- Date published:
8:09 pm, March 18th, 2009 - 93 comments
Categories: john key, national/act government, wages, workers' rights - Tags: council of trade unions, david farrar, minimum wage, nzpa, productivity
Key’s speech to the CTU today showed an interesting inight into how he thinks you lift wages. NZPA reports:
He said it was not good enough for New Zealand to be in the bottom third of the OECD for per-capita incomes, but was cautious about tackling the issue by lifting minimum wage rates.
“In reality, lifting the minimum wage will only take workers so far,” he said. “In the end, it’s productivity that drives wages.”
As I pointed out when David Farrar made the same fallacy the other day, the minimum wage isn’t there to make us all rich, it’s there to ensure that people on low incomes are able to live their lives with some basic dignity and security. It’s actually quite concerning that Key has such cartoonish view of what the Left stands for.
The other part of his argument – the bit about productivity – is only half right. Yes, in the long run you need to increase the amount of wealth produced per worker if you’re going to increase wages.
But in a capitalist system any benefit from productivity increases goes directly into the pockets of business owners. You need a mechanism to translate that into wages. And that mechanism is decent employment protections and a unionised workforce that has the strength to bargain decent wage increases.
The alternative, hoping that wealth will somehow ‘trickle down’ to ordinary people, has been a recipe for stagnating and in many cases declining wages. We saw a lot of that here in the 1990s under the anti-union Employment Contracts Act, when real wages fell even as productivity increased.
The American experience has been even more stark – since the mid 1970s productivity has increased by 70 percent but wages have remained static. Between 2001 and 2004, when productivity rose 11.7 percent, median household income grew by a mere 1.6 percent.
That’s what happens when you remove employment protections and make it harder for workers to organise through their unions – wages stagnate and the benefits of economic growth go exclusively to those at the top.
So while Key talks about lifting wages through productivity, his attacks on employment rights are kicking away the very mechanism that makes this happen. As it stands, all he’s offering New Zealand workers is the same trickle down theory that’s failed them for the last 20 years.
UPDATE: Good article from CNN here. “U.S. worker productivity still rose 18% in the 2000s… But inflation-adjusted income for the American middle-class family actually fell during the same period.”