Turns out scorn is not a growth multiplier

The latest HLFS survey reveals a very high level of unemployment – higher than during the GFC in 2008. And it also reveals that the number of manufacturing jobs in the New Zealand economy declined again during the last quarter.

I find this slightly surprising. Sure, it seemed like manufacturing was in trouble: just about every week saw announcements of factory closures and job losses, and the opposition parties made a very big deal of this in the media and in the house.

But Economic Development Minister Steven Joyce’s reaction to this talk about a crisis in manufacturing was so dismissive, so withering, so contemptuous that I wondered if the opposition parties had over-reached. This was Joyce’s area, he has his vast new MoBIE Ministry to advise him of real-time conditions in the economy. He must know something the opposition parties didn’t.

Well, he didn’t. The manufacturing sector has lost a net 17,000 jobs this year. The opposition was right, and the Minister, for all his mocking, dripping scorn, was dead wrong.

It’s been a bad two days for the government and its claim to be a credible manager of the economy, which means it’s probably going to be a bad couple of weeks for beneficiaries, or whoever else they decide to get tough on as a smokescreen.

Excerpts from the MSD Household Incomes Report

Which is here.

16   Poverty rates for children in beneficiary families are consistently around 65-75%, much higher than for children in families with at least one adult in full-time employment (9% in 2011).

• Since the benefit cuts in 1991, 65-75% of children in beneficiary families have been identified as ‘poor’ in each HES.   The figure was close to 70% for 2004 to 2009, and 65% in 2011.
• For beneficiary families with children, AHC incomes from main benefits, the Family Tax Credit and the Accommodation Supplement are almost always below the AHC 60% fixed line threshold.
• Why is the reported poverty rate for beneficiary children not therefore 100%?  There are typically 20 to 30% of beneficiary children living in households in which over the 12 months before the HES interview there is market income as well, either from their parent(s) or from other employed adults.  This extra income is enough to take total household income ‘over the line’.
• In June 2011 there were 234,000 children in beneficiary families (22% of all dependent children).  Around 25% of children live in households in which there is no adult in full-time employment.

 17   Nevertheless, on average from 2007 to 2011, two in five poor children (40%) were from households where at least one adult was in full-time employment or was self-employed, down from around one in two (50%) before WFF (2004).

• The WFF package had little impact on poverty rates for children in beneficiary families (around 70% from 2004 to 2009), but halved child poverty rates for those in working families (21% in 2004 to 11% in 2007 and close to the same since then).
• Because there are many more children in working families than in workless or beneficiary families, the proportion of poor children who come from working families is much higher than the poverty rates themselves at first sight suggest.
• On average from 2007 to 2011, two in five poor children came from working families where at least one adult was in full-time employment or was self-employed, down from just over one in two before WFF.
• The New Zealand proportion is not unusual.  In OECD countries (on average), around half of poor children come from working families.

19   Poverty rates for Maori and Pacific children are consistently higher than for European/Pakeha children: on average from 2009 to 2011, just under half of poor children were Maori or Pacific.

• On average over 2007 to 2011, around one in six European/Pakeha children lived in poor households, one in four Pacific children, and one in three Maori children (double the rate for European/Pakeha children).
• The higher poverty rate for Maori children is consistent with the relatively high proportion of Maori children living in sole-parent beneficiary families and households (eg around 43% of DPB recipients were Maori in the 2007 to 2011 period).
• On average from 2009 to 2011, just under half (47%) of poor children were Maori or Pacific: for children overall, around 34% were Maori or Pacific.
• The sample size is too small to allow more precise poverty rates to be given for the smaller ethnic groupings.

Sort of standing up for the Conservative Party on their opposition to gay marriage

The essence of conservative philosophy goes something like this:

Human civilisation is a complex web of customs and traditions representing the accumulated wisdom of thousands of generations of our ancestors on how to live well in a harmonious society. Whenever liberals and/or reformers want to change those customs they contend they’re acting from good intentions for the betterment of all, but often they’re acting from selfish motives, and even if they’re not their changes can lead to disastrous unforeseen outcomes. Social change – especially to core institutions like marriage – should be gradual and organic, not imposed by politicians.

I don’t agree with that philosophy in general, and I totally disagree with it as applied to marriage equality – but it’s not an invalid argument and I think there’s a large constituency who would agree with it. So I do hope that the Conservative Party make it into Parliament next term. (Even if I spend the subsequent three years mocking them.)

If they do make it, it might be off the back of Louisa Wall’s Members Bill, which – now that the PM has backed it – is basically a done deal. This is a huge stroke of luck for Labour. Next time they’re in government there would have been huge pressure from many MPs and the party rank and file to pass this into law, and serious push-back from the factions of Labour reluctant to live through another version of the anti-smacking debate. Now they get to deliver to their base without wearing much backlash.

 

Cui bono

Public health researchers use incident rates of sexually transmitted disease as a proxy for what they term ‘risky sexual behavior’ – unprotected sex with multiple partners. Reviewing some of the literature on same sex marriage, it looks as if legalising same sex marriage leads to a reduction in risky sexual behavior amongst gays and lesbians.

One can only speculate as to why various politicians and organisations (Family First, etc) opposing same sex marriage have such a vested interest in maximising the rate of promiscuous gay sex in our society

Even more advice for David Shearer

In the spirit of this Stuff article, that combines several totally contradictory strategies for the new Labour leader (Move to the left! Move to the center!), here is my short take on what Labour should do to win in 2014, based less on my own preferences and more on simple observation of what successful opposition parties have done before:

Have a vision. I know, you already have a vision. A high value knowledge economy. Education. Finland. The problem is that we’ve been hearing this knowledge economy line for a long time, and the National Party has already identified the education sector as a target for reform.You’re not differentiating yourself from the government or critiquing it if you’re promising basically the same thing.

Your vision should be something that defines the government in a negative sense, and yourself in a positive sense, and that ties in with your flagship policy, which you should be signaling the broad details of at least eighteen months out from the election. Example: in 2008 National campaigned on growing the economy, which John Key and Bill English were experts on, and which they claimed Labour had mis-managed. Their policy was tax cuts. Closer to the election they signaled the details (‘North of $50 dollars a week for 90% of New Zealand workers! Wow!’), but from real early on in Key’s leadership everyone knew that he promised better economic leadership than Labour and strong growth through a policy of lower taxes. You should have a similar duel vision. This is what’s wrong with the country. National isn’t fixing it. We will. Here’s how.

Events, dear boy. Events bring down governments – but only if the opposition can wed them to something more meaningful. Currently Labour has no strategy around events – they happen in a vacuum. Nick Smith resigned last week, and that’s ‘bad for the government’ – except it isn’t in any enduring sense because the opposition hasn’t defined a vision of what’s wrong with this government, so they can’t tie events to it in a credible way. In the 1990s the Labour opposition under Helen Clark attacked the Shipley government as being about ‘sleaze and cronyism’ – which was brilliant, since all government is about sleaze and cronyism (Clark promised ‘open accountable government’ as her contrast). So every time some shoddy deal came to light it reinforced to the public that negative vision the opposition presented of the government was valid. Imagine how much worse the Nick Smith/ACC saga would have played out in that environment.

Some pundits claim that Labour shouldn’t be too negative. They’re wrong – you should be almost completely negative, until the election campaign itself rolls around. Then it’s government-in-waiting time. When you’re the opposition, negative is what you’re being paid for – but you do need to offer up that initial, positive vision in contrast, and you marry the negativity to events and ‘the vision thing.’

Explaining is everything: Some pundits love to repeat the phrase that ‘in politics explaining is losing’ – the subtext being that the public are too stupid to understand any complex political or policy issues. But the political science consistently shows that in matters of controversy the public looks to their political leaders (amongst other people) to explain what’s happening and to argue their case. This is something National is really good at – Key especially – and Labour generally doesn’t do at all, which means our window of political debate is constantly being shifted to the right as National wins almost every argument by default (Welfare and education being the obvious examples). The great exception to this phenomena: Capital Gains Tax. The conventional wisdom was that this policy was political suicide, but David Cunliffe went out, made the arguments and won them all. By the time the election came around public support for Capital Gains was roughly double the level of support for the Labour Party. Not explaining is losing.

Shibboleth

Stuff reports:

Prime Minister John Key has met executives from internet giant Google as plans to shake up the public sector gather steam.

Virtual jobs will replace staff as the sector moves away from frontline services to call centres and online interaction.

Mr Key said yesterday that people wanted to use their smartphones to apply for passports and other tasks, rather than wait in line in offices.

“It really doesn’t matter if there is a street frontage there … We are living in an age where kids have iPads and smartphones. That’s the modern generation … and they actually don’t want to walk in, for the most part, and be in a very long queue and be waiting for a long time.”

Last time I looked, smart-phone penetration in New Zealand was around about the 5% mark. But I guess Key’s kids and all his staffers have them, so that’s everyone in the world of the Sun King.

This isn’t a bad idea, per se – but when I hear ‘applying for passports online’, I think ‘national identity management platform’, which will be (a) expensive, (b) require a ton of public servants to implement, support and curate, unless we want to outsource the curation and warehousing of all our private data to Google, which it kind of sounds like ‘we’ do, and (c) will send quite a lot of the population into throes of paranoia.

The fourth way?

Trevor Mallard excerpts this announcement about the UK Labour Party rethinking their approach to welfare:

Labour is calling for a radical rethink of the welfare state, arguing that the benefits system has betrayed its founding principles and “skewed social behaviour”.In a significant redrawing of Labour’s position on welfare, the shadow work and pensions secretary, Liam Byrne, on Tuesday argues that the ballooning of the system has provided support that is unearned, and mislaid the original ideal of providing help to those that contribute.

Heralding a series of speeches over the next few months designed to mark out new territory for Labour, Byrne claims the party must recast the welfare state to meet the original intentions of its founder, William Beveridge.

I read a few chapters about Beveridge in a history of modern Europe a few years back, so I consider myself something of an expert on the subject. And yes, we have moved away from the original intention of Beveridge’s approach to social welfare – which was a full employment policy. His vision of the welfare state was that everybody got a job, there would be minimum unemployment while people transitioned between jobs, so you could afford a generous welfare system to support that tiny number of people.

The way governments did this – both in the UK and here in New Zealand – was that the state owned various labour intensive industries and hired people that weren’t employed in the private sector. Both countries stuck with that model until the 1980s when Thatcher came to power in the UK and Douglas and Lange corporatised and/or sold the NZ government owned forestries and the rail-roads, and all the surplus workers were sacked, which destroyed many of the country’s provincial economies overnight.

Part of the justification for these actions were the economic arguments that full employment policies aren’t a good thing. They lead to market distortions, they can be inflationary, they decrease labour market motility. A healthy economy has a fluctuating employment rate responding to economic conditions.

And these might all be true – but the reality is that scrapping the ‘full employment’ half of Beveridge’s welfare platform led to massive unemployment, both here and in the UK – that’s when the welfare system first came under criticism for being unaffordable. The party that reneged on the social contract around employment and welfare was the state, not the workers.

Anyway, for a while the new consensus was that we need a certain degree of unemployment so we need an unemployment benefit, because it isn’t fair to run an economy which benefits from unemployment but consigns the actual unemployed to lives of starvation and abject misery.

There are two problems with this arrangement. The first is that the unemployment created by Douglas/Thatcher wasn’t temporary or transitional – it was structural. The unemployed people in the regions most effected by their policies didn’t retrain or move – because there weren’t any jobs to move for, and this unemployment became inter-generational, with associated social problems – and the economy didn’t get the benefits of having a pool of unemployed workers, it just got the cost.

That’s the second problem. How do you pay for the welfare state? Most centre-left parties – including the New Zealand Labour Party under Clark and Cullen – adopted ‘the Third Way’, a term popularised by Tony Blair. The idea here is that the wealth creation from a deregulated free market economy provides enough tax revenue to fund a generous welfare state.

The problem with that is that unregulated free market economies are prone to catastrophic collapse (or, if you prefer, ‘creative destruction’): when this happens the state needs to step in and prevent the destruction of key industries like banking and finance, its revenues decline dramatically, and at the same time the cost of the welfare system rises sharply. The government can’t borrow to stimulate its way out of a recession because it’s already borrowing to prop up the financial system and meet its current welfare spending commitments.

Realistically I doubt UK Labour’s concern about welfare is driven by any of these considerations – their problem with the welfare system is that the Conservative Party ‘owns’ the issue of welfare, and that the UK public is just as excited by beneficiary bashing as the New Zealand public, so they want to inoculate themselves against being perceived as ‘soft on welfare’.

Personally I think the full employment policy might be worth a re-think. It upsets economists so it would probably be good for the economy – but it is hard to think of a nation-wide, mostly rural industry the government could run that would provide a good return to the taxpayers.

Eh

My initial impression of National’s welfare reform policy is that it looks more like a routine department-level re-branding than an election policy from an incumbent government. The name of the DPB changes to the ‘Sole Parent Support’ benefit. The Invalids Benefit is now a ‘Supported Living Payment.’ Sickness beneficiaries go on the unemployment benefit, which is now the ‘Jobseeker Benefit’, but sickness beneficiaries still get exempted from job seeking while ill.

I like the financial incentives to encourage people back into work – but if you’re placing an expectation on solo parents to get back into the workforce, you really need to have a concrete child-care policy in place and National doesn’t – according to Bennett’s FactSheet they’re still working on it.

Some of the entries in the ‘Fact Sheet’ are bleakly funny due to the absence of any actual facts:

What medical evidence have you based the policy of putting work obligations on
sickness beneficiaries on?
Society’s expectations about work have changed. Not only can many sick and disabled
people contribute through employment, there is evidence that points to improvements in
health and wellbeing through taking up appropriate work.

It’ll be interested to see how many sickness beneficiaries transition to the Invalids Supported Living benefit.

Update: Rob Salmond at Pundit points out a huge inconsistency in National’s new benefits package:

Consider these two families:

Mary and Bob have been married for 16 years. Bob is the breadwinner, Mary stays at home. Mary becomes pregnant, and at the same time the marriage breaks down. Mary has few skills and has a tough time getting a job in this economic environment. She is initially on the unemployment benefit, but transfers to the DPB when her first child is born.

Jane and Jim have been married for 16 years, and have a 14 year old child. Jim is the breadwinner, Jane stays at home. Jane becomes pregnant again, and at the same time the marriage breaks down. Jane has few skills and has a tough time getting a job in this economic environment. She goes on the DPB, and remains on it when her second child is born.

Because of the new incentives scheme, Mary is eligible to receive the DPB without a work requirement for five years, while Jane is expected to find work after one year – even though their situations are basically identical.

Chart of the day, I was going to post pictures of my garden covered in snow instead but I couldn’t find my USB cord edition

Helpful to keep in mind that the number of people receiving this benefit targeted in Key’s new reforms is (a) pretty tiny and (b) tracks with unemployment rates.

Ominous

The National government is currently considering the Welfare Working Groups proposals, the gist of which is that the entire welfare system should be privatised and run on a corporate ‘for profit’ model. So Key’s insistence that his secret welfare reforms will ‘probably cost more in the short term’ is not awesomely reassuring.