Economic Bulletin

February 2010

Is the recession over? We're on the way, many economists say. The government gives mixed messages - John Key emphasises things are improving; Bill English that the economy is still fragile.

January 2010

Taxes

The Tax Working Group (TWG) report which was made public this month has been widely discussed. There are some positive aspects of its recommendations, and some disappointments.

To begin with the disappointments: it limited its view of the taxation system largely to its revenue gathering purpose. Yet there are other purposes for the taxation system, notably to redistribute income in an unequal society. Given the substantial rise in inequality and poverty in New Zealand, particularly over the 1980's and 90's, this review was an ideal opportunity to look for ways to use the taxation system for this important social purpose - what is called a progressive tax system.

November 2009

There is considerable evidence that union members get better pay than non-unionists because of their coverage by collective agreements.

One survey of over a thousand studies of the economic effects of unions and collective bargaining in 2002 found that "Union members and other workers covered by collective agreements in industrial as well as in developing countries do, on average, get a wage markup over their nonunionized (or uncovered) counterparts." The survey found other benefits as well: for example collective bargaining and high union density reduced income inequality.¹

October 2009

Discussion on an Alternative Economic Strategy was launched at the CTU Biennial Conference last week. It will be considered by affiliates over the next 6 months, with the intention to finalise it in June 2010.

September 2009

Fair deal? The cost of living, productivity and wages

What's a fair way to set increases in wages?

August 2009

Green shoots?

"Green shoots" is the phrase of the year. It is used to hint that the winter of recession is ending. Newspapers, politicians, and most recently the Governor of the Reserve Bank, are constantly reporting sightings. We find it hard to give them the significance they seem to claim. As reported below, unemployment came in at an unexpectedly high 6.0 percent in June, and Treasury is still forecasting that unemployment will peak at 8 percent in the September quarter next year, 2010. What is even more concerning about those forecasts are that they project that it will take much longer for unemployment to fall than it has taken to rise. Their forecast is for unemployment to be still at 7.5 percent at March 2011 (with 167,000 people looking for jobs), and 6.3 percent in March 2012 (141,000 people).

July 2009

High inequality - not only unfair but inefficient

If there is a single theme that has run through the history of the labour movement it is fairness, including a dislike of high levels of inequality whether of income or of power. And many early settlers from Europe came here to get away from extremes of inequality.

There is increasing evidence that people are built to dislike unfair shares. For example in an experiment called the Ultimatum Game that surprised economists who believed people were simply self-interested, a person (the "proposer") was given some money (say $10) and told that he and a second person (the "responder") could keep the money if the responder agreed to the way the proposer offered to share it. If the responder rejected the offer, neither would get anything. If people are indeed simply self-interested, responders would accept just one cent, on the basis that was better than nothing, and proposers would offer no more than that. Apparently chimpanzees do behave like that! But human responders regularly reject such miserly offers even though it means they get nothing. Proposers on average offer a little under half of the money. Fairness is in some way hard wired into humans.

April 2009

Comment

All eyes will be on the Budget at the end of May to see whether or not the Government has not only set out a credible plan for fiscal and economic management, but is also responding with sufficient scale and urgency to the deepening recession. Back in February, the response to the global financial crisis was being viewed as primarily about jobs.