Category: wages

I am so sick of this obvious lie, pt 2

Unemployment under Lab and NatAnother 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):

National supposedly solved unemploymentkey labour anti jobs party

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:

LIE 1:

“Raisng the minimum wage reduces jobs”

TRUTH 1:

Sydney Morning Herald

new york times

Business Insider

CEPR 1

CEPR 2

DOL 1

DOL 2

treasury

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.

LIE 2:

“National have solved unemployment by making it harder to get the benefit”

TRUTH 2:

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:

Mills quote

* 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.

Averages, intentions and inequality: more Key trickery

median vs mean

Graph from latest Household Incomes in New Zealand report; yellow and pink annotations are 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:

Mean and median over time

Graph from latest Household Incomes in New Zealand report; yellow and pink annotations are mine

It’s also worth noting that the increased average income Key mentions has accrued almost entirely to above-median earners:

income changes recession and recovery

Graph from latest Household Incomes in New Zealand report; yellow and pink annotations are mine

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:

Salmond Fig 8-2-01

Graph from Rob Salmond; yellow and pink annotations are mine

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:

income taxes NZ aust
income tax UK france
income tax US

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.

Money matters

john-key-too-drunk-to-drive

John Key on raising incomes for low-income families, 3 News, 9 Sept 2014:

Prime Minister John Key says there’s no evidence that giving people money makes any difference.

“What really makes a difference is employment and employment opportunities,” he told reporters.

John Key on tax cuts, 3 News, 10 Sept 2014:

“Whatever the number was for an individual or a household, whether it’s $500, $1000, $1500 – you can pick your poison – I don’t accept the argument that doesn’t matter to a low- to middle-income family. I think it does matter.”

This is why we need a living wage

we_told_them_the_wealth_would_trickle_down

More free healthcare for kids and extended parental leave are both great ideas in the Budgetstolen from Labour of course but I’m still glad they’re doing them.

Nonetheless, this can’t seriously be called a “family focussed” budget while they’re still doing next to nothing about the housing affordability crisis, the jobs crisis, child poverty and inequality.

Perhaps (though only perhaps) it’s more fair to say that they’re not ignoring these issues; they just have faith in the magical power of the market to solve them all.

But their own numbers show that’s working about as well as Brownlee’s “let the market sort it out” worked for the Christchurch housing crisis. Yes, the economy is growing again, but that growth isn’t making its way into the pockets of ordinary workers. From 2014-2018, they’re forecasting 14.2% GDP growth, but only 4% wage growth.

In fact, this supports Thomas Piketty’s inequality thesis quite nicely: the natural and inevitable movement of capitalism is for wealth to accrue to the already-wealthy. In other words, you can’t solve inequality and poverty just by growing the economy. You need more radical interventions, as Piketty suggests. Mana’s tax policy – shifting the tax burden from poor and middle-income earners to the unproductive, untaxed income of the 1% – is a good start. Another much-needed policy is a minimum wage that allows people to live with dignity in society – the calculated Living Wage. This would mitigate against inequality across the board and end working poverty.

We can no longer use tough economic times as an excuse. We can afford these measures; we just need to decide to prioritise them, instead of letting our economic growth accrue to the unproductive parasite 1%.

Hone and Johnny

Harawira and Key

John Campbell has started a series of interviews with party leaders and their partners in their homes. The first two were with John and Bronagh Key and Hone Harawira and Hilda Halkyard-Harawira.

Both couples feed John a meal and talk about their lives and their political involvements – that’s about where the similarities end. Hone has photos on his wall from the Springbok tour protests. John famously can’t remember his stance on that issue, but he vividly remembers when he first wanted to be Prime Minister a few years earlier.

This is a good illustration of the main difference between Key’s and Harawira’s interviews, and indeed their overall political personas: Harawira’s interview is far more about politics and real issues, while Key’s is far more about superficiality, personality and content-free generalities like “making a difference” and “economic management” (Ha!).

Key does talk about “vulnerable people” and kids in poverty after Campbell observes the extreme wealth of their context. But for him these “vulnerable people” are an abstraction – they’re completely absent from his life.

Harawira’s concern for the marginalised is far more real. His biggest achievements are sacrifices he’s made for real live vulnerable people – be it Māori, the poor, South Africans suffering under apartheid, or his grumpy father-in-law. Mana’s policies are primarily motivated by real justice for those who most need it.

Moreover, Key’s claimed concern for kids growing up on welfare belies the fact that his government has kept benefit rates at 1991 levels. 1991, you may recall, was the year National deliberately set benefits to only cover 80% of minimum nutritional needs. This was an attempt to incentivise people into accepting the new low-wage jobs – or at least, those lucky enough to find jobs. They also encouraged a certain level of unemployment to drive wages down and again incentivise these poverty-wage jobs. This shows individual incentivisation may fill low-wage jobs, but it can’t cure unemployment: that requires broader socio-economic changes. These policies were and are sacrifices of the poor to support rich poverty-wage employers.

Two things have changed since then: One, poverty dropped slightly among working families (see p.47 here) since the last Labour government’s third-way policy, Working for Families. Key called WFF “communism by stealth” at the time, but he’s kept it, and praises it in the video for how it subsidises low wages. Two, National’s rhetoric is all anti-unemployment these days.

But three things still speak volumes: One, Key’s more willing to use taxpayer money to subsidise poverty-wage employers than make them pay living wages. Two, he sees no problem with WFF’s exclusion of beneficiary children from assistance, even though he notes they’re the majority of kids in poverty. Three, Key looks no further than individual solutions to the societal issue of unemployment.

Meanwhile, the real-life vulnerable people who miss out on the limited number of subsidised jobs offered by this “economic management” suffer now more than ever. Key thinks leftover Labour policies and welfare scapegoating is enough to help them. Harawira does not. I know which one I’d rather vote for.