Another obvious lie too many National supporters believe is that Labour are bad for employment (because they raise the minimum wage too fast), and National have “solved unemployment” (because they’ve made it harder to maintain benefits):
Now, it is true that Labour raise the minimum wage much faster, and that National cut welfare (in a recession!). But the unemployment rates have been more like the other way around,* and anyone suggesting National are better than Labour at keeping unemployment down is either believing or promoting a lie.
Actually, it’s a couple of lies… but they’re both obviously bollocks to anyone who’s spent five minutes looking into them:
“Raisng the minimum wage reduces jobs”
As usual, Gordon Campbell says it best:
If, as Key claims, Treasury has done research that shows major job losses would result from gradual increases in the minimum wage, then this amazing information would be world news – because the vast weight of academic research around the world ever since the groundbreaking David Card/Alan Krueger work in the US fast food industry 20 years ago, is that it would do no such thing.
“National have solved unemployment by making it harder to get the benefit”
I’ve covered this before, and so have many others. Basically, kicking people off the dole (or DPB/invalid’s/sickness benefit) doesn’t magically put them into jobs; it just increases the number of people lacking either work or welfare (which has hit a record 110,000 since National’s bennie-bashing “reforms”). Creating a desperate unemployed person doesn’t create a job for them to go into.
This confusion arises from a basic failure to understand the difference between individual problems/solutions and socio-economic problems/solutions, as sociologist C. Wright Mills pointed out 55 years ago:
* It started to get bad under the Lange (& Douglas) Labour government, which was actually more like a Bolger/Key National government than a Labour one. Of course, just like with debt, things are more complicated than one graph could show.
PS: Graph and truncated y-axis from tradingeconomics.com; annotations mine.
John Key is being a Spurious George again. In explaining why he’d love to cut taxes for (mostly) the rich, but just can’t afford to yet…
Key pointedly said that when National took office the average wage was $47,000 a year but had risen to around $55,000 today, and was expected to climb to $62,000 by 2017. This was creeping towards the top tax bracket, where salary earners pay 33c in the dollar for earnings over $70,000.
“I don’t think it was anyone’s intention that someone on the average wage would be paying the highest marginal tax rate in New Zealand,” he said, echoing arguments National has been making in private for months.
Well, Mr. Key, it also wasn’t anyone’s intention for the incomes of the rich to rise so much faster than those of the poor, pushing up the average (mean) income to a level less than 30% of people reach. (Actually it was some people’s intention: right-wingers who think inequality is a good thing)
Key is trying to give the impression that the average (mean) income is the income earned by the person in the middle. But mean doesn’t measure the middle of the people, but the middle of the money; and of course the money is weighted towards wealthy outliers at Mr. Key’s end of the spectrum, who push the average up with their exponentially higher incomes.
A far more useful statistic is the median income: the amount that half the people earn more than, and the other half earn less than. This truly represents the average Kiwi. The median individual income is almost exactly $30,000 p.a. – just under the middle of the third-to-top tax rate band.
It’s actually getting more and more misleading to portray average income as a reflection of middle-income earners: As inequality worsens, the “middle of the money” (average income) is moving further and further from the “middle of the people” (median income). My eye makes it less than 10% difference in 1980, up to about 25% now:
It’s also worth noting that the increased average income Key mentions has accrued almost entirely to above-median earners:
Another problem with mean income figures is they hide inequalities like these and portray a boon for the rich as a boon for everyone.
I do agree in principle with indexing tax-rate thresholds (in fact, all thresholds… *cough*student loan repayments*cough*) for inflation, but Key’s trying to use that principle as a smokescreen for more tax cuts to the rich, spinning this as a release for the average NZer from crippling over-taxation, which is not true on any level whatsoever. Taxpayers between the median and mean incomes actually pay the lowest proportional tax:
And in the context of a supposedly progressive tax system it’s the rich who are really best off:
“At very low incomes, New Zealand’s taxes are a little above the OECD average … But for high incomes, our overall “tax wedge” … is the lowest in the developed world.
Our tax system asks too much of those with little, and too little of those with much.”
This would only get worse under National’s proposed 2017 tax cuts.
In any case, if Key is really worried about too many NZers in the top tax bracket, there’s an obvious solution: Implement a new top tax rate(s) for the super-rich, like most similar countries have:
Soooooooooo: whatever people’s intention about who should be on the top tax rate, it’s clear John Key’s intention in referring to the mean income, rather than the median, is to mislead (or perhaps he simplify misunderstood statistics in a conveniently misleading way, as with child poverty at the last debate). Sadly he’ll probably largely achieve that intention.
And yesterday, Mickysavage from The Standard responded to the latest idiot millionaire (good at making money, not so good at fact-checking National spin) to whom the corporate media has given uncritical voice to trumpet this propaganda. He says it better than I can:
Rod Drury: “What I’d like to see is the Government have another term because they’ve had two terms where they got the debt sorted …”
Mickysavage: “Such economic illiteracy coming from such a senior businessman is a worry. It obviously needs to be repeated that in June 2008 Labour had paid off
allcrown debt and the crowns accounts showed a slight surplus. By September 2013 net Crown debt had reached $60 billion and increases in debt are predicted for years to come.
Of course many will then trot out Key’s mantra that Labour had left the country with a decade of deficits but this statement is essentially a lie. The Global Financial Crisis was the cause of the sudden change in the country’s finances but instead of Helen Clark and Michael Cullen being blamed I can suggest many other names of those who should take responsibility. Names such as Wall Street, Morgan Stanley, Bear Stern and my personal favourite Merryl Lynch. Because it was a bunch of robber merchant bankers that brought the world’s economy to its knees.”
Here’s a couple more graphs and a couple more quotes, to help illustrate the various impacts of the GFC (for which Key was partly responsible), the 2010 tax changes (which made tax regressive for the majority of incomes), and the Canterbury earthquakes.
However, please note that the main point of this blog was never to say National have been irresponsible with their deficits and debt (I tend to think they have been, but it’s a complicated question). The main point was to show that the right-wing suggestion that Labour are irresponsible with deficits and debt is completely unfounded.
“The estimated cost of the Canterbury rebuild has been increased … Mr Key said the budget would also show the estimated net cost of the earthquakes to the Crown would rise from about $13 billion to about $15 billion.”
“Tax as a proportion of GDP is slightly below OECD averages and has declined markedly over the last few years … New Zealand has, like other countries, faced a cyclical decline in tax revenue as a result of the global financial crisis but there were also important policy steps which reduced tax revenue between 2004–05 and 2009–10.”
I’ve written a sequel blog on the equally pernicious lie that National are better for employment than Labour, because (it’s assumed) beating up beneficiaries and keeping wages low are good for unemployment.