The Dim-Post

July 29, 2010

Oh. That.

Filed under: Politics — danylmc @ 1:19 pm

The Nats had the chance to back away from their wage-parity with Australia promises back in February when Alan Bollard declared that it was impossible. Instead Key doubled down. I guess the Nats are telling themselves that the gap started to widen again in Labour’s third term (so it isn’t their fault) and that they’re ‘growing the broader economy’ and that wage increases will be a ‘lagging indicator’.

Every time National introduces new legislation it points out that they included the policy (or a vague approximation of it) in their election manifesto and thus they have a mandate from the people. My memory of the election is that they campaigned on an end to the nanny state, wage-parity with Australia and very little else. If they have a mandate for anything surely it’s lifting wages?

Given that it was the main platform of their election campaign I wonder how long they’ll be happy to let it lag before they produce policy to specifically address this problem. Or is that what the budget was supposed to do? Does shifting the tax burden from income to consumption mean that – in their minds – they’ve closed the gap?

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30 Comments »

  1. The comments over in the Sewer are hysterical.

    Comment by JD — July 29, 2010 @ 1:25 pm

  2. What is really funny is that you (and others) think that National actually give a crap about mandate.

    Notice how they point to it when it suits them and then ignore it when they are flip flopping? Supercity anyone?

    All they care about are the polls and spin. Nothing else. A government devoid of original ideas. Pathetic.

    Comment by Mr Magoo — July 29, 2010 @ 1:32 pm

  3. JD – I’d say more delusional that hysterical. How people can be convinced a country as laissez-faire as NZ, with the reforms we went through in the 80s and 90s, is a communist paradise is beyond me. As Danyl frequently says, Australia has more regulation of almost everything – labour markets, infrastruture, petrol pricing, broadcasting – compulsory super (nanny state!), strong unions, and rejected Howard’s workchoices.

    And yet the right still insists that NZ must catch up by doing the exact opposite of all of that. And that if we do all of that in NZ it’ll magically make us poor. Bizarre.

    Comment by Eddie C — July 29, 2010 @ 1:41 pm

  4. I think the current minimum wage of $12.75 per hour is more than enough because New Zealand is a small exporting country. To increase the minimum wage to $15 an hour which a lot of young people especially seem to want would be an irresponsible move and jeopardize our exporting and tourism industries even more so.

    In the United States, their minimum wage is US$6.50 per hour, equating to about NZ$11 per hour, which is not good for us at all. 10 years ago their minimum wage was US$5.50 per hour which equated to NZ$10 per hour, while our minimum wage was NZ$9 per hour. This did a lot of good for the New Zealand economy, firstly, because Americans used to flock here in droves and made our tourism industry prosperous and, secondly, because young people could go off to America or the UK or Europe on a working holiday and save twice as much as they could if they worked here for that time. Then they would come back with a sizeable sum, sometimes enough for a house deposit.

    These days, young New Zealanders would be hard-pressed to find another country apart from Australia where they can go and save a decent amount of money on a working holiday, which I don’t believe is good.

    Comment by Liam — July 29, 2010 @ 1:41 pm

  5. Depends on whether individuals choose to factor in the effect of mining as part of Oz’s successes or not, really. But seeing as National were pretty confident of catching up with mining going on I guess they can’t push that one.

    Comment by Stephen — July 29, 2010 @ 1:49 pm

  6. Liam,

    Lot of stuff in there, not all of which seems particularly connected …
    (1) The US minimum wage is (of course) frequently supplemented by tipping – which is why tipping is virtually compulsory in almost all areas of the service economy and you have to add 15-odd percent (plus sales tax) to whatever the menu says.
    (2) In 2000, visitors from the US totaled 198,000 people. In the year to June 2010, 194,000 visitors came from the USA. A small downtick, sure … but in 2000 the US was in its longest ever economic boom, whereas now it is in the tank. So I’m not convinced the rise in the minimum wage really accounts for even this minor fluctuation.
    (3) Even if it IS bad that young people can no longer earn more overseas than they can in NZ (bad because …?), is the solution really to cut NZ’s minimum wage to make leaving more attractive? That hardly will help with the saving of a decent amount of money whilst overseas, will it?

    Comment by Andrew Geddis — July 29, 2010 @ 2:27 pm

  7. Liam: US federal minimum wage is US$7.25, though some states have it set higher (it’s US$8.55 in Washington state). Where did you get the NZ$11 figure from? On a straight exchange-rate basis, US$7.25 is less than NZ$10, and using some IMF data for a PPP conversion (if I’m working these numbers right), it’s about $7.39.

    In Australia, the current minimum wage is AU$15.00.

    Comment by derp de derp — July 29, 2010 @ 2:31 pm

  8. If we became a state of Australia, would that mean we had pay parity with them?

    Put another way, let’s stop kidding ourselves about catching up with the Western Australia mining industry and the Sydney financial sector, and set our sights on something more realistic.

    Tasmania has an average wage of AU $55K, we’ve got NZ $52… at today’s exchange rate that’s a 30% gap.

    Any government which lays out a convincing plan for catching us up to Tazzy has got my vote.

    Comment by gazzaj — July 29, 2010 @ 2:48 pm

  9. “Instead Key doubled down”.

    No he didn’t. He strongly acknowledged we don’t have the easily accessible minerals, and said “It’s a substantial challenge but I don’t think we should be as fatalistic as to say we can’t do it.”

    Thats a fair statement and both he and English have said its an “aspirational” target. Its better than Muldoons aspirational statement “I want to leave NZ no worse than when I became PM” or Helen Clark’s vision in 1999 to get us back “into the top half of the OECD”.

    JC

    Comment by JC — July 29, 2010 @ 2:51 pm

  10. According to Teh Standard, John Key promised to lower wages. They were very clear on that. So no complaints if that is what actually happens.

    Comment by Vibenna — July 29, 2010 @ 3:12 pm

  11. JC,

    I am committed to playing football for Barcelona. The fact I am nearing 40, have dodgy ankles, lack a silky first-touch, get easily drawn out of position and generally struggle in a 4th grade Dunedin side should not be seen as contradicting my aspirational target.

    It should, however, mark me out as a complete fantasist who really shouldn’t be taken seriously as a judge of what is achievable in the real world. The latter being skills that are, you know, kind of useful in a political leader.

    Comment by Andrew Geddis — July 29, 2010 @ 3:14 pm

  12. lack a silky first-touch . . .

    I’m amazed that comment made it through the porn algorithms in the spam filter.

    Comment by danylmc — July 29, 2010 @ 3:23 pm

  13. I’m amazed anything I write makes it through a spam filter …

    Comment by Andrew Geddis — July 29, 2010 @ 3:25 pm

  14. it may be an impossible aspiration but since were are losing an important part of our labour force to Australia it’s not a silly aspiration to have.

    Having an increasingly more wealthy neighbour that will increasingly have better health and education systems as well as better aged care and have better science and technology research is not going to make many NZers very happy about being here.

    Comment by NeilM — July 29, 2010 @ 3:26 pm

  15. NeilM,

    Don’t we need to separate out what would be a desirable thing to have happen in NZ (wage parity with Australia; average life expectancy of Japan; football skills of Brazil) with what it is possible to accomplish in NZ? Or, to put it another way, isn’t the real test of political leadership not the stating of desirable things (wage parity with Oz! zero net-carbon emissions! a unicorn for every little girl!) but rather the setting of goals with a clear path to how those goals will be reached? Otherwise we get a politics of wish-fulillment … find what the focus groups desperately want, promise the nation that this is your goal too, then just juke the stats when challenged on your delivery.

    Comment by Andrew Geddis — July 29, 2010 @ 3:36 pm

  16. National can pay the price if there is one of using catching up to Oz for electioneering purposes but the comparative wealth of Australia is a real issue for many NZers. People go there to lead a better life. That wealth translates into things we want like better health and education services.

    Behind the catching up to Oz rhetoric is simply the desire to increase our economic performance. National has implemented policy they believe will lead to that goal just as Labour did.

    Comment by NeilM — July 29, 2010 @ 3:55 pm

  17. NeilM

    I’m not quite sure of your point. I don’t think there’s anyone in NZ (outside of the anti-materialistic Buddhist/neo-pagan “back to earth” communities) who would deny that – all other things being equal – it would be “a good thing” to have the same level of wealth as Australia. So no-one on the thread is arguing the desirability of the goal.

    What is at issue is the means of accomplishing it. (BTW: when you say “National has implemented policy they believe will lead to that goal just as Labour did”, I assume you don’t mean the policy is the same, but the end goal is the same?) In which case, it is reasonable to ask:
    (1) What is National’s proposed path to equal wages by 2025 (as without such a path, the end goal is meaningless puffery)?;
    (2) Have the policies adopted so far advanced us down that path (as the most recent figures contra-indicate that claim)?;
    (3) Given the disparate performance of NZ and Australia’s economy over recent years, is it likely that National’s policy proposals will reverse matters?;
    (4) Are the costs associated with those policy proposals acceptable to bear (i.e. is it worth mining schedule 4 land to bump our economic performance)?

    Now – I’m not specifically having a go at National here. We could be debating Labour’s “zero net-carbon emissions” rhetoric from a few years back. But you know – one of the curses of being in Government is that when you talk big, people are entitled to ask how you plan to deliver.

    Comment by Andrew Geddis — July 29, 2010 @ 4:14 pm

  18. It’s not silly to have the aspiration.

    It’s very silly to have the aspiration, and appoint a task force to consider ways of achieving it, BUT then appoint Don Brash to lead it AND then ignore almost everything it says AND still keep the task force reporting (next one due soon) AND continue to ignore it BUT keep claiming that the task force you cheerfully ignore is … er, part of the plan to achieve your aspiration.

    Every government will have a gap between rhetoric and action. This one’s turning it into a chasm.

    Comment by sammy — July 29, 2010 @ 4:24 pm

  19. Andrew,

    Just a few months ago the All Whites coach was gearing up for the Soccer WC. He nabbed a couple of Poms, snaffled a kid just out of school, employed a couple or three nobodies and then went on TV to say he had grabbed another kid from offshore.. he said he’s never met the kid, never seen him play but someone had, so he was in.

    God how we laughed.. the buggers never won a game.. just got parity with a bunch of teams 40 places higher on the ladder.. way up further than Oz too.

    JC

    Comment by JC — July 29, 2010 @ 4:31 pm

  20. The better analogy would be if the All Whites coach asserted his intention to win the World Cup loudly and repeatedly, hired a rugby player to lead a “Winning the World Cup” taskforce (and ignored all his advice about how picking up the ball and running was the only way to save the World Cup), spent the three months leading up to the World Cup kicking his players in the shins and waking them up at 2 a.m. every night with Kraftwerk at four hundred decibels.

    And then the All Whites do even worse than they did last time and this is explained because of space gremlins.

    Comment by JD — July 29, 2010 @ 4:45 pm

  21. Andrew (again),

    Small steps..

    Tradeables went into recession in 2004, now growing again and even surplus last quarter, non tradeables down, consumption down, household debt easing, China trade booming.. is Key wrong to try and grow it to $20 billion pa?

    My opinion of Labour aside it could not have done that because its an ideological switch from one sector of the economy to another.. one long neglected in favour of non tradeables.

    Key also has another thing going.. the almost criminal neglect of exporting, small countries like Ireland and Norway/Sweden have 3-5 times the level of exporting per capita..he can put small attention into trade and get a very handsome dividend.. note the almost obsessive glad handing he is doing around the Asian markets.. which is where the money and population is.. and where they appreciate a successful trading man with an eye for a deal.

    Right now Aussie is borrowing proportionately twice as much as NZ.. or proposing to.. indeed, it may be why Rudd was looking to whack the mining industry, it looked like easy money. Oz has an even more pathetic exporting record than us, its primary export industry proportionately a sixth of ours and its house price/income ration slightly worse than ours.. who can say how all this will play out over 15 years?

    Parity might look impossible, but maybe only when looked at in the context of the last decade.

    JC

    Comment by JC — July 29, 2010 @ 5:17 pm

  22. Passing IR legislation that weakens the hand of employees will help. Oh nah, nevermind.

    Comment by Pascal's bookie — July 29, 2010 @ 5:39 pm

  23. JC,

    Are you David Cunliffe? Come clean, now …
    http://blog.labour.org.nz/index.php/2010/07/28/the-naked-economist-part-3/

    As for “Parity might look impossible, but maybe only when looked at in the context of the last decade”, is it at all relevant that the gap between NZ and Australia’s GDP has been growing since the early 1970s, before stabalising in the late 1990s through to 2007? I simply ask as this is what Don Brash’s 2025 Task Force Report demonstrates … http://www.2025taskforce.govt.nz/pdfs/2025tf-summary-nov09.pdf

    Comment by Andrew Geddis — July 29, 2010 @ 5:52 pm

  24. Should Key get away with his misleading responses?
    Excuse my whoring but it’s all I know :-)

    http://robertguyton.blogspot.com/2010/07/telling-truth-are-politicians-including.html

    Comment by Robert Guyton — July 29, 2010 @ 6:08 pm

  25. I’m not quite sure of your point.

    neither am i really. I suppose its I don’t really mind the catch up to Oz rhetoric and that the gap is a real part of the NZ psyche.

    and that Labour and National have both tried to boost our economy with mixed sucess mainly because there’s important thing they can’t control.

    Also, National I think have made some important moves such as switching more tax to consumption and moving on property investment. But with the financial melt down the’ve been forced to just tread water.

    but this was all disappear as an issue since Labour has decided to provide alternative entertainment.

    Comment by NeilM — July 29, 2010 @ 6:17 pm

  26. What is wrong with trying to get into the top half of the OECD?
    Methinks Crosby Textor reliance has led Nats to ignore the planet.

    The whole oz nz comparison is stupid. They cannot be meaningfully compared.

    The topic is propaganda.

    Comment by peterlepaysan — July 29, 2010 @ 8:38 pm

  27. Just a note on the US minimum wage – it doesn’t apply to tipping positions. I worked as a waiter for a time in the US, the actual wages from the restaurant only covered tax (and wouldn’t have covered that if I had fully reported all tips). It was about $2 an hour I think. The minimum wage in the UK is currently less than ours based on current exchange rates, and they have a youth wage.

    Comment by Matthew — July 29, 2010 @ 8:39 pm

  28. .

    Comment by John — August 2, 2010 @ 12:09 pm

  29. All these viewpoints about raising the minimum wage to catch us up to Australia just make my head spin. Australia has been mining extensively for decades and they have the wealth to pay truckers $100K per year. New Zealand is just starting out in the mining industry and we do not have sufficient revenues yet in order to make it fiscally viable to raise the minimum wage even further. All it would do is drive companies away from New Zealand, not a particularly smart move when the Government may be reliant in the near future on the taxes derived from these companies in order to start up our mining industry at a scale comparable to Australia’s.

    Comment by Troy — August 4, 2010 @ 2:02 pm

  30. Cheers Matthew. Besides, the US has a very limited welfare system and high unemployment at the present time.

    Comment by Liam — August 4, 2010 @ 2:04 pm


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