Act now to protect workers’ wages

Written By: - Date published: 11:40 am, June 19th, 2008 - 55 comments
Categories: benefits, economy, election 2008, greens, labour, tax, wages, workers' rights - Tags:

 

 

 

 

 

 

 

Times are going to get harder for workers in the next few years. Unemployment is set to rise to 4.5-6% (still well under 1990s levels). The wages of those who keep their jobs won’t rise as fast. At the same time, prices are rising faster, particularly petrol. What can be done?

Tax cuts aren’t the answer. You can’t make big tax cuts year on year, and any big cuts will come by cuts in the social wage. Cutting public spending would be disastrous, adding to unemployment, further suppressing wages, and having a negative knock-on of further job losses in the rest of the country (watch In a Land of Plenty to see how that happened in the 1990s).

More public transport is a partial solution; it combats petrol prices by giving workers a cheaper (and greener) alternative to driving but better public transport can’t relieve other raising costs or lower wages.

We also need to keep workers’ incomes up. First, by raising benefits and creating grace periods for the In Work Tax credit portion of Working for Families, so workers who lose their jobs don’t face huge income cuts. Secondly, by putting up the minimum wage to $13 an hour on October 1 (giving a pay rise to over 300,000) and ensuring it keeps going up by locking increases into legislation. These changes would put money to the communities in New Zealand that are set to suffer the most the lower income areas where job losses will be concentrated – stimulating local economies.

Both those changes could be in place, helping workers, by October 1. Labour and the Greens should act now to protect workers in the present and the future. Because if National gets in, those workers will once again see their incomes stagnate and eaten up by inflation.

55 comments on “Act now to protect workers’ wages ”

  1. Ari 1

    Auto-increasing minimum wage definitely needs to be voted in before the election. I’d like to see National try to touch that one.

  2. Tane 2

    Ari – agreed. Peg it to 2/3 of the average wage like the CTU suggests and let the Nats try and repeal it. Minimum wage workers can’t afford a repeat of the 90s.

  3. Disengaged 3

    Dumb question maybe, but how does raising benefits keep worker’s incomes up?

  4. Because unemployed workers are workers too. They’re just workers for whom there isn’t work at the moment.

    Also, higher benefits mean more demand from beneficiares, stimulating their local economy. the opposite effect happened when National slashed benefits in 1991 – tens of thousands of jobs disappeared because consumer demand decreased when benefit payments went down. This had a multiplier effect through the economy.

  5. Disengaged 5

    Thanks for the response.

    I wouldn’t have thought that beneficiaries would be responsible for sustaining many aspects of the economy. I would like to see more support for getting people back into work and easing that transition.

  6. Scribe 6

    “Act now to protect workers’ wages”

    I was stunned when I read that. I thought Rodney and Sir Roger had released some new policy that was going protect workers’ wages. Now that would have been news 😉

  7. Disenegaged. ” I would like to see more support for getting people back into work and easing that transition.”

    Wouldn’t we all. And that’s what’s happening. Unemployment benefit numbers fell to a new low in May (17,000, they hadn’t been below 20,000 since 1979) and Sickness benefit numbers also fell.

    Beneficaires individually only have small buying power ($10K a year on the benefit) but there nearly 250,000 of them (down from over 350,000 in National’s time). Cut their income by a significant amount and you’ve got a significant cut on overall consumer demand. Then, people lsoe their jobs becuase demand is down, and their incomes reduce too, further surpressing demand. That echoes on. The standard multiper for an injeciton or subtraction of moeny from the economy is five – taking, say, $10 a week off the incomes of 250,000 beneficairies would cost the economy $130 million a year in consumer demand.

    That’s a large part of why unemployment went through the roof in National’s early years in the 1990s (it was a deliberate policy to create unemployment and thereby drive wages down) and the economy contracted. it wasn’t until the end of 1993 that the economy was as large as it had been in 1990.

    Factor in population growth and GDP per capita did not regain 1990 levels until the end of 1994.

  8. Disengaged 8

    You can’t artificially prop up a failing economy through welfare payments though. Also forcing unsustainable wage increases onto companies that are already struggling is a good way of tipping them over the edge and forcing more people onto the benefit. I would rather see minimum wages linked to productivity growth than to average wages.

    Capture: Sudden Wages…mmmm

  9. dave 9

    Because if National gets in, those workers will once again see their incomes stagnate and eaten up by inflation.
    Just like what is happening now under Labour. Perhaps National will do better than Labour has done over the past 9 years.

  10. Disengaged. I would have minimum wages tied to nominal GDP per captia growth (which is really the same thing as productivity growth in the long-run).

    You can’t fix all the world’s ills by paying the poor more, nor could you set that level as high as you like. But that’s not what I’m proposing.

    Companies have done very well out of the last 9 nine years of uninterrupted economic growth, and if someone has to tighten their belts during a downturn I would rather it’s the well-off business owners and shareholders than poor workers. that’s not only better morally, it’s better for crime rates, population health, and the economy.

  11. Dave. No it’s not happening under Labour – the minimum wage just went up 7% in April, benefits went up by CPI. Pay rates are in fact rising at the record rate.

    But to stop inflation beating wage rises in the period of high inflaiton coming, the govt should bring forward the next minimum wage increase and increase benefits.

    (fish in a barrel, Dave. You can do better)

  12. AndrewE 12

    Companies have done very well out of the last 9 nine years of uninterrupted economic growth, and if someone has to tighten their belts during a downturn I would rather it’s the well-off business owners and shareholders than poor workers.

    And you’re dreaming if you think they will. They’ll simply take their business elsewhere if you try to force them which is not good for anyone. That is exactly why Labour has never repealed all the changes that happened during the 90s. They were necessary, painful yes, but think how much worse off we would be as a nation if they had not happened.

  13. How about this:
    Minimum wage to be adjusted to inflation (if inflation is 5%, the minimum wage goes up by 60c per year).
    Tax thresholds also be inflation adjusted.
    Workers are only to get pay rises (above inflation) with increased productivity.
    Market forces to determine level of unemployment (and ultimately) wages.
    Govt policy aimed at long term growth.

  14. rave 14

    What happened to the original Standard and Red Flag staple ‘workers produce the wealth’? Your 2.0 version is mired in the intricacies of fiscal fiddling.
    Inflation proofing a living wage is absolutely necessary. But how and what with? So long as Labour is scared of a capital strike it will swallow fiscal responsiblity and keep the inequitous regressive GST in place. Where’s today’s Nash who goes to London and pisses on the red carpet of the Bank of England?
    The most impressive hat tip to the ritual egalitarian-nostalgia of Labourism would be to get rid of GST on all basic food, fuel, housing etc etc,
    This would be a tax cut to be rejoiced. Labour can claw back any lost revenue 10 fold by nationalising the Aussie banks, expropriating Comalco in honour of Dr Sutch, and many other such adventures.
    Of course this would need someone to actually stand up and grab the Red Flag off the wall where is has faded to shallow pink among the photos of the forebearers.

  15. Tane 15

    Rave, you’re right that workers produce the wealth, and that ultimately the only proper answer to multinational capital strike is to nationalise. Put crudely, the workers are here, the means of production is here, all we’re missing is the guy at the top who gets to keep all the profits.

    But unless you’re willing to confront capital head-on (and being in the Workers’ Party I guess you are) then you have to do what you can within the framework of a capitalist economy.

    Labour clearly aren’t there, and no responsible social democratic party could be in the current climate. The social conditions simply do not exist for revolution.

  16. There’s a sad irony in that Australians will be looking to us if National get in only to see the same turmoil they went through under Howard’s Work Choices. As Kevin Rudd continues to roll back Work Choices will they be able to hear our screams?

  17. higherstandard 17

    Tane

    I was going to say that Rave was taking the piss, but judging from the website he links to that is not the case.

    Bizarre indeed !

  18. “More public transport is a partial solution; it combats petrol prices by giving workers a cheaper (and greener) alternative to driving but better public transport can’t relieve other raising costs or lower wages.”

    Public transport is just another form of income transfer from the hard working to the indolent.

  19. Tane 19

    HS. The Workers’ Party are a odd bunch. Some good people in there, but a lot of nutters, and most of them wildly detached from political reality. Of course, that’s just the opinion of a reformist sell-out in league with the boss class. 🙂

  20. leftrightout 20

    “Workers are only to get pay rises (above inflation) with increased productivity.”

    Why cant workers get pay rises because its fair?! Why should workers have to work more just to keep up with inflation? Why cant employers share the wealth their employees are generating for them!

  21. mike 21

    Steve,employers hurt in a down turn too.
    We are in negotiations with the union at present. If demands are met it will mean redundancies.
    Shareholders have had little in return for a few years also.

    Everybody needs to tighten their belts that means employers as well.

  22. Lew 22

    leftrightout: The trick is in defining `fair’ness. Also, productivity isn’t about working more, or about working harder, it’s about working smarter. This isn’t really up to employees – it’s up to employers (and managerial staff, who implement the employers’ strategies) because it’s about investment in more efficient workflows.

    L

  23. mike 23

    “because it’s about investment in more efficient workflows”

    Which results in fewer employees. My industry is already donkey deep in the “lights-out” manufacturing push – It’s bad news for your average worker.

  24. Matthew Pilott 24

    Public transport is just another form of income transfer from the hard working to the indolent.

    Can the troll posting under bryan’s name please piss off?

  25. ants 25

    “Cutting public spending would be disastrous, adding to unemployment, further suppressing wages, and having a negative knock-on of further job losses in the rest of the country.”

    So the reason we have unprecedented unemployment (as the left always trumpet) is because the government has created a load of jobs out of thin air?

    What about the novel idea of cutting wasteful public spending (e.g. policy analysts, 50% of public-sector IT departments) and letting those people actually work in the REAL world where they have to be productive for the economy instead of being leeches and adding no value whatsoever?

  26. ants. show me specific instances of waste. and think about your logic, do you think that the Government wants to have waste, when it could be spending that money on voter winners like more services or tax cuts?

    In response to your question, obviously not, but cutting incomes of tens of thousands of people by cutting public spending has a negative multiplier effect throughout the economy. The worst thing for a government to do during hard times is stop spending, instead, it should run down its surplus, inject more demand in to the economy through spending and tax cuts, not less. Which is what the Labour-led Government is doing.

    That’s 6th form economics.

  27. ants 27

    “No it’s not happening under Labour – the minimum wage just went up 7% in April, benefits went up by CPI. Pay rates are in fact rising at the record rate.”

    Thats an interesting way of putting it – didn’t the same shopping trolley of goods cost 28% less last year?

    Also, if our pay is rising by record rates, how come the OECD says that it is actually comparatively poor?

  28. Vanilla Eis 28

    ants: CPI clearly encompasses more than a simple basket of goods from the supermarket (around a third of which, IIRC, were dairy-based). The cost of groceries alone is a poor inflation indicator.

    captcha: Speaking harness. Sure wish I could hand a few of those out.

  29. “Also, if our pay is rising by record rates, how come the OECD says that it is actually comparatively poor?” – because those statements aren’t mutually exclusive

    “Thats an interesting way of putting it – didn’t the same shopping trolley of goods cost 28% less last year? ”
    – yes but that’s only a fraction (less than 2%) of what people spend money on. CPI encompasses inflation in all consumer spending.

    I’m just intersted, ants, do you geniunely not know things like what inflation is or are you just making hollow arguments and hoping no-one will call you on them? There’s no shame in not knowing about inflation and other economics, most people don’t, but it is surprising that you seem to have strong opinions based on little knowledge.

  30. Joker 30

    Wow…and I thought I had seen pompous

  31. djp 31

    You guys talk as though workers are slaves forced to work by a evil employer.

  32. Yeah, I agree with the idea. In fact, make it generous enough so that it defeats any Key tax cut for anyone earning under $40k.

    Its simple really – businesses either run a profit maximisation, or a cost minimisation strategy as part of their overall goal of improving profitability.

    Poor old Joe Employee is ‘designated as a cost to cut’, so in real terms, they don’t increase his pay, even though they would be prepared to threaten him with litigation, and not pay out on entitlement to prevent him leaving.

    The only way some employees get pay rises is through hikes in the minimum wage – and while it could be political strategically advantageous for Labour not to move and let Joe Employee suffer a term under National with no pay rise (maybe a tax cut if you’re lucky), it would be cold hearted and could backfire.

    Those within the labour movement don’t think so heartlessly, these decisions all have real impacts on real people.

  33. Swampy 33

    High public spending causes high inflation and high interest rates. Cutting back such spending would not be disastrous at all. It would put more money in homeowner’s pockets with a reduction in mortgage interest rates.

    Labour’s policy of large spending increases is the principal cause of housing unaffordability. Labour, of course, believes this can be addressed with yet another layer of bureacracy and more money thrown at some kind of extra welfare payments. They regard everyone who isn’t in the low-income category as cash cows to fund their rapacious spendthrift ways.

  34. Swampy 34

    “In response to your question, obviously not, but cutting incomes of tens of thousands of people by cutting public spending has a negative multiplier effect throughout the economy. The worst thing for a government to do during hard times is stop spending, instead, it should run down its surplus, inject more demand in to the economy through spending and tax cuts, not less. Which is what the Labour-led Government is doing.”

    That’s what Norman Kirk and Rob Muldoon did in the 70s. It didn’t do either them or the country much good.

    It is not the role of the government to drive the economy. The whole of the government’s income and all of the money it spends is funded almost entirely by taxation from the activities of the private sector. Best just to make it easier for them to increase their economic activity and the whole country will do better as a result.

  35. Swampy 35

    “Labour clearly aren’t there, and no responsible social democratic party could be in the current climate. The social conditions simply do not exist for revolution.”

    There’s just one little thing you missed out and that is democracy.

    Is there one single country in the world which has gone for a revolution through the democratic process of holding elections in a fair and free way? (That lets out Zimbabwe of course)

  36. burt 36

    rave

    What happened to the original Standard and Red Flag staple ‘workers produce the wealth’?

    The anon authors here at the standard cannot be true to their principals and Labour supporters at the same time – they appear to have made their choice…..

    I like you principaled stand. Keep it up – but beware you will be called a National party supporter if you don’t agree with everything Labour say.

    [I’m not anonymous and I’m not a Labour supporter either, and I want left wing government just like rave. We only differ on means. Is this really the best you can come up with Burt? SP]

  37. burt 37

    SP

    Swampy said what I would normally say here;

    http://www.thestandard.org.nz/?p=2237#comment-62271

    I was just acknowledging that ‘rave’ had a good principaled approach – I like that.

    Harden up SP, clearly in talking about ‘anon authors’ I wasn’t talking about you – did I hit a raw nerve?

  38. Tane 38

    I think Burt missed my comment entirely, but then he tends to miss a lot.

  39. Not at all. The writers of the standard are principled and true to them.

    I just wish we could get some decent debate from youse – it’s all silly innuendo about Labour and piss-poor understanding of economics and government finance.

  40. burt 40

    Nice personal attack Tane, I don’t like that as it shows that you can’t defend the argument.

    There is no reason to support Labour from a workers rights perspective under an MMP framework. If 20% of the population think workers rights are “very important” then get organised and set up a workers party…. Don’t expect a one-size-fits-all party to push a minority agenda – rave clearly understands this.

  41. vto 41

    Why are you surprised Mr Pierson? I have given you my opinion on the quality of many of your posts – while I don’t doubt your integrity andf passion (a tub that can hold many sins) I don’t think your posts are robust enough to spend time on. Hence my own often rather pointless jabs from the sideline.

    I think you will find the answer to your problem “I just wish we could get some decent debate from youse – it’s all silly innuendo about Labour and piss-poor understanding of economics and government finance.” within.

  42. Lew 42

    burt: You’re strictly right, but implementation is a different matter. In fact, this was one of the big warnings against MMP, but clearly it hasn’t come about.

    L

  43. Tane 43

    No burt, I’m just getting tired of you constantly misrepresenting my arguments.

    A few points:

    * Workers’ rights are not a ‘minority agenda’. The vast bulk of the population rely on a wage or salary for their income.

    * As you know I vote for the Greens and I support a Labour-led government over a National-led government.

    * I also support Labour’s direction on workers’ rights even if I think they’ve been far too timid. Your constant claim that they’ve done nothing for workers is baffling.

    * Your implication that someone who is truly of the left should refuse to work with the dominant social democratic party in New Zealand makes no sense in the absence of a viable alternative.

    * The idea that a staunch left party could spring up out of nowhere is fanciful. You also assume that once in place it won’t have to make the same compromises as Labour to maintain power and advance its agenda.

    * While your (at least rhetorical) commitment to ideological purity is admirable, I prefer to actually get things done. It’s easy to be a mouth militant, much harder to make real gains for working people.

  44. burt 44

    Lew

    Picking one of the two major parties because it is closer to your principals than the other major party is FPP mentality. I do wish we could get over the “must support major parties” mentality. I’m happy being a 1.5% supporter, at least I can say I voted for the party that fits my ideology rather than the one that was least offensive.

  45. burt 45

    Tane

    Nothing will change as long as we all compromise for expediency. Do you agree with this or are I wasting my time?

  46. r0b 46

    Nothing will change as long as we all compromise for expediency. Do you agree with this

    Speaking only for myself Burt I certainly don’t agree, that’s BS.

    Is Labour and the perfect left-wing party? Of course not. Have things changed (significantly for the better) since Labour took over in 1999? Of course they have.

    To phrase the underlying question explicitly, which is more admirable? Is it (1) refusing to compromise your ideals and accomplishing nothing, or (2) compromising some ideals and accomplishing significant good?

    It’s a debate that I resolved for myself a long time ago, I’ll take door number two thanks.

  47. Tane 47

    I think we’re talking past each other burt. You can eschew any compromise and spend your life, like the Workers’ Party, standing on the sidelines achieving nothing, or you can work pragmatically towards your goals and actually achieve something in line with your principles.

    That’s about where I’m at, but then trade unionism tends to sharpen your focus on actually making gains for people. Pure theory ain’t much use on a picket line.

  48. Lew 48

    burt: “Picking one of the two major parties because it is closer to your principals than the other major party is FPP mentality.”

    I entirely agree.

    Ultimately there’s a second axis which you’ve overlooked, though: competence. I might support the Libertarianz’ principles or policies, but if I don’t think Bernard Darnton has the chops to be a minister in government, or a competent, credible voice in Her Majesty’s Loyal Opposition, I’m going to be very cagey about voting for him. This is basically an incumbency advantage of demonstrable competence, and it presents a chicken-and-egg problem. Minor parties which succeed tend to be formed around people, not principles.

    RAM, Kiwi (which a good mate of mine calls the Cope With Balls Party), Republicanz, the ALCP, Destiny and the other fringe nutter parties are exactly that, because there’s no demonstrable political competence there. Sure – they might have wonderful policies. But if you put ’em in a room with the Clarks and Cullens and Brownlees and Peters’ and Hides of this world, will they amount to anything?

    L

    (FWIW, substitute any other fringe nutter party instead of Bernard and the Libertarianz, if you like – he’s the only one I could call to mind. Which says something.)

  49. Quoth the Raven 49

    Swampy – I suppose that’s why Stiglitz said virtually the same things as SP is saying. In short he said our government’s spending would buffer our economy against a global economic downturn.

    Public transport is just another form of income transfer from the hard working to the indolent.

    It occurred to me that when you take the initials of our handles e.g., Quoth the Raven becomes QTR, Bryan Spondre become BS, yours is particularly apt.

  50. burt 50

    Tane

    Let me clarify my position.

    I would not accept that one person holding the proxy votes for very close to 50% of of a company board would always make decisions in the best interests of the company. I’m pretty sure that the Labour govt felt the same way over circa 40% voting rights for the Canadian bid for Auckland Airport. Personally I had no issue with the offer of reduced voting rights but I agree that at 40-odd% they could be seen to have virtually complete control, although one might also argue that under democratic principals they do not.

    Bloc voting is the kicker, as I’m sure it was for the Airport bid. I don’t think forming coalitions is any different, it’s not in the countries best interest to give such a large percentage of the vote to one ‘bloc voting’ entity. Likewise a major party having 22% of the vote would also be acceptable to me.

    If I were a Green party supporter I wouldn’t switch my party vote to Labour to attempt to deny a National govt (if constant polling indicated the green would not make 5%), that would make me a watermelon. I might give Labour my electorate vote if the local Green MP didn’t stand a chance, that would make me a pragmatist.

  51. burt 51

    Tane

    For 9 years there has been nothing concrete stopping the Labour party and the Green party cooperatively introducing environmental policies balanced with economic policies. This is pragmatism.

    If a major party can’t work with a long standing and well supported environmental based party rather than trying to ‘out green’ it to gain ground, against in, in the polls then how will they suddenly work together in coalition? Likewise how can the Green party really be taken as a serious environmental party when it abstains on votes of supply and confidence? Everything Labour do is OK? Really? The EFA was OK? Really?

  52. burt 52

    Oh, just for rOb.

    Retrospective validation was OK? Really?

  53. r0b 53

    Oh, just for Burt. Yes apparently it was OK.

    You may recall Burt, that during the 2005 election one particular party engaged in behaviour so despicable that the public outrage cost them their leader. That party was National. Don Brash paid the price for the sins of the Hollow Men, but the rest of them are still sitting there on National’s front bench, waiting for another chance…

    Cheers Burt, thanks for every opportunity for a little historical retrospective on the ’05 election!

  54. burt 54

    I completely agree with NRT on this post.

    NRT: Challenging the broadcasting allocation

    I made this comment here because I can’t comment on NRT and I know there are some staunch defenders of the status quo lurking around the standard somewhere.

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