Bill English thinks he has proven that wages grew just 3% under Labour and grew 15.5% under National in the 1990s. How’s he done it? By taking a ridiculous definition of wages and a very convenient timeframe.
English uses the Quarterly Employment Survey’s series of average ordinary time wages for Full-Time Equivalent workers. What’s wrong with that, you may ask. Well:
First, English is looking only at Full-Time Equivalent workers. If the average hours worked by workers changes over time, it won’t be picked up by looking only at FTEs. Under Nationals in the 1990s, the workforce became increasingly casualised and part-time, under Labour average work hours rose.
Second, English is counting only ordinary time pay. If average overtime pay or average paid overtime hours worked changes, it is not captured by looking only at ordinary time pay. Under National’s Employment Contract’s Act, overtime all but disappeared. Labour’s Employment Relations Act led to it being restored for many workers.
Third, English compares the quarter ending September 30 1999 and the quarter ending September 30 2008. In fact, Labour entered office on November 27 1999 and left on November 8 2008. The second quarter English has chosen for his comparison just so happens to end one day before Labour’s tax cuts came in. If you include the tax cuts, then even the narrow measure of FTE ordinary time wages increased 6%, not 3% (I can supply anyone who requests it, the working on any of these calculations).
When you count all employees (not just a fictional FTE), and when you count all paid hours (not just ordinary time), and when you use the tax rates when Labour entered and left power (not those at a time that suits English), then the increase in after tax real wages was 8.9% – three times greater than what English would have you believe.
And the increase under National in the 1990s is not the 15.5% English claims but 8.4%.
But that’s not all. English is ignoring the fact that employment levels change too. In fact, Labour’s biggest achievement was getting more people into work for the hours they wanted.
That’s why I look at the total wages earned by all workers and divide it by the number of people in the working age population (not the workforce, because workforce participation changes too). Gross total wages per working age person adjusted for inflation grew 9% from 1990 to 1999. From 1999 to 2008 they grew 16.2%.
Finally, English is howling that wages have gone up 8.7% since this government came to power. Well, if you only count full time workers and you don’t count overtime and you take the old tax rates, not the ones that were in force when he came to power. If you only look at a highly selective narrow set of wages and use invalid assumptions, you can prove anything.
But if you count all workers and you count all hours and you use the real tax rates, the increase is wait for it . 0.5%. Likewise if you take the best measure total wages divided by working age population then wages grown just 0.5%.
And that growth all took place in the last quarter of 2008, the quarter Labour lost power, and can be attributed to the fact that wages are sticky pay rises are often negotiated infrequently for several years ahead so they and take time to follow changes in economic growth. Since National came to power, wages per working age person have fallen 1%.
Yeah, that’s some record, Bill. Keep on inventing distortions, mate. It’s about the only thing you’re good at. Because god knows you’re doing an appalling job running the economy.