High unemployment helps Nats keep wages down

Written By: - Date published: 9:12 am, March 11th, 2010 - 21 comments
Categories: capitalism, education, national, public services, unemployment, wages - Tags: , , ,

There was an article a while back about how Norway was bearing up in the global economic crisis. Pretty damn well. And it wasn’t thanks to the oil, not directly. Oil prices had actually plummeted and yet the Norwegian economy was going strong and unemployment wasn’t a problem.

That wouldn’t have been the case if New Zealand had the kind of oil output Norway does. Our government spends all the oil royalties it gets, Norway salts the money away for a rainy day. The bust in oil prices would have had us stuffed because it would have torn a huge hole in the government’s operating revenue but Norway carried on fine.

But this post isn’t about Norway’s oil, it’s about the other reason it survived the recession so well. It’s public sector.

One in three Norwegians are employed in the public sector (it’s one in nine here). When the recession came the Norwegian government took the attitude that it would not be slashing its workforce at this time of turmoil, instead it used its influence over the economy and the labour market to act as a keel that steadied the ship. These secure public sector jobs kept unemployment from rising and protected consumer confidence, saving private sector jobs.

What has our government done? Slashed 2,000 jobs so far with hundreds more to come. It seems like madness given the multiplying effect these job losses have on an already reeling private sector. Especially when you consider the sums saved are relatively trifling and that the government’s books are in much better shape than expected. Anne Tolley’s cuts to Education will cost hundreds of jobs, put more work on to the ‘front line’, and save just $25 million while at the end of January government debt was $3 billion less than it expected only back in December.

But here’s the thing, this isn’t really about saving money. It’s about unemployment and, through that, unemployment keeping wages down.

National does not believe in full employment, it works counter to their economic aims. In 1999, Bill English called Labour’s promise to get unemployment near 3% a hoax and nowadays he claims that the jobs lost in the recession weren’t real jobs.

A bit of unemployment is a good thing in National’s eyes. Look what happens when you have full employment – wages rise. Now, you wouldn’t be a very good party of the capitalist class if you were in favour of wages rising. Every dollar in wages is one that doesn’t go to profits. In fact, to become the leader of such a party you probably “would love to see wages drop” as John Key once told a businesswoman when he didn’t realise a reporter was present.

If National was serious about getting unemployment down they would say ‘hmm, each unemployed person on the dole costs the government about $18,000 a year in benefits and lost tax, it’s worth spending on the same order to get them into work.’ But they don’t do that. Instead they produce some window-dressing programs and throw more people out of work.

Fire some civil servants and put the wind up the rest of them is the idea. Sure, they’ll lose all the output that those people created (and don’t kind yourselves, there aren’t offices full of people doing nothing, well, not outside the Beehive anyway). But that’s a price the government is willing to pay to constrain wages, and it’s not like they listen to the advice they get from their ministries anyway.

These sackings and their multiplied effects through the public and private sectors put workers where the bosses want them – insecure in their employment, grateful to have a job when so many don’t, and afraid to push for better pay or conditions.

The Key Government has no intention of closing the wage gap with Australia and, to keep wages down, it is happy to keep unemployment up.

21 comments on “High unemployment helps Nats keep wages down ”

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  1. tc 1
    11 March 2010 at 9:37 am

    Yup their masterplan working nicely……Frontline means outsourcing probably and I think Australia has about a 1 in 6 public servant ratio so we’re really catching up eh Clown.

    More of the same from the party who only have a few clubs in their bag…..pro-business, anti union/beneficiary, reward the well off…whatdaya mean there’s more clubs than that ? Social justice/balanced distribution/paying attention to decades of research and proven outcomes….never heard of those ?

  2. blinded by the right 2
    11 March 2010 at 9:42 am

    Going back to your first couple of paragraphs about money being salted away for a rainy day. This is what we all thought we had too, until a few months before the last election when it turned out the cupboard was bare.

    • Bright Red 2.1
      11 March 2010 at 9:52 am

      we had salted money away for a rainy day. The government had net assets for the first time in a hundred years because it had paid down debt and put money away.

      Labour had also maintained healthy structural surpluses, so when the bad times hit it wasn’t a deficit on top of a deficit (like the US).

      Treasury has a little piece on this – how a healthy fiscal balance going into the recession was key to countries getting through ok. http://treasury.govt.nz/economy/mei/feb10/03.htm

      bit of information always helps, eh blindy?

    • lprent 2.2
      11 March 2010 at 12:03 pm

      FFS blinded. Labour finally managed to pay down the government debt to the minimum levels only in 2007 fiscal year. You expect surpluses in the following year, with a global recession underway. The forecast first real balance sheet surplus (ie after killing all non-operational debt) for 2008 was spent on frigging tax-cuts. When the recession hit hard, the surplus dissipated with a reduction in expected government revenue.

      You really are a frigging optimist with no understanding of anything outside of your wallet, and unreasonable expectations of everyone else supporting you with infrastructure and services you don’t want to pay for. You think short-term…. Ummm describes the usual right mentality

  3. gitmo 3
    11 March 2010 at 9:49 am

    “Norway has a strong budget balance thanks to its revenues from oil and gas. It also has a huge sovereign wealth fund in which some of the receipts from the country’s fossil-fuel exports are kept for the benefit of future generations.

    So when the Government needed to boost the economy this year, it had the means to do so without having to cut public budgets or increase taxes.

    “The fund has allowed Norway to have an expansionary fiscal policy,” says Espen Moen, economics professor at the Norwegian School of Management. “It can stimulate demand by spending, without fear of higher taxes, because it is so big.”

    Moen also points out that Norway is not as dependent on exporting industries: “We export oil and gas, but even though oil prices have fallen since last summer, production is at full capacity.”

    Surely this is why we need to at least consider prospecting for and then utilising our mineral and fossil fuel potential ?

    • RedLogix 3.1
      11 March 2010 at 9:53 am

      Surely this is why we need to at least consider prospecting for and then utilising our mineral and fossil fuel potential ?

      By overseas companies who will pocket the profits. Any royalties will just get pissed away in tax cuts … and there’ll nothing to show for it but sodding great holes in the ground.

    • Pascal's bookie 3.2
      11 March 2010 at 9:54 am

      Who says we shouldn’t?

      Or do you think that all of our mineral resources are in schedule 4 protected areas? It’s exploring those that people are objecting to.

      • gitmo 3.2.1
        11 March 2010 at 12:24 pm

        See the comment by RL – this is a typical kneeJERK reaction.

        • Pascal's bookie 3.2.1.1
          11 March 2010 at 12:35 pm

          Firstly, if you want a Norway type situation then Red is right. We won’t get there by selling the mineral rights to foreign miners.

          Secondly, how does that justify prospecting in schedule 4?

          If you want bullshit knee jerkism, ‘drill baby drill’ takes some beating.

  4. RedLogix 4
    11 March 2010 at 9:51 am

    Thoughtful and well argued as usual Marty… but the shorter version goes like this… these Nats represent the interests of the predatory classes who need a nice stock of desperate prey to feed upon.

  5. TightyRighty 5
    11 March 2010 at 9:56 am

    you’re really starting to believe your own bullshit aren’t you? the nats know that lower unemploymnt means higher prosperity. do you really think they are just sitting in ivory towers scheming how to keep the general population enslaved?

    • Lanthanide 5.1
      11 March 2010 at 9:59 am

      Based on their actions, yes.

    • Bored 5.2
      11 March 2010 at 10:22 am

      Hey Tighty, thats a bit of pot calling the kettle black. The concept of lower unemployment being desirable because then everybody gets prosperous is both laudable and laughable. As an employer I will always try and keep as much of the margin as possible, its the way we employers work. You might also have noticed that it is possible (as demonstrated by USA stats) to have extreme wealth alongside very low wages and high unemployment. I dont need to listen any lefty arguments about wages to know how the whole thing works, nor do I need to listen to any spurious right wing apologist nonsense.

    • Daveo 5.3
      11 March 2010 at 10:28 am

      It’s basic political economy.

      – Businesses want to keep wages down in order to make larger profits. It’s not about businesses being immoral, it’s about businesses working as they’re designed to in a capitalist system.

      – National, as the party of business and free market capitalism, is obviously hugely influenced by what business wants. They come from business, their funding comes from business, much of their policy is written by business, and their rhetoric is the same as business’.

      – In order to get elected, National needs to say they stand for the interests of working people, including higher wages. Even if it’s not their intention.

      – Hence the disconnect between National’s rhetoric and reality.

  6. Clarke 6
    11 March 2010 at 12:02 pm

    Unfortunately full employment was a policy goal that was largely abandoned by both National and Labour in the 1980s, despite the evidence that poverty is a direct precursor of the crime that both parties seem obsessed with. As a result, we’re now one of the least equitable societies on earth, and we regularly consign hundreds of thousands of New Zealanders to being less than full members of society.

    If there was a genuine Left in New Zealand politics then it would be advocating for full employment to be one of the core functions of government.

    • Jum 6.1
      15 March 2010 at 12:39 pm

      Clarke, I will then assume that you voted for Clark and Cullen who were doing just that until the greed for tax cuts got in the way of the New Zealand psyche of a fair go for all. Enter the NActMs, exit the reducing unemployment.

      John, I am fairly relaxed, I am confident, I would love to see wages drop, Key is fulfilling his goal.

      And now the carefully leaked tax cut talk that will have greedy NZers foaming at the mouth.

  7. Peter Cresswell 7
    11 March 2010 at 12:02 pm

    Or for a more accurate headline:

    “High wages help keep unemployment up</b?"

    • Peter Cresswell 7.1
      11 March 2010 at 12:04 pm

      Oops. Sorry. Munted the bold tag. :-/

      • felix 7.1.1
        11 March 2010 at 12:11 pm

        And the humour. And the reasoning. And the reading of the post beyond the headline.

        Oh well, one day Peter…

    • Clarke 7.2
      11 March 2010 at 12:38 pm

      If high wages kept unemployment up, then ipso facto low wages would result in low unemployment. And like all good linear relationships, the lower wages went then the lower unemployment would become, until it reached zero.

      If your hypothesis was actually true – as distinct from being a right-wing troll – then how come the unemployment and under-employment rate in India is actually higher than NZ< despite their average wage being so much lower? Care to explain?

  8. Quoth the Raven 8
    11 March 2010 at 8:55 pm

    According to the Norway post:

    Unemployment in Norway is expected to rise further, according to new prognoses from the Norwegian Central Bank, DnB NOR Markets and Statistics Norway (SSB), from 2.8 per cent at present to 5.5 of the total work force in 2011.

    However, compared to other European countries, this is still low: In neighbouring Sweden the unemployment rate is already well above 10 per cent, according to Aftenposten.