The grass isn’t greener across the ditch

Written By: - Date published: 12:05 pm, June 23rd, 2008 - 72 comments
Categories: im/migration, Social issues, wages, workers' rights - Tags:

The cornerstone of National’s ‘New Zealand sucks’ campaign is that Australia is much better (and we have to lower taxes and slash work rights to catch up). Now, the Sunday-Star Times produced a well-researched article on standards of living here and in Australia. A year late, but good to see, nonetheless. The conclusions:

  1. Your tax is lower but your wages are docked 9% for superannuation; NZ super comes out of your ordinary tax. Likewise, you pay 1.5% for Medicare (partial health funding) and if you earn over $100K you are meant to get private insurance or you pay a higher levy; health is funded out of ordinary tax in NZ.
  2. Services for pregnant women are worse and there’s no paid maternity leave. GP visits cost more there and medicine isn’t as heavily subsidised.
  3. The public education system is so deficient that most middle class kids go to private school, and their parents have to pay the extra costs, unlike in NZ. Private school is even more expensive in Aussie than here.
  4. If you buy a house or a car, you pay stamp duty of about 5%. Then there’s the mortgage tax. Plus, interest rates are higher.
  5. But renting is more expensive too. An apartment in Melbourne will cost 60% more than a similar one in Auckland.
  6. Cars are more expensive and also attract stamp duty. Annual registration is three times what you pay in NZ.
  7. Food and drink are more expensive and often of lower quality.

The one thing Australia does have over NZ (apart from weather) is wages, and the reason Australia’s wages are higher is they didn’t have 9 years of anti-worker labour law in the 1990s. Unions are much stronger in Australia and that translates into higher wages and, ultimately, higher productivity. Now, there’s one area where we should be imitating our cousins across the ditch.

72 comments on “The grass isn’t greener across the ditch ”

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  1. Daveski 1
    23 June 2008 at 12:20 pm

    All valid points. So why are people still leaving (which is the point that Dom made on Saturday??).

    So the problem is anti-labour laws in the 1990s??? Who has been in govt for the past 9 years and according to you worked the economic miracle?

    Higher wages come after higher productivity, not the other way. Let’s not forget that our size makes economies of scale difficult and we don’t have a high skilled labour force … whatever happened to the Knowledge Wave?

    This NZ sucks stuff is puerile and heads in the sand. What’s wrong with saying NZ is underperforming and needs to do better. Surely, that’s what the people who have left for Oz believe?

  2. Bernard Hickey 2
    23 June 2008 at 12:27 pm

    Clinton,
    How does higher wages translate into higher productivity, rather than the other way around
    cheers
    Bernard

  3. Tane 3
    23 June 2008 at 12:27 pm

    Higher wages come after higher productivity, not the other way.

    Not always. Productivity grew in the 1990s but with no mechanisms to turn it into wage growth Kiwis’ incomes stagnated and in many cases fell.

    Productivity also tends to follow higher wages. Read the link in the article through to NRT. When labour is cheap there is little incentive for business to invest in productivity.

    So the problem is anti-labour laws in the 1990s??? Who has been in govt for the past 9 years and according to you worked the economic miracle?

    Labour haven’t completely rolled back the ECA, they’ve ameliorated the worst effects of it. We still have an extremely deregulated labour market and very low levels of unionisation.

    The changes there have been, however, have lifted wages and stopped the widening of the wage gap. While I don’t think Labour’s gone anywhere near as far as they need to, history and the little policy we’ve seen suggests wages and worker protections will only go backwards under the Nats.

  4. Tane 4
    23 June 2008 at 12:30 pm

    How does higher wages translate into higher productivity, rather than the other way around

    Bernard, I threw that line in when I was adding links for the young fulla. My reasoning is explained above – low wages disincentivise the capital investment needed to improve productivity.

  5. Matt Nolan 5
    23 June 2008 at 12:33 pm

    “Clinton,
    How does higher wages translate into higher productivity, rather than the other way around
    cheers
    Bernard”

    If wages are higher, the relative price of labour to capital is higher implying that firms will choose a greater capital/labour ratio. The more capital each work has to work with, the more productive they will be – ergo higher wages give higher productivity by definition.

    However, if this is the result of market power on the part of some segment of society (say workers) then it is likely that this will lead to lower output. So we may have higher wages, higher average productivity, but less people in jobs, and a smaller economic pie.

  6. roger nome 6
    23 June 2008 at 12:35 pm

    Yep, the social wage (social service subsidisation) is lower in Aus, but they probably make for that, to a degree through collective bargaining. So for medium to low income earners quality of life is probably similar – i.e. centralised collective bargaining tends to mitigate labour market segmentation, meaning that wage disparity between high-skilled and low-skilled workers is less in Australia than it is here.

    Also Australia’s higher collective bargaining coverage rate means that more of the pie goes to workers and less to bosses – i.e. growth in corporate profits since 1991 has far outstripped growth in average wage in NZ, but the two have grown at a roughly even rate in Aus.

    http://rogernome.blogspot.com/2007/08/why-new-zealand-needs-its-unions-back-4.html

    Personally I would like to see redistribution happening through collective bargaining rather than increases in the social wage, but I seem to be one of the few people on the left that wants to return to the awards system that we had before 1991.

  7. Robinsod 7
    23 June 2008 at 12:52 pm

    All valid points. So why are people still leaving (which is the point that Dom made on Saturday??).

    Because the National Party has been successfully marketing Australia as the place to be for the last three years. I sometimes wonder if they realise which country they want to govern (especially in light of Key’s “I was talking about Australian wages” remark…)

  8. roger nome 8
    23 June 2008 at 12:53 pm

    Matt Nolan

    “So we may have higher wages, higher average productivity, but less people in jobs, and a smaller economic pie.”

    The evidence from overseas tends to suggest that people would be working less hours (a good thing in over-worked NZ), and jobs wouldn’t necessarily be cut. i.e. workers in counties with high union density enjoy higher wage increases, yet employment rates in these countries aren’t lower. In fact the countries with the highest unionisation levels also have the highest employment rates. See ,
    here
    here
    and here.

  9. illuminatedtiger 9
    23 June 2008 at 12:57 pm

    National claim to be FOR New Zealand – however they are running an “NZ Sucks” campaign as Steve says.

    Something that has been getting on my nerves recently is the assumption by Nats that anyone leaving New Zealand for Australia is doing so because of the government, taxes or the economy. I find this to be utter bullshit and the few I do know who have left think so too. When I ask them why it’s “for a change” and even “for the weather” – how can anything be done for people who want a sea change? How do you think they feel being used in dirty John’s statistics? From what they tell me – they’re not happy.

    Perhaps it’s about time Key gave the country he has forsaken for decades a break – then release some actual policy!

  10. Bryan Spondre 10
    23 June 2008 at 1:17 pm

    “That’s if you can afford to buy. To live within 4km of Melbourne’s centre, expect to pay well over $600,000 for a house. The house will be semi-detached, unrenovated, have a tiny courtyard and probably be next to a big highway.”

    And what does $600,000 buy you in NZ within 4km of the city:

    “A unique two bedroom urban retreat, oh so private, bathed in sunlight. One of just two individual vintage 70’s abodes. In a superb location, it is surprisingly separate from its neighbour and opens out to its own spacious lawn, fringed by luxuriant, established sub-tropical plantings. This safe haven will uplift you. And make you smile! Come see for yourself. Realistically priced: $595,000.”

    A 2bdrm semi-detached unrenovated unit.

  11. dad4justice 11
    23 June 2008 at 1:20 pm

    Two parents work here to pay back bank for house on $12 an hour. How many will leave our shores this year, 35,000 up until May. Bookie paying evens at 100,000 gone by Christmas.

    Well done Labour!

  12. djp 12
    23 June 2008 at 1:21 pm

    Re: productivity

    One thing that I haven’t seen mentioned is the workers themselves. The characteristics of a worker a probably the highest factor in determining the productivity of his/her output.

    Skills, attitude, work ethos…. alot of these things the employer are not able to influence directly.

    Will paying a worker make them more skilled (or have a better work ethic)? Depends on the worker I guess.

    Most employers wait until a worker has proved his skills and work ethic until they give them a raise or a promotion.

    Does anybody think that automatically giving people a wage increase will automatically improve their skills or work ethic?

  13. illuminatedtiger 13
    23 June 2008 at 1:22 pm

    Do you work dad4justice? Honest question.

    Do you receive a benefit?

  14. dad4justice 14
    23 June 2008 at 1:25 pm

    I don’t answer to some cowardly internet wacko.

  15. Bryan Spondre 15
    23 June 2008 at 1:27 pm

    Steve” The National Party isn’t running a “New Zealand sucks’ campaign”, it is running a New Zealand sucks under a Labour Government campaign.

  16. illuminatedtiger 16
    23 June 2008 at 1:29 pm

    “cowardly internet wacko”?

    That’s a bit rich coming from you yes?

  17. dad4justice 17
    23 June 2008 at 1:30 pm

    I don’t hide my identity tiger, unlike you.

  18. roger nome 18
    23 June 2008 at 1:31 pm

    djp:

    “The characteristics of a worker a probably the highest factor in determining the productivity of his/her output.”

    That’s bogus. The most important factor is capital intensity. i.e. a fat lazy slob will harvest more wheat per hour with a combine harvester than a super-athlete will with a sickle.

    You’re right that attitude is important though, and evidence shows that people who work in highly-unionsied workplaces have more input into the production process, higher wages and better working conditions, so they’re happier and more productive.

    In workplaces with low unionisation levels there’s often a one-way power dynamic, meaning workers have little power to determine their working conditions, or the production process – so productivity is lower.

  19. illuminatedtiger 19
    23 June 2008 at 1:31 pm

    So answer my question then.

  20. T-rex 20
    23 June 2008 at 1:31 pm

    Bryan – The problem in your example is that the vendors have been smoking crack.

    “Realistically priced at $595k, despite housing sector freefall and rv of $425k”.

    Other than that, spot on.

    Just to discredit your selective example further, would be buyers could go for this or this this.

    So basically your point is completely invalid.

  21. burt 21
    23 June 2008 at 1:33 pm

    Bryan Spondre

    The question of ‘value for money’ re inner city living is not simply a ‘what you get for your $$$’ equation. I think you know that.

    What proportion of the average persons salary living 4km from central Melbourne is their house vs what proportion of the average persons salary living 4km from central Welly is the thing we should look at. It’s about affordability, not gross cost.

    I once purchased a can of coke in Malysia for $0.20 NZD, can I conclude from this that coke is more affordable to Malysian people than it is to people here in NZ?

  22. andy 22
    23 June 2008 at 1:33 pm

    I don’t answer to some cowardly internet wacko.

    LMAO

  23. roger nome 23
    23 June 2008 at 1:34 pm

    Dad – put it away. The family Court has shown who you truly are. So if i were you I would stay away from personal attacks and focus on the issues. Comprehend?

  24. Tane 24
    23 June 2008 at 1:36 pm

    So, djp, you’re suggesting productivity is lagging in NZ because workers are lazy? And that they happened to get lazy at just around the time NZ embarked on a radical right-wing economic experiment? Sounds kind of absurd from where I’m sitting.

    Workers want to be upskilled, and if employers want a more skilled workforce then they need to be prepared to invest in it. That’s how modern economies work.

    Nor can you blame workers for their employers’ failure to upgrade their ageing and outmoded equipment and improve their work processes to eliminate waste.

    Workers can influence productivity if employers let them (and the Dairy Workers Union has a good history of this at Fonterra), but at the end of the day it’s employers who own the means of production and it’s they who have the power to lift productivity.

  25. TomS 25
    23 June 2008 at 1:38 pm

    I wonder how much of the trans-Tasman exodus is due to the relentless propaganda bombardment NZ suffers from Australia? Our pay-TV station in particular subjects us to superficial, feel good propaganda masquerading as history all the time. Hyper-Patriotic war documentaries, those shockingly trivial and inaccurate Peter Fitzsimon’s narrated feel-good propaganda pieces that promote Australia’s own version of “manifest destiny” on the history channel, etc etc etc. I would say Australia is the most relentlessly “branded” country in the world, and I suspect some of the propaganda (which I believe is largely meant for an internal audience – patriotism and the “Lucky Country” mantra being the glue that holds a collection of mutually loathing ethnic groups together) has had an impact on the Kiwi psyche, and that is reflected in the defeatism exhibited by a lot of the Kiwi’s who cross the Tasman.

  26. bill brown 26
    23 June 2008 at 1:47 pm

    What surprises me is that this is the first inkling I’ve seen in the MSM which investigates the relative costs / benefits of living in each country. And that with the numbers of Kiwis living over there, more stories haven’t come back.

    I suppose that if you’ve made the move, especially with your whole family, you’d manage to convince yourself you were better off. After all it’s hard to admit you may have made a mistake. You might even try to convince your relatives and friends to do the same thing just to reinforce your conviction?

  27. Bryan Spondre 27
    23 June 2008 at 1:51 pm

    T-Rex: both the examples you offered were in Wellington. Auckland is a much more reasonable comparison with Melbourne in terms of geographical & population size.

    While you are right there has been a dramatic crash (down 50%)in prices for shoe box apartments in Central Auckland houses further up the market prices appear to be holding. Three bedroom un-renovated villa’s on 450 square metre sites in my street in Ponsonby are still selling for $200k above CV inspite of the slump. A rennovated three bdrm villa with minimal off street parking sold in the last month for $1.6 million.

    burt: ditto re ‘central Welly’ not being a valid comparison.

  28. burt 28
    23 June 2008 at 1:52 pm

    bill brown

    The same could be said for people who are still here claiming it’s not as good in Aussie as people say.

    Misery loves a friend.

  29. djp 29
    23 June 2008 at 2:00 pm

    no Tane, im not saying NZ workers are lazy. I am saying that a significant factor for productivity is worker attitude and skills.

    Can I walk up to a Law firm and say “upskill me to be a lawyer please”? Of course not, even if they were in the business of training lawyers how do they even know if I am a worthwhile investment.

    The attitude of this post seem like you expect a hand out: “you have to give me this wage, give me these skills, invest in me thanks”

    The problem with people who get everything they want with no effort is that they don’t value it and they turn into spoilt brats like paris hilton.

  30. Bryan Spondre 30
    23 June 2008 at 2:08 pm

    burt: you make a good point about the affordability issue.

    The Demographia Survey gives Auckland a median (income) multiple of 6.9 with Melbourne at 6.7 making Auckland more un-affordable than Melbourne.

    A detailed analysis of affordability in this country can be found here.

  31. Tane 31
    23 June 2008 at 2:12 pm

    No djp, simply a recognition that improving productivity requires ongoing workforce development.

    You haven’t demonstrated that New Zealand workers have a worse attitude than Australian workers, hence your argument is bullshit.

    All you’ve done is whinge and imply that employers shouldn’t have to pay for any ongoing employee training.

    You’ve also completely ignored the lack of capital investment by business into the tools workers use to produce wealth. Do you think workers should pay for that too?

  32. Rex Widerstrom 32
    23 June 2008 at 2:20 pm

    Well I’m living in Australia right now, so here’s my take on things:

    Your tax is lower but your wages are docked 9% for superannuation

    Well I happen to think compulsory savings are a good thing, and I have never – repeat never seen a job advertised as paying $X and then found it to be $X minus 9%. Employers advertise the salary plus either 9% or 12% superannuation. And you can salary package some of your gross earnings straight into super and avoid tax, assuming you’re earning enough.

    GP visits cost more there and medicine isn’t as heavily subsidised.

    I go to a GP in a posh inner-city suburb. I pay about $67 for a “long” (over 10 min) consultation and get just over $40 back from Medicare (minutes later, if I want to queue up. Soon I’ll be able to claim at the GP’s – why it took them this long to set that up I don’t know). Can you see a GP for under $30 in NZ?

    The public education system is so deficient that most middle class kids go to private school

    Say what? I worked for the Australian Education Union for a while – I think they’d have a different opinion, Steve. I don’t have kids at school here but I know people whose kids are in the public system and they’re quite happy (apart from the usual grumbles about class sizes etc, same as in NZ).

    If you buy a house or a car, you pay stamp duty of about 5%… Cars are more expensive and also attract stamp duty.

    I could be wrong but new cars seem roughly the same price, but you’re right, stamp duty is a killer and adds thousands to the cost of a car. And the dealers get away with not including it in the advertised price… there’s just an asterisk and, in tiny print someplace, “plus dealer delivery and on road charges”.

    However used cars are of uniformly better quality and available at very good prices, since income levels here mean people buy new cars and replace old ones regularly.

    Annual registration is three times what you pay in NZ.

    So you’re paying about $130 to register a car in NZ, then? Because it costs me around $400 & that includes compulsory third party.

    Food and drink are more expensive and often of lower quality.

    Slightly more expensive for many of the basics perhaps (though we’re not paying $15 for a kilo of cheese!), but the quality of supermarket foodstuffs is pretty much the same – i.e. mediocre. I buy my fresh produce from the markets – cheap and generally excellent quality.

    In summary Australia isn’t the paradise some in NZ paint, but nor is it as disappointing as the SST article makes it out to be. And if you want to get rich you can, easily, even if you’re unskilled… drive a truck in the mines and make $100,000+. They’ll pay you while they train you, and give you accommodation, feed you and regularly fly you to whatever city you call home, and back.

    Can anyone in NZ who wants to earn $100k do so if they’re willing to accept some slightly harsh conditions? I think not.

  33. Joker 33
    23 June 2008 at 2:21 pm

    tiger

    “Something that has been getting on my nerves recently is the assumption by Nats that anyone leaving New Zealand for Australia is doing so because of the government, taxes or the economy. I find this to be utter bullshit and the few I do know who have left think so too. When I ask them why it’s “for a change’ and even “for the weather'”

    If they are not moving for the economics why do they all end up in Australia and not Mozabique or Nicaragua.

    Certainly good weather there and would certainly be a change.

  34. djp 34
    23 June 2008 at 2:26 pm

    Tane,

    No djp, simply a recognition that improving productivity requires ongoing workforce development.

    I agree, the question is how and who is responsible for what parts. I believe both employers *and* employees have a part to play.

    You haven’t demonstrated that New Zealand workers have a worse attitude than Australian workers, hence your argument is bullshit.

    I havent tryed to argue that (I have no idea how aussie worker attitude compares to nz), I am simply saying worker attutude (and skills) constitutes part of the productivity equation.

    All you’ve done is whinge and imply that employers shouldn’t have to pay for any ongoing employee training.

    By all means if a worker wants employer funded training he/she should negotiate for it in his/her contract. Indeed I dont think that an employer should *have* to pay for employee upskilling unless contractually obliged.

    However would not a socialist want the govt to pay for all education anyhow (they currently pay about 3/4 of uni costs already)?

    You’ve also completely ignored the lack of capital investment by business into the tools workers use to produce wealth. Do you think workers should pay for that too?

    I havent overlooked it I was just noting other parts of the productivity equation. No I do not think that workers should pay for any capital investment into a business (unless they get appropriate ownership/shares).

  35. Stephen 35
    23 June 2008 at 2:31 pm

    Not many culture differences in those places either eh Joker

  36. Tane 36
    23 June 2008 at 2:32 pm

    By all means if a worker wants employer funded training he/she should negotiate for it in his/her contract. Indeed I dont think that an employer should *have* to pay for employee upskilling unless contractually obliged.

    I’m not arguing over whether employers should be forced to upskill their workforce. I’m simply saying it’s in their long-term interests, and New Zealand’s. In any country a lack of investment in skills by employers will harm productivity, and we’re seeing that here.

  37. Matt Nolan 37
    23 June 2008 at 2:34 pm

    Hi Roger,

    Those cross country comparisons you link too don’t say anything – as they do not take into account the structure of the economy.

    Look at this paper from MED, by Arthur Grimes:

    http://www.med.govt.nz/templates/MultipageDocumentTOC____29864.aspx

    The main factors driving labour productivity etc are external factors, such as the terms of trade and perceived credit risk.

    The only argument that can be made stating that market power leading to higher wages would truly lead to higher social welfare is if:

    a) we believe employers have a higher degree of market power in the first place and want to “level the playing field (this is an equity, not efficiency argument btw),

    b) we believe that employers are stupid, and by making labour more expensive we make them realise that capital can be used with labour in other, more productive ways, thereby increasing multifactor productivity.

    The blanket statement, higher wages leads to higher productivity is misleading – we need to define causation as well.

  38. roger nome 38
    23 June 2008 at 2:36 pm

    Tane:

    “You haven’t demonstrated that New Zealand workers have a worse attitude than Australian workers, hence your argument is bullshit.”

    Well, according to right wing economic theory NZ workers should be more motivated to up-skill/work-harder because the relatively high degree of union bargaining coverage in Aus means that wage differentials between high and low-skilled workers are lower there than here.

    Now I don’t agree with this, but if djp believes in right-wig economic theory his argument is self-defeating.

  39. Bryan Spondre 39
    23 June 2008 at 2:37 pm

    “James Michael Curley, a four-time mayor of Boston, used wasteful redistribution to his poor Irish constituents and incendiary rhetoric to encourage richer citizens to emigrate from Boston, thereby shaping the electorate in his favor. Boston as a consequence stagnated, but Curley kept winning elections. We present a model of the Curley effect, in which inefficient redistributive policies are sought not by interest groups protecting their rents, but by incumbent politicians trying to shape the electorate through emigration of their opponents or reinforcement of class identities. The model sheds light on ethnic politics in the United States and abroad, as well as on class politics in many countries including Britain.”

    Here is a link for all the conspiracy theorists in the room that it is all a deliberate plot by the Labour Party to upset us Act/National Party voters so much we piss off to Australia.

  40. T-rex 40
    23 June 2008 at 2:54 pm

    Bryan – apologies, I looked at my last search rather than the address at the top, my bad.

    Instead, let me use this as my counter-example.

    I didn’t actually realise people still wanted to live in Auckland! Weird…

    Rex –
    1) GP visits here are on the verge of becoming free for all ages, and already are for most.
    2) Cars are VASTLY more expensive in aussie.
    3) Fair point on the mines, but that’s the mines.

    For someone on their own, Aussie will probably be a better place to get ahead than NZ assuming you’re planning to return to NZ eventually, as your discretionary income will be worth more, even if pretty similar proportionally. For a family I haven’t seen or heard much evidence to suggest things are very different.

    Aussie politicians have been campaigning on platforms of helping out struggling aussie housholds (which, to hear them talk, are all aussies) for years. Obviously THEY don’t think they’ve got it so easy… and they all DO live there.

    Still, Aussie is a richer country than us for sure. Cutting personal tax rates sure as hell won’t change that though.

  41. roger nome 41
    23 June 2008 at 2:57 pm

    Matt:

    “The main factors driving labour productivity etc are external factors, such as the terms of trade and perceived credit risk.”

    And in the US’s case, domination of the global financial system, which allows low interest rates (i.e. demand for $US keeps inflation in check), and higher levels of borrowing and therefore investment in the US economy (though we’re starting to see that system unravel).

    “b) we believe that employers are stupid, and by making labour more expensive we make them realise that capital can be used with labour in other, more productive ways, thereby increasing multifactor productivity.”

    You miss the point that it costs less to lay off massive amounts of workers in bad economic times, than it does to liquidate massive amounts of capital, and with NZ’s comparatively lax collective dismissal laws (see the world bank’s “doing business” survey) there’s every incentive for employers to invest more in labour (which has meant ever increasing working hours as well as a higher employment rate) than in extra capital. Increasing the price of Labour would mean that employers would be less likely to put the risk of doing business on to workers in this way, and consequently they would invest more in capital and productivity would increase.

  42. deemac 42
    23 June 2008 at 2:58 pm

    how is the weather a plus for Oz? they are running out of water which is a definite disadvantage in my book
    Plus I know a few people who went to Perth but it was strictly to get high pay, save a stash and then return as the weather there is too **** hot for most Kiwis

  43. T-rex 43
    23 June 2008 at 3:13 pm

    Plus I know a few people who went to Perth but it was strictly to get high pay, save a stash and then return as the weather there is too **** hot for most Kiwis

    That’s why I’m off to Switzerland, and why I’m not bothered about young kiwis heading overseas. I’m sure as hell not going to live there forever. Essentially we go to another country, learn a lot, get a lot of money, then come back here bringing all the money and skills back to our country. In addition to getting exposure to the world etc etc. How is that bad?

  44. Steve Pierson 44
    23 June 2008 at 3:15 pm

    What determines the price in a market?

    Supply and demand, eh?

    And labour is a market (well, really thousands of inter-related markets).

    So what determines the price of labour, ie wages?

    Why, the supply of labour and the demand for it

    Productivity comes into it only in that is alters how much the demander of labour is able and willing to pay for the labour. An increase in productivity does not mean that the price of labour will go up, nor is an increase in the price of labour only possible if productivity increases. In the 1990s, productivty went up but busiensses retained the extra output as profits for themselves.

    What does a union do? It sets a bottom price limit on the supply of labour, rising the price at which it will be supplied. In these conditions, businesses can be forced to pass along a higher percentage of the returns form a business to the people who do the work than would otherwise be the case.

  45. Matthew Pilott 45
    23 June 2008 at 3:22 pm

    Bryan &all those in the Great Housing Debate – try a simple TM search, ‘Auckland’, and then ‘Auckland City’, and then ‘City Centre’. Fix price at ‘any’ to ‘$600k’.
    Result: over 1,131 listings. Bryan, picking one example out of 1,131 isn’t convincing me sorry, your sample size is a tad flawed methinks!

    Interesting comment from djp:
    “By all means if a worker wants employer funded training he/she should negotiate for it in his/her contract. Indeed I dont think that an employer should *have* to pay for employee upskilling unless contractually obliged.

    However would not a socialist want the govt to pay for all education anyhow (they currently pay about 3/4 of uni costs already)?”

    Maybe a true socialist would, DJP, but there’s an essential ingredient missing: the socialist would posit that the state already own every industry/enterprise, so they would be doing the training by default!

    When a private industry makes profits for their shareholders, you wouldn’t find a socialist demanding state education specifically for that role. So a bit of a simplification there.

    You also state that worker training should be negiatated, and you are right to an extent. The best question you can ask during a job interview is “what training programme will be provided for this role”, but the way you’re presenting it implies the training is for the employee’s benefit only. Not so.

    If training is specific to one role, as is often the case, I’d say it’s only right for the employee to undertake that training under their own steam with the requirement that they be employed by the organisation for as long as they wish. That’s absurd too, so I think the training status quo is fine as regards to structure (who does it and why) – implementation could use a shake-up though.

    So as you say, and employer doesn’t *have* to provide training, but it’s in their interests. You’d think most employers would be intelligent enough to realise this (and I haven’t seen any suggestion of compulsion thus far…)

    Rex – do you think the jobs you have looked at would represent a standard cross-section of those that many New Zealanders would be looking at? If, for example, you were looking at higher-end jobs, then you could expect to see that 9% outside the basic remuneration package. I’m not sure the same goes for all jobs.

    What’s more important though, is what is included when the various comparisons of salaries occur between NZ and Aus. If they speak of TEC then it would be important to remember that we must deduct 9% from Australian salaries. Not sure if anyone can say whether this happens when the headlines speak of wages “X% more in AUS“… (I doubt it)

  46. Rex Widerstrom 46
    23 June 2008 at 3:40 pm

    T-rex says Cars are VASTLY more expensive in aussie.

    Not so in all cases, or even the majority, but certainly true for the more expensive end of the market, which also gets hit with “luxury car tax”. If you’re in the market for a nice but reasonably humble car, you’re better off buying here. (I won’t bother doing currency conversions because local buyers are buying with their own dollars). For example:

    A new Toyota Prius: NZ $43,990, Aus $37,400 excluding duty, which varies depending on where you live. I’d pay $2,004 in WA for a total of $39,404.

    A new Hyundai i30 (2.0 SX auto): NZ $30,990, Aus $20,900 + $608 duty = $21,598.

    But go near the luxury end of the market, even used, and you’ll be stung. For instance a 2004 545i BMW: NZ $55,500, Aus $69,990 + $4549 duty = $74,539. Ouch.

    Who’d have thought that years of John Howard’s rule has in fact created a socialist paradise where rich pricks are punished for driving luxury European autos, but the common man gets a good deal on a nice shiny new green mobile 🙂

  47. Bryan Spondre 47
    23 June 2008 at 3:45 pm

    Matthew: “Bryan &all those in the Great Housing Debate – try a simple TM search, ‘Auckland’, and then ‘Auckland City’, and then ‘City Centre’. Fix price at ‘any’ to ‘$600k’.
    Result: over 1,131 listings. Bryan, picking one example out of 1,131 isn’t convincing me sorry, your sample size is a tad flawed methinks!”

    Agreed it wasn’t a particularly ‘scientific agurement’ but doesn’t your ability to find 1,131 listings in Auckland Central tend to confirm my point. You should really limit the search to 2bdrm, semi-detached to meet the criteria outlined in the SST.

    The Demographia survey I linked to probably is more meaningful anyway as it takes into account incomes as well: “Auckland a median (income) multiple of 6.9 with Melbourne at 6.7 making Auckland more un-affordable than Melbourne.”

    T-Rex: “Bryan – apologies, I looked at my last search rather than the address at the top, my bad.

    Instead, let me use this as my counter-example.”

    Yes that is a much more affordable property but is located on the edge of an industrial zone 10 km from Central Auckland and “Remuera” is a real estate agents exaggeration, it is actually Mt Wellington/GI border.

    Again the Demographia survey is probably more helpful as a comparison.

    “I didn’t actually realise people still wanted to live in Auckland! Weird ” I tend to agree, I certainly wouldn’t be that happy living in the outer suburbs and commuting anywhere in Auckland.

  48. T-rex 48
    23 June 2008 at 3:47 pm

    Rex – I hadn’t even looked at new prices. Getting a decent second hand car seems to cost around double.

  49. Rex Widerstrom 49
    23 June 2008 at 3:48 pm

    Matthew Pilott asks: Rex – do you think the jobs you have looked at would represent a standard cross-section of those that many New Zealanders would be looking at? If, for example, you were looking at higher-end jobs, then you could expect to see that 9% outside the basic remuneration package. I’m not sure the same goes for all jobs.

    I’d invite you to do your own comparison on, say, seek.com.au and http://www.thebigchair.com.au. On the latter site there’s a Business Manager position here in Perth quoted at “$150,000 – $200,000 +Super + Car + Bonus = $250,000 Total Package”, though at that level some do just quote the total figure.

    But for the vast majority of NZers heading here, the salary they’ll be looking at in the ad will be plus 9%, not minus.

  50. Matt Nolan 50
    23 June 2008 at 3:58 pm

    “demand for $US keeps inflation in check”

    What? I’m not quite sure what you are talking about – are you saying that foreign demand for US currency keeps inflation in check by increasing the US exchange rate?

    The US has lower corporate taxes than most of the world, a significant endowment of resources, and strong property rights – its not surprising they have strong productivity growth.

    Anyway, we are not really interested in the US so I will move on 🙂

    “You miss the point that it costs less to lay off massive amounts of workers in bad economic times, than it does to liquidate massive amounts of capital”

    That is part of the relative cost argument. I do have sympathy for the argument that flexibility can lead to sub-optimal investment in human capital – implying that there is an optimal level of labour market flexibility that is not completely flexible. However, this is not the argument you are making.

    You are making the argument that higher wages lead to more capital and more output, not to less employment. This is a difficult argument to make especially at the aggregate level.

    Productivity is a complication issue. Ultimately I think that this paper:

    http://www.med.govt.nz/templates/MultipageDocumentTOC____29864.aspx

    Gives a good explanation of the factors driving productivity. It is written by a fairly left-wing economist, so you don’t have to worry about any ad-hoc union bashing. However, it does put the fundamental factors behind productivity growth in perspective. (Treasury also have a set of working papers on productivity that are a little less enlightening, but still interesting).

  51. Matthew Pilott 51
    23 June 2008 at 4:23 pm

    Bryan, I’m going to give up apart from to make the point that I actually need to be looking for houses better than ones that are $600k, “semi-detached, unrenovated, have a tiny courtyard and probably be next to a big highway.” given there are over 1100 in central Auckland at or below that price, I’ll leave it to you to discover what is available.

    Rex, if I were going I would indeed have a look, although I’m in the “ignorance is bliss” camp for a variety of reasons at present (with regards to my own line of work) so better not.

    What I’d be more interested in is whether all these Aus-NZ comparisons take that into account. Does our traditinal view of the “wage gap” include this as an extra they get, or a cost that negatively affects take-home pay.

    i.e. let’s pretend that a story shows median wage is $30,000 in NZ and $38,000 in Aus. Would that $38,000 be TEC, and therefore need 9% taken off to give a more accurate comparison? Or would it be more accurate to say $38k + 9% super contribution? (this is ignoring NZ Super, because I have no idea whether Australia has a similar scheme. If not, factoring that in would be a chore…

    So I’m not sure how relevant your take is to what National’s NZ Sucks campaign is based upon, if you see the distinction.

  52. roger nome 52
    23 June 2008 at 4:35 pm

    “re you saying that foreign demand for US currency keeps inflation in check by increasing the US exchange rate?”

    That’s part of it, but I’m saying that trillions of US dollars are held in bonds, thus they are kept out of circulation, meaning goods and services are cheaper in the US than the amount of printed currency reflects. Do you know any other developed countries that are able to have interest rates like this, whilst having inflation levels like this?

  53. roger nome 53
    23 June 2008 at 4:49 pm

    Matt:

    “You are making the argument that higher wages lead to more capital and more output”

    Output per labour hour yes, but not output in absolute terms. I don’t mind if total output falls a little, and I expect raising the price of labour will result in less total hours worked (but not necessarily less jobs). But having said that, I don’t think that output is everything. There’s a point where hours worked has a diminishing, and even a negative return where quality of life’s concerned.

    Ultimately for me it’s about having a high employment rate, reasonable leisure time and high productivity growth. At the moment in NZ we only have the first one of those, whilst other countries, notably the Scandinavian ones, have been able to achieve all three. Increasing wages through collective bargaining will have a positive impact on the second two variables whilst not necessarily negatively impacting the first variable. My real world examples (note it’s not just abstract theory), taken together show this to be very possible.

  54. Draco TB 54
    24 June 2008 at 1:02 am

    a) we believe employers have a higher degree of market power in the first place and want to “level the playing field (this is an equity, not efficiency argument btw)

    Employers generally do have the greater market power because they are the owners of production which, effectively, makes them the owners of the market. This is all backed by force of law.

    b) we believe that employers are stupid, and by making labour more expensive we make them realise that capital can be used with labour in other, more productive ways, thereby increasing multifactor productivity.

    From what I’ve seen at the places I’ve worked I’d say that employers, in general, are stupid. They don’t invest when or where they need to in technology/skills to increase productivity. They will always take the cheaper option even if it’s more expensive in the long run.

  55. jbc 55
    24 June 2008 at 2:22 am

    From what I’ve seen at the places I’ve worked I’d say that employers, in general, are stupid. They don’t invest when or where they need to in technology/skills to increase productivity. They will always take the cheaper option even if it’s more expensive in the long run.

    They you have worked for stupid employers only; or you have only seen their stupid side.

    Generally I’d say that companies are far smarter and more calculating than you think. Sure, there are some knee-jerk cost-cutting measures taken sometimes but these aren’t usually part of the plan (perhaps forced by finance trouble – or decided without full knowledge). But this is just my experience. Certainly the cheapest option is not always taken.

    Your first assertion about employers owning the market doesn’t make sense either. I’m not an economist but I think what you say would only be true if all employers worked in collusion.

    Some companies I have worked with have an avowed HR policy of paying employees at a rate higher than 90% of their competitors do. This is so that they can attract the staff of their competitors. Not generosity but sound business practice.

  56. Draco TB 56
    24 June 2008 at 1:04 pm

    Your first assertion about employers owning the market doesn’t make sense either. I’m not an economist but I think what you say would only be true if all employers worked in collusion.

    Who says they don’t? Adam Smith certainly thought that they did so and stated as much in his Wealth of Nations. National pretty much represents business interests in NZ. Just because they may be in competition with each other doesn’t mean that they don’t have some common interests.

    Then there is the matter of ownership and the ability to deny others access to that resource. When that resource happens to be the means of production then nobody can enter the market without the owners say so. This is a normal aspect of capitalism and why I say that you cannot have a free-market within a capitalist socio-economic system.

  57. Bernard Hickey 57
    24 June 2008 at 8:24 pm

    I’m loving this debate.
    I take my hat off to The Standard. A real debate about productivity, which is the real nub of our economic issues.
    Good on you all. More interesting than any other blog I’ve read for a while. Don’t agree with many, but at least people are arguing (mostly) at a high level.
    Interesting points about higher wages leading to productivity growth by forcing business owners to be more capital intensive. That’s one way to increase unemployment, but in a low unemployment economy like ours it may not be such a problem.
    This is what happens in France and Germany because of relatively high wages (certainly per hour) and their inflexible labour markets. The French love to invest in machines to replace people. I’ve stayed in hotels there where there are NO staff. The bathrooms are essentially self contained tubs with nozzles that automatically ‘spray’ it clean after you leave. You pay with a credit card at an eftpos machine that gives you a ticket with your security number to get into your room. The French are paranoid about employing people. The Germans are not much better.
    I’d hate to get ourselves into a position where we make it so expensive and difficult to employ someone that we don’t employ them anymore. Or, even worse, we just employ them on contract, which is what happens in France where a huge proportion of the young have no real jobs. It’s a big recipe for inter-generational warfare.
    Checked out that Stats at the OECD.
    France’s unemployment rate has been stuck around 8.5% since 2003. Germany’s unemployment rate has been stuck around 10%.
    I hope we don’t go anywhere near there.
    Thanks in particular to Tane for pointing me to that NRT piece. Well argued and about the issues rather than the people.
    cheers
    Bernard

    [lprent: I’m a great believer in free speech. Except from trolls of course, I define them as rogue programs. It is amazing what comes out in blogs after you debug the rogues]

  58. Robinsod 58
    24 June 2008 at 8:28 pm

    Are you drunk Bernard?

  59. Bernard Hickey 59
    24 June 2008 at 8:39 pm

    No. Just full of the joys of life.
    Yourself?

  60. Dean 60
    24 June 2008 at 8:53 pm

    “Food and drink are more expensive and often of lower quality.”

    Steve, have you ever actually spent time over there to decide this?

    Because if so you’ve been eating in entirely the wrong places.

    Or are you just relying on the link you posted? If that’s the case, why don’t you take articles from the Pravda Herald on face value? Oh, wait, I forgot. You don’t agree with everything the Herald says. Therefore it must be incorrect.

    I suspect you’ve been schooled by r0b on objectivity – it only applies to other people.

  61. Robinsod 61
    24 June 2008 at 8:54 pm

    What else is one to do on a tuesday night? So um… did you ever study economics?

    [Tane: Sod, be civil. There’s no need to personally attack Bernard. If you have an issue with his analysis then criticise his analysis.]

  62. r0b 62
    24 June 2008 at 9:27 pm

    I suspect you’ve been schooled by r0b on objectivity – it only applies to other people.

    Sorry Dean, I didn’t realise that occasionally pointing out your rather tenuous grasp of the facts was causing you such distress. I’ll try and take it a bit easier on you in future.

    No no that’s all right, no need to thank me.

  63. Dean 63
    24 June 2008 at 10:10 pm

    “Sorry Dean, I didn’t realise that occasionally pointing out your rather tenuous grasp of the facts was causing you such distress. I’ll try and take it a bit easier on you in future.”

    I’m not the one who said Clark’s “by definition I cannot leak” clanger was acceptable, r0b.

    That fact that you did speaks absolute volumes on your objectivity.

    You can make this all about what I’ve said if you like – after all, that’s the exact MO the party you belong to uses when people point out their shortcomings – but don’t for a moment pretend that you can fool all of the people all of the time. You feral inbred hater and wrecker. How’s the chinless scarf wearing working out for you?

  64. r0b 64
    24 June 2008 at 10:24 pm

    I’m not the one who said Clark’s “by definition I cannot leak’ clanger was acceptable, r0b.

    Why exactly was it a clanger Dean?

    You can make this all about what I’ve said if you like

    Nah, been there, done that, bored now.

    How’s the chinless scarf wearing working out for you?

    I own my own words Dean, I don’t own every word uttered by every member of my party. The scarf wearing thing was stupid comment. Your problem is that you can’t even defend your own words.

  65. Dean 65
    25 June 2008 at 6:56 pm

    “Why exactly was it a clanger Dean?”

    Well r0b, in your case I suspect it’s like the old adage of Jazz. If you have to ask then you’ll never know. I should have expected that from a paid up EFA supporter.

    “I own my own words Dean, I don’t own every word uttered by every member of my party. The scarf wearing thing was stupid comment. Your problem is that you can’t even defend your own words.”

    I’m not the one who pays money to belong to a political party with members of parliament who say such things, r0b.

    You might not own their words, but I love how you’re paying for them. It must make the view from that high horse all the more enjoyable every time you have a go at the Nats for some alleged nastiness or another, but as I’ve pointed out before, it’s all do as I say and not as I do with people like you, isn’t it?

    How very cancerous and corrosive of you.

  66. Felix 66
    25 June 2008 at 7:52 pm

    Dean is there really nowhere else for you to express your “thoughts”? Isn’t there an ACT blog or something similar where your hateful, selfish and ultimately clueless views might be taken seriously?

  67. Paul Robeson 67
    25 June 2008 at 8:40 pm

    Australia-
    9 Labour governments and award wages.

    can see why John Key wants to emulate it

  68. Dean 68
    25 June 2008 at 10:25 pm

    “Dean is there really nowhere else for you to express your “thoughts’? Isn’t there an ACT blog or something similar where your hateful, selfish and ultimately clueless views might be taken seriously?”

    Goodness me, now I’m hateful and selfish. Felix, if you’re not willing to defend Clark’s clangers, such as I’ve outlined above, then perhaps it’s you who belongs commenting on an ACT blog.

    I’ll bet you’re just drooling with anticipation over the very idea of hate speech laws, aren’t you.

  69. RedLogix 69
    25 June 2008 at 10:44 pm

    In the meantime…. back to productivity.

    Actually it has very little to do with economics, liberalisation, or the operation of the so-called free market. Almost all productivity gains come from just one thing… improved technology.

    For example. Fonterra is now the recongised flagship entity of NZ business. 30-40 years ago the NZ dairy industry consisted of dozens of small to medium sized businesses going nowhere but round in circles cutting each other’s throats.

    In the mid 70’s something special happened. A small handful of dedicated geeks realised that they could apply newly available cost effective Programmable Logic Controllers (PLC’s) to automating their dairy factory process. As a result they could process more and more milk with in larger and larger sites. Productivity, quality and compliance steadlily improved decade on decade. Eventually all the small inefficient factories were closed down. Big mega-sites like Kiwi Dairies Hawera plant that could process in excess of 15 million litres of milk a day completely absorbed the entire farm supply from almost the whole lower North Is.

    The destination point of this productivity boom and merger process has been Fonterra. It was ONLY possible because of automation, and NZ was ahead of the world because of just a few dozen technical people who had the skill, enthusiasm and were prepared to work 80plus hour weeks under enormous pressure to get these highly complex and demanding systems going.

    This is how real change happens. Techies and geeks make it happen. Other people take the credit for it.

  70. T-rex 70
    25 June 2008 at 10:57 pm

    Engineers FTW

  71. r0b 71
    25 June 2008 at 11:22 pm

    “Why exactly was it a clanger Dean?’

    Well r0b, in your case I suspect it’s like the old adage of Jazz. If you have to ask then you’ll never know

    OK Dean, I get it now, it was such a terrible thing to say that you can’t even explain how terrible it was. Jolly good then.

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