The wage gap and the productivity lie

Written By: - Date published: 11:42 am, March 28th, 2013 - 23 comments
Categories: class war, economy, International, national, wages - Tags: , ,

National was elected on the promise to close the wage gap with Australia. It’s getting bigger – which probably has something to do with why record numbers of Kiwis are crossing the ditch. New figures yesterday continue the trend:

Income gap growing wide as the Ditch

Despite rising salaries, Kiwis’ pay packets are still well behind those of their Australian counterparts – and the gap is getting bigger.

At the end of last year the average New Zealander earned 26.3 per cent – or $12,800 – less than the average Australian, the latest Roy Morgan state of the nation report reveals. Kiwi salaries have risen from $35,000 to $48,600 since 2001, but across the Tasman incomes have increased from $38,800 to $61,400.

Evidence of the widening gap is even more pronounced among fulltime workers, with Australians earning 24.1 per cent more than fulltime workers in New Zealand – a difference that 10 years ago was only 6.6 per cent.

The number of Kiwis chasing the Australian dollar has been increasing in the same decade, a record 53,763 people leaving in the 12 months to June last year.

Great work National. Thank you John Key. Your policies, such as they are, are not the solution, they are part of the problem. And when it comes to the “captains of industry” what we get is the old productivity lie again:

Employers and Manufacturing Association spokesman Gilbert Peterson called the latest figures a “sobering reality check”. “We could do considerably more I’m sure and we need to keep working at it but we have had the global financial crisis to contend with and the earthquake in Christchurch which has been a big challenge, and of course we can do more to lift the productivity of New Zealanders …

This line is just an endless treadmill for workers – the promised higher wages are forever out of reach. Productivity has gone up and up and up – wages have not followed. There’s a long CTU report about it here, but the short version is that:

Between 1980 and 2008 (the latest data available) labour productivity grew by no less than 82 percent – while the average ordinary time real wage grew by just 18 percent.

(See also various Standard posts here, here, here.)

The way to raise wages is to have a healthy economy, a living minimum wage, and a strong union sector. The Nats have held back the first, will never deliver the second, and always work to undermine the third. Nor do we need another rerun of the productivity lie. What we need is a change of government.

23 comments on “The wage gap and the productivity lie”

  1. Enough is Enough 1

    New Zealand sucks at the moment and I hold nothing against those economic refugees who are packing their bags and few possession they have and heading to where they will be able to make a livfe for themselves and their children.

    When will New Zealand wake up and demand more from their governments. This trend has been getting worse for decades yet we continue to elect governments that have policies which force our kids overseas.

  2. Draco T Bastard 2

    This video, (yes, it’s the same one I posted in Open Mike), covers the productivity gains of the last thirty years and how almost all of it the went to the rich and that the rich then went on asset bubble crusades. This resulted in increased inequality, an unstable economy and the GFC but not the improved conditions that the business sector and the political parties said would happen (I was going to just say National but Labour said the same bloody thing).

  3. Poission 3

    Productivity always decrease following banking crises,and almost obvious problem.

    Why? it is the reallocation of financial resources from the productive sectors( read parts of the economy that add value ) to the unproductive sectors such as property ,land and duboius infrastructure that is in essence a financial sink ie they lock in finance into illiquid assets.

    In each of the 61 Banking crises since 1980 (yep) productivity has decreased in every domain it has occured.There is a good discussion of this in Broadbent 2012

    http://www.bankofengland.co.uk/publications/Documents/speeches/2012/speech599.pdf

    The underlying regurgitating of the productivity fallacy by these lobby groups suggest that they (and their echo chambers) are a bit thick!

    • muzza 3.1

      Someone send that to spokeman Gilbert Peterson, maybe with the instruction that he reads it, and if he can’t understand it, to consult with someone who can walk him through the basics!

  4. infused 4

    Productivity != profit. Cheers.

    • Draco T Bastard 4.1

      The owners profits have been going up in line with productivity – the wages haven’t.

      • infused 4.1.1

        Where? My wage hasn’t increase in 3 years. My staff have.

        • McFlock 4.1.1.1

          Has the Value of your business changed in that time ?

        • Draco T Bastard 4.1.1.2

          Well, you’re obviously not the people this government is governing for then even though you probably think that you are.

          BTW, a single person whinging that their profits haven’t gone up while banks and several others have doesn’t pass the evidence test.

          • infused 4.1.1.2.1

            What’s the percentage of small business in New Zealand Draco? Banks and a few other very large businesses are the only exception.

            • Colonial Viper 4.1.1.2.1.1

              Those large corporations are the ones making super-profits, draining your local community and your customers of cash. To the tune of several billion dollars a year. And then exporting that cash, typically to Australia.

            • Draco T Bastard 4.1.1.2.1.2

              You’re still only one person and not all small businesses.

  5. UpandComer 5

    The meaningful measure is after tax wages, which have increased by 3% more then oz since 2009.

    The gap is being closed.

    Also I agree with Draco’s comment re wages not keeping track with productivity. I think employer’s in NZ do need to recognise productivity increases and incentivise productivity. Giving employees an option to buy shares in the company they work for at a reduced rate or the likes is a great idea.

    • Draco T Bastard 5.1

      The meaningful measure is after tax wages, which have increased by 3% more then oz since 2009.

      Mr and Mrs Middle New Zealand: Median NZ household income falls

      I think employer’s in NZ do need to recognise productivity increases and incentivise productivity.

      There’s a couple of reasons for that:
      1.) NZ employers are stupid (there’s research around proving that but I can’t be bothered going to find it again)
      2.) Why would they pay the workers more when they can pay themselves more instead? Greed is Good don’t ya know.

      Giving employees an option to buy shares in the company they work for at a reduced rate or the likes is a great idea.

      Ah, yes, having people buy into capitalism will magically make them better off.

      • Colonial Viper 5.1.1

        Not magically, but owner-employees are the way of the future.

        • Draco T Bastard 5.1.1.1

          Cooperatives are but do you really think that an owner is going to sell voting shares to the workers? For some of them part of the reason for being in business is the power rush they get when they tell people what to do.

    • The meaningful measure is after tax wages

      No it isn’t.

      The best measure is of pre-tax wages (gross income). Taxation legitimately takes a share of the return to labour in order to benefit the overall society (that’s the only legitimacy for taxation).

      The meaningful measure has to be the gross return to labour for a couple of reasons:

      First, closing the gap by reducing tax rates would not be possible. As Bill English pointed out, most New Zealanders are paying around 17.5% in tax. Even removing all income tax for this majority would not close the gap. Further, reducing the top tax rate alone would simply ‘duke the stats’ when it comes to ‘average take home pay’. That is, bigger paypackets would get disproportionately more dollars in their pocket, increase the average disproportionately and leave everyone else potentially just as far behind Australia as ever.

      Second, for the majority of income tax payers, the amount of income tax they pay is less than the benefit they receive from overall taxation. Hence, reducing the tax take (especially at the upper ends) would simply make their after tax wages worth less because of the services that would need to be cut to afford the tax cuts, services which they would then have to pay for one way or the other. Put simply, they would be worse off materially (isn’t this what the right so often complains about? – that the higher income people are paying most tax?). This is especially so if the kinds of cuts introduced were those favoured by right wing governments (e.g., benefits, education, health).

      I know Key and English like to run this line about after tax wages being relevant to closing the gap with Australia, but that’s meaningless given that the benefits of a progressive tax system fall disproportionately on the majority of (low and middle income) people – as is, of course, the intention of a redistributive tax system.

      In addition, cutting the top tax rate (as Treasury and IRD seem keen to do) would increase inequality within New Zealand.

  6. UpandComer 6

    “Real after tax wages

  7. Colonial Viper 7

    So Telecom has to fire 1300 workers to “remain competitive”. It’ll save them $80M in wages, annually.

    And they are forecasting a reduced profit of just over $1B for 2013, once redundancy costs are taken into account.

    Labour, please come forward and criticise the idiocy of shareholder EPS driven capitalism and the insecurity it has created for NZ workers. Any time now would be fine, when convenient, maybe when your members come back from enjoying a long weekend away.

    • fender 7.1

      +1

      The greed is rampant, and taxpayers are paying for their future revenue stream infrastructure as well ffs.

    • infused 7.2

      Dude you have no idea. People at Gen-I are sitting around with fingers up their ass. They have lost so much work recently.

      So easy being an armchair warrior eh?

      • Tim 7.2.1

        “Dude you have no idea. People at Gen-I are sitting around with fingers up their ass. They have lost so much work recently.”

        Which is rather strange is it not considering DIA is a bugger’s muddle, the primitive ACC and EQC systems, and IRD?

        The funny thing is that things seemed to work when we had a GCS, a Vogel Computing Centre and a banking system that was more integrated.
        I suspect ‘corporate prestige’ and big egos have been part of the problem over the past 20-30 years.

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    2 weeks ago
  • Let me explain what I meant by Everyday New Zealanders
    By Simon Bridges. The following is a press release from the office of Simon Bridges, leader of The National Party. Key ora, New Zealand. Happy Maori Language Week. Look, I’m writing to you today because I want to clear something up. There’s been a lot of kerfuffle around some things ...
    The CivilianBy admin
    2 weeks ago
  • Yes, the SIS is subject to the Public Records Act
    I understand there's some stuff going round about how the SIS "was removed from the list of public offices covered by the Public Records Act in 2017". The context of course being their records derived from US torture, which will be disposed of or sealed. The good news is that ...
    No Right TurnBy Idiot/Savant
    2 weeks ago
  • An evidence-based discussion of the Canadian fluoride/IQ study
    Dr. Christopher Labos and Jonathan Jarry discuss the recent Canadian fluoride/IQ research. They provide an expert analysis of the paper and its problems. Click on image to go to podcast. The critical debate about the recent ...
    2 weeks ago
  • Climate Change: Australia in denial
    Australia is burning down again, and meanwhile its natural disaster minister is denying climate change:Australia’s minister responsible for drought and natural disasters, David Littleproud, has said that he doesn’t “know if climate change is manmade”. Clarifying earlier comments that the question is “irrelevant” when considering the Coalition government’s response to ...
    No Right TurnBy Idiot/Savant
    2 weeks ago
  • Philippines activist speaking on the Duterte tyranny
    Auckland Philippines Solidarity is excited to host Professor Judy Taguiwalo for a speaking tour of NZ in September. She is a well-known activist in the Philippines and was a political prisoner under the Marcos dictatorship. Professor Taguiwalo briefly served as a Cabinet member under President Duterte but was forced from ...
    RedlineBy Daphna
    2 weeks ago
  • Disgust
    I have no special insights to offer on the Labour sexual assault coverup. All I have is disgust. Disgust that an organisation could fail its people so badly. Disgust that they punished the victims rather than the perpetrator. Disgust that its party hacks are apparently blaming the victims for demanding ...
    No Right TurnBy Idiot/Savant
    2 weeks ago
  • Speak Up for Women calls out Greens’ censorship
    This open letter to the Green Party was penned after an opinion piece by Jill Abigail, a feminist and founding member of the party, was censored by the Greens’ leadership. (Redline has reprinted her article here).The intolerance of the Green Party leaders and their acceptance of the misogyny of gender ...
    RedlineBy Daphna
    2 weeks ago
  • Member’s Day: End of Life Choice, part 3
    Today is a Member's day, and David Seymour's End of Life Choice Bill continues its slow crawl through its committee stage. They're spending the whole day on it today, though the first hour is likely to be spent on voting left over from last time. After that they'll move on ...
    No Right TurnBy Idiot/Savant
    2 weeks ago
  • Flight to Los Angeles turned back after passengers decide they don’t want to go anymore
    An ambitious plan to fly to Los Angeles petered out into a brief sight-seeing trip and a desire to return home and get some sleep before work tomorrow. Air New Zealand has confirmed a flight to Los Angeles last night was turned back about a quarter of the way into ...
    The CivilianBy admin
    2 weeks ago
  • Indigenous Futures: defuturing and futuring – an analytical framework for policy development?
    There appears to be consensus – by omission – that the concept of indigenous futures should be accepted at face value. So I scavenged the internet to see if I could locate an academic descriptor or a framework around how we think about it as a concept, and whether it ...
    EllipsisterBy Ellipsister
    2 weeks ago
  • Cadbury rumoured to be releasing the Pineapple Trump
    Here’s another novelty chocolate to shove in your gob, New Zealand Cadbury could be seeking to make itself great again with a rumoured new release: Pineapple Trumps, a spin on its classic chocolate-encased pineapple treat and do-it-yourself tooth remover. The global confectionery manufacturer and bumbling “before” character in an infomercial, ...
    The CivilianBy admin
    2 weeks ago
  • The coming resource war.
    During my time in the Pentagon I had the privilege of sitting down with military leaders and defence and security officials from a variety of Latin American nations. Sometimes I was present as a subordinate assistant to a senior US defence department official, sometimes as part of a delegation that ...
    KiwipoliticoBy Pablo
    2 weeks ago
  • Māori Language Week with The Civilian
    Kia ora, Aotearoa. It’s that magical time of year. Te Wiki o te Reo Māori. In English, the week that frightens talk radio. As you probably know by now, all your favourite media outlets are participating, some more successfully than others. Stuff has changed its name to Puna for the ...
    The CivilianBy admin
    2 weeks ago
  • Will Horizons act on climate change?
    Local body elections are coming up next month. And it looks like all Palmerston North candidates for Horizons (the Manawatu-Whanganui Regional Council) want to take action on climate change:Climate change is set to be a key issue in Palmerston North for the next three years if those wanting to get ...
    No Right TurnBy Idiot/Savant
    2 weeks ago
  • BORA reform is stalled
    Eighteen months ago, the government promised to strengthen the Bill of Rights Act, by explicitly affirming the power of the courts to issue declarations of inconsistency and requiring Parliament to formally respond to them. So how's that going? I was curious, so I asked for all advice about the proposal. ...
    No Right TurnBy Idiot/Savant
    2 weeks ago
  • Corbyn and Brexit
    As the Brexit saga staggers on, the focus is naturally enough on the Prime Minister and his attempts to achieve Brexit “do or die”. But the role played by the Leader of the Opposition is of almost equal interest and complexity. The first problem for Jeremy Corbyn is that he ...
    Bryan GouldBy Bryan Gould
    2 weeks ago

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