A graph showing the share of income that the richest 1% of people in New Zealand have received over the last 90 years together with union membership over that period gives a clear picture. Income inequality has risen when union membership has been falling, and inequality has fallen when union membership has been strong.
Events around the world threaten another round of recession and dangerous financial turmoil. Just as in 2008, there was little debate about what parties would do if the economy plunges. The incoming government could once again plead “crisis” and change may be much deeper than National’s election platform.
The political parties now have most of their employment relations policies out. These policies have great importance for New Zealand’s wage levels, and already there are the predictable allegations by business that Labour’s policies will lead to unaffordable wage demands. Yet it is inescapable that National’s policies which weaken collective bargaining will mean lower wages. This commentary shows that higher wages are affordable, even with current economic output and growth rates. And of course wages could be higher yet, if productivity increased faster – and the results of that were fairly shared with wage and salary earners.
It has been almost the perfect storm for New Zealand over this government’s term. From the global financial crisis to the Pike River tragedy, all are beyond our control here in New Zealand – or at least appear to be.
For any government however, a crisis brings opportunity and licence to do what it always wanted to do (but never dared ask). So bad luck for voters may be good luck for a government. By these standards, the Key government has been extraordinarily lucky.
Undoubtedly, much was beyond this government’s control, for the better and the worse. But they did have choices in how they reacted. Despite low government debt they talked up its danger. They used it to spin a story of “there is no alternative” to holding, then cutting, government spending when a more generous programme was affordable and could have held down unemployment and prevented its stagnation. An effective economic stimulus could also have reduced the big income gaps in New Zealand.
