Lucky Aussies, they kept their work rights

62 comments on “Lucky Aussies, they kept their work rights ”

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1. Macky 1

   31 July 2008 at 4:25 pm

   It looks like the oil shocks in the 1970s actually increased workers’ share of GDP. I guess they won above-inflation pay rises because the unions were still strong and the real economic losses were borne by companies.
2. James Kearney 2

   31 July 2008 at 4:40 pm

   Steve- I think the right’s genuinely given up. Come on guys, can’t you even muster a “Paintergate! Corrupt!” line of attack?
3. roger nome 3

   31 July 2008 at 4:40 pm

   Macky:

   “It looks like the oil shocks in the 1970s actually increased workers’ share of GDP.”

   nah – that was the ascendancy of the Labour movement in both Aus and NZ. It could be argued that this was a response to the austerity induced by the oil shocks though. The Labour movement overstepped the mark there IMHO – you can’t go on increasing wage levels by 10% per year when the economy’s stagnating. That’s causes stagflation and unemployment.

   Fortunately the Labour movement appears to have learned from these mistakes.

   I would argue that wages needed to come down to about 47% of GDP in order to get inflation under control, but that was achieved by the late 1980s, and we never needed to go the way of the employment contracts. That legislation was designed by monetarist zealots who wanted 1-2% inflation, and were prepared to savagely cut wages and benefits to do it.

   Have the National Party moved on since then? Well, you’re not going to find out from a vague series of bullet points that fit on to one side of A4 paper.
4. roger nome 4

   31 July 2008 at 4:52 pm

   One thing we also need to take into consideration is that NZ has a lot of very wealthy self-employed people (Dairy Farmers) – which will tend to bring our Labour income share down, relative to other countries.

   Still, this doesn’t explain all the disparity, because if you look at the OECD’s labour income share statistics within individual industries, were still one of the lowest.

   Take for example the construction industry, where workers in NZ get a much smaller share of the pie than in most OECD countries.
5. roger nome 5

   31 July 2008 at 5:06 pm

   In fact if you use the scroll down function at the top of the link, you will see that Labour income share in NZ is usually down with the “wild west” and “ex-communist” countries like poland, mexico and slovakia, who also have very weak employment laws, and low GDP per capita.

   National turned NZ into a “capitalist wild-west” country in the 1990s, and Labour have not made nearly enough ground back. It’s a real shame.
6. Daveski 6

   31 July 2008 at 5:07 pm

   Ahh … debating real issues again 🙂

   I was going to add a comment that Govt policy is not the only explanation given the double whammy on NZ of the oil shocks and EEC.

   The Rightwing Economic Revolution was unavoidable IMO – it’s like someone with a gangrenous limb blaming the DR for amputation. I’m not trying to underestimate the impact but NZ economy was a basket case (ironically I have no option but to blame National :)).

   Australia clearly has natural resource advantages over NZ, coupled with larger markets not to mention the HO syndrome.

   We are still too much a low skill economy compared to Aus.

   The answer must be long term economic transformation rather which is beyond simply pay workers more.
7. roger nome 7

   31 July 2008 at 5:12 pm

   Daveski:

   “Australia clearly has natural resource advantages over NZ”

   nah – mining only accounts for about 3% of GDP. It’s not as big a deal as you think.

   “The Rightwing Economic Revolution was unavoidable IMO”

   Then you’re ignorant. Moderate Australian-style reform was available. It was just ignored, and in truth the right wing revolution was drawn up between the Treasury Department (which was run by ex-IMF types) and the NZ business Round-Table. The policy development process was woefully inadequate, and they were always going to take a radically pro-employer approach.
8. roger nome 8

   31 July 2008 at 5:14 pm

   “Daveski”

   So NZ workers should get a smaller share of the pie than workers in every other developed economy? Guess how many votes that would win you?
9. roger nome 9

   31 July 2008 at 5:31 pm

   “Daveski’

   If you want to look at how ridiculous the new-right policy formation process was, just read three pages at this link. It’s very well researched academic work.
10. Daveski 10

    31 July 2008 at 5:32 pm

    Roger – the point I was making was about NZ in the 1970’s being ill prepared for the change that followed the UK joining the EEC. Likewise, I specifically made comment about Australia alone – no where have I suggested what you claim.

    The only way to compete long term is to transform the economy to high value, high skill otherwise we will continue to fall behind countries like Australia.

    I’m genuinely interested in the revisionism within Labour circles – the labour govt in 84-87 inherited a mess and laid the platform for many of the economic improvements.
11. roger nome 11

    31 July 2008 at 5:41 pm

    Daveski

    “The only way to compete long term is to transform the economy to high value, high skill”

    Of course. The problem is that a deregulated labour market (like mexico, slovakia and poland have) creates a low-value added, long hours, low tech, low capital investment, low skill, low pay economy. You’re arguing for, what you purport to be against.

    Do you have the slightest clue of what you’re talking about?

    For you education:

    http://rogernome.blogspot.com/2008/07/kiwis-are-overworked-and-underpaid-says.html

    http://rogernome.blogspot.com/2008/07/national-prepares-to-make-war-on-poor.html
12. Daveski 12

    31 July 2008 at 5:56 pm

    I sense aggression, Roger 🙂

    You are twisting my comments in a way that wasn’t implied or intended.

    The problem we all have is that we need to encourage investment in high tech, high capital, high skill economy.

    This comes from encouraging business investment and high skilled workers. I would ask what strategies are in place to achieve this.

    I can’t see how this can be miscontrued in the way you have nor why you adopt such an aggressive pose … I even complimented Labour 🙂

    Raising the minimum wage per se is admirable in principle but is not going to solve our economic problems without fundamental economic transformation.
13. roger nome 13

    31 July 2008 at 6:00 pm

    Daveski:

    You haven’t contributed anything the whole thread. Just a bunch of random, unsupported, vaguely pro-right wing statements. How about going somewhere you can benefit?
14. roger nome 14

    31 July 2008 at 6:01 pm

    Just construct a logically sequential argument that addresses the points that steve made in his post. Back up what you say. Until then you’re a waste of space.
15. CPW 15

    31 July 2008 at 6:02 pm

    Umm, that OECD data linked to by roger nome, which is presumably on a comparable basis, puts NZ on exactly the same labour share as Australia for the last year available (2004). It also says that the Australian share fell more than the New Zealand share did over 1991-2004. Which rather undercuts your argument.

    Actually, the NZ labour share fell less than the OECD average over this period.

    As I said yesterday, by itself the labour share isn’t a meaningful measure of bargaining power or lack thereof. Cross-country differences are most likely being driven by differing industry compositions with differing capital levels.

    Ireland is the fantastic example of my point – the labour share fell from 50% to 30% after they made the economy an attractive destination for foreign capital. But all that foreign capital allowed the economy to grow rapidly, greatly increasing living standards.
16. roger nome 16

    31 July 2008 at 6:12 pm

    CPW:

    “puts NZ on exactly the same labour share as Australia for the last year available (2004).”

    Wrong. In 2003 (the last available data), NZ labour income share was 47% and in Aus was 61% (total economy).
    See here

    “by itself the labour share isn’t a meaningful measure of bargaining power or lack thereof. Cross-country differences are most likely being driven by differing industry compositions with differing capital levels.”

    I negated that when I pointed out that NZ is consistently amongst the lowest in every individual industry. You need to learn to read.

    “Ireland is the fantastic example of my point – the labour share fell from 50% to 30% after they made the economy an attractive destination for foreign capital.”

    Rubbish. Labour income share in Ireland hasn’t fallen below 52% since 1990.
17. Daveski 17

    31 July 2008 at 6:16 pm

    Thanks CPW – I await Roger’s reply

    Roger – this is getting boring. Not agreeing with you is quite different from not contributing to the thread. Conversely, I have pointed out the fundamental economic issues that contribute to the decline in the 1970s. You haven’t acknowledged this in any way yet it is economic history 101.

    I acknowledged the transformation under a Labour govt in the 1980’s.

    Ironically, I was going to mention the Irish situation but given me lack of detailed knowledge chose not too.

    You have misconstrued my comments and IMO in an overly aggressive manner. Your comments are worth noting but I don’t see why mods should tolerate your aggression towards me given I am trying to be constructive and debate issues.

    Off to read your blog now.
18. roger nome 18

    31 July 2008 at 6:21 pm

    “Daveski”

    IMO your posts are so random and without point that your posting has bordered on trolling.

    Try constructing an argument, then I’ll give you the time of day.
19. Daveski 19

    31 July 2008 at 6:31 pm

    Roger – you are on home turf here so i will leave. Clearly, the only debate you want is with those who agree with you.

    You simply repeat your taunts without backing them up. Tell me that the EEC in the 1970’s is not relevant to NZ’s decline.

    Look at my very first sentence. A real issue worthy of debate.

    You’ve simply killed the debate. Sad.

    Sorry SP – this thread deserved better.

    BTW Where are the mods?? A bit quiet for my liking given that Roger is killing the debate.

    Enough, I’m out of here.
20. Anita 20

    31 July 2008 at 6:37 pm

    Daveski,

    Tell me that the EEC in the 1970’s is not relevant to NZ’s decline.

    I was curious before, and I’m now curious again 🙂

    Surely the EEC and the oil shocks will have affected Australia and New Zealand equally?

    So while they might account for a kink in the curve they can’t account for the widening gap.
21. roger nome 21

    31 July 2008 at 6:46 pm

    “Surely the EEC and the oil shocks will have affected Australia and New Zealand equally?”

    Yep – which is why I maintain that Daveski is a waste of space. He hasn’t proposed a single coherent argument, and has instead threadjacked with random pieces of unsupported drivel. Yet he has the gaul to accuse me of killing the debate.

    BTW – I’m not usually so aggressive. I just have a low threshold for trolls, and Daveski, while being an unusually polite one, that’s all you’ve been on this thread.
22. roger nome 22

    31 July 2008 at 6:53 pm

    ooops – should have been “gall”, not “gaul”.
23. Daveski 23

    31 July 2008 at 6:55 pm

    Hi Anita

    Not wishing to appear precious so I will reply.

    I’m not an economist but my understanding …

    NZ was overly reliant on the UK market for our primary products. We simply produced product and sold it to the UK.

    Once that stopped we had a problem with products but no marketing. Marketing as a subject was introduced at Massey in the 1970’s as direct consequence.

    The NZ economy was therefore woefully prepared for the economic crises and Muldoon made it worse.

    That explains the freefall in the 70’s and the need for action by Labour in the 1980’s.

    Admittedly that is now 20 years ago but it is central to what happened in the 1980’s and why we started behind the Aussies.

    My view is that simply paying people more won’t achieve anything – it will in fact worsen the situation – unless we attempt to transform the economy.

    We can’t simply pay workers more unless we do something to make our products more valuable. Rod Oram I believe is quite passionate about this and he’s no right wing stooge.
24. RedLogix 24

    31 July 2008 at 7:02 pm

    Daveski,

    Tell me you can read a graph. The most important aspect is of the graph that leads this thread the different shapes between the Aus and NZ series.

    Look carefully. Although the data for NZ does not extend as far back as the Aus one, it is clear that up until the wage freeze and the right wing economic revolution, NZ was more or less tracking comparably with Australia.

    And then something happened. Around the late 1980’s wages in NZ plummeted in comparison with Aus, and continued to decline until this current Labour govt came to power.

    The vital thing this graph conveys is NOT the relative economic performance between Aus and NZ. We all know that Aus has grown it’s total economic pie somewhat faster than NZ. But what is clearly seen here is that differing POLITCIAL policies between the two nations has clearly resulted in New Zealand workers getting a smaller slice of the kiwifruit pavlova.
25. Anita 25

    31 July 2008 at 7:08 pm

    Daveski,

    NZ was overly reliant on the UK market for our primary products. We simply produced product and sold it to the UK

    Equally true of Australia I thought.

    Admittedly that is now 20 years ago but it is central to what happened in the 1980’s and why we started behind the Aussies.

    Even if it is why we started the 80s behind Australia – my argument, incidentally, is that we started behind the Aussies from the beginning and the two economies moved roughly in tandem until the 80s – it doesn’t explain why we got so much worse when they didn’t.

    My view is that simply paying people more won’t achieve anything – it will in fact worsen the situation – unless we attempt to transform the economy.

    I also read this graph to say that we need to transform the economy – but I think our answers to the question “to what?” might be different. I would argue that it shows we need to alter it so that the returns go to the workers not the owners of the capital.

    It’s not about paying more/less directly, it’s about what proportion of the return goes to labour and what to capital.
26. Daveski 26

    31 July 2008 at 7:32 pm

    Ha ha .. hoist on my own petard 🙂

    I’ll try to be less verbose also in my reply.

    1. We’ve got sidetracked on the 1980’s a bit but we were a basket case in the 1980’s hence Australia widening the gap.
    2. Happy to agree that political policies have lead to improvement on this indicator over the last couple of years.
    3. Happy to argue that continuing to put up wages without trying to transform the economy is destined to fail.

    Most commentators I’ve read argue that the economic advances of the last 9 years built on a platform built by Labour in the 1980’s.

    The irony of this is that I’m giving Labour big ups for what it did in the 1980’s 🙂
27. Tane 27

    31 July 2008 at 7:33 pm

    Daveski bro, we have lives. I was working late then grabbed some dinner with a few friends.

    Roger etc, I understand it can be frustrating some times, but from what I’ve seen Daveski tends to be one of the more reasonable righties here. Let’s educate him rather than driving him away.
28. Anita 28

    31 July 2008 at 7:40 pm

    Daveski,

    1. We’ve got sidetracked on the 1980’s a bit but we were a basket case in the 1980’s hence Australia widening the gap.

    Were we more of a basket case than Australia?

    If so, why? I don’t buy either the EEC or the oil shocks.

    Most commentators I’ve read argue that the economic advances of the last 9 years built on a platform built by Labour in the 1980’s.

    Rightwing commentators are likely to say that.

    Leftwing ones are more likely to say that the advances of the last nine years were built on the nadir constructed by Labour in the 1980s.

    It’s really tough to find a balanced commentary on the economic history of the last 30 years. Any suggestions anyone?
29. Daveski 29

    31 July 2008 at 7:43 pm

    Thanks Tane

    I’m not grandstanding and I do have a life too – the storm has cut into mine given me MORE time to post. Sorry Roger 🙂

    I’m also happy to accept that SP and others have a better economic pedigree than I. However, I enjoy the debate and the opportunity to play Devil’s advocate and always try to be constructive even if I don’t agree with all the views.
30. Anita 30

    31 July 2008 at 7:44 pm

    Daveski,

    Oh, and I forgot to ask…

    So I’ve told you what I think the economic transformation should look like.

    What does the one you want look like?
31. vto 31

    31 July 2008 at 7:49 pm

    Anita – “it’s about what proportion of the return goes to labour and what to capital.”

    So, what proportion should go to each in your opinion?

    My business uses both capital and labour, as all do. I don’t think you will have much/any luck in increasing the labour portion at the expense of the capital portion.

    The reason? If my capital is not achieving an appropriate return it will go elsewhere. It is a very simple equation. If you increase the costs too much and the return on capital drops then the business stops. And in fact that is exactly what has/is happenning to my business right now. Last few years – result has been dozens and dozens employed. Now costs have increased, returns dropped, and the business and consequent employment stopped.

    To pull more for labour at the expense of capital you will need to adjust countless settings right across the globe so that there is no alternative for the capital owner but to accept a lower return in the event you put labour costs up. Good luck.

    I’m not sure what else to say.
32. Anita 32

    31 July 2008 at 7:53 pm

    vto,

    From the graph above it looks like just over 53% goes to labour in Australia. Would it be a problem if that much did in New Zealand?

    I agree there is a risk of capital going elsewhere if you shift it in your business alone, out of alignment with your competition. If, however, the economic structure in NZ was changed so that it shifted consistently across the economy – where could the capital go instead?
33. vto 33

    31 July 2008 at 8:06 pm

    Anita, firstly I have to point out that I would be more than happy for the workers incomes to increase, as would most long term business folk be.

    Your question, ‘would it be a problem if 53% goes to labour like in Australia?’ I don’t know. I imagine though that such an increase must mean a drop in return on capital (as there are no other variables that can change to accommodate such a change). And as mentioned, the capital would move to a better return elsewhere. Remember NZ’s interest rates (capital return) are higher for a reason. Usually associated wih risk.

    Re changing the economic structure so that the capital is limited in its possibilities, well sheesh good luck there too. If you can then give it a go. All I point out is the simple equation that owners of capital utilise. It is very simple and very direct. And capital can be very flighty so tread carefully.
34. Daveski 34

    31 July 2008 at 8:06 pm

    Anita

    I think we all agree that we risk McJobs if all we offer is tourism and the like.

    For me, the future has to involve around smart use of technologies, some of which will obviously involve the primary industries.

    We need to take the no 8 wire mentality but in the technology space.

    To achieve this, we need to encourage research, education, investment in a business friendly environment.

    I would say Labour does the first three but is not perceived to be business friendly. This is most likely why National has become Labour lite.

    As with Ireland, it would take major incentives to make this happen in the short term.

    I don’t want a low wage economy. Full stop.

    I know I will get rubbished for a Pollyanna vision. There is a reality tho – I work in a research environment that is attempting to do exactly this. We do have successes in this area but to do it as a country will take a major transformation.

    Sorry, I realise we have sidetracked from the original post but I see this as a logical extension of SP’s starter.

    Anita – I’d be surprised if we did disagreed on the where but more likely the how.
35. vto 35

    31 July 2008 at 8:19 pm

    Actually, I’ve got a solution that I’ve been banging on about for years that may help ,Anita. It is though, as daveski says, a major transformation. Lower the proportion that goes to capital by simply legislating, perhaps through the Reserve Bank Act (or whatever its name is), a one-off structural and substantial drop in our interest rates.

    It would without doubt cause some heavy short term unease and pain but it may simply re-adjust the returns on capital (interest rates) that apply in this country. And all else being equal then there should be a difference that labour could, if it was quick and savvy enough, grab for itself (my god there would be a cat fight over it though).

    To be honest I dont see why NZ’s interest rates are so high. I think it stems from all things historic and hangover-like.
36. Anita 36

    31 July 2008 at 8:27 pm

    Daveski,

    For me, the future has to involve around smart use of technologies, some of which will obviously involve the primary industries.

    That sounds like a way to stimulate economic growth, but is it a way to increase the proportion returned to labour?

    It seems to me that it risks increasing the return to capital – and consequently decreasing the return to labour – through the perception that the value is in the capital (the technology and the plant).

    I know I will get rubbished for a Pollyanna vision. There is a reality tho – I work in a research environment that is attempting to do exactly this. We do have successes in this area but to do it as a country will take a major transformation.

    It’s a great vision! But it seems like a vision of transforming the method of production not the underpinning economic structure.
37. Anita 37

    31 July 2008 at 8:30 pm

    vto,

    Your question, ‘would it be a problem if 53% goes to labour like in Australia?’ I don’t know. I imagine though that such an increase must mean a drop in return on capital (as there are no other variables that can change to accommodate such a change). And as mentioned, the capital would move to a better return elsewhere

    But where elsewhere?

    Plus, if 53% is unacceptable to NZ capital, why is it acceptable to Australian capital?

    I think we need an economist (anyone out there?! : ). While interest is one type of return on capital it’s a small one. To what extent would decreasing interest rates flow through to alter the return to labour? Would lower interest rates make a lower return on invested capital more acceptable? Huh? Huh? 🙂
38. burt 38

    31 July 2008 at 8:36 pm

    Who needs increasing wages when you can pop out a few kids and be tax free and let other people pay for your lifestyle choices.

    Come on guys keep up – workers rights are so 1990’s – today middle class welfare is the new black, even National are starting to realise that bribing voters is more important than sound policies for growth and strategies to lift productivity.

    National have learned well from Labour – just buy the votes and forget about the state of the economy.
39. vto 39

    31 July 2008 at 8:45 pm

    Flag the economists, they just get in the way of great ideas. Like never ask an accountant how to make money – they know how to count it not make it (peace to all accountant and economists!)

    Interest rates correlate directly to business returns. If interest rates are higher, so too are business (capital) returns required to be higher. If they are lower, business returns lower. Examples – The NZX has very high yielding companies compared to say the NYSE, just as NZ’s interest rates are very high compared to the US.

    Capital/business will accept a lower business return if the return for the money in the bank is lower. And vice versa. This is a truth.

    Your question “if 53% is unacceptable to NZ capital, why is it acceptable to Australian capital?” again is answered by corresponding interest rates, future capital value and perceived risk between the two countries.

    So where this leads to is that the cost of capital is the driver. Concentrate on lowering that and I suspect that there will be more dosh for others.
40. Anita 40

    31 July 2008 at 8:48 pm

    vto,

    So, if we were to plot NZ interest rates over the return to labour graph we’d get a correlation?

    Do you wanna do it, or shall I?
41. vto 41

    31 July 2008 at 8:59 pm

    oh dear not me. Try the interest rates to whole economy return to capital – that’s more appropriate. To capital, labour is just another variable cost which has little directly to do with what the capital is trying to achieve. Hence it would probably not be useful.

    Perhaps of more use would be something comparing economies with low interest rates and those with high interest rates, and see what the labour returns there are.

    But then there are so many variables… Say rates were slashed here and the difference was up for grabs. It would be grabbed at by EVERY sector of society (you know how people are with money). So the return on labour in that comparison may in fact reflect more which sector of that particular society has more strength to do the grabbing than anything else(be it guns, religion, sheer population, staunch unions, middle-men, etc). That’s why I said before ‘all else being equal’.
42. RedLogix 42

    31 July 2008 at 9:09 pm

    Who needs increasing wages when you can pop out a few kids and be tax free and let other people pay for your lifestyle choices.

    Burt you can do better than that. I know its been a long wet fortnight and we’ve all got a spot of cabin fever, but hell I thought you were above DPB bashing.

    And can I remind you that the definition of a beneficiary is someone who receives more from the State than they pay in taxes. I cannot imagine anyone ‘middle class’ in NZ, who is by this definition ‘on welfare’.

    Anita,

    I guess that the right wing/left wing divide we are discussing might fall out like this:

    The right believes that by cutting the price of labour, the business owners will be more price competitive, sell more volume and make more profit…thereby increasing GDP and total wealth.

    The left has argued that by distributing costs more evenly, the total customer market will be wealthier, will be able to pay higher prices and businesses profit is sustained by better margins.

    The fundamental difference boils down to this. The right wing model has an inherent tendency concentrate wealth into the control of fewer and fewer people, and thereby REDUCES the velocity of money flow. Taken to it’s logical extent this model arrives at the absurd conclusion of one fabulously wealthy person owning everything… but all that wealth being worthless because it’s flow has slowed down to absolute zero.

    The left wing model pushes in the opposite direction, believing that by moderating the natural and inevitable differences between the wealth generating capacities of all people, that the resulting redistribution inherently INCREASES the velocity of money flow, driving more economic activity, increasing total wealth and GDP. But likewise taken to it’s absurd conclusion, this model would mean that all wealth would be worthless because if all money was equally redistributed to everyone, there would be no incentive to do anything and no resulting goods or services to spend it on.

    Examining the two absurd extremes shows us that our current social democratic mixed economy utilises both mechanisms. The really interesting question would be, “What is the optimum balance between these two apparently competing forces?”

    And the answer to that probably depends on what you define ‘optimum’ to be.
43. vto 43

    31 July 2008 at 9:17 pm

    Redlogix, I think right/left divide has zip to do with it. As stated above it is simply the return on capital that drives it. Sheesh, even the most heavily left people I know weigh up whether it is better to put their money in the bank or in some other investment or into a business. It is human nature to maximise your return on resources.

    Honestly, if you are looking for some way to increase the labour component of the equation then look to the most easily varied component of the equation – the cost of capital.
44. Anita 44

    31 July 2008 at 9:18 pm

    vto,

    Now I’m so confused 🙂 What do you think has to be altered to increase the proportion returned to capital?
45. vto 45

    31 July 2008 at 9:24 pm

    no no anita, not increase the proportion to capital, increase the proportion returned to labour. silly. My posts may be a little confusing to follow but I have re-read them and stand by them. I have thought about it many times before. And now I need another 20c for the next thre minutes. Time almost up.
46. RedLogix 46

    31 July 2008 at 9:27 pm

    vto,

    One person employs 100 people to dig a ditch for a cup of rice a day, that there will be a return on the investment in spades and rice.

    Another calculates that if he/she buys a digger to dig the same ditch, and employs 1 person on a good wage that reflects the level of skill and responsibility required to operate the digger efficiently, that there will also be a return on the investment.

    It turns out that both employers operating in their respective markets are making a 15% return on capital.

    Discuss.
47. Anita 47

    31 July 2008 at 9:28 pm

    vto,

    I think that was my brain-finger interface 🙂

    What do you think needs to be altered to increase the return to labour?
48. Anita 48

    31 July 2008 at 9:32 pm

    RL,

    While the percentage return on capital to the farmer may be the same, the proportion of the farm’s turnover returned to labour is different.
49. RedLogix 49

    31 July 2008 at 9:37 pm

    “Once upon a time there was a little chimney sweep named Tom. He lived in a great town in the north country, where there were plenty of chimneys to sweep, and plenty of money for Tom to earn and his master to spend.”

    The opening lines of another classic that somewhat pre-dates Pink Floyd.

    Anita.

    Exactly. While the return on capital in both cases is the same, and the same ditch gets dug…. but in the latter case the total wealth is much greater because the one person operating the digger is far more productive.

    And in being more productive that one person on the digger has effectively freed up the labour of 99 other people to contribute to total GDP in many other ways.
50. vto 50

    31 July 2008 at 9:39 pm

    Oh god mr logix, that brings the fear of school and academia flooding back, that word ‘discuss’. Can’t do it justice as have to go but a brief jab…

    If that was me – actually, it doesnt make sense because the digger would be infinitely quicker and so the 15% made in shorter time, hence improved return. Easy decision.

    But if the time was the same because there were many ditch diggers, um, I don’t know. I guess you would have to look at what other variables are floating around to help the decision fall one way or the other (like the ‘time’ thing).

    If there are no other such variables and you were all living in the same community then I would help out my fellow citizens and employ them. Easy too.

    Or maybe another variable would be that by using the digger instead of the people it frees up the people for other things. And this exact thing is how the agricultural revolution came about, and the industrial revoltion and the techno one and whatever the next one is going to be etc. That is a great discussion for another day.

    Anita, see 9.17 post para 2.

    Gotta go

    (all just my own opinion of course, developed over many hours spent gazing vacantly into space)
51. Quoth the Raven 51

    31 July 2008 at 9:45 pm

    National have learned well from Labour – just buy the votes and forget about the state of the economy.

    So National was thinking of the state of the economy in the nineties? How can you not see that this government has done better for the economy than the last national governemnt and it appears to be those same failed policies that you are lamenting the loss of, from your precious National party.
52. burt 52

    31 July 2008 at 10:05 pm

    Quoth the Raven

    You forget about the state of the economy the National party inherited from the Labour party in the 90’s. The Fiscal Responsibility act, the bail out of the BNZ, stagnating growth, inflation outside desired ranges… Labour legacies… National’s problems.

    So Quoth the Raven, which party is to blame for the economic troubles of the 90’s?
53. Felix 53

    31 July 2008 at 11:30 pm

    Not which party burt, but which policies.

    (That’s what matters to me anyway.)
54. Bill 54

    1 August 2008 at 12:25 am

    I haven’t read through all the responses, so excuse me if this point has already been made. Australia lost a lot of their work rights under Howard and they have not yet been reversed under Rudd.

    Is this another case of (as in NZ)a supposedly left wing government accepting neo-liberal economic BS because there is apparently no alternative (TINA) and merely softening the edges while peddling the same old same old?

    FFS if you guys are serious about trying to resurrect ‘info left’ (ie a voice for labour) then you have to step out of and beyond the parliamentary labour party and offer a broader and more comprehensive left perspective. And that means – even for the liberal democrats- being engaged in constructive criticism of the (parliamentarian and beyond)left and generally accepting a pushing of the envelope.

    Otherwise you are merely accepting parameters set by the right. Sorry guys, but as incisive as you might be on given issues, the scope is narrow and ultimately defeatist…you have right wing international financial institutions hemming in the possible manoeuvrabilities of social democratic governments….something the various labour parties of the Anglo-Saxon West have not only accepted but promoted in the face of supposed ‘end of history’ pragmatisism.

    The voice of labour was never defined by parliamentary parties. That was and will only ever be a strand of the voice of labour. Give full voice to labour or change your definition of what ‘The Standard’ seeks to resurrect and perpetuate. Please.

    Rant over.
55. Razorlight 55

    1 August 2008 at 1:33 am

    SP “To recap: we’ve shown that National let the minimum wage stagnate while inflation ate its buying power, the Labour-led Governments have increased it,”

    I made the point yesterday and I will continue too as along as you keep making the argument that this National goverment will be the same as the Bolger/Shipley goverment.

    There is no basis for this argument. Yes there are a few who will sit in both cabinets. But didn’t Goff and Clark sit next to Douglas and Prebble.

    John Key had nothing at all to do with the National government of the 1990’s. He has clearly moved the party left. Yet for some reason you keep bleating on about how his government will mirror that of governments past.

    So you can proudly spend your days and nights trawling through statistics from a decade ago, but what does it show.
    Even if your stats are true, what do they show? Bolgers government was rubbish? So? How does that make Keys goverment rubbish?

    The National Party, as has the Labour Party, evolved. For better or worst I know one thing for sure. The 5th National goverment will differ from the 4th. Just as the next Labour Government in 2017 will be alot differnt to Clark’s.
56. lprent 56

    1 August 2008 at 1:45 am

    Razorlight: They certainly do differ as previous prospective national governments put out policy. This lot of play-dough politicians put out ambiguous and largely meaningless bullet points.

    In the absence of any policy to analyse, you have to run on a parties previous policies and performances. The Nat’s do have some pretty appalling performances to look back on.

    Besides even the Nat’s should be reminded exactly how much the screw the country over when they get into power. They show a long-term trend of thinking short-term. Obviously don’t enjoy reading history..
57. Razorlight 57

    1 August 2008 at 2:07 am

    lprent.

    One certianty in Politics is you will make mistakes, the country will suffer and you get booted out. That is not unique to the right. The left make silly decisions that pisses off the electorate and they get booted. If some of Labour’s past performances were not appalling as you say, why have they been booted from office four times, soon to be five. Were they doing a good job? That is stretching credibility.

    And as you are questioning my grip on history feel free to show me two governments from the past that have mirrored each other. I cant think of any.
58. lprent 58

    1 August 2008 at 3:09 am

    Off to bed (finally)…

    Razorlight: It is called the gerrymander. Because of the nature of FPP it was a hell of lot easier for the right to turf out the left in past elections. This is was despite how good or bad they were in office. In practice since the 1940’s, there has only been a single two term labour government under FPP, and that was because the Nats under Muldoon were so damn awful.

    With MMP the ballgame is a bit different.

    Before you say polls, I’d say that they are completely inaccurate for reasons I’ve expressed elsewhere. At this point they mainly pickup the talkback listeners. Most people haven’t really made up their mind yet.

    This election is going to be close – within 5% for the two main parties from my feel. That means that the election is likely going to be decided on who can form a coalition. That is the main reason that the Nat’s have gone to “whatever she is having” as policy. They are looking to leave as much room as possible for coalitions towards the left – because there is going to be nothing on the right.

    Problem is – can anyone trust them?
59. Kevyn 59

    1 August 2008 at 4:06 am

    Fortunately Steve provided a link to the source of the stats for the growth in real median incomes over the last 10 years. That source allows disaggregation by age, region, occupation and industry. Those disaggregated stats don’t support the conclusion that the increase in the median wage was as a result of policy choices taken by the parties when in power. Unless of course those policy choices included raising global food prices and moving the most highly paid head office jobs from the Auckland to overseas financial centres.

    The latter is important because the loss of a large number of jobs in the 10%-20% above median wage bracket supresses the increase in median incomes in the region where those jobs were concentrated. If, at the same time, that region’s employment growth was concentrated in retailing, which had the smallest median income increase, then you would actually expect to see what actually happened to regional median incomes – Auckland’s median income falling from being 25% above the national average to only 10%.

    By occupation the smallest increase in median incomes was 25% for managers and technicians, with factory and clerical increasing 33% and farming/forestry/fishing increasing 50%.

    By industry the smallest increases are for manufacturing, construction and transport, second biggest are health and education, biggest of course being ag/fish/forest.

    The 60-64 age group increased 150%, 55-59 increased 100%, over 65s (presumably working superannuitants) by 70%, most other age groups were up around 50% except 20-24 which only increased 25%.

    Curiously the traditioanlly unionised industries have caught up with managers but it is the least traditionally unionised occupations that have made the biggest gains under Labour.

    These stats only go back ten years so it would be going too far to state that this is definitely a case of an industry where supply and demand suppressed wages once SMPs were removed and rising global demand has simply reversed that trend.

    If you can find this detailed data for Australia and NZ for the 4 decades shown in today’s graph and it proves my theory false I’ll be quite happy.

    Can you provide us with a simple pie chart of the share of GDP for each type of income? The concept of wages as a share of GDP is not as simple as median incomes and wage gaps or taxes as benefits as a percent of GDP.
60. CPW 60

    1 August 2008 at 11:17 am

    Sorry Roger nome, I was looking at the wrong table the first time. But the correct (total economy) data still supports my points. Australia’s labour share fell more than New Zealand’s 1990-2003. In fact, New Zealand’s change was unremarkable. In percentage points (% change in brackets) 1990-2003:

    New Zealand -3.4 (-6.7%)
    Australia -5.0 (-7.6%)
    Euro Area -3.8 (-5.6%)
    Ireland -10.7 (-16.7%)

    The data doesn’t support this post’s thesis that right-wing economic policies reduced the labour share in NZ (or establish that a falling labour share is necessarily bad for workers, again, look at Ireland).

    Roger nome – “I negated that when I pointed out that NZ is consistently amongst the lowest in every individual industry.”

    You’d expect equalisation of returns on mobile capital between industries, so this is entirely consistent with my claim that industry composition is a crucial factor.

    As to the fact that other countries generally have a higher level of labour share, I think people are getting the causation back to front here. Other countries’ workers aren’t richer because they’ve negotiated a higher share of output, they’re richer because they’re more productive – and being more productive, they earn a higher share of output for a given level of capital stock.

    I’m not claiming that bargaining power isn’t ever a factor in deciding the labour share. But it is a not a major one for explaining cross-country average income differences, and the data presented so far does not support the claim that it has been significant in NZ’s recent history.
61. Quoth the Raven 61

    1 August 2008 at 1:25 pm

    Burt – I think Felix puts it perfectly. The fourth labour government was poor because of their right wing policies. I don’t support labour come hell or high water if labour’s policies don’t align with what I think is good for the country then I won’t support them. We’re not all partisan hacks like you burt. How can you support a right wing party and critise the very same right wing policies when it comes from another party?

Links to post

1. The Standard 2.01: Wage gap decreasing thanks to pro-worker policies: posted on 3 October 2008 at 12:06 pm

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