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Key loves to see wages drop

Written By: - Date published: 1:01 pm, October 7th, 2010 - 36 comments
Categories: john key, same old national, wages - Tags: ,

 The median weekly income in New Zealand fell in the year to June from $538 to $529. That’s a fall even before inflation (and you have to take inflation into account or the figures are meaningless). After inflation, this is the third successive year in which the median income of New Zealanders has fallen. It’s now nearly 5% lower than when National came to power and 5.5% down from its all-time peak in 2007. This year alone, the median income fell 3.5%.

It’s important to note that average and median incomes are heading in opposite directions (before inflation). The average rose 1% to $687, which is still down nearly 1% after inflation. The median tells us what is happening to the ‘typical’ Kiwi whereas the average is affected by what happens to the elite. The fact that nominally the average is rising while the median is falling says that typical Kiwis’ incomes are falling even before inflation and the very wealthy are getting such big income increases that they can offset that to lift the average.

Looking just at wages. The median wage earners’ pay packet failed to keep up with inflation – rising just 1.2% (the slowest since 1999) vs inflation of 1.8%. Even those lucky enough not to have lost their jobs are seeing their pay eroded in real terms.

It’s clear that the Key Government has no plan to stop the fall in incomes that started during the global recession and is actually getting worse over a year after the recession supposedly ended. The truth, we know, is that Key told business he “would love to see wages drop” and that’s the goal we’re seeing realised. Ordinary Kiwis are getting poorer, while the rich get richer.

And it’s no good crying ‘but we got tax cuts!’ because, as we know, for most people the income tax cuts barely cover the GST hike and those that do get more are being funded by government debt, which we all have to pay for in the end.

36 comments on “Key loves to see wages drop ”

  1. Colonial Viper 1

    You’re not saying that the few are getting a larger and larger slice of the income pie are you? Well they need to, how else are they going to add to their larger and larger slice of the financial wealth pie?

  2. comedy 2

    What’s a government transfer, as per

    “Median weekly income from government transfers for those receiving government transfer income slightly
    decreased by $4 to $269. The number of people receiving government transfers has increased
    significantly by 54,400 (4.9 percent) since the June 2009 quarter. In the last two years the number of
    people receiving government transfers has increased by 88,100 (8.3 percent).”

    in the link.

    • Bright Red 2.1

      from the stats page:
      “Government transfers in the tables relates to the sum of income from benefits, working for families tax credits, paid parental leave, student allowances, ACC, New Zealand Superannuation, and Veteran’s and war pensions.”

  3. tc 3

    Sideshow/Blinglish/bus roundtable’s masterplan is coming along nicely with a handy recession to blame everything on (when they aren’t whining about 9 years of labour) and an MSM with the intellectual capacity of a flock of seagulls.

  4. Bored 4

    Get used to it everybody. We are going to be in a deflationary cycle for the next twenty years or more…the issue will not be whether wages drop but by how much and for whom.

    The real fight is about relativity and purchasing power. As the economy shrinks our real concerns should be for how we ensure some equitable arrangement so that everybody gets a fair slice of the cake. This as you know is not something National are good at, they wish to eat their own slice plus everybody elses as well.

    • Bright Red 4.1

      the thing is, it doesn’t have to be this way. there’s plenty of wealth in the nation, it’s just concerntrated in too few hands.

      Wages could continue to rise by taking a larger slice of GDP. Instead, the opposite is happening.

    • Draco T Bastard 4.2

      Precisely. The economy is going to shrink due to Peak Oil and other complicating factors. Now is the time for bringing about equality. Equal living standards and equal say in the use of our limited resources.

  5. Red Rosa 5

    Without access to the full stats one can’t say, but it is possible for the average wage (of those in work) to increase at a time of increasing unemployment, when the average income (the whole workforce employed and unemployed) is static or drifting down, and the median income is declining rapidly.

    This is what seems to be happening at the moment.

    For those actually in work, and at stable incomes, the 1930s Depression was a great time. Prices for most goods and services fell, so real incomes for the fortunate few were better.

  6. Colonial Viper 6

    Without access to the full stats one can’t say, but it is possible for the average wage (of those in work) to increase at a time of increasing unemployment,

    Another explanation is that new unemployment is hitting the lower paid and the part time much harder than the higher paid. Hence average incomes would increase. (However we would proably expect to see an increase in median income as well).

    For those actually in work, and at stable incomes, the 1930s Depression was a great time. Prices for most goods and services fell, so real incomes for the fortunate few were better.

    And this applies to the tax cuts. Fine if you still have a job. Great if you have a highly paying job.

    • Red Rosa 6.1

      Well said CV. The situation in the US has been studied in depth, with some great stats to work on, and by some measures the ‘average American’ has seen his ‘real after-tax income’ unchanged since 1973.

      The US is a huge and dynamic society, and clearly many people have done very well over the last 30 years. But the rapid decline in well-paid manufacturing jobs and the shift into lower paid service industries (laid off at GM, end up flipping burgers at McDonalds) has been well documented.

      This goes some way to explaining the bitterness of US politics at present. There are a lot of angry and resentful people who are ready to blame anyone for their situation, so the wingnuts have a lot of followers .

      • Draco T Bastard 6.1.1

        …so the wingnuts have a lot of followers .

        Which is weird considering that it was the wingnuts that caused the problem.

  7. tc 7

    Not really DTB as logical thought process is asking a bit much of the wingnuts.

  8. Jim Nald 8

    Many more of us now are worse off under Nats.

  9. smhead 9

    A little flaw in your stats there Marty. As you know median income are before tax. Real after tax incomes have risen since 1 October. Pity your much loved Labour Party opposed these tax cuts. Might be one of the reasons they’re so unpopular.

    • lprent 9.1

      Until you add in the GST increase, consequent inflation, and small wage increases…. I’m picking that isn’t going to make the vast majority of wage earners feel happy.

    • Marty G 9.2

      I wrote a para just for you smhead:

      “And it’s no good crying ‘but we got tax cuts!’ because, as we know, for most people the income tax cuts barely cover the GST hike and those that do get more are being funded by government debt, which we all have to pay for in the end.”

      where do you think the money for the tax cuts came from? Thin air? The giant vault that Bill English goes swimming in? For every choice there’s a cost – the income tax cuts came at the cost of higher GST and higher debt.

      • BLiP 9.2.1

        where do you think the money for the tax cuts came from? Thin air?

        Actually, yes it did. If one considers the fact that New Zealand is borrowing huge amounts of money, billions and billions of dollars, where do you suppose it is? Where are they storing all those containers of $US banknotes or bullion? Fact is, the money only exists in our imagination.

      • smhead 9.2.2

        Average inflation per year since November 2008: 1.7%
        Average inflation per year from December 1999-December 2008: 2.8%

        http://www.rbnz.govt.nz/statistics/0135595.html

        After tax wages under Labour taking into account inflation didn’t grow faster than under National even though the world economy was growing faster than any other time in generations. Labour wasted the good years and NZ workers didn’t benefit. Now we have a recession and it’s no bloody wonder that wages aren’t growing. It’s good we have a government that understands the advantages of controlling spending, giving tax cuts and keeping inflation under control. That’s how real wage increases will happen.

        • BLiP 9.2.2.1

          And another one who claims Blinglish is a liar by repeating the disproved fantasy notion among the RWNJs that Labour wasted their opportunities.

          Bill English had to swallow the proverbial dead rat this morning and effectively acknowledge that Michael Cullen had done something right in his stewardship of the Government’s finances in the past nine years.

        • Galeandra 9.2.2.2

          Don’t forget to add the holy water and the pixie dust.

        • Pascal's bookie 9.2.2.3

          Are you excluding Labour’s tax cuts from your little massage session. I suspect you have to make it work.

          • jacinda 9.2.2.3.1

            They increased taxes……

            Something about people over 60k having had it good for too long??????

            So on top of increased taxes, the inflation rate was crap, causing the OCR to have to be upped constantly, pushing property further and further out of the reach of hard working kiwis.

            And all the puppets on here think we were better off under Labour?

              • Vicky32

                “while unemployment fell to below 4% and stayed there for four years.”
                Ah, those wonderful days! I got a threatening letter today, informing me that I must make an appointment to ‘re-apply’ for my UB, as I have failed to get off my butt in a year… The poor woman at the call centre didn’t know what to do, I was the first person of the thousands, to ring for an appointment under the new system… Part of it will be a “comprehensive work assessment” which will consist of them demanding to know why I haven’t got a job in all this time! I shall have many answers, oh yes! (But I won’t dare to give them, as I don’t know what powers they have under this new system…)
                The reason people accept low wages, is because *any* job is better than this! (Even minimum wage earned in a call centre at midnight!)
                Deb

            • Pascal's bookie 9.2.2.3.1.2

              Yes jacinda, they did raise taxes for those earning over 60K on taking office. They campaigned on that too, if you are old enough to remember.

              They also cut taxes in 2008. If you ignore that fact when making partisan comparisons, you are simply dishonest.

              On inflation, what do you think the effect on inflation is of taxing and using those taxes to pay off govt debt? Is this a stimulatory policy adding to inflation pressure, or the opposite? Compare with what National was proposing at the time.

    • Colonial Viper 9.3

      Real after tax incomes have risen since 1 October.

      Oh did you notice that everything else did too? In fact, the only people who come out ahead are…the people who are already ahead. What a co-incidence, under a Tory Government.

      Pity your much loved Labour Party opposed these tax cuts. Might be one of the reasons they’re so unpopular.

      42% of the tax cuts going to 10% of income earners. Wait until the other 90% of workers wakes up to that little fact.

  10. Red Rosa 10

    Bill English has taken a serious gamble. He is assuming that the economy has bottomed out, a modest recovery is under way, and the tax cuts will give a mild stimulus, some of which will be captured by the increased GST. But if the economy continues to shrink, as seems increasingly likely, then the tax cuts will simply widen the gap between govt income and expenditure, and the GST increase will dampen demand further.

    One thing which is certain, is that the high income earners will gain from this policy mix. And there will be no ‘equality of sacrifice’ – more the opposite.

    Everything else is guesswork.

    • Pascal's bookie 10.1

      Rosa, that’s pretty much the way I see it too. Next year is election year, but that won’t excuse English from having to write a budget. He will be aware enough of what this package’s downside effects will be that we should assume it is strategic.

      Labour need to be getting all the info they can get and running the numbers so that they can point to the hole and say what part of it was caused by the member for Cthulhu-Southland giving himself a ‘tax cut’. A tax cut that that creates a bigger deficit is a tax hike on our kids. Using that deficit as an excuse to cut services or sell assets is not something the left need to let them get away with.

    • Draco T Bastard 10.2

      He is assuming that the economy has bottomed out, a modest recovery is under way, and the tax cuts will give a mild stimulus, some of which will be captured by the increased GST.

      Ah, no. Blinglish during the time of surpluses was calling for tax cuts. When the recession hit, he was calling for tax cuts.

      Blinglish’s, and NACTs by extension, tax cuts are idealogical, ingrained. Doesn’t matter what the economy is doing or what is actually required to correct it Blinglish and NACT would implement tax cuts. If it doesn’t work, which it won’t do, they’ll implement more.

      • Red Rosa 10.2.1

        Would be most interesting to dig out some of those quotes from English while the surpluses were accruing in 05 and 06.

        Cullen was sensibly doing his best to cool down an overheating economy, and get the books in shape for the proverbial rainy day (now here)….and all we heard from the Nats was ‘tax cuts’.

      • KJT 10.2.2

        Not idealogical. Just bribes to NACT voters. Cynical opportunism is the the word that springs to mind.

  11. KJT 11

    http://krugman.blogs.nytimes.com/2010/10/02/how-the-other-half-thinks/

    “The point is that recent events have actually amounted to a fairly clear test of Keynesian versus classical economics — and Keynesian economics won, hands down”.

  12. Red Rosa 12

    Ireland is facing a massive fiscal deficit, and raising taxes is part of the fix.

    http://www.irishtimes.com/newspaper/frontpage/2010/1007/1224280568488.html?via=mr

    Ireland was touted as an NZ role model until quite recently, but gone quiet on that one lately.

  13. Mackman 13

    “Gather round guys and kick the crap out of them, they’ll come right in the end, ….in the head Bill, not the arms you pussy. Yes massa John, don’t hit me again”. Shades of the Muldoons years all over again. War mongers, not peace makers, and for some crazy reason they think that this is democracy. Someone get the guillotine!

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