The Business Roundtable held another in their series of forums on political issues targeted at young people on Thursday. The aim is obviously to get along the type of kid who goes to his (sorry for the gendering but they were 90% male) commerce classes in a suit that he can’t yet fill and give him an ideological steer. It’s pretty funny and there’s free pizza and beer, so worth going along to.
This forum was on the dreaded brain drain. Roger Kerr hosted a usual and the panelists were the CTU economist Peter Conway and Opus head Kevin Thompson. I can’t make up my mind if Kerr’s presentation was amusing or outrageous. The man’s a trained economist, he knows statistics and he knows when he’s mis-using them, so it speaks to a deep arrogance that he would present flawed statistics to what is, after all, meant to be a friendly audience; on the other hand, it’s amusing that none of them seemed to see the flaws in the numbers they were being shown but, then, there’s none so blind…
Three examples of how Kerr used faulty figures to make an argument about the mythical brain drain:
He did not show the historical trend in migration figures, he just said there were spikes in net emigration 1979, 1989, 2002 and now – he failed to mention that these ‘spikes’ are actually just peaks in a cycle and that the earlier peaks were much larger in terms of % of the population than the present one. He also failed to show that peaks in the net migration were correlated with anything else.
Which didn’t stop him concluding that the wage gap is the problem (despite the head of Opus not mentioning wages once in his talk on retention strategies and studies showing we, like Australia, like Canada etc don’t have a brain drain but lose a small % of people representing a cross-section of skills and gain more highly skilled workers) and presented a graph of average full time equivalent wages in Australia and New Zealand. He knew this isn’t adjusted for purchasing power parity, that one should uses medians rather than averages because a situation as in the 1990s when the rich get richer and most people get poorer can show a rising average when most people are actually worse off, and that just look at FTE wages is useless if other sources of income are changing, like the removal of overtime and penalty rates in the 1990s, or if the composition of the workforce changes (ie casualisation and high unemployment in the 1990s) but chose to misrepresent the numbers that suited his argument – ie. that the wage gap grew less in the 1990s than the 2000s thanks to de-reguation.
He then brought up the productivity growth figures. The argument being if we are to raise wages we need more wealth (a higher GDP) and the way to do that is to increase productivity (through lower taxes, weaker work rights, and less regulation). Of course, that’s falsely premised. We know that growth is not passed on to workers in wage rises automatically it only happens if workers have a good bargaining position (eg low unemployment and strong work rights). It also seems somewhat odd that we should try to catch up to the wages paid in Australia, where there are stronger work rights, by further weakening our work rights. But the clincher is this: productivity per worker grew at something like 2.7% per annum under National and has grown 1.5% per annum per worker under Labour but GDP per capita barely rose under National and has grown much faster under Labour. How can GDP growth be faster when productivity growth is lower? Because under National we had hundreds of thousands of workers unemployed and lots of capital sitting ideal – only the highest quality workers and capital were used. Labour has succeeded in bringing New Zealand to practically full employment but that means lowering the overall quality of the workforce which makes productivity growth appear slower. According the Brian Easton, a study of workers employed in both the 1990s and 2000s showed their productivity growth rate did not change.
Of course, Kerr knew all that when he made be presentation but he chose to do it anyway. The interesting thing was that he was trying to fool young Tories (and succeeding, a smattering of questions from Lefties had him floundering by the tory-boys just swallowed it). Why lie to your own side, why not all just believe in something that is supported by the facts instead? I think there’s two answers. One is that the brain drain argument is veiled xenophobia. National certainly dog-whistles xenophobia when it talks about the number of ‘native-born New Zealanders’ who are overseas; if so many ‘real Kiwis’ weren’t leaving the proportion of the population from non-European ethnic groups would be smaller. For the second answer we have to look not at the ‘problem’ by the proposed solutions. The Right’s remedy is tax-cuts, weaker work rights, lower government spending, and weaker regulation. No serious person could think these would really solve a brain drain were there one – is anyone really leaving over $20 a week, $1000 a year, of tax? Would weakening work rights somehow see workers paid more? of course not. But it does just so happen that the ‘solutions’ proposed by National and others like Kerr for the brain drain are their solution for everything from growth rates to heartburn and the people who would certainly gain from lower tax, smaller government, weaker work rights (=lower wages), and less regulation are the big business owners that employ Kerr and finance the National party. Funny that.