EconBulletin

Unions and many others are concerned about the development of “dependent contracting” in New Zealand. It is a form of self-employment in which the worker is virtually tied to one employer/contractor and is an employee in all but name and employment rights. This situation is ripe for exploitation and abuse of the worker. Though it… Read more »

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The Government is putting poverty on the agenda despite denying that there was a problem during the election campaign. It is difficult to see how it can address poverty without increasing incomes, yet Ministers talk about not “throwing money at the problem”.

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We’re in unusual times. The economy is growing strongly yet deflation (falling prices) is on the cards. There are still serious problems in other developed economies which are creating great hardship for working people and could bite us through falling demand for New Zealand exports – but also contribute to falling prices. Employment in New… Read more »

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Where are New Zealand unions strongest and where are they weakest? While we often focus on the fall in overall union density (the proportion of wage and salary earners who are union members), underlying that is a very uneven spread of union membership. It’s important to understand this ‘landscape’ of unionism in New Zealand if… Read more »

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Remember back in the 2008 election, the National Party set itself a target of wage parity with Australia by 2025? I looked at it two years ago when Bill English was talking about the wage gap as an advantage which would attract businesses to New Zealand. With Australia now not doing as well economically as… Read more »

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One of the most significant aspects of the Budget on 21 May will be what has been described as radical changes to funding of public services. For example, yesterday Bill English announced a voucher system for funding people with disabilities. Other ingredients will include applying wider use of the “investment approach”, currently being trialled for… Read more »

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We won’t know for a while which parties will make up the new New Zealand Government. Whoever it is will face the same challenges. The most likely shocks to New Zealand’s economy are from the international economy and from a crash in the housing market. There are still many concerns in Europe, the US, even… Read more »

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This is my 100th Bulletin. It is not quite my last. Our new economist takes over in May. I have found over the years that unionists value a statistical update that focuses on the measures that matter to them. Of course statistics can be misused. And sometimes a statistic can be accurate but still mislead… Read more »

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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… Read more »

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So, what to think about the Budget. This was never going to be an easy one in the midst of economic and financial crisis. Whoever won the 2008 election would have had difficult decisions to make. It said something about the quality of the election campaign that such matters were barely discussed, even when it… Read more »

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The news last week that the economy’s output (GDP) had fallen by 1.0 percent in the three months to March sends shivers down the spine. This is the fifth consecutive quarter in which output has decreased, and the first time since 1992 that a decline in output for a full year has occurred. The annual… Read more »

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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.

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“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… Read more »

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What’s a fair way to set increases in wages? There are many factors, but two that always come up in bargaining are the cost of living (inflation, usually measured by the CPI), and productivity. Workers have an expectation that they will at least be compensated for price increases (inflation) in order to maintain their spending… Read more »

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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. There were two papers provided to the Biennial Conference – a short discussion paper and a longer background paper with… Read more »

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There is considerable evidence that union members get better pay than nonunionists 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… Read more »

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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.

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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. Internationally, “fragile” is certainly the picture with many countries concerned that they will take years to recover and some with fears that they will… Read more »

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Many people will be thinking about the effect of GST on the cost of living. The following must be somewhat speculative as the government has not yet finally said it will raise GST (though it seems highly likely it will go up by 20% from 12.5 percent to 15 percent), nor when that might happen.… Read more »

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This is a new-look Bulletin with changes made as a result of the review we polled you on last year, and a lot of thinking on our part. You’ll see the difference in the information section following the commentary. It’s designed to be easy to skim read, but with links you can click for further… Read more »

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Just as both life and geology in Christchurch seemed to be stabilising from the September earthquake, the vicious 22 February quake has hit with terrible human pain and physical destruction. It would be hard to show more starkly how inadequate Gross Domestic Product (GDP) is to measure our progress and welfare. It does not measure… Read more »

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There is a lot going on. The earthquake continues to take its heavy toll on the quality of Christchurch people’s lives, and will come on top of the continuing recession to slow the economy in the coming year. Many aspects of the government’s low-road approach to employment relations take effect including the bare 25 cent… Read more »

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The government’s 19 May Budget is a fateful one. It could push New Zealand back into deeper recession and unemployment, or it could give us a chance to pull out of three years of stagnation. It could set some directions to begin solving the big problems New Zealand faces, or it could be a vote-buying… Read more »

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The 2011 Budget was a victory of story-line over needs. The story was that the New Zealand government has a debt problem. When confronted with the fact that government debt is not a problem by world standards – one of the lowest in the OECD – the government acknowledges that the real problem is private… Read more »

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The government has recently compared wages in New Zealand and Australia again. It is now resorting to an after-tax comparison to try to show some progress. But cutting taxes doesn’t increase the size of the economy. And its comparisons conveniently forget to go beyond income taxes to take into account benefits like Working for Families.… Read more »

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We often say that low income families are hit harder by rises in the prices of necessities than high income families. That is very topical with the big rises in food prices in the last year – 7.5 percent from June 2010 to June 2011 – and petrol up 20.1 percent between the two June… Read more »

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Youth unemployment is finally getting some traction on the political agenda. It is a big reason for unemployment remaining high: 44 percent of unemployed people are under 25.

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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.

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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.

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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.

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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.

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We’re told that New Zealand has had an awful saving record, but that it’s now turning around. Is that true? Household debt grew hugely in the US too, and the financial system, including profits and pay, grew to an absurd size, partly on the back of it. Did that happen here too?

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“Business facing” is how the Government is describing the latest round of public service restructuring. The spin will be “more jobs, higher wages”, but can a “business-facing” organisation absorbing the Ministry of Economic Development, the Department of Labour, the Ministry of Science and Innovation, and the Department of Building and Housing really achieve this while… Read more »

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The Government’s Budget will be announced on 24 May. There have been surprisingly few pre-Budget announcements so far. The main one was that there will be a near-zero “operating allowance” for new spending rather than the already very low $800 million the Prime Minister was confident about as recently as February. This is a worrying… Read more »

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The media coverage of last week’s Budget has emphasised its petty nastiness such as the removal of the tax exemption for newspaper girls and boys, and the move to stricter assets tests for people needing support when going into residential aged care.

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An affiliate asked how reliable Treasury’s wage forecasts are, after forecasts in the May Budget showed wages increasing nearly 50 percent faster than the inflation rate for the next four years. This commentary looks at the forecasts of annual increases in the average wage from both Treasury and in the NZIER Consensus Forecasts that we… Read more »

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Recently we’ve made submission on topics as varied as the relationship with Australia and protection of our bank deposits. This commentary covers some of the issues we raised.

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The report on household incomes, inequality and hardship prepared each year by the Ministry of Social Development was released this month. It showed that income inequality rose again in the year to June 2011, and is now at its highest level ever in New Zealand. It also showed that the median (middle) household income fell… Read more »

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The Industrial Relations Centre at Victoria University collects information on collective employment agreements which it reports on each year. Its 2012 report shows slower wage growth in collectives than the previous year – 2.0 percent compared to 2.6 percent – but similar to employees in general. This is unusual because pay increases in collectives over… Read more »

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The government currently heavily subsidises feature films, with the best known example being the $100 million for the Hobbit. Yet it refuses to take any action to support, let alone subsidise manufacturing despite calls from both employers and unions in the sector, and from opposition political parties. This commentary compares the case for supporting manufacturing… Read more »

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The fifteenth round of negotiations of the Trans Pacific Partnership Agreement (TPPA) will take place in Auckland over the next few days (3-12 December). It is under negotiation between New Zealand, the US and nine other countries. Japan and Thailand have also shown interest but would join in the face of strong opposition in large… Read more »

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I guess it is inevitable that the first Bulletin of the year should have a look at the year ahead. The outlook is very mixed, and though it has improved from a year ago, most of the hopes and fears of the same time last year remain. The rural economy is still bolstering our exports;… Read more »

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This year I plan to have two or three guest commentaries. The first one is from Charles Waldegrave who with Peter King, both of the Family Centre Social Policy Research Unit, carried out the research that gave us the Living Wage figure of $18.40 per hour, announced earlier this month. He tells us how it… Read more »

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From time to time I get questions like “I’m just heading into negotiations. Do you have any up to date information on the actual cost of living for workers in [region X]?” It’s long been a question in Auckland, and is particularly a concern in Christchurch right now, for good reason.

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The government has so far given us few clues as to what will be in the Budget on 16 May. There will be an “operating allowance” for “new spending” of $800 million, but as usual with this Government, most of that will be used by increased health and education spending. Health is rumoured to be… Read more »

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It’s not only New Zealand’s high unemployment rate (still in the longest recorded stretch that it has been higher than Australia) – it’s a whole series of social and longer term problems that were not addressed in the Budget

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The Living Wage campaign has made some important advances. As well as some private sector employers, the Auckland, Hamilton and Wellington City Councils are all considering adopting the Living Wage

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The wage gap has been in the news again, with talk of banks and other Australian businesses moving call centres from Australia to New Zealand, and IBM cutting staff in Australia and considering moving some of its jobs here.

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Over the last 30 years, income gaps have widened dramatically in New Zealand. Increasing income gaps of this kind have traditionally been defended on economic grounds by arguing that they create the incentives needed for economic growth. Recently, however, more economists have begun to question whether inequality at current levels is necessary.

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This month is the fifth anniversary of the September 2008 collapse of US investment bank, Lehman Brothers. By allowing it to collapse the US government was attempting to signal that investors could not count on government bailouts and that the government would rely on the market to fix the problem itself. Instead it signalled the… Read more »

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There are always some myths doing the rounds that serve various interests. I look at four

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The time and the science are well past debating whether human-driven climate change is occurring. In the absence of effective action, the outcomes described by the latest expert projections are frightening.

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Whatever you might think the economy will do in 2014, it’s going to be a hectic year. I hope it will bring a real challenge to the primacy of neoliberal ideology – the idea that private ‘markets’ know best and government should be small enough to drown in a bathtub. It is important to remember… Read more »

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Inequality will be a big issue in the election, as it should be. Income inequality means that many people are missing out on a fair share of the income the economy generates. That’s exactly what has happened over the years beginning in the 1980s. To understand the current position, it is crucial to understand how… Read more »

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What has happened to wages and salaries during the recession triggered by the Global Financial Crisis and under the National government? In this commentary I compare wage and price increases over the period, and look at wages adjusted for price increases or ‘real wages’. I also look at a Statistics New Zealand proposal to publish… Read more »

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We have yet to hear much from the Government about what will be in the Budget on 15 May other than that they hope to be forecasting a surplus – by a whisker – and that in the interests of paying off debt quickly, new spending will again be very tight.

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One of the most important aspects of the Budget got very little attention. It confirmed a continuing fall in government expenditure as a proportion of the size of the economy, from 33.0 percent of GDP in the year to June 2013, down to 29.9 percent in the year to June 2018. Bill English has told… Read more »

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In the past I have shown how wages rises have failed by a long way over the last 20-25 years to keep up with labour productivity. In this Bulletin, I look at three industry sectors – Agriculture, Forestry and Fishing; Manufacturing; and Finance and Insurance: how their wages fared, and how they compare to other… Read more »

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Wages and salaries are a vital part of the picture of income inequality in New Zealand because so many people depend on them. For households with at least one member aged 18-64, wages make up over three-quarters of average household income, and this is rising.

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What economic policies do we need from a new government after the election? The “rock star economy” was never more than a blip and economic growth has probably peaked. Yet wages haven’t followed growth on its way up and unemployment is much higher than it should be. Meanwhile crucial economic, social and environmental imbalances remain.

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Does it pay for you to be on a Collective Employment Agreement (CEA) rather than an individual agreement? The evidence available suggests that yes, workers on Collective Employment Agreements get bigger and more frequent pay rises. They may of course get other benefits aside from a better deal on pay, such as better job security,… Read more »

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In political terms this was a Shuffle Budget. Rather than redistribute to those who most needed it from those who could afford it, the Budget shuffled money from one group of not-so-well-off New Zealanders to another. Rather than address issues in a serious way, it shuffled policies just enough to recognise mounting public concern. And… Read more »

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Peter Conway died on 9 June after a serious depressive illness. He was CTU economist before me, and he was my boss and colleague as CTU Secretary. He also founded the CTU Monthly Economic Bulletin. So I’m taking this opportunity to remember him as an economist – but also as more than that, because he… Read more »

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This reports some interesting new research from the 2015 New Zealand Association of Economists conference at the beginning of this month.

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This looks at the latest data on collective employment agreements, showing again that people who are part of a collective do better in pay rises, and unionisation’s effect on inequality.

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Overseas investment is frequently controversial. When multinational corporations misbehave or try to influence governments (including in treaties like the TPPA) they attract odium. Land sales to overseas buyers are controversial for understandable reasons. But ongoing business investment frequently flies under the radar and is economically much more important.

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Despite economic growth in production per hour worked which peaked at 4.7 percent in dollar terms in the year to June 2014, wage rises have been subdued. Even the Reserve Bank is commenting on it. What are some of the reasons for wage rises being low?

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Predictions on the economic outlook for 2008 are tinged with more than the usual degree of hesitancy. This is a time when many economists are saying, in effect, “there is a lot of uncertainty, markets are volatile”. In other words – they don’t know! There is obviously more certainty about what has already happened and… Read more »

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There is now an accumulation of economic indicators pointing to slower economic growth. Despite relatively low levels of unemployment, the prospect of higher dairy returns, improving terms of trade and the likelihood of a solid Budget in May, in general it has to be acknowledged that the key economic issue is not inflation – but… Read more »

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The free trade agreement with China is due to be signed next week. The CTU has consistently raised concerns about these negotiations over the last 3 years and has made comprehensive submissions, met with MFAT officials on many occasions, and signalled our key issues in discussions with Ministers. As the negotiations neared a conclusion we… Read more »

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Food prices are hitting households – and also the headlines. In the 30 years to 2005, world food prices fell by around three-quarters in inflation-adjusted terms. Since then they have risen by 75 percent, with much of the increase in the past year. The U.N. Food and Agriculture Organisation’s (FAO) Food Price Index, measuring the… Read more »

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Budget 2008 showed that relatively modest tax cuts nevertheless use up a large amount of money. The annual average cost of the tax cuts is $2.7 billion. John Key had been quoted prior to the Budget as saying that National would have bigger tax cuts. Last October I commented in this Bulletin that for the… Read more »

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Times are hard. It is likely that when the June quarter economic growth figures come out on 26th September, it will confirm that the economy has been in a technical recession through the first half of 2008. We are halfway there with the news that the economy contracted by 0.3 percent in the March quarter.… Read more »

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Economists are never that keen on comparing previous forecasts with what has actually happened. This is understandable. Usually the defence against the accusation that economics is a dismal science is that it is not always that dismal – but we also know it is not always that scientific either. This year we have seen plenty… Read more »

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There is now widespread recognition that wages need to rise in New Zealand. The CTU has identified a number of measures that are needed to lift wages on a sustainable basis. These include: increasing the minimum wage to two-thirds of the average wage; amending employment law to strengthen collective bargaining particularly in relation to promoting… Read more »

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As the old union song Solidarity Forever goes, “they have taken untold millions that they never toiled to earn”. But now, as we witness a major meltdown in the financial system, it is trillions – not millions. And as unions have often observed, the titans of capitalism are always keen to see financial losses socialised… Read more »

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Tough times lie ahead but there is considerable uncertainty about the extent of the impact on the real economy from the global financial crisis. In the midst of this uncertainty we have an election! For workers this highlights the differences between the political parties in terms of worker rights, employment, and security. There have been… Read more »

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As the Economist wryly observed this week, some in the West used to say that the only thing that could save China was capitalism: now they are saying that the only thing that can save capitalism is China. In recent months in this Bulletin, I have trawled through the story of sub-prime housing, devious derivatives… Read more »

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The current economic crisis was not created by workers. But they are paying for it. This financial crisis was not about too much government, too much regulation, or wages being “too high”. As The Economist said this week in its leader – financial markets were ‘plagued by poor regulation, dangerous incentives and the reckless use… Read more »

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Economics is sometimes called the “dismal science”. It is certainly living up to its reputation. But it is the dismal outlook for workers and others that is of greatest concern.

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What the Tax Working Group did and didn’t do

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Transforming New Zealand’s low wage economy

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Finding enough revenue and the “Wellbeing Budget”

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