Jobs and wages

Written By: - Date published: 8:46 am, February 6th, 2016 - 54 comments
Categories: capitalism, class war, economy, jobs, Unions, wages, workers' rights - Tags: , , , ,

It has been a tumultuous start to the political year. Massive TPP protests, Key fleeing Waitangi, flying dildos, Iowa caucuses, leagalised rape bastards, and more.

So let’s talk about jobs and wages. Two good pieces in The Herald recently. From Brian Fallow:

Wages going nowhere fast

Unemployment rate is down, but economic growth is not boosting incomes as it once did

So, the unemployment rate has plunged to 5.3 per cent from 6 per cent three months ago. … But much of the drop in unemployment is explained by declines over the past three quarters in the participation rate – the labour force as a share of the working age population (everyone over 15).

Even so, taken at face value, the December quarter numbers are evidence that the labour market has tightened, in defiance of the forecasters.

But that has yet to show up in the wages data.

The Labour Cost Index, which reflects pay rates for the same quantity and quality of work, continued to drift lower, to an annual increase of 1.5 per cent in the December quarter.

For the private sector alone it was only slightly higher at 1.6 per cent, the lowest since September 2010.

Some 46 per cent of pay rates did not increase in the latest year. Among the 54 per cent that did, the average increase was the lowest for 16 years, at 3 per cent, and the median rise 2.4 per cent.

This week’s data are prima facie evidence of a weakening of the relationship between economic growth on the one hand and employment and wage growth on the other.

The quotes focus on jobs and wages, but here’s heaps of detailed stuff in that article (go read the whole thing in The Herald). As to the conclusion, “a weakening of the relationship between economic growth on the one hand and employment and wage growth on the other”, wages have never kept up with growth / productivity, especially since the neoliberal reforms of the 80s. (We are continually told Productivity crucial for higher wages, but wages never keep up, see here, here, here, and graph at the end of this post.)

Second Herald piece by Sophie Ryan:

Interactive: New Zealand’s big jobs divide (and how it’s crashing the recovery)

Maori and Pacific unemployment has dropped to the lowest level since the 2008 recession, but still haven’t recovered to pre-crash levels.

The divide between employment rates in New Zealand European and Asian population, and Maori and Pacific population remains large, with Asian and European workers closer to returning to pre-recession unemployment rates. …

It is always those at the bottom that suffer the most from recession.

Nick Tuffley. chief economist as ASB, said the fall in labour participation rate by 0.3 percentage points to 68.4 per cent was a surprise, and could be overstated. “It is unusual to have the participation rate fall when employment growth itself has been so strong.

“We suspect there still exists a degree of slack in the labour market and that wage inflation will remain slow for some time yet.”

“Wage inflation” is economist speak for wage growth. Predicted to remain low sounds about right, that’s what National’s employment legislation has been all about after all. How long will voters keep putting up with it?


wage and productivity gap

54 comments on “Jobs and wages”

  1. Incognito 1

    Can this be interpreted as production with lower (profit) margins that is putting pressure on wages? Or is it more a reflection of increased automation and the likes, i.e. a shift from higher to lower paid jobs? I am sure there are plenty of other possible explanations and I am keen to hear those.

    • Nic the NZer 1.1

      “Can this be interpreted as production with lower (profit) margins that is putting pressure on wages?”

      No, it can’t the wage/productivity chart shows that productivity (sales per hour work) has been increasing so the capital share is also rising. There is a shift to higher profit margins putting pressure on wages.

      • Incognito 1.1.1

        O.k. thanks. This raises my next question: how come they get away with increased profit margins without the labour force taking a well-deserved share of it in the form of wage rises? Not every company has to deliver to shareholders but every company has an ‘owner’. Where are the increased profits going if not to increased wages? I guess “capital share” is not the same as “profit” but the economic subtleties tend to get lost on me ;-(

        • Nic the NZer 1.1.1.1

          Profits are one component of the capital share, yes. Could also be more money leaving the business in renting equipment as well. Other factors are a slack labour market makes it easy to keep wages down. The capital share is all the payouts from a business which are not ultimately somebody’s wages.

          How come that they get away with it? Don’t know. I think its a political question. The government used to moderate the returns to capital in some ways and I believe its ultimately a political shift going on here as well.

          • In Vino 1.1.1.1.1

            No, I think it is just because Directors get big bonuses for driving wages down and increasing dividends to those who vote them in.

  2. Steve Alfreds 2

    I think the lower participation rate can probably be linked to WINZ and its hard nosed attitude towards those who are unemployed. I remember being made redundant a couple of years ago and after one meeting with a WINZ case officer I vowed I didn’t want anything to do with them. That’s despite the fact I was unemployed. They are encouraged to deny people benefits to meet their targets. I don’t think my experience is isolated, and I’ve spoken to more than a few people who’ve faced the same challenges. My partner and I had a young child, but we struggled through and I found work, but to me a lower participation rate means there are just more people falling through the cracks of the welfare system.

    • UncookedSelachimorpha 2.1

      Yes, WINZ use many tactics to pressure people off benefits, even if they are entitled to be on them. They don’t care the reason, so long as they can cut them off. For example repeated requests to complete huge, complex forms (even where WINZ already hold all the information on the form) and frequent meetings with abusive and sneering case managers. I know people living 100km from their nearest WINZ office with less than $10 disposable income per week, forced to try to fund frequent travel to pointless WINZ appointments.

      As if being in poverty and despised by much of society for being on a benefit wasn’t enough.

    • DH 2.2

      I thought that would have the reverse effect Steve. If I’ve read the rules properly being on a benefit doesn’t make a person unemployed in this context. The criteria for being employed is that you work an hour or more in a week and there’s no exceptions for beneficiaries.

      No shortage of people on benefits doing the odd part time work to make ends meet, my interpretation of the employment stats is you can be both unemployed and employed depending on who’s asking….

      The employment figures are taken from the Household Labour Force Survey and I’m wondering if the large demographic changes in NZ over the last decade have had any impact on their results. The unemployment figures for ethnic groups are interesting;

      European – 4.1%
      Maori – 10.6%
      Pacific peoples – 10.6%
      Asian – 6.3%
      Middle Eastern/Latin American/African – 10.2%

  3. Tautuhi 3

    Companies are only interested in paying minimum wages today, if you don’t like the work and pay conditions there are plenty of workers lined up at the door.

  4. UncookedSelachimorpha 4

    Good post. The many people on zero-hour contracts and the minimum wage (or worse) are experiencing the disconnect between productivity, economic growth and wages.

    Underemployment seems at least as much of a problem. People on low and unpredictable hours are in the worst of all worlds due to abatement of WINZ benefits at low thresholds, resulting one of the highest effective marginal tax rates in NZ (>80%). Strange how the same people who think financial signals should drive everything…expect only the poor to do things for moral, rather than economic, reasons (i.e. go find a zero-hours poverty job instead of a benefit).

    • Little Kiwi 4.1

      Re zero hours contracts not the only issue

      Hello fellow employees/slaves

      I am currently based in a tourist mecca in the south island where many people don’t have employment contracts at all. I probably represent the typical kiwi living here. At first my job was part time – not zero hours, then after a couple of months it seemed I had to be available 7 days for odd jobs unpaid until I eventually complained, knowing I could lose the job (which isn’t worth the stress). It made my wage closer to minimum wage than what was going on my online tax form, especially given I have work expenses I can’t declare. Despite having no contract my leave date post resignation last year, has been extended. My boss pays my tax, I’m not self employed. I don’t want to give too much detail and expose who I work for as I am grateful I got some work here, although there is room for things to get more pear-shaped for me, given I am plotting escape to another job and I have to train someone to replace me. Why would I want to drop someone else into my situation as the previous staff did to me?

      It is very hard for NZ citizens to get jobs here when many employers seek to exploit migrants – especially those needing sponsorship to get residency. As much as I was desperate to get a job I don’t think I would be prepared to start a job without a contract again, because if an employer is prepared to do one thing that is illegal, they will do others. All of these illegal jobs are weakly advertised without the company name present. It seems economically irresponsible to me that employers are not systematically monitored by labour inspectors. Workers pay most of the tax and if they don’t get paid for all of their hours it doesn’t make economical sense. Many migrants are way to scared to complain about their lot down here because they risk deportation. Also, if a labour inspector turns up, it’s really easy for an employer to mock something up, make up a story. Who to believe? The exploited employee winds up being the villain. This is a hypnotically beautiful place, workers tolerate a lot to be here, temporarily anyway.

  5. Draco T Bastard 5

    We are continually told Productivity crucial for higher wages…

    Yep, that’s what we’re told but the reality is what we observe – wages decrease as productivity increases. Wages for the same job would only increase as demand for that work increased and increased productivity decreases the demand for that work as the demand for the product remains the same as it did prior to the increase in productivity.

    The only way for increased productivity to result in increased wages is if there’s an increase in demand for the product such that demand cannot be met. Politicians try to boost an increase in demand for products via exports hence the politicians desperation for free-trade agreements. But these don’t work to produce higher incomes either because demand still doesn’t increase at rates greater than productivity because the nations being exported to are quite capable of supplying the product themselves.

    The end result is lower wages across the world and higher profits for the corporations and the bludging shareholders.

  6. McFlock 6

    This week’s data are prima facie evidence of a weakening of the relationship between economic growth on the one hand and employment and wage growth on the other.

    So a predicted 1% increase in GDP in fifteen years time, even if it actually comes about, could well have absolutely no benefit for the majority of NZers.

    • Draco T Bastard 6.1

      Well, over the last few decades, almost all of the benefits of increased productivity have gone to the CEOs, CFOs and the shareholders. We really can’t expect this to change when we get more of the same policies that produced that shift of benefit in the first place.

      • Yes, that is what has been happening more and more as time has gone on. But its all very easy to say force them to pay more but if they increase their prices of goods and services to compensate higher wages then the inflation cycle begins. Typically, that’s what they do, greed will ensure their nice fat salaries remain intact.
        The key is how do we get them to pay more and take that cut from their high fluting salaries without increasing their prices on goods and services?

        • Mike S 6.1.1.1

          The inflation cycle begins with an increase in demand rather than an increase in prices i.e more money in the overall money supply (inflation) means more demand for goods and services which causes price increases. Price increases are a symptom of inflation.

          This is why you could have a situation where you have a “rock star” economy, yet prices for essentials aren’t increasing much. This is because all of the new money in the economy (inflation) is going to fewer and fewer people who put it into non productive activities such as property investment rather than the new money going into wage rises for the majority.

          Wage increases used to keep up with productivity increases. Now, without regulation, all the gains of productivity increases go to greedy business owners an executives.

  7. The issue with wages is how far they go in regards to the cost of living expenses. Wages can be $1.00 or a million a week but if you can’t afford to buy decent food, pay for decent shelter and pay for other basic costs such as power, water and phone with them then there is an issue. Disposable income after all basic expenses are met is also another key indicator of how well the economy is doing.
    So when they tell us wages are increasing that really doesn’t tell the whole story of how well off people are. What does is how much disposable income people have, has that increased or decreased over time and how much are wages increasing in comparison with basic living costs. If we apply this to places like Auckland with the current housing crisis I would suspect it would paint a very dark picture for our current government and they would not like that to be made public.
    When talking about wage increases the other side of the equation of living expenses should also be addressed. Why are we paying so much for food, power and housing? Are these expenses fair or is there gouging going on in these industries that make these items/services more expensive? If so, they should be addressed but how’d you do that?

  8. Keith 8

    What is not really mentioned by Fallow is Nationals sneaky little policy of “Student Visas” that dangle the carrot of residency.

    Its a well known scam, come from a populous semi third world country, enrol in a “course”, get into the workforce, shelf stacking, taxi driving, any crap wage job you can think of, move into a “Managerial” position, all the while working zero hour SUB minimum wage, to hell with compensation for conditions, even accept not even being paid correctly and bingo, employers get away with near slavery, no one complains for fear of deportation, wages stay supressed and dire working conditions that would see those employers workerless go rewarded with a choice of applicants. Seen it, worked with such people, told on the quiet about the scam.

    For a party who revere the free market, National secretly love to distort it for their employer mates.

    • I know of companies that take advantage of immigrants from third world countries and work them longer than the 20 hour per week that their student visa allows them and don’t pay them for it. These immigrants never report these employers due to fear of been sent back and loosing their visa. This is blatant abuse of NZ law and also forces bad conditions and low wages on NZ citizens who’s ancestors fought long and hard for those rights.
      What is the labour department doing to police these scenarios? All these companies that do this should be publicly named and shamed and their products/goods boycotted by everyone. This would send a message to them and they may think twice before abusing and taking advantage of people.

      • Keith 8.1.1

        It is the perfect unemptying pool of unquestioning labour and so very exploitable. When you realise it exists it easily explains why wage growth is near frozen in NZ, poor conditions prevail and why appalling labour laws succeed!

      • One Anonymous Bloke 8.1.2

        Consumer boycotts aren’t enough: the full force of the law is more appropriate, including jail time for the perpetrators, and severe penalties for aiding and abetting, whether or not that leaves empty tables at Cabinet Club.

        • Incognito 8.1.2.1

          What would happen then with those students? Surely they were not being exploited for the sake of it?

          • One Anonymous Bloke 8.1.2.1.1

            I can’t see how jailing centre-right crims is going to make their lives worse.

  9. Bill 9

    Why would employers pay higher wages when workers can sink themselves in debt to get the things that wages used to provide? Better yet, why not deliberately pay low wages in order to produce ever greater numbers of debt ridden workers who will then become not much more than indentured labour?

    And when it all goes to hell in a hand basket for them, well so what? Almost everything being produced is for richer people overseas anyway, not workers here, so the workers hell is not the world of the employer. The trick, I guess, is to maintain that balance whereby debt ridden workers can still afford to buy imported stuff from even cheaper over-seas sources of labour.

    But keep the lid sinking chaps. And keep those profit margins heading skywards.

    Eventually, there’s a reckoning, but then…even the idea of producing for richer over-seas people isn’t really where the smart game’s at. The smart game is making money from the debts and getting government bail outs. And then the employer gets an introduction to the hell where the worker’s been living, but then the hell of the employer and the worker isn’t the world of the financier 😉

    • Reddelusion 9.1

      Of the 1000s of businesses in nz I suggest very few are making huge profits, I wish it was as easy as you lot make out

      • BM 9.1.1

        Makes me laugh how the left think being in business is such a doddle.

        They seem to think work appears out of thin air.

        • Bill 9.1.1.1

          In line with “Reddelussion’s” nonsense, I see you lump me in with some imaginary ‘left’. Don’t.

          Care to point to any place or comment where I’ve even so much as suggested that being in business was a doddle? I might think that setting up business in the way people tend to do is bloody stupid. But that’s a completely different matter and nothing to do with the opinion you claim that I hold.

          Bad idea to put words in my mouth. Just saying.

      • Stuart Munro 9.1.2

        It’s easier if you’re good at it.

      • Bill 9.1.3

        I’d have thought it pretty obvious I wasn’t talking of small businesses (those with a handful of employees at best). They tend to pay comparatively well in my experience.

        btw – There’s only one of me and I don’t belong to any “you lot” – that “you lot” doesn’t exist anywhere outside your imagination.

        • Reddelusion 9.1.3.1

          A lot of large businesses pay ok as well, including dreaded multinationals, similarly they are not making super profits or excessive return on capital which is a better measure. You lot simply refers to parroting the same tosh, group think

          • Draco T Bastard 9.1.3.1.1

            Any ‘return to capital’ is excessive. Or, to be more precise, the correct amount of return to capital is infinitesimal.

            That’s the purpose of the free market – to lower profits to zero.

            • Reddelusion 9.1.3.1.1.1

              Monopoly profits yes, market return no, otherwise capital will go elsewhere

              • Draco T Bastard

                Steve Keen has shown have the same effect as a monopoly:

                What happens if we recall some basic facts of calculus that the economists have forgotten and decide to add all the competitive firms together correctly? The result is that adding together a large number of marginal revenue curves for all the competitive firms, which are almost (but not exactly) equal to the equilibrium price curve, gets a total marginal revenue curve that is *drumroll please* the same as the monopoly curve! That’s right – in a highly amusing twist, the set of competitive firms gives the same social outcome as the monopoly according to economic theory – at least when it remembers to pay attention to basic facts of mathematics.

                Monopolies make no more profit than a ‘competitive business’.

                And, IIRC, the LSE found that no business uses the marginal pricing mechanism that economists rant on about. They all use cost+ instead.

                Also: Capital can’t move. Money can but that’s financial capital which is a different beast altogether and is also effectively worth less. In fact, all the capitalists could leave and we’d probably be better off. After all, all that needs to happen is that the government create some more money and spend it into the economy.

            • ropata 9.1.3.1.1.2

              free market equilibrium is a total fantasy… debunked hard

              • Draco T Bastard

                Oh, I know that. I just like pointing out the logical fallacies that entwine standard economic theory that the RWNJs base their delusions upon.

      • ropata 9.1.4

        if these businesses can’t pay a living wage then they don’t deserve to be in business

        • Reddelusion 9.1.4.1

          who gives you the right to determine this before even considering a liveable wage is a totally subjective concept

          • ropata 9.1.4.1.1

            strange comment from a RWNJ for whom money is the measure of all things.

            there are plenty of definitions and research on this topic, it’s a wage sufficient to make ends meet in whatever place the worker is living in.

            perhaps the fact that families are living in cars and kids are dying in damp houses might clue you in.

          • DAVE 9.1.4.1.2

            if a business can only survive on exploitation then that business is affecting the profits of businesses who do not exploit and does not serve the interests of society so they should go out of business

      • Incognito 9.1.5

        Your comments @ 9.1 and 9.1.3.1 are full of straw men.

        The OP raised the issue of wages not keeping up with productivity. This has got nothing to do with whether SMEs or large businesses pay well or make “huge profits” or “super profits or excessive return on capital”. It also has got nothing to do with whether it is “easy” or not to run a business – please don’t make it sound like it is the hardest thing to do. Running a business is what it is and that includes paying wages to employees and a whole lot more management & HR stuff.

        If wages go up in a given sector then pretty much all employers need to follow suit or they run the risk of losing staff. On first principle, increased productivity ought to lead to increased wages. If in larger companies (higher and top) management get large salary increases and bonus payments when the company has a good year then why should the other employees not also get an increase? NB it does not seem to matter whether large companies or institutions have a good or a bad year as the top earners always seem to get a relatively large increase compared to the rest of staff.

        • Descendant Of Sssmith 9.1.5.1

          Yet the experience of the last 30 years shows that for most ordinary workers the businesses paying lower wages have driven out the businesses paying higher wages.

          Many a good employer has gone under because of wage undercutting. Going back to have awards that cut across all businesses would solve much of this.

          Apart from specialist areas and the managerial class of course.

          And remember too it wasn’t just productivity we were promised increased wages for, it was also the lowering of the business tax rate.

          We should have had significant increase in wages based on the combination of those two promises.

          The other factor of course is that much of the wage increases that have occurred have simply gone into the pockets of landlords. So for many there’s not even been any personal benefit from those increases.

          • Incognito 9.1.5.1.1

            Interesting comments, thanks.

            If indeed “many a good employer has gone under because of wage undercutting” surely there would have been other business practices contributing to the demise of the business? In other words, the business going under cannot solely be contributed to paying a decent wage relative to other competing businesses?

            In any case, it seems that margins are thin and/or wages make up a large part of the cost of running a business.

            Those “promises” counted for nothing and they knew it but they are still making them and many are still getting sucked in. That said, it might be a fine line between paying staff more and the business going under based on your comments.

            • Descendant Of Sssmith 9.1.5.1.1.1

              The difference for each staff member in wages say between minimum wage and living wage is about $10,000 per annum per staff member.

              Then allow for things like loss of penal rates versus still paying staff for over-time, paying staff monthly instead of weekly or fortnightly so the cash stays in the business banks account, monthly salary so no extra days in the month are paid for, reduced sick leave entitlements to the minimum legally allowed, reducing staff to working peak times only, no provision for redundancy, having workers buy their own gear and uniforms, not investing in up to date training and so on and you can get quite a competitive advantage in undercutting the opposition through lower quotes or lower prices.

              I’ve known a few good employers, mainly older, who simply couldn’t compete – particularly when a few cash jobs drop into the other business as well.

              These employers don’t believe in paying a fair price either.

              I know one supplier lost a family members business – worth hundreds of thousands of dollars a year – when a supplier caved in to a new business and was giving them supplies at a much lower rate – despite the family member having been a customer for over 50 years.

              The combination of all those things above simply meant he was losing good business to someone with few ethics and scruples.

              Not all businesses will survive that and often if the unscrupulous business goes bust somewhere down the track the good employer has already gone.

              I’ve seen it happen to quite a few people.

              • Incognito

                A rather sad picture, which shows that nothing really can be or should be judged in isolation as everything and everybody is part of a larger system with a lot of vital and less-vital connections. I tend to take ‘anecdotal facts’ with a grain of salt but you provided the necessary context that clearly shows the systematic shortcomings. Thank you.

  10. Reddelusion 10

    I was responding to bill not the OP, so no strawman here

    One response though why do Professinal sportsman get paid many more times than say the back room staff of such a professional sports franchise he works for

    • Incognito 10.1

      I was responding to bill not the OP, so no strawman here

      That’s another cop out on its own.

      Bill was commenting on the OP.

      Your second sentence is an affront to the English language and also makes no sense whatsoever.

  11. Brian Smith 11

    @reddelusion- so you’re suggesting that top management are celebrities and increased profits are attributed to increased demand caused by their celebrity status!! Moron

    • In Vino 11.1

      @reddelusion-
      In addition, you still seem to assume that a healthy society will be built out of myopic profit-gouging.
      It won’t. Give up that idea, and start thinking about how to improve society instead of some greedy guy’s profits. Profits do not lead to overall improvement, unless they are spread evenly. This is clearly not happening now- “average” wages have risen because those at the top have had huge increases, but in fact those at the bottom have virtually no increase, but increasing expenses that are not counted in the official inflation index.
      Get Real.

  12. Tautuhi 12

    Overseas students are sucking up most of the employment opportunities here in Auckland.

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