Thursday, May 10, 2007



Wage rises, not tax cuts

The Australian government presented its budget the other day, just a week before ours, prompting the usual whining that the Aussies are getting tax cuts while New Zealanders (or rather, rich New Zealanders) are not. National is complaining that by committing to restore and strengthen public services, the government has wasted a golden opportunity to cut taxes while economic times are good - thus displaying clearly its belief (amply demonstrated elsewhere) that the purpose of government is to hand out public money to its rich mates, rather than benefit the people of New Zealand as a whole. But perhaps the most disingenuous example of this genre is from Martin Kay in the Dominion-Post complaining that tax cuts are necessary in order to close the gap between Kiwi and Aussie pay packets.

Leaving aside John Howard's recent ECA-style industrial relations "reforms", which will see that gap close from the other direction as employers across the Tasman take the opportunity to slash wages and conditions, I'd have thought that the best, simplest, and most sustainable way to close that gap was not to cut taxes, but rather to increase wages. And funnily enough, that's exactly what the government has been working to do.

11 comments:

How exactly is the government working to increase wages? As someone who has come back from overseas (where I paid off my very sizeable student loan in a matter of years), I find the low wages here appalling. If the government is working to reduce the gap between Kiwi and overseas wages, then I'm all for it. But how are they doing it?

Posted by Anonymous : 5/10/2007 01:48:00 PM

Firstly, they've raised the minimum wage as well as wages across the public sector. As well as producing direct benefits to the people involved, these actions also drive up wages in the wider economy by putting pressure on employers to compete. Secondly, they repealed the ECA and replaced it with an employment relations act which allows unions to fight for wage increases, rather than sidelining them. This has produced obvious benefits to EPMU and NDU workers. Finally, they've had a long-term program of shifting New Zealand out of the "low wage, low skill, get another warm body" mindset beloved of our employers and business leaders into more capital intensive production (which in turn requires greater skills, and can pay higher wages).

These are long-term projects - but they've made a difference. People on the bottom of the heap have seen their wages increase by 60% since 1999. People further up the scale have received repeated wage rises where previously they would have got nothing. And that's done them far more good than a one-off tax cut ever would.

Posted by Idiot/Savant : 5/10/2007 02:10:00 PM

A lot more could be done around allowing industry-wide bargaining. At present a companies can flatly refuse to become part of a multi-employer collective agreement and there is no right to strike over it. Furthermore, even within companies there is no right to a national collective. We saw that during the Progressive dispute last year, which was about a company denying that right.

We also need the right to strike over outsourcing. As we saw at Air NZ recently, the company can just threaten outsourcing (meaning redundancies and pay cuts) unless workers accept lower pay, and they have no way to fight back.

Labour has done a bit to help workere - they certainly aren't actively screwing them like National would - but there's a lot that needs changing if we're going to start seeing some real gains for working New Zealanders.

Posted by Unknown : 5/10/2007 04:11:00 PM

And what part of the public service has been improved Idiot.

Lets see a 50% increase in health and less operations and more people on waiting lists.

The only thing Labour has achieved in this area is told people to fuck off and die.

How about education - NCEA for example is a mess with meaningless credits for picking up rubbish.

Tertiary education is even worse with billions spent with people doing sing-along to the radio courses, and twilight golf.

TEC has been restructed three time sinces it inception.

How about the police - nope, crime is still going up, particularly violent crime.

Housing then, nope thousands of people without a house to live in and on a waiting list.

Or the ability for the average NZder to buy a house. No, again.

How about generation of 'green' electricity. Nope the RMA is a mess and needs to be changed.

The absolute waste without acheiving anything is shocking.

All National wants to do is to provide good quality services effiecently without the waste and the left cry bloody murder.

Labour doesn't care as long as they stay in power.

Posted by Anonymous : 5/10/2007 04:50:00 PM

Thanks, I/S, for that run-down. I was just a young lad when the ECA got pushed through and remember not really understanding it, but I didn't know it had been repealed. Good news.

I was about to relate my conversation with a small business owner (all right, my hairdresser) and how she was saying it was time for a change. But it seems Anonymous has already got his/her chops in.

I'm not that satisfied with Labour (especially on its half-hearted climate change policy), but it seems the alternative is much worse. But how to get that message across when it seems National has free rein of the person-on-the-street message?

I know blogs are hardly representative of the Zeitgeist, but it's worrying to me that the NZ blogosphere is dominated by the braying right. Thank the stars for blogs like this. Keep up the fight!

Posted by Anonymous : 5/10/2007 10:22:00 PM

If you want to see NZ wages go up, make NZ a MORE profitable country in which to do business. It isn't rocket science.

(1) Yes, that means you'll need to cut both the headline corporate tax rate, and the actual compliance charges incurred by business.
(2) You'll need to reduce regulation in some areas.
(3) You'll also need to scrutinise those areas of the economy where informal cartels operate to restrain trade. It's ludicrous how long lawyers were able to hold on to conveyancing, for example. ACC should also be re-opened to competition.
(4) The government should direct that its university funding can only be used to support practical, rigourous subjects, not the easy-credits courses that abound today.
(5) The public sector needs a top-down professional structural audit, to eliminate redundancies/overlaps/talk-shops. Hard questions need to be asked (as Cullen did a year or so back) as to whether we're actually getting the sorts of improvements we ought to, given the increases of funding that have gone into the public sector. The public sector by its very nature all to easily acts as a drag on the rest of the economy; it needs to be thoroughly re-assessed.

Posted by Walsingham : 5/11/2007 10:11:00 AM

Walsingham, that depends on how you want NZ to be more profitable for business. I can't recall exactly, but surely the ECA made NZ more attractive - it certainly reduced wages and strikes significantly. Likewise, gutting the RMA and slashing taxes would no doubt make some businesses more profitable, the question is whether that would help NZ at all. It's bad enough having trade deals that increase profit extraction without also trying to compete with places like China on conditions for workers (including the environmental ones).

Posted by Moz : 5/11/2007 11:03:00 AM

(1) Yes, that means you'll need to cut both the headline corporate tax rate, and the actual compliance charges incurred by business.

Cool, I cant wait to see the kid's faces in Starship hospital when you tell them tax cuts are more important than their health care..

(2) You'll need to reduce regulation in some areas.

Translation: Bring back slavery and let companies pump as much crap in the air as they like..

(3) You'll also need to scrutinise those areas of the economy where informal cartels operate to restrain trade. It's ludicrous how long lawyers were able to hold on to conveyancing, for example. ACC should also be re-opened to competition.

Nothing like compensating for the income that lawyers lose when they lose their monopoly on converyancing than turning them into ambulance chasers...And do you really want a surgeon operating on you who has his degree from www.onlinemedicalschool.tk?

(4) The government should direct that its university funding can only be used to support practical, rigourous subjects, not the easy-credits courses that abound today.

Ill get back to you on this....

(5) The public sector needs a top-down professional structural audit, to eliminate redundancies/overlaps/talk-shops. Hard questions need to be asked (as Cullen did a year or so back) as to whether we're actually getting the sorts of improvements we ought to, given the increases of funding that have gone into the public sector. The public sector by its very nature all to easily acts as a drag on the rest of the economy; it needs to be thoroughly re-assessed.

Well getting rid of the right-wing wank fantasy of the funder provider split would be a good start. Why funding for activities have to be channeled through up to 3 ministries is beyond me...

Posted by Anonymous : 5/11/2007 12:06:00 PM

Millsy:

(1) You might want to examine the current size of the NZ budget surplus before ordering the kids at the Starship hospital to hand back their blankets.

(2) "Bring back slavery"? "Pump..crap ..in the air"? These are novel policy initiatives you're proposing, but I had in mind things more akin to reworking the frequency and volume of regulatory filings etc.

(3) Whilst various professional associations like to claim their one and only reason for being is to protect Joe Public from dastardly foreigners, in practice they also have a habit of operating a nice little closed-shop for themselves.

(5) It seems we can agree on this one.

Posted by Walsingham : 5/11/2007 01:40:00 PM

a tax cut culd be more or less a wage rise if it was for example a larger tax free income.
GNZ

Posted by Anonymous : 5/11/2007 11:34:00 PM

I mean if lets say the first 20 k was tax free.

Posted by Anonymous : 5/11/2007 11:34:00 PM