour.

Average weekly earnings for manufacturing workers in Australia are higher than those in Canada, Britain, New Zealand and the United States, says a study which put Australian earnings at more than $1000 a week, versus about $700 in NZ.

Now Labour for four years has gone on about jobs. It has said that the number one priority must be more jobs. If you try to discuss welfare reform, they say “what about the jobs”. No matter what the issue, they say “what about the jobs”.

So what do they say to jobs moving from Australia to New Zealand:

“Labour does not want New Zealand to become Australia’s Mexico, yet with lower value jobs such as making cigarettes that is exactly what is happening.

“Bill English has been misdirecting his energy on praising the advantages of low wages to attract Australian jobs rather than coming up with real ideas to grow the economy.

“There are record numbers of Kiwis leaving for Australia. They are not going so they can work in call centres or cigarette-making factories,” David Parker said.

This is just bullshit elitism, that must be unique to the Wellington beltway. Go out to a provincial town with high unemployment and tell them that a job in a call centre is not worth having, and they should remain on welfare.

Anyone who buys into this sort of bullshit is seriously out of touch with reality, and reflects more their elitist views.

They are also economically ignorant also. If you argue against Australian companies creating jobs in New Zealand because our wages are lower, you don’t understand the basics of supply and demand. Remember it is the market which broadly sets wages – not Goverments.

Now if you have more jobs created in New Zealand, it increases the supply of jobs. What does increasing the supply do? It pushes wages up. Just as when the supply of jobs diminishes, then wages drop or at least do not increase in real terms.

Next time Labour complains about unemployment, remember how they think some jobs are not worth having. They’d rather people be on welfare than working in call centres.

As for closing the wage gap with Australia. There is only one sustainable way to do that – greater productivity including labour productivity. The very thing that Labour is fighting against at the Ports of Auckland, where the union is striking rather than accepting a 10% pay increase in return for greater labour productivity.

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NBR on bureaucrats

March 12th, 2010 at 4:27 pm by David Farrar

NBR has a “The good, the bad and the ugly – NBR 24/7′s plays of the week”, It is behind the firewall and always a good and often amusing read.

I am sure they don’t midn me sharing one small extract from it:

The good

Bureaucrats are getting fired (slowly)

If you want to know whether a government policy is a good idea or not you usually just need to listen to the reaction of the Public Service Association and take the opposite view.

This week the PSA, along with the union’s Labour allies, was bleating about comparatively minor ($25 million) restructuring at the Ministry of Education as part of a wider plan that includes possibly merging some ministries.

Voicing vociferous opposition to any pen-pushers being shown the door they said (as if it was some kind of tragedy) that about 2000 public sector workers had lost their jobs since National got elected.

This was quite possibly the best news of the week: National has seemingly managed to sack 2000 bureaucrats without anyone (except Labour and the PSA) noticing.

NBR goes on to explain the difference between jobs that create wealth and those that use it up.

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Youth Opportunities Package

August 2nd, 2009 at 12:35 pm by David Farrar

John Key has announced a $152 million package to fund almost 17,000 youth opportunities. Some of these are:

  • 4,000 6-month job placements for low-skilled young people with a $5,000 wage subsidy for employers
  • 3,000 placements for youth to work on community programmes for 30 hours a week, paid at minimum wage
  • 4,000 places in polytechs etc for 16 and 17 year olds not in schools, with no fees. This can be for stuff like literacy credits.
  • 2,500 places in Limited Service Volunteers courses on military-style 6-week training programmes
  • 1,600 summer scholarships for university students

The $152 million includes $32 million of 2009 Budget funding and $120 million from the 2009 – 2011 between budgets contingencies. This means no additional Government debt is incurred.

There are a lot of things I think the Government should not fund. But the economic (and human) return on this package could be significant if they increase the skills and employability of all those youth who are currently dropping out of school early, so I think it is a great wee package.

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Goff’s record on jobs

June 3rd, 2009 at 9:00 am by David Farrar

Fran O’Sullivan reminded me on Saturday that Phil Goff was Minister of Employment from 1984 to 1990. I had forgotten this. I just remembered Phil as the man who introduced higher tertiary fees.

So everytime Phil Goff goes on about how the Government is not doing enough to reduce unemployment, we should look at how Phil did as Minister of Employment. And of course Phil did not have a global recession as a factor to deal with.

The Household Labour Force Survey only started in 1986, so we’ll compare 1986 to the end of 1990.

Well Phil managed to preside over the destruction of 97,000 jobs – falling from 1,623,000 to 1,526,000. Unemployment doubled from 71,000 to 150,000 – in percentage terms going from 4.2% to 8.9%.

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NZIER on fiscal stimulus

May 15th, 2009 at 12:46 pm by David Farrar

NZIER have done a very interesting report on the balancing act between jobs and debt.

The fiscal stimulus of almost $10b over four years will result in an extra 10,000 jobs in the short run, but it will reduce future consumption by $160 per person per year. We can spend now, but we have to pay for it eventually.

And that is the key thing to remember – that debt has a cost.

We find that a policy that reduces the cost of employing people could boost employment more at a similar cost to long-run consumption. Better still would be well-targeted spending on infrastructure to deliver longrun productivity improvements. Given New Zealand’s longer term growth challenge, any fiscal efforts to stabilise the economy and avoid a more severe recession should have productivity at the centre of the policy radar screen.

Productivity growth is all important.

we find that the current package is likely to:
• generate an extra 10,000 jobs in the short run
• raise GDP in the short term by 0.6 percentage points
• lead to lower employment after 2012 and a 0.8 percentage point fall in long-run real consumption per annum than without the stimulus.

Again debt has consequences. And just think about how much more debt there would be with Labour – not just $1b+ for their pet tunnel, but they have oppossed every cost saving in the public service.

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Jobs

April 20th, 2009 at 4:23 pm by David Farrar

Some of the jobs initiatives are starting to work, while others are not eventuating. Phil Goff highlights that he banks are not proceeding with their co-funding of credit in partnership with the Government.And the cycleway has been watered down significantly.

However Paula Bennett has announced that two more firms have joined F&P in the nine day fortnight scheme. You can only be in it for six months, so I am surprised even three firms have already gone into it, as I suspect the worst times are still ahead. I would probably want to go in, if needed, around September 09 and out in March 10 when hopefully the recovery is starting.

One of the new firms going is is Summit Wool Spinners, Oamaru’s second largest employer.

Also better news from Phil Heatley who has 935 people working on upgrading state houses.  Housing NZ is building 86 new homes (on top of the 475 scheduled for this year) and is upgrading 18,000 state houses by July 2010.

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Stupidity

March 11th, 2009 at 7:00 pm by David Farrar

I know the “subsidy” by the Government (taxpayers) is not at much as some would want, but that doesn’t excuse this stupidity by Labour Party President EPMU National Secretary Andrew Little:

The Engineering, Printing and Manufacturing Union said the pay out was “underwhelming”.

“Unless employers are willing to meet this subsidy with a substantial top-up of their own it’s unlikely to be accepted by workers,” national secretary Andrew Little said.

“As far as the EPMU is concerned, this will be a bottom line.”

This staggers me. Andrew is saying that employers should pay employees more money to work less hours as a way to stop businesses going broke and/or having to lay staff off.

If your staff hours reduce by 10% yet your staff costs only decrease 5%, the company is arguably in a worse position – they have lower productivity as they are effectively now paying a higher hourly rate.

Luckily the CTU is being more rational:

However, the Council of Trade Unions welcomed the announcement, saying the union’s members wanted to protect employment and the package provided “a real basis for business and unions to work to save jobs”.

“We will always advocate that the package could have included a higher rate of pay. But the government contribution was essential to make this idea acceptable to workers,” CTU president Helen Kelly said.

The CTU does also say they would like employers to contribute:

“We expect responsible employers, who will also benefit from this scheme in terms of retained staff, and reduced costs associated with redundancy, to also make a contribution to the lost wages, since clearly there are benefits for businesses that do this.”

But the difference in tone and substance is significant. The EPMU is saying they will have nothing to do with the scheme unless employers pay staff to not turn up to work. They say it is a bottom line.

The CTU far more rationally says “Hey this is a good scheme, we would like employers to contribute, and think it benefits them to do so”.

Anyway the EPMU has made itself clear. Any site where they represent workers should be prepared for big job losses, as they won’t co-operate with helping save jobs.

This is one of those situations where people might ask what hat is Andrew wearing when he condemns the scheme, as oppossed to the CTU that welcomed it?

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Details announced for nine day fortnights

March 11th, 2009 at 1:30 pm by David Farrar

John Key has announced details of the nine day fortnight plan to help struggling businesses:

  • Available to 1,600 businesses with more than 100 employees. Those businesses employ 580,000 people.
  • Available from March 27, 2009 through until December 31, 2010 – but only for up to a six month period within these dates.
  • Government’s contribution of five hours at $12.50 will be paid direct to employers to give to the workers it has negotiated a voluntary agreement with to reduce work hours to a nine-day fortnight.
  • Will be available to up to 10 employees for each averted redundancy.
  • Will apply to employees who have been full-time for the two months preceding going into the scheme.
  • Is anticipated to be picked up by between 20,000 and 25,000 workers, making the approximate cost $16 million to $20 million.

I am glad it is targeted and temporary. To some degree this is the Government paying in a bit of money, to allow employers, unions and workers to negotiate some reductions in hours to prevent redundancies. This is a useful reminder of how important flexibility in the labour market is.

If someone earns $30,000 a year and they drop down to nine days a fortnight, then their gross wages will drop from $1,151 to $1,036 a fortnight.  That is a drop of $115 a fortnight. The Government’s subsidy will give them back $63 a fortnight leaving them with a gross income drop of $52 a fortnight. So at $30,000 the Government picks up 54% of your day off, and you pick up 46% and you are guaranteed not to be made redundant.

$52 a fortnight is still a reasonable drop in income. But hey it is less than what the ACC levies were looking to rise under Labour!

What will be interesting is the impact of Working for Families. One of the problems of WFF is the abatement rates for it plus the accomodation supplement means that effective marginal tax rates get close to 90%. So certain families could have the main incoem earner go from $50,000 to $70,000 yet only have net income increase by $1,200 or so (figures off memory). Not that is a very bad thing, but for once it may work in favour of some families – if your income drops by going into a nine day fortnight, then the abatement rates will work in negative and may keep you at close to your old net income.

The Government should get IRD and WINZ to do a online calculator tool where people can work out what happens to their net income if they go onto a nine day fortnight.

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Kerr on Jobs Summit

March 11th, 2009 at 11:00 am by David Farrar

Roger Kerr writes about the jobs summit:

In the lead-up to the Summit there were some predictable outbursts.

Veteran anti-globalisation campaigner Jane Kelsey hyperventilated. She saw the Summit as “a Trojan horse for the business sector” and likened it to the 1984 economic summit which was apparently “a carefully orchestrated piece of pageantry chaired by Ron Trotter” (actually David Lange – academics should get their facts right).

Professor Kelsey should calm down and watch Slumdog Millionaire. It is a rags to riches story of entrepreneurship in the new India, the product of sweeping moves to cut taxes, liberalise trade and deregulate business.

India needs to go further to lift up more of its poor, and it is unlikely to abandon globalisation any time soon.

Developing countries are arguably the biggest winners from globalisation – it allows them to sell their goods and services for a fair price.

And interestingly, even though the election only four months ago was largely about economic directions, no one argued that the government was heading in the wrong direction with its economic policies.

Opinion polls also suggest a majority of the public supports its return to more conventional and less interventionist economic policies.

There were no calls for more fiscal stimulus. Participants seemingly understood that the existing stimulus is large and that any further boost could put our credit rating at risk. This would raise the cost of borrowing for all New Zealand firms and households.

That’s an interesting observation. I certainly agree that the level of fiscal stimulus is about as large as we can manage, without dooming future generations to huge interest costs on public debt.

Politically, the Summit can be seen as an extension of the government’s moves to have a relationship with the Maori Party and a dialogue with the Greens, and many other inclusive initiatives.

This is a far cry from the tribal ‘We won, you lost. Eat that!’ style of government of recent years and augurs well for a better consensus on national directions.

Very different.

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The 9 day fortnight

March 10th, 2009 at 1:00 pm by David Farrar

Starting to see some details around the vexed question of who pays for the 10th day if workers go on a nine day fortnight.

Obviously the business can’t still pay staff for the tenth day, when the whole idea is to help businesses survive by reducing their costs. Having them pay the same wages for one less day’s work would make things worse, not better.

So that leaves either the workers not getting paid for the tenth day, or the Government paying.

As usual, John Key looks to be heading towards a pragmatic compromise, according to Tracy Watkins in the Dominion Post:

The Government has ruled out a wage subsidy on the grounds of cost, but is considering an allowance based on a “benchmark”, such as the average or minimum wage.

Government sources say a 100 per cent wage subsidy for the lost day’s pay is too expensive and would send the wrong signals to business, which might see it as an opportunity to trim wage costs by getting the Government to pick up the tab.

The minimum wage is $12.50 an hour which is $100 for an eight hour day. So the Government would be paying around $2,600 a year to a worker on their day off. If 100,000 workers go onto this scheme, then the cost is $260 million a year plus admin costs.

Some unions have said they want it higher, such as the median wage. The problem with that though, is some employees who earn less than the median wage will actually get paid more by having the tenth day off for training, than is otherwise the case.

In the long term is is silly to think a sustainable business model is to have the Government pay 10% of the wages of every worker, to save businesses model. If that is a good idea, then why not have the Government pay 100%.

So the key is that it has to be temporary and targeted. It arguably is not economically efficient – but if it can avoid unemployment hitting double figures, that will reduce the downstream effects in terms of crime and benefits etc.

I am nervous about the ability of the Government to target it only to firms that really need it. They team that has to implement this will need to be very good.

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1000 free hours for jobs

March 6th, 2009 at 11:00 am by David Farrar

Hazel Phillips covers the neat initiative by DraftFCB:

DraftFCB is doing its bit for the recession by creating a concept called the 1000 Hours Fund – at an estimated cost of $200,000.

The agency ran a full-page ad in today’s New Zealand Herald to announce its offering.

The project came about after staff heard ideas generated at last week’s job summit, which prompted them into action. Notably, PM John Key’s exhortation that each of us can do something that could save someone’s job, create a new job or help someone else find a new job as soon as possible.

The 1000 Hours Fund is a pro bono project where the agency is promising to provide 1000 hours of its services gratis to companies that could – as a result – create more jobs for Kiwis. The idea is to free up budgets to be spent in areas other than creating a communications campaign.

What a great initiative. Like ASB Bank, it is a win-win. Good for DraftFCB’s brand, and good for companies that want to create jobs, and can use this offer.

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The Jobs Summit

February 28th, 2009 at 10:22 am by David Farrar

John Key will be pleased, I suspect, with the Jobs Summit. It appears to have indeed avoided being just a talkfest, and some actual initiatives have come forward for consideration.

What I also found interesting was the reports of how it engendered a sense of responsibility in participants that they all have a role to play. You had the Reserve Bank Governor and Treasury Secretary not just there to give speeches, but also actively working side by side in the sessions with participants.

The other interesting thing has been the almost unchallenged assumption that saving jobs is the foremost priority, as determined by John Key. So the Govt is willing to take on some more debt. The banks are willing to lend some more money, the unions (here at least) did not just press for pay increases, and the employers backed plans to reduce hours instead of jobs – despite the latter being a lot easier.

So what are the main ideas:

  • A nine day working fortnight, with the Government paying (but at leass than full wages) for training on the 10th day. Est to cost $320 million a year which is huge. However if it does keep up to 20,000 people in jobs, then you save a lot by not having to pay unemployment benefits and still collecting tax on their incomes.  Backed by Key, unions and employers
  • A $50 million cycleway from Cape Reinga to Bluff, employing 4,000 people (not sure for how long). Supported by Key as a tourism measure and Greens for obvious reasons. Not one of the formal top 20.
  • A multi-million or billion equity investment fund, with the Government and banks, designed to let companies access capital to grow.
  • A $60 million private-public fund to boost Tourism

Fran O’Sullivan praises the Summit:

Pairing Air New Zealand chief executive Rob Fyfe and Council of Trade Unions president Helen Kelly as co-chairs for the critical employment session proved to be a masterstroke.

Very decent of John, $60 milconsidering the anti-National ads that the CTU ran last year.

Well before the summit, Kelly and Fyfe had nutted out a range of policy ideas that are enticingly pragmatic.

One has to say also kudos to Kelly for her work.

Key’s decision to appoint Mark Weldon as summit chair also proved inspired, giving the talented NZX chief executive officer the opportunity to provoke other business leaders to be more creative in their thinking.

Weldon’s appointment was criticised by more than a few, but at the end of the day he delivered.

Colin Espiner blogs:

It’s been a very long day but I think a productive one.

I have to admit I was a bit of a cynic about the Jobs Summit. I’ve been to enough of these things to know that half the time they are a load of hot air, with competing egos and ideologies crowding out the room. At the time of the day some vague communique gets released and nothing ever happens.

Well, this summit was a little bit like that. But only a little. Whether it was the sense of impending crisis, whether it was the change of government, whether business and the unions are more prepared to listen to each other I don’t know, but I did get the feeling that for once, everyone seemed to be singing from the same page.

It is only a beginning. What will be interesting is how many of the ides get implemented in the Budget, or before.

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ASB’s $1 billion jobs fund

February 25th, 2009 at 7:52 am by David Farrar

What a very smart move by ASB. Their pledge to set aside $1 billion for cheap (5%) loans to small and medium businesses (and farmers), if it will save and create jobs is inspired.

Yes, it will mean a dip in profits in the short term. But it will do wonders for their brand, which will be of greater value in the long term. Especially doing it at a time when people are very negative on banks.

The Herald reports:

The “concessionary” rate would affect ASB’s profitability, Mr Pink said, “but obviously we are still looking after our shareholders”.

“There is a balance between profitability and the needs of customers and the community. I guess we’ve just swung that balance towards the needs of customers and the community.”

ASB has moved to seize the moral high ground in the competitive banking business by announcing the fund days before the Government’s jobs summit on Friday.

Prime Minister John Key welcomed the plan as “just the sort of creative private sector idea I have been seeking in the lead-up to this week’s jobs summit”.

The PM did say a number of times, that he expected banks to be socially responsible, in exchange for the government guarantees on their deposits. I suspect he’ll be pretty delighted with this as a response.

“As I’ve said many times, the summit is not only about what the Government can do. It will bring together people at the coalface of the economy who can make a real difference as we navigate these difficult economic times.”

Too many people think the Government can just wave a magic wand, and create jobs. It can’t. The Government can help create an environment which is job friendly, but it can not force consumers (both globally and domestically) to spend more money on NZ produced goods and services.

ASB is showing what the private sector can do.

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A more efficient public sector

February 18th, 2009 at 10:38 am by David Farrar

Some people regard this as bad news:

The Ministry of Social Development aims to cut its staff of 9500 by 5 per cent (475) over the next four years by automating some processes and allowing people to apply for some benefits online.

I regard that as very good news.

If we want to lift wages for everyone, then you do it through productivity gains, and online automated processes are one of those ways. And a 5% reduction over four years is pretty modest – I doubt anyone will lose their job – just that some vacancies do not get filled.

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The SME package

February 4th, 2009 at 12:25 pm by David Farrar

National has announced a half billion package (0ver four years) of policies to help small and medium sized businesses, during the economic downturn.

There are five parts:

  1. a suite of 11 tax changes costing $480 million
  2. an expansion to the export credit scheme
  3. extended jurisdiction for the Disputes Tribunal
  4. expansion of business advice services
  5. a prompt-payment requirement for government agencies.

The tax changes are:

  1. removing the 5% increase in provisional tax over the previous year
  2. reducing the use of money interest rate for underpayments by 4.5%
  3. threshold for GST payments method (instead of accrual) to increase by over 50% from $1.3 to $2.0 million
  4. threshold for GST registration to increase by 50% from $40,000 to $60,000
  5. legal expenses of under $10,000 can now be fully expensed in the year incurred, not capitalised
  6. increase in threshold for montly PAYE filing increases from $100,ooo to $500,000
  7. FBT annual filing threshold raised to $500,000 from $100,000.
  8. value of minor fringe benefits to employees without attracting FBT will increase to $300 a quarter per employee from $200, and $22,500 a year per employer from $15,000
  9. FBT prescribed interest rate for low-interest, employment-related loans will fall from 10.90% to 8.05%.
  10. some other thresholds for accrual expenditure adjustments will also be increased.
  11. certain SME tax simplification measures that are part of a bill now before Parliament will be fast-tracked.

Other significant changes are a doubling from $7,500 to $15,000 the value of any disputes before the Disputes Tribunal, which saves having to go to District Court. Also the Government has instructed all Departments to pay their bills no later than the 20th of the month following receipt of invoice.

Also good is the New Zealand Export Credit Office (NZECO) will provide short-term trade credit insurance for exporters, as the lack of such credit insurance could have seem some exporters having to turn down orders.

There is no silver bullet amongst the changes announced, but that is because there is no magical cure. One just has to keep working away at making things better. This is why reform is not a one off thing you do, but is continual.

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CIS wants a NZ policy analyst

March 14th, 2008 at 10:15 am by David Farrar

The Centre for Independent Studies, of which I am a proud member, is seeking a Policy Analyst or Research Fellow for their NZ Policy Unit. The job is based in Sydney but you end up back in NZ a fair bit.

I would have loved a job like this when I was an employee, and the current staffer has described it as the best job he has ever had.

If you have the right skills, experience and background and want to join the brain-drain, then this may be for you.

I’m also running a (free) ad for them for the job.

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