Wage gap decreasing thanks to pro-worker policies

Written By: - Date published: 12:05 pm, October 3rd, 2008 - 35 comments
Categories: economy, election 2008, labour, national, wages, workers' rights - Tags:

earnings 450 gap 450

As The Standard first reported on April 1 and Radio New Zealand picked up today, Treasury figures show that the wage gap between Australia and New Zealand increased 50% under National in the 1990s and has decreased moderately under Labour since then.

Now, a lot of our readers simply won’t want to believe that is true, just like they don’t want to believe that crime is going down, because it goes against their premises (‘NZ is going to hell in a hand basket because of this socialist dykocracy’). So let’s ask: ‘does this data make sense, given what we know about wages during these two periods?’

Well, we know that in the 1990s National weakened the unions, ran a high unemployment policy, and refused to raise the minimum wage (expect one time with NZF forced them to). We know that real wages fell for many workers and incomes fell after inflation for over 40% of Kiwis during that period. We know that in Australia during that period work rights and wages were not undercut by government policy. We also know that Australia grew faster than NZ during that period, even as wages as a % of NZ GDP fell.

We know that under the left-wing governments since 1999 the minimum wage has been increased by $5 an hour; something like 40% in real terms (I don’t have the number on me). We know that workers’ collective bargaining power was strengthened by the introduction of the ERA and a full employment policy. We know that New Zealand grew faster on average than Australia during this period and wages rose as a % of NZ GDP. We know that incomes at every level have risen under these policies. At the same time, we know that Australia’s right-wing government was weakening work rights.

If we were asked to construct a hypothesis on the relative change in wages between Australia and NZ given these facts, what would that hypothesis be? Surely, we would expect the wage gap to have opened under National and at least stopped growing under Labour (remember, once you’re behind, you need to grow much faster just to stop the gap growing). And that is exactly what the Treasury figures show.

[the CTU has a list of policies to help close the wage gap further. I’ll write more on that later]

35 comments on “Wage gap decreasing thanks to pro-worker policies”

  1. higherstandard 1

    Can you write more on that later as well.

  2. higherstandard 4

    Don’t play the innocent with me missy.

  3. Tane 5

    Ah, I can explain. Steve wrote ‘right’, I changed it to ‘write’, fixing his wee typos as I always do. Hence the confusion on all sides.

  4. higherstandard 6

    How will the children learn if you’re always cleaning up after them ?

  5. fitzyp 7

    I wonder what the response of the right will be. “You just scared cause you’re 18% behind in the polls!” is my bet.

  6. Tane 8

    HS, I know, but I think poor Steve’s beyond teaching.

  7. higherstandard 9

    On a more serious note, ignoring the fact that our two economies are somewhat different, perhaps overlaying the graph on the right with real average weekly earnings in Australia over the same time period would strengthen your argument.

    Pr alternatively a link to that information and the information you’re used for you graphs so people can make up there own minds.

    I think what is undeniable is that it is only by improvements in productivity growth that we will see stronger long-term income growth in New Zealand.

  8. vidiot 10

    So in 1996 the real average weekly wage was about $452 a week and in 2007 it’s up around $508 a week. It’s interesting to see that when you apply just a 2% average annual inflation (yes that is on the low side) to the initial figure, that the average weekly take should be now up over the $570 mark. $510 was right for 2002, but not today.

    And in your 2nd graph it shows that wage gap now is greater than what it was in 1999. So how you can claim it’s decreasing is a bit bogus, unless you are referring to 2006 to 2007 only.

    Would also be interesting to see how those figures stack up today, with the rampant wages that you can achieve in the land of Oz. $80K for holding a road sign in WA anyone ?

    Note: After all the bitching the other week on graphs [% of electoral vote] not showing the zero scale figure, I would have thought these ones would have been done that way.

  9. higherstandard 11

    Feck my grammars worse than Clintons… bring back the edit function I say.

  10. vidiot 12

    Hey wtf, the charts you have posted are the exact same ones you posted back on April 1 – http://www.thestandard.org.nz/the-trans-tasman-wage-gap/.

    Is this a bad joke or have you run out of drums to beat ?

  11. Tane 13

    Yes vidiot. I added them to SP’s post as an illustration. Big blocks of text with no pictures turn off the readers. Sorry if that wasn’t clear enough.

  12. NeillR 14

    Back to the old “before tax” argument. It’s been easy for Cullen to let everyone’s wages and inflation run out of control, which makes these figures look good, but once fiscal drag and tax are taken into account there’s no doubt that people are worse off now than when Labour came to power.
    And on the back of the best economic conditions in a generation. I hate to think how bad it will be if Labour gets re-elected and carrys on with their profligate spending in the face of the economic tsunami that is about to swamp us.

    [show us the maths to prove that NeilR. Fact is fiscal drag is a minor effect on people’s incomes. For example, say your income was 40K (above average) in 1999 – you were paying 20.35% tax, 9 years later if you income has risen only in line with inflation it’s now about 50K and you’re paying 22.7% tax. Fiscal drag does exist but it’s small and won’t take down your after-tax inxome unless your pay only goes up at the rate of inflation or a small amount about it. As we know, average wages have risen far faster than that. SP]

  13. Rakaia George 15

    Are these the figures that according to Treasury advice “cannot be considered accurate”?

  14. toad 16

    Okay, vidiot, let’s look to the future then, and to what National are actually proposing to do.

    Everything that is in (or in the case of anything about the minimum wage, not in) their policy would indicate that National are gearing up to cause the wage gap to increase if they get into power, just as they did in the 1990s.

  15. Tane 17

    NeilR. Many families effectively pay no tax now because of WfF. To ignore that is just dishonest. I’m sure SP can enlighten us with actual numbers.

    Also, a tax cut doesn’t necessarily make one richer. When you cut taxes, sooner or later you have to cut spending and that leads to a decrease in the social wage.

    To use an old example, if National had been in in 2005 I might have had a higher after-tax income based on massive tax cuts, but I’d be paying interest on my rather hefty student loan and no longer able to get cheaper doctor’s visits, WFF or Kiwisaver tax credits. Chances are those tax cuts would have made me worse off.

  16. higherstandard 18

    If these graphs are pretax what is happening to the wage gap post tax ?

  17. vidiot 19

    If these graphs are pretax what is happening to the wage gap post tax ?

    Join the Move to Aussie and find out.

    Was talking with one of the guys that were recently laid off from a local lines company (brought out by a competitor). He’s off to Oz next week, was saying his base salary was xx, but when you added on the 19% (for oddball hours), the 9% that the company pays to his super, etc etc etc – he would be foolish not to go.

  18. Tane 20

    HS. Depends what figures you use and which taxes you count. Do you count state and federal tax in Australia? Stamp tax? Excise tax? Do you count Working For Families? Do you count differences in the social wage?

    It’s fraught with difficulty, as you can see.

    Vidiot. Sounds like your mate is leaving for Australia for higher wages, not lower taxes.

  19. vidiot 21

    Sounds like your mate is leaving for Australia for higher wages, not lower taxes.

    No he’s leaving for a job. There are only a few places in NZ that his skill set can be utalised, and currently none of them are employing, ergo he’s off to Oz.

    He also did comment on how backward the Aussie system were – simple stuff (like having GPS units fitted to service vehicles) was not done over there.

  20. Dom 22

    Yep, we’re a small market and the job opportunities her, especially for certain skill sets, are limited.

    I’ve had two job offers from Oz companies in the past three years – one in Sydney and one in Melbourne. I could earn a lot more over there than I do here. But I would also have to live in Oz. It can’t offer the quality of life I have here – not even close.

    It’s not ALL about the money.

  21. higherstandard 23


    Agreed which suggests that all the rhetoric for National or Labour on the issue is little more than political point scoring.

    [HS. you’ve been around here long enough to know that changes in tax only make small changes to after-tax incomes. The big way that aftertax incomes change is through wage increases. SP]

  22. Matthew Pilott 24

    Hs, that rhetoric’s all from the blue corner, sonny. Labour never said tax cuts are a panacea for all that ails ye…

  23. NeillR 25

    To ignore that is just dishonest.
    No it’s not. When people talk about “the wage gap” it’s really only a measure of purchasing power – how much can you get for what you earn. So the dishonesty comes from jacking up gross wages (as Cullen has done) while taking an ever increasing amount in tax, and the purchasing power of the money left over is being eroded due to runaway inflation.
    When Cullen took over the financial reigns he quickly increased the top tax rate to 39% and said that it would only ever apply to the top 5% of earners. That is now the top 12%, but i’m sure if you asked the other seven percent how they are coping they would be quick to tell you – as the massive exodus of Kiwis and the low showing of Labour in the polls will attest.

  24. Felix 26

    hs you’re really stretching the bounds of possibility there. No way could your grammar be worse than his.

  25. Chris S 27

    Was talking with one of the guys that were recently laid off from a local lines company (brought out by a competitor). He’s off to Oz next week, was saying his base salary was xx, but when you added on the 19% (for oddball hours), the 9% that the company pays to his super, etc etc etc – he would be foolish not to go.

    You mean rights that are entitled to workers? Paid overtime and employer contributions to super?

  26. higherstandard 28

    Bollocks – both this thread and Labour have been just as vocal with their spin on the same issue.

    The biggest concern for me is that those overseas and earning tend to be higher earners, I recall that around 30% of those working offshore were on 100k or more compared to only 3% of the NZ workforce. I’d like some non partisan analysis of why that is.

  27. higherstandard 29

    Felix …fair call, although my writing and grammar (and SPs) would definitely be better with the edit function in place.

  28. higherstandard 30

    Sonny ?? I’m probably old enough to be your dad

  29. Matthew Pilott 31

    Eh? Doubtful. ’twas a follow on from your ‘missy’.

    I am well aware that I’d see National spinning this a lot more that the good guys, but after two years of attacks over the underclass, the wage cap, tax cuts curing everything, and you reckon they’re as bad as each other? While one eye may be a teeny bit squinty at times, I genuinely can’t see it.

  30. Draco T Bastard 32

    From here:

    So why is it we’re always led to believe that everything is better in Australia? Does Australia have some secret PR guru working on its behalf in this country?

    Yes, yes it does. It’s called the National Party of NZ.

    captcha: intends intrigues

  31. randal 33

    hs the reson leavers are paid more is because out there in the wider world there are more things to do than pulling a cows tit.

  32. If you want lower pay, crap worker rights and high doctors fees then please, by all means, vote National.

  33. sean 35

    illuminatedtiger – and if you want lower net pay, lower productivity, booming inflation and run down health and education systems, by all means vote Labour.

    Rhetoric and spin is so easy to fart out isn’t it?

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