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Reining in student loans

Written By: - Date published: 2:28 pm, March 13th, 2012 - 133 comments
Categories: benefits, education - Tags: , ,

As widely reported today, Key made several comments on student loans this morning.

The news that they will remain interest free will be very welcome of course. Key is refreshingly honest about the naked political opportunism in this – he’d like to bring back the interest charges dropped by the last Labour government, but he knows it would definitely cost him the next election. (Love the back-handed insult to students though – the issue is “about the only thing that will get [young people] out of bed before 7 o’clock at night to vote” according to Key. Charming.)

The news that the loans scheme will be reined in “in a big way” will cause much more anxiety, especially until the details emerge. It seems inevitable that the Nats will repeat their large scale mistake, the austerity cuts that are stifling the economy, and restrict eligibility criteria to the extent that it damages access to education. The only tool in National’s box is a knife, so their only solution to any problem is to cut cut cut. Cutting education will save them some cash in the short term, the long term damage to the “knowledge economy” is beyond the scope of their impoverished “vision”.

I’d like to change the student loan scheme in “a big way”. I’d like to get rid of it, and replace it with a benefit set at the level of the unemployment benefit. We pay people who are unable to find work, we should be paying people who are prepared to get out there and study. This could only happen in the context of a massive overhaul of tax and welfare, of the kind described by Morgan and Guthrie in The Big Kahuna. More of that in a later post perhaps…

133 comments on “Reining in student loans”

  1. Bunji 1

    Gotta love Key the “anti-politician”:

    “That is about the only thing that will get [young people] out of bed before 7 o’clock at night to vote, but it’s not politically sustainable to put interest back on student loans. It may not be great economics, but it’s great politics. It is a bit of a tragedy because it sends the wrong message to young people, it tells them to go out and borrow debt.”

    That’s right remain true to your principles John. No wait, do what makes “great politics”, and make sure those young people don’t get out and vote…

    • Eduardo Kawak 1.1

      “It is a bit of a tragedy because it sends the wrong message to young people, it tells them to go out and borrow debt.”

      This is so hypocritical I can’t stand it. Is Shonkey suggesting you should wait until you’re older and in politics before you go out and borrow debt – on behalf of the whole country?

  2. queenstfarmer 2

    This could only happen in the context of a massive overhaul of tax and welfare, of the kind described by Morgan and Guthrie in The Big Kahuna.

    I love it how so many who express left wing ideology appear enthralled by the flat-tax advocated by Gareth Morgan. It is a great idea (though with a number of rough edges). As Gareth says:

    The most pleasing graph in the Tax Review’s recent report is the one that demonstrates the total futility of having a progressive personal income scale.

    A single rate of personal income tax remains one of the fundamental reforms that could improve the simplicity, efficiency and equity of the taxation system …

    I presume when you advocate the massive overhaul of tax and welfare, this include embracing the “fundamental” flat-tax part of the formula too, and not just the “free money” part?

    • r0b 2.1

      Don’t recall saying I was enthralled by flat tax QSF, I said a big shakeup “of the kind” in TBK (not adopting the proposals in TBK) – with more to come some time when I get finished reading it and have time for a post on the topic.

      • queenstfarmer 2.1.1

        Flat tax is a fundamental part of the Big Kahuna. You can’t call for a shake-up of the kind in TBK without it.

        • shreddakj 2.1.1.1

          Flat tax is also a terrible idea.

          • Draco T Bastard 2.1.1.1.1

            Nothing wrong with a flat tax just so long as:-

            1.) There’s a Universal Income that ensures no one lives in poverty
            2.) Either all tax deductions are claimable by everyone or there aren’t any tax deductions

            Without the second then you won’t have a flat tax at all and the first makes it a progressive tax rate.

        • r0b 2.1.1.2

          The ideas in TBK aren’t set in concrete QSF, they are one set of proposals, and it’s possible to ponder variations.

          But if you insist on flat tax, then maybe I’ll agree, with the level set at 50% (and various rebates along the lines of Working for Families for lower income earners). Would that make you happy?

          • Bafacu 2.1.1.2.1

            So the flat tax is only a flat tax for those that don’t have the flat tax (that’s the result of allowances and rebates) – so in effect no flat tax, just a variation of the existing tax structure?

            How wonderfully thought out to achieve what – bugger all.

            • r0b 2.1.1.2.1.1

              Breath deep Bafacu, I’m not seriously proposing anything of the kind (yet), I’m just pointing out to QSF that the nirvana of a flat tax system that so many right wingers drool over might not be as pleasant for them as they think. A lot depends on the flat rate eh?

            • RedLogix 2.1.1.2.1.2

              qstf is misrepresenting as usual. He’s only telling half the story.

              The combined effect of BOTH a Universal Basic Income and flat PAYE tax is in fact quite nicely progressive.

              • queenstfarmer

                The combined effect of BOTH a Universal Basic Income and flat PAYE tax is in fact quite nicely progressive.

                I don’t agree (and neither does basic maths), but if you say that TBK flat tax + UBI is “quite nicely progressive”, I take it you don’t have any problem with the flat tax?

                • Bren

                  Actually the combined effect of a UBI and a flat PAYE tax is progressive.

                  I even made a nice little table for you.

                  https://docs.google.com/spreadsheet/pub?key=0AqEQVhEnsxsqdEhIaFB1UFN2ZE5xWWZZcDVBU0JrNWc&output=html

                  It shows that as your income goes up, then the proportion of the income you pay as tax also goes up. Which I believe is the definition of progressive taxation.

                  • r0b

                    Interesting table – thanks Bren.

                  • queenstfarmer

                    I don’t know what figures those are, but TBK isn’t proposing a tax rate of 40% and $50,000 UBI.

                    Using the real figures ($11k UBI plus 30% flat tax), the marginal tax rate between someone on say $40K vs someone on $200K is less than 5%. Versus 21.5% under Labour’s tax rates it campaigned on. I don’t think many Labour or Green activists would regard a <5% marginal rate per $160,000 of income as "progressive".

                    Hence my surprise that so many on the left have been expressing support for TBK.

                    • McFlock

                      maybe they support it because it’s at least on the same planet, rather than the myth of if the rich pay less tax, the poor would be better off?
                         
                      $11k is way too low, imo.  

                    • RedLogix

                      Really it’s hard not to lose patience with such obduracy.

                      ANY level of UBI combined with ANY flat tax creates a SOME degree of progressiveness.

                      Using the real figures ($11k UBI plus 30% flat tax), the marginal tax rate between someone on say $40K vs someone on $200K is less than 5%

                      Income= $40k; UBI= $11k; PAYE = $12k; Total Tax = $1k; Effective Rate = 2.5%

                      Income= $200k; UBI= $11k; PAYE = $60k; Total Tax = $49k; Effective Rate = 24.5%

                    • Draco T Bastard

                      Using the real figures ($11k UBI plus 30% flat tax), the marginal tax rate between someone on say $40K vs someone on $200K is less than 5%.

                      According to my calculations it’s a difference of 22%. Some with a $40k income pays 3% tax and someone with $200k income pays 25%

                      That spreadsheet rounds off the decimals.

                    • RedLogix

                      Thanks DtB… that’s a much smarter presentation.

                      Really qstf reminds me of a lawyer I once met who coudn’t do simple fractions.

                    • Bren

                      Sorry I admit that I just made up my numbers. My point was just to demonstrate that UBI +Flat Tax is progressive and as RedLogix says, any combination of figures would create a progressive tax system. I didn’t stop to think if $50,000 a year was realistic. Obviously it’s not but it doesn’t deflect from my point.

                      On a side note, a progressive tax system is one where the proportion of tax paid increases with the income of the tax payer. What a Labour or Green activist considers “progressive” is beside the point.

                      On another side note, I think I now where queenstfarmer gets his less than 5% figure. It all depends how you frame the data.

                      https://docs.google.com/spreadsheet/pub?key=0AqEQVhEnsxsqdHlKLTlvUkdyZGQtSG5adjRsOVhNTWc&output=html

                      I’ve put in the “real” figures of $11k UBI and 30% tax. The first tax rate column shows

                      Tax/(Income+UBI)

                      that gives us queenstfarmer’s claim of “less than 5%” while

                      (Tax-UBI)/Income

                      is what RedLogix and Draco have used.

                    • queenstfarmer

                      DTB that’s because you’re ignoring the UBI in calculating the tax rate.

                    • RedLogix

                      Yeah… but the point is that the UBI would be tax-free, so there is no point in treating it as taxable income.

                    • Lanthanide

                      Yes, in TBK the UB is tax-free. Taxing it somewhat defeats the purpose, because:
                      1. It is being paid to everyone
                      2. There is a flat rate tax for all income
                      3. There are very few deductions available in TBK

                      At the moment people pay tax on their welfare income, but that’s because the 3 conditions above are not the case in the current system, so many people on benefits have very different circumstances that can’t be easily computed up-front as in TBK: instead of paying everyone say $14k and then taking back $3k in tax, just pay them $11k tax-free to begin with.

                    • RedLogix

                      Thanks Lanth. A very clear explanation.

                      I assumed it was obvious that the UBI would be tax free.

                    • queenstfarmer

                      but the point is that the UBI would be tax-free, so there is no point in treating it as taxable income.

                      It’s not being treated as taxable income, but it is being treated in determining the effective marginal tax rate.

                      Regardless, I’ll be very happy if more people regard TBK as progressive (or massively progressive, on your methodology) because typically the ideological far-Left would never even consider a regime that applied the same tax rate to the poor as to “the rich”, regardless of any UBI (under whatever name), which usually gets ignored.

                      For example, Labour’s tactics of deliberately ignoring WFF, housing allowances, and other income & credits to make deliberately misleading claims about parliamentary cleaner income during the election.

                    • Draco T Bastard

                      It’s not being treated as taxable income, but it is being treated in determining the effective marginal tax rate.

                      And it’s the effective tax rate that’s at the heart of the problem with the normal flat tax from the right. Farmers paid, what?, $1700 average in tax last year? That’s about the same as what someone on the unemployment entitlement pays and yet that person doesn’t get to drive around in brand new $200k cars.

                      You need to do more than just have a flat tax.

            • Fortran 2.1.1.2.1.3

              Surely a flat tax is only for those who actually pay tax.
              A large number of families are negative tax payers, so how will this work ?

          • shreddakj 2.1.1.2.2

            Actually I hadn’t thought of that, a high flat tax with tax subsidies and income assistance for lower earners. That could work pretty well. The doctrine usually brings to mind people like Herman Cain and Rick Perry of recent Republican fame, who were advocating single digit and low double digit flat tax rates. I think also the ACT crowd were proposing a 20% flat tax rate a few elections ago weren’t they?

            • r0b 2.1.1.2.2.1

              I think they were yes (not sure because, like 98% of the country, I don’t pay any attention to ACT policy).

            • Matthew Whitehead 2.1.1.2.2.2

              Yeah, a UBI + Flat Tax system proposal tends to be very popular on both the left and the right in principle, but when you go into specifics you find that the Right wants a low UBI and rate, while the left wants a high UBI and rate.

              I think with a reasonably high rate, a system with a tax-free UBI and flat tax rate would be a much simpler way to administer both the tax system and basic-level benefits like the unemployment benefit. (You could have additional supplements available below certain income thresholds for dependents, various degrees of illness, and other critical social needs as appropriate, too) It also has the advantage of freeing up a large amount of people from administering gatekeeping on welfare payments who could be more productively used to improve society directly, either as government employees or in the private sector.

          • queenstfarmer 2.1.1.2.3

            The ideas in TBK aren’t set in concrete

            That’s right. But Morgan himself says the flat tax part is fundamental, i.e. essential. You seem to be saying you want the universal allowance TBK promises, but not the process its architects say will make that wonderful outcome possible. That is textbook blinkered ideology.

            But if you insist on flat tax

            I’m not insisting on it, The Big Kahuna is.

            then maybe I’ll agree, with the level set at 50%

            So Morgan comes up with a calculated and costed (albeit somewhat approximately) flat tax rate of 25%, which is all he says the plan needs. For what reason, exactly, are you now proposing 50%? Once again, you appear to be ideologically bound, in this case to the concept of high taxes. Just pluck out a figure of 50%. Great.

            • r0b 2.1.1.2.3.1

              50% was mainly just to wind you up QSF (sorry, I guess I’m feeling particularly grumpy today). It is not a serious proposal about anything. The only claim in the post was that a big shakeup is needed, “of the kind” set out in TBK. You’re the one who wants to turn everything in to a discussion of flat tax, not me.

              I’m not sure where I stand on the exact details of TBK yet, I haven’t finished reading and thinking about it yet, again as stated in the post. So patience my dear QSF, we can have this debate some time I’m sure, but here and now is the wrong post.

            • mik e 2.1.1.2.3.2

              QSF Morgan also says their is a $20 billion hole shortfall in his idea
              Meaning gst would have to rise and a tax on all capital gains would have to be put in place.

              • Lanthanide

                If you read TBK as finalised, it is roughly revenue neutral, because it does indeed include a comprehensive capital tax and increase in GST.

              • RedLogix

                IIRC TBK proposed an increase in GST from 12.5% to 15% ….

                A CGT and perhaps an FTT would make up the difference. Moreover the flat tax would not only eliminate the incentive for most tax avoidance and probably improve compliance rates substantially.

            • Matthew Whitehead 2.1.1.2.3.3

              Right, a flat tax is a big part of the plan, because it’s part of what greatly simplifies the administration costs of taxation and allows for the payment of the UBI- the point is that the UBI is largely paid for from savings.

              And yeah, 50% is ridiculously high, as this plan includes capital gains as part of income, so the rate sounds lower than it actually is due to that. I can’t see the rate ever needing to reach 40% in such a system, barring catastrophes. A high rate of tax under such a system would be 30-35%. Morgan’s proposal of 25% and a low UBI payment might actually be acceptable under an economic boom with near-full employment, but in times of economic depression or recovery there could be advantages to ratcheting the rate up towards 40% and boosting the UBI higher to stimulate the economy.

        • Blighty 2.1.1.3

          I don’t see why flat tax is fundamental to having a guaranteed minimum income/negative tax plus comprehensive capital tax.

          You could still have tax brackets.

          • Lanthanide 2.1.1.3.1

            You’re right, they definitely could have tax brackets. A large tenant of TBK however is that it makes structuring your affairs to avoid tax very difficult / worthless. Even having a tax bracket that kicked in at $1m would encourage people to create structures to avoid that tax.

          • Matthew Whitehead 2.1.1.3.2

            It would make more sense to have a sloping tax rate than to have brackets under a UBI system- brackets require much more admin than applying a simple formula.

    • mikesh 2.2

      I would be quite happy with a flat tax if I was receiving at the same time a tax handout of $11,000 pa from the government. But not otherwise.

      • Kotahi Tane Huna 2.2.1

        So what? Seriously, do you think policy decisions should be based on what you are happy with? Or do you think they should be based on stuff that works?

        When there’s a discrepancy between what works and what you’re happy with, then what?

      • $11,000 is actually a very low UBI.

        • Colonial Viper 2.2.2.1

          Yeah, its hardship poverty level living.

          A $7/hr full time job (which we all know intrinsically that no one can live on) would be a $13650 p.a. income. That’s a full 24% more. And still virtually unlivable.

          Looking at the comments which say the UBI is a tax free figure, the unlivable full time job above would still pay more than the UBI after taxes (if only by a few %).

  3. If they cut eligibility to people who are already studying (oh wait they already have with their limit on how many years you can get the loan for) then I’m buggered. This is my 5th year at university and I’ll have at least another 2 before I’m done, if my access to funding for education gets cut before I can finish I’m going to go postal. Full time activist perhaps.

    • higherstandard 3.1

      Hi Shreddakj

      Are you able to save or pay any of your loan off while studying in case you no longer qualify for a subsidy ?

    • r0b 3.2

      shreddakj – they would have to be insane to kneecap people like you who are already studying. I can’t believe that even the Nats would be so stupid.

      • shreddakj 3.2.1

        @ hs, I would probably be able to mooch of family members for money for transport and nutrition, but I would have absolutely no way to pay for the $6,000+ requires for annual tuition fees. Actually, since the neoliberal University of Auckland management are raising fees by 4% a year (the maximum allowed by legislation put in place during the Clark administration) that would be even higher.

        @r0b, they’ve already kneecapped some people I know who had to go frantically looking for scholarships and grants they might be eligible for in order to finish their last years while working for a slave wage at a local retail outlet just to eat. Having to do this places an enormous burden on any student, and their grades suffer, and if they fail any courses it exacerbates the problem.

      • Draco T Bastard 3.2.2

        I can. They want themselves and their children to be special and being educated while everyone else isn’t is one way to bring about that special feeling that the psychopaths want.

      • Simon Poole 3.2.3

        Studylink refused to give me a loan to study the final paper in my degree. The reason: I wasn’t doing enough papers to qualify.

        Following that logic, the Government wants me to borrow extra money to complete papers I don’t need. Either that or stop university with a sole paper left until I pull together the $1000 odd needed to pay for it – an easy task when working part-time and caring for a toddler.

        • NickS 3.2.3.1

          Did you try the limited full time study option? iirc last I looked it wasn’t limited solely to the sick or disabled, and was there for anyone who had one or two papers to knock off to finish their degree. Though that was pre-National…

    • Vicky32 3.3

      If they cut eligibility to people who are already studying (oh wait they already have with their limit on how many years you can get the loan for) then I’m buggered.

      My sympathies! 🙁
      I am also buggered – being over 55 I simply can never get another student loan, which reflects Key’s estimate of my chances of ever getting a job, it seems. I took out a loan for a course in 2009 which was supposed to guarantee me work – yeah, right! 
      I need and want to do at least another two courses, even to be an HCA in a resthome (or so I’ve been told.) I can’t do it.

    • That’s not the only way their existing restructuring has hurt students. Due to the requirement for set end-dates, self-directed study no longer has timing flexibility and has to estimate completion times, usually allowing far too little time for a reasonable grade. Guess who has 3/4 of a qualification due to fixed end times? 😉

      If National kicks students any further they’re going to lose the next election spectacularly- they’re very lucky that voting among students was heavily depressed this election.

  4. DH 4

    I’m surprised at how many support Gareth Morgan’s idea of a universal income. It’s as extreme & unworkable as the free market bullshit he used to espouse so ardently. Morgan is the typical economist who knows naff all about people & human behaviour, the grand ideas will never fly in the world of real live people. He’s in fantasy land IMO.

    • r0b 4.1

      I’m interested in the problems as you see them DH. Care to set them out?

    • James 4.2

      Can you elaborate?

      • DH 4.2.1

        Well basically IMO Gareth’s economic opinions have always been coloured by a view of how he personally wants people to behave and not how they do behave in real life. You can see that in all of his writing. His UBI is predicated on an expectation that people will act in a certain manner and it doesn’t match with the way people actually do behave.

        The plain fact about people is that if you offer them free money they’ll take it. Gareth is labouring under the misapprehension that many will take a more socially responsible approach to UBI and basically work for the collective communal good. He’s dreaming. If the UBI is an adequate income to get by on then you’ll see over half the population quitting the work force. If it’s not enough then it’s a waste of time anyway.

        If you want a recent example of how people respond to offers of free money you only need look at WFF. Well over 60% of those eligible didn’t actually need WFF, it was desirable but they certainly weren’t going broke without it. But they all took it whether they needed it or not. Now translate that behaviour into Morgans UBI and then ask yourself how many taxpayers are going to be left to fund the UBI.

        • dave brownz 4.2.1.1

          In TBK these are both in a package with a serious CGT. Now that would be a redistribution of wealth, no? Trouble is that no-one is ever going to seriously tax capital gain in this country. We will have to wait on the proletariat to expropriate all unearned income. Whoopee!

          • mikesh 4.2.1.1.1

            Morgan is not suggesting a CGT but a tax on an equitable rate of return on all capital.

        • mikesh 4.2.1.2

          People are basically greedy. Most will continue working for the extra income they can earn over and above the $11,000. UBI will give those who are prepared to live more frugally the option of opting out of the paid work force, whatever might be their motive for doing so.. After all there are still many superannuitants who continue in paid employment beyond the age of 65.

        • Kotahi Tane Huna 4.2.1.3

          @DH: yes, because people who win lotto always quit working, don’t they? And obviously the UBI is like winning lotto, so anyone on the UBI will quit work too.

          And when WFF kicked in, the economy shrunk because people didn’t need to work so hard. Didn’t it?

          I don’t know if Gareth Morgan has it right, but you are going to have to do better than that to debunk him.

          • DH 4.2.1.3.1

            None of those are the point I was making. The financial viability of UBI is totally dependent on only a small percentage of the population removing themselves from the workforce. Far more than Gareth Morgan thinks will take up the opportunity; so many so that it won’t come close to funding itself.

            The very principles of his UBI make it unworkable. It is a universal income for life given to all without preconditions. It must be a survivable income as it’s intended to replace all existing welfare payments. If, right now, everyone knew they could leave work & go on the dole for life the dole queue would more than double tomorrow.

            • Vicky32 4.2.1.3.1.1

              If, right now, everyone knew they could leave work & go on the dole for life the dole queue would more than double tomorrow.

              That’s complete nonsense.

              • Kotahi Tane Huna

                So bad it’s “not even wrong” 🙂

                • DH

                  Well I’d suggest you’re projecting your own middle class outlook onto every member of NZ society. It’s a big diverse world out there, I can think of at least a dozen people Iknow who’d hapily

                  • Vicky32

                    Well I’d suggest you’re projecting your own middle class outlook onto every member of NZ society.

                    If you mean me by that remark, it’s hilarious! I am not middle class, and in fact, I loathe middle class people. I assume you don’t know any working class people – because it’s them I am thinking of when I say I don’t believe most people would give up work if they could get UBI.

                  • Kotahi Tane Huna

                    Well I’d suggest I’m no more subject to confirmation bias than you are, my anecdotes are better than yours, and my advocacy is irrelevant, but my evidence isn’t based on either of them.

                    *happily

                  • Populuxe1

                    Clearly you’ve never tried to live on it as a single person with no dependents. It doesn’t even cover rent.

                • DH

                  Try breaking out of that middle class world you’re inhabiting & take a look around you. Ask the many people in crap jobs paying $13 an hour what they’d prefer to do.

                  • Kotahi Tane Huna

                    Stop your hand-waving and construct an argument.

                    • DH

                      I just did. There’s a whole bunch of people out there who would be no worse off if they quit work & went on the dole. They’d get a free 45-50hrs a week they can use to augment their income by whatever means they can come up with.

                      There’s a lot of really dirty, crappy jobs out there that people do because they have no other choice. We’re not the land of milk & honey any more, not for the low socio-economic groups. Give them a choice & then ask them if they’d still shovel shit.

                    • RedLogix

                      Starting to get it…

                    • Kotahi Tane Huna

                      @DH: I see your advocacy and I wonder what evidence you have to support it.
                      There are “dirty crappy jobs” that pay well because they are dirty and crappy (presumably as opposed to clean and crappy). Do you have some basis for your assertions?

                    • DH

                      Reply option isn’t on your post so using this one….

                      “@DH: I see your advocacy and I wonder what evidence you have to support it.
                      There are “dirty crappy jobs” that pay well because they are dirty and crappy (presumably as opposed to clean and crappy). Do you have some basis for your assertions?”

                      Could give you plenty but one example; Last proper labouring job I did was casual work for one of the slave gangs at ten bucks an hour. Had just come back from overseas & needed an income while I looked for decent job. I didn’t mind the work, quite like manual labour for a while & it was only short term

                      For me that was ok but I’m one of the privileged. Got a good education, a reasonable intellect & life ain’t that hard for my kind. My workmates weren’t all in the same boat. They had to do that shite because that’s all they could find. And it was shite work, ok for a while but not if you’re looking at a lifetime of it. Many days I’d come home totally rooted & I was pretty fit then.

                      The point? There’s a big sector of NZ society who can never be a cosy educated middle class sitting in a comfortable office. They’re incapable of it, either through upbringing or because they’re better with their hands than their head. They deserve a decent life just as much as anyone else, and for that they need decent jobs that pay a decent wage. UBI ain’t going to give them that is it?

                    • RedLogix

                      They deserve a decent life just as much as anyone else, and for that they need decent jobs that pay a decent wage. UBI ain’t going to give them that is it?

                      That’s shifting the goalposts somewhat. The UBI idea is important because it demolishes all the distortions and poverty traps that the existing tax system is riddled with. It treats ALL taxpayers exactly the same.

                      As you’ve already pointed out the existing system means that for most people earning around the minimum wage is probably not a lot better off after all their costs are taken into account. The UBI gets rid of this completely; if fact it gets rid of the whole idea of being ‘unemployed’ altogether.

                      The crucial point you miss is that while my proposed UBI is fairly low ($11k) … it can be very easily supplemented with a part-time income of some sort without facing absurdly high marginal tax rates.. That’s the incentive to do better.

                      There are all kinds of ways people can earn a bit of extra cash without necessarily entering the formal job market. Lot’s of small-scale entrepenurial businesses or gigs that pay ok … so long as they aren’t being taxed all to hell and back.

                      That would go a long way towards making life a lot better for a lot of people.

                    • Kotahi Tane Huna

                      “Slave gangs”. Nice vision thing for the future, and this is your manifesto is it? Just asking.

                      RL is far better informed than I.

                  • RedLogix

                    Three responses:

                    1. $11k pa is barely enough to pay the rent and power. If you want to survive on that then great.. personally I doubt very much that more than a tiny fraction of the workforce would choose to live like that long-term.

                    2. A flat tax means that every dollar you earn you get to keep at least 70c … from the first one you earn in a part-time job as a paper-boy or waitress in cafe, to the last one earned by the CEO of Westpac. It eliminates the huge marginal tax rates faced by people on benefits as they transition into low-paid work. The reason why they hate their crappy $13/hr jobs is that not only do they suck; at the end of the week they’re not so much better off than being on the benefit.

                    3. If $13/hr is still not enough to do the crappy damned job… maybe employers might have to meet the market.

                    • DH

                      For some reason some posts don’t have a reply button, might be the FF fonts…so…

                      No moving any goalposts there, just addressing a different part of the issue. My original argument still stands. If UBI isn’t enough to survive on then it isn’t socially desirable. If is enough to survive on then loads of people will exploit it to change their lifestyle; far more people than Gareth would anticipate. UBI has to be funded by the remaining taxpayers and human nature is such that there won’t be enough of them. Everyone wants to give up work & retire early, many will find a way to do it with UBI.

                      Just as people learn to avoid tax, so will people find ways to exploit a guaranteed income for life. It’s just the way we humans are.

                      [lprent: the comments go to a maximum depth of 10 replies and then the reply turns off. Yo have to go up to the previous level and reply from there. Or start a new thread. Otherwise the comments start jamming up on the right and go vertical… ]

                    • RedLogix

                      Just as people learn to avoid tax, so will people find ways to exploit a guaranteed income for life. It’s just the way we humans are.

                      I totally disagree. Under the current system there already is a form of ‘guaranteed income for life’. We call them benefits.

                      Yes some people exploit the system; but when there are plenty of jobs around as in 2007 the total number on the Unemployment Benefit fell to about 17,000. That strongly suggests that there are not huge numbers of people who are likely to be a problem in the sense you suggest.

                      With the UBI set at $11k and a 30% flat tax, the actual net sums people receive under TBK system are not hugely different to the current model…. but crucially without all the distortions.

                      Besides if someone is feckless/clever enough to want to try and live long-term on $11k pa… then good luck to them I say.

        • mik e 4.2.1.4

          DH Gareth Morgan has travelled to many countries in the world a knows a lot more than most economists to write him off so flippantly shows your naive ignorance.
          He has put these ideas out for discussion their are some very good ides in that mix but he has also admitted it need quite a bit of tweaking.
          One of the main problems he identified was the huge tax burden of those trying to work their way off the benefit who are paying over 70% tax.
          Morgans cash up front is a flat tax break no need to have a bureaucracy to make it work no need for people to work under the counter while on a bene etc .

        • Vicky32 4.2.1.5

          If the UBI is an adequate income to get by on then you’ll see over half the population quitting the work force. If it’s not enough then it’s a waste of time anyway.

          You’re completely wrong! It’s not just for $$ that I want to work.. IMO, it’d have to be more than 11,000 a year – my UB is less than that, and I can’t live on it, full stop. No one can. $11 000 is a pathetic amount for UBI.

          • DH 4.2.1.5.1

            Err, that was my point there Vicky. UBI is meant to replace superannuation, the dole & every other benefit. If it’s not enough then it won’t work will it.

            That’s the contradiction. If it is too low then it won’t achieve the intended social objectives. If it isn’t too low then lots of people will retire on it, making it unaffordable.

            • Vicky32 4.2.1.5.1.1

              That’s the contradiction. If it is too low then it won’t achieve the intended social objectives. If it isn’t too low then lots of people will retire on it, making it unaffordable.

              You’re right that if it’s too low it won’t work. The $11 000 figure I keep hearing is way too low, and would be workable only with the plethora of accomodation allowances we now have – or for people living together with (lots of) others. Where would it leave people living alone (or trying to?)
              However I believe you’re wrong about people retiring on it. As I’ve said, I want a job for other reasons as well as money and I think that’s true of 99% of unemployed people.

            • RedLogix 4.2.1.5.1.2

              Yes there is a gap between the proposed UBI and the current levels of Superannuation.

              Super is a form of UBI for the elderly already, as is WFF for children.. so there are several options.

              1. Adjust the UBI on age. Below 18 yrs old make it say $3k, above 65 yrs old make it $18k

              2. Or keep Super at $11k and fill the gap with KiwiSaver income tax-free.

        • Draco T Bastard 4.2.1.6

          If the UBI is an adequate income to get by on then you’ll see over half the population quitting the work force.

          Have you considered that half the work done in the country isn’t actually needed?
          That we actually produce far more than what we need?
          That we are motivated by purpose and not money?

          That latter is the most important. Give people a purpose to go to work and they’ll quite happily do so. Force them to go to work, as we do now, and they’ll resent it.

          All I really see from what you’ve written is that you’ve fallen for the lies of the RWNJs in believing that people have to be forced to work – just like slaves.

          • DH 4.2.1.6.1

            I’m not falling for anything. All of my comments have been based strictly on my own life experiences in NZ society. I’m lazy middle class these days but I haven’t forgotten my upbringing. I’ve worked in factories, had numerous labouring jobs, worked in shops, been both manager and wage slave over the years. I’ve worked often with those at the bottom of the pyramid. I’ve drank with them, socialised with them & spent more time with that group than I have with the middle class. I’d have fought with them too but they’d kick my arse too easy. I know & understand those people a hell of a lot better than the Gareth Morgans of this world, which is perhaps why I stick up for them.

            • Draco T Bastard 4.2.1.6.1.1

              I’m not falling for anything.

              Yes you are.

              All of my comments have been based strictly on my own life experiences in NZ society.

              Anecdotes are not proof.

              …understand those people a hell of a lot better than the Gareth Morgans of this world, which is perhaps why I stick up for them.

              Except that you’re not. You’re saying that people need to be forced to work which the reality disproves. We didn’t get down to 3% unemployment because half the people didn’t want to work. If half the people didn’t want to work then, quite simply, they wouldn’t.

              • DH

                Huh? Where have I said people need to be forced to work? You’ve totally lost me there.

                • Draco T Bastard

                  In nearly every comment in this thread you’ve said that people won’t work if they don’t have to. The obvious corollary is that they must be forced to work.

                  • DH

                    Hmm, that’s a bit of a stretch. Certainly a large percentage of the workforce would leave if they had better options, work isn’t a joy for everyone.

                    Gareth Morgan himself obviously thinks people need to be ‘incentivised’ to work or he wouldn’t have set the UBI at such a low level. People would have to work because they couldn’t live on $211 per week. An income that no-one can live on kinda defeats the purpose of it, doncha think?

                    All I see with UBI is the country once again being treated as a fucking lab experiment. Morgan isn’t God, there’s no guarantees with it. What if he’s wrong? What damage would it do? Can it be undone? What if it turns into one big clusterfuck like all the other great ideas forced on us.

                    If it all turned to shite, like I think it would, is anyone going to front up & say “Err…um… ahem… well sorry folks but we made a bit of a blue. You’re totally fucked now. But hey, don’t feel too bad, we fecked up the future for your kids & their kids too so you won’t be alone in your misery.” Will they hell.

                    Even if I was a believer I wouldn’t support it, the risks are too great. I sometimes wonder if anyone who worked for Treasury ever reflects on the harm they’ve done. The lives they’ve ruined, hopes & futures they’ve destroyed. Do you think any of them have a conscience?

                    • RedLogix

                      That’s not an argument… it’s just a rant against ever trying out anything new. And like the existing system is somehow perfect.

                    • Colonial Viper

                      Even if I was a believer I wouldn’t support it, the risks are too great. I sometimes wonder if anyone who worked for Treasury ever reflects on the harm they’ve done. The lives they’ve ruined, hopes & futures they’ve destroyed. Do you think any of them have a conscience?

                      The funniest thing here is that you are attacking Treasury – an outfit who are facilitators and enforcers of the present neoliberal status quo.

                      While (as RL has pointed out) you are doing exactly the same by refusing to consider change.

                      Oh the irony of that.

                  • DH

                    RedLogix …
                    14 March 2012 at 11:55 am

                    “That’s not an argument… it’s just a rant against ever trying out anything new. And like the existing system is somehow perfect.”

                    Nope. It’s making the point that you don’t try something new just for the sake of it. You have to weigh up all the possible consequences and be prepared to carry them if it turns to custard. The people in this country aren’t lab rats who can be swapped for new ones if the big experiment fails.

                    No the system isn’t great but you don’t make major changes that have the potential to make things even worse if all doesn’t go to plan. Irresponsible recklessness got this country in the mess it’s in, the last thing we need is more of it.

                    I think Lynne here might understand when I say that Morgan hasn’t got a disaster recovery plan & until he does UBI gets no creds from me.

                    • RedLogix

                      I think Lynne here might understand when I say that Morgan hasn’t got a disaster recovery plan & until he does UBI gets no creds from me.

                      Easy… just go back to the existing tax system.

                      In fact that’s one of the aspects you haven’t thought about. The entire TBK system can be gradually be phased in over say 3-6 years; starting with a low UBI of say $5k and gradually increasing it $1k per year.

                      There is no need to go cold turkey overnight; if the numbers go badly wrong .. then just unwind it.

            • Vicky32 4.2.1.6.1.2

              understand those people a hell of a lot better than the Gareth Morgans of this world, which is perhaps why I stick up for them.

              That’s always been my issue with the Big Kahuna… the person advocating it! Gareth Morgan was an ACT activist and a disciple of/advisor to Ruth Richardson. Meant to me, that there must be a sting in the tale/tail of the idea as put forward by him..
              OK, I am speaking for myself only here. I have an education, I’ve worked in offices and classrooms, but that’s not all I’ve done! I spent years working for IHC, as a support person, which in the 1980s, before they offered any training, meant teeth cleaning, bottom wiping, bed-making etc (I’ve also done similar things in rest homes.) Nevertheless, health issues notwithstanding, I would still rather do that than sit at home, even if I had a UBI of say, $20 000. I work when I can get work, for money of course, and because I feel much better in myself, to have a reason to leave the house every day, and a purpose and yes, even the label of ‘tutor’, or ‘support worker’ or office admininistrator’ or ‘library assistant’. I dread dying in a noteworthy manner (flood, earthquake, bus crash) and being described as “Mrs X, 58 years old, unemployed of Mt XXXXXX”…

              • DH

                Aye he’s counting on everyone to be like you Vicky, that was my reference about people acting in socially responsible manner. But we’re not all like you, only need look at our voting to see how much our values vary. His reasoning seems to be that people will work through greed or need.

                The devil is in the details really. No-one can live on $11k, hell I was on & off a sickness benefit more than 10yrs ago & I couldn’t get by on it back then even when I was getting a bit of extra income from part time work. So he either has to get the $11k up or he’s just a bit callously putting a lot people into penury.

                • Draco T Bastard

                  Aye he’s counting on everyone to be like you Vicky…

                  But that’s just it, most people are like that. Sure, there are a few (~1%) that don’t want to work but we can carry them and they may even come up with a viable idea to make society better while not “working”.

                  • McFlock

                    and really, not wanting to work and contribute to something could be regarded as the purest form of alienation of the worker, according to Marxist theory. Someone completely disengaged and unable to relate to the rest of society.
                       
                    I don’t agree with his solutions, but that guy sure identified the problems. 

                  • DH

                    I admire your faith in people but I’m afraid it’s misplaced. I can think of three groups who’d leave the workforce in a flash if the opportunity presented itself;

                    One is those mid forties & onwards, white collar workers. They’ve been in the same job all their life, reached the end of the career path & work has turned into drudgery. They’ve got nothing to look forward to except retirement or, possibly, redundancy. What keeps them there is the money & force of habit.

                    Two is those in manual trades whose bodies are getting plain worn out – usually fifty & upwards. Nothing you can do about it, work just gets harder each year & making the transition from manual work to seat warming is beyond many. Those who played contact sports can find it tough even earlier.

                    Three is those in low paid soul destroying jobs. Can be repetitive process work, hard manual labour, service work & other types of jobs that are totally unrewarding. Often made worse by a shite boss who treats people like crap.

                    Those three alone would make up around half the workforce.

                    • RedLogix

                      And what is so meritorious about all these people slogging away at jobs they really don’t want to do?

                      The first group will likely keep working more or less because they have mortgages, families, a retirement to save for and as you say; force of habit will likely keep them going to work each day.

                      The second group can damn well ease back on their hours if they really need to.

                      The third group can tell the boss where to shove his shitty job if it’s that lousy.

                    • McFlock

                      Number 3 in particular is a great reason to have a UBI. Basically the point seems to be that a UBI is bad because it would end wage slavery.
                         
                      Good. 

    • RedLogix 4.3

      I’ve been studying the UBI idea for about a decade DH. You tell me what’s unworkable with it and I’ll knock you over.

    • mikesh 4.4

      I can’t comment on that, but Morgan is a trained economist and I assume he has done his arithmetic.

      • Descendant Of Smith 4.4.1

        I’d still rather tax businesses on gross income same as employees:

        Tax-take bullshit


        I can’t find any real way of finding out what the gross (before tax) income is of all businesses is in NZ but if anyone knows where this info is I’d love to know it to consider what that rate might be.
         
         

        • Kotahi Tane Huna 4.4.1.1

          Whatever it might be it would never bring in anything close to a paltry tax on financial transactions.

          • Descendant Of Smith 4.4.1.1.1

            That’s nonsensical.
            It’s not about bringing in more tax (whether we should bring in more tax is a different argument) it’s about how the tax collection is distributed.
            Both could bring in equal amounts of tax revenue.  Each would bring it in in a different way.
            I see taxing every financial transactions as much more complicated.
            Take the example of a bank.
            It would be much more complicated taxing every financial transaction (for instance would internal transfers between their own accounts count) than to simply tax each month their gross income before expenses.
             

            • RedLogix 4.4.1.1.1.1

              Not complicated at all. That’s what computers are really good at.

              If you set the FTT at a very low number (say 0.1% or less), then it’s a meaninglessly small number that rounds out to virtually nothing for most ordinary transactions for ordinary people.

              But it does raise real money from the people in the finance industries who shuffle millions around on a daily basis.

  5. js 5

    There is also blatant ageism as you can’t even get a student loan over 55, despite the fact that you will likely be contributing to the economy for several more decades. This government policy discriminates against those who have been made redundant or who have finally finished (or are between) caring responsibilities and want to do something with their brain.

  6. Bored 6

    Has anybody on either side of the political spectrum asked why the hell we have so many students? Or why we give degrees for every subject or practice known to man?

    And while all this “learning” is going on does anybody learn anything useful enough to justify the vast amounts of money they are charged for it? And is it useful to society and / or the economy?

    Has anybody asked how much universities have become businesses as opposed to places we need for the cultivation of applied thinking and abstract ideas that don’t directly relate to money?

    Has any bugger asked how much student numbers mask youth unemployment or if there are any real jobs for half the graduates?

    I personally believe student debt is an abhorrent imposition upon the individual and should be written off: more importantly before we take on more we need to ask what do we really want for and from our students?

    • Draco T Bastard 6.1

      Has anybody asked how much universities have become businesses as opposed to places we need for the cultivation of applied thinking and abstract ideas that don’t directly relate to money?

      Yes

      Has any bugger asked how much student numbers mask youth unemployment or if there are any real jobs for half the graduates?

      I’ve been wondering if we need to have real jobs that take up 40 hours plus per week each. Does that count?

      • Bored 6.1.1

        Yes it does count Draco. I reckon if our living costs and desires were a lot less we might all take benefit of a shorter week and spread the load. Nobody mentions it much with regard to employment and equity, proof our education system fails big time at turning out any original thinking…..parrots only.

  7. ad 7

    Tertiary edcuation in the end should make us wealthier and with greater options in life. But does it now? What we should be tracking is the relationship between student loan debt growth and home ownership. In the United States, I understand, the parallel is pretty close.

    I suspect (as in the case for my child) if they do acquire a reasonably hefty student debt, it is particularly hard to step them onto the property ownership escalator (and hence long term wealth) unless you fork out and give them the deposit. There’s simply so little left over in their pay packet for aggressive saving towards a deposit, let alone to service their first mortgage.

    I would like to hear if statistical work has been done tracking long term home ownership rates versus student debt in this country.

    I suspect it will be a real debt versus equity tradeoff: you can’t take on the debt that comes with qualifying, and also have earning capacity to take on the debt of a mortgage. You can only have one or the other.

    It’s a terrible signal to send to young people about to leave high school, facing the choice of further training, or getting into lower-skilled and lower-paying occupations. And a really brutal sorting mechanism for society. Policy quandary, anyone?

    • Kotahi Tane Huna 7.1

      Apples, meet oranges.

      Student loans are not the only way to fund tertiary education.

      • shreddakj 7.1.1

        “Student loans are not the only way to fund tertiary education.”

        There’s always trust funds and rich parents.

        Oh wait..

        • Kotahi Tane Huna 7.1.1.1

          Yes, those are other ways. But the traditional way is that we all pay for it through taxation, except for industry-specific training, which is a business cost.

          This Tory loan experiment, like most Tory experiments of recent times, is a failure.

          • shreddakj 7.1.1.1.1

            Oh I was just thinking of within the current paradigm. I would love to shift back to fully funded education for all. It would be a victory for social mobility.

    • Draco T Bastard 7.2

      Tertiary edcuation in the end should make us wealthier…

      Why? Or, perhaps, I should ask you to define wealthier. IMO, Having more money isn’t being any wealthier and doesn’t achieve anything.

  8. Harry 8

    It’s disgusting that there’s no interest on student loans.and anyone that thinks otherwise is not quite there upstairs. Of course there should be interest on them – not as much as the1990s, but at least at the rate of inflation. Plus much more pressure should be put on people who have taken off overseas to pay them back.

    • Kotahi Tane Huna 8.1

      It’s disgusting that there’s no evidence whatever that the whole student loan experiment has been anything other than a colossal failure, a rort from start to finish, and yet those who drove the policy into being against all good advice cannot be prosecuted, but instead become company directors.

    • Colonial Viper 8.2

      Fuckers in charge in Parliament all attained their lofty positions via tertiary education during the pre student loan era, when a university education was essentially free.

      Make the younger generations pay for their privileges.

    • Bored 8.3

      Harry you probably think that you are the only sane person in the asylum, keep taking the pills.

  9. Hilary 9

    Universities are supposed to be the conscience and critic of society. The role of education is to train people to think critically, and thus challenge political and social structures and assumptions. Of course the powerful who fear such challenges want to make education less accessible.

  10. hateatea 10

    One of the biggest problems with the Student Loan scheme, IMHO, was the way it was applied to almost every student involved in PCET. Industry played a part in that too by supporting 6 month and 12 month pre-employment programmes where the future apprentices took out loans to learn what they would have once learned on the shop floor with the employer footing the bill.

    At the time of the introduction of the scheme I saw students suddenly paying $2000 of more for anything from full time literacy and numeracy courses through pre-apprentice courses to Batchelors programmes. Worse, many suddenly found that they were ineligible for student allowances because of the income criteria. Two parents working jolly hard at minimum wage jobs showed incomes above the limits while the children of those who lived in the more plutey parts of town but had means of ‘income reduction for taxation purposes’ WERE eligible.

    Add to that the pressure on all of the polytechnics to have more and more of their academics with PhD’s, researching and presenting papers at symposia and conferences thus adding to the overheads of the staff without any other means than fees to recoup and you have some of the ingredients that have driven up the costs of tertiary education over the past 20 years or so.

    It annoys me still that there is a widely held perception that all students are studying subjects that will earn them significant salaries once they are qualified whilst the reality is that many will go into jobs that are little more than minimum wage but still with Student Loan debt to repay.

    That said, the pursuit of knowledge, in and of itself, may bring rewards to the student and the community in which they live far in excess of the amount of the loan amount. I sometimes think that it is a shame that we look so much at the monetary cost of education and insufficiently at the sense of fulfillment and emotional richness that can come from study.

    Off my soapbox now 

  11. rosy 11

    “It annoys me still that there is a widely held perception that all students are studying subjects that will earn them significant salaries once they are qualified whilst the reality is that many will go into jobs that are little more than minimum wage but still with Student Loan debt to repay.”

    Exactly, this is one of my soapboxes too. I’ve spent a very long time trying to get this across to people who see student loans as something for middle-class kiddies to go to university. The abrogation of the employer part of training workers means that student loans are paid across all sorts of job training, regardless of probable income.

    I agree that knowledge for knowledge sake is a worthwhile pursuit, but when it’s job training rather than education there’s not so much of that emotional enrichment, it’s more paying to get a job – and enriching employers who no longer fork out for training, who then have to the cheek to complain about the ‘quality’ of their new employees. Take on some apprentices for goodness sake! It’s win-win in the long run.

    • Bored 11.1

      Hatatea is onto it. Basically what I see is that without paying for “training” and racking up a debt students dont get the interview for the job. There are then so many of them that supply exceeds demand and the price is low. And worse as Hatatea says less affluent families struggle to compete. It is just plain wrong from start to finish. Time for a major overhaul.

  12. I’m really impressed with all your writing skills in addition to with the
    layout on your own weblog. Is this a settled theme or did an individual
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  13. Fortran 13

    Superannuation is for a married couple just over $11,000 pa each.

    • Vicky32 13.1

      Superannuation is for a married couple just over $11,000 pa each.

      Which is nice for them, because there are two of them! As I know from the experience of solo mothering, two can (and do) live as cheaply as one.

    • Colonial Viper 13.2

      Thats bullshit. Jeeezus fortran please realise we all have access to google. For a single person NZ Super is over $17,600 pa

      https://www.sorted.org.nz/a-z-guides/nz-super-rates

      Where did you get your bullshit numbers from? Out of your ass?

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