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Treasury’s verdict on raising the Minimum Wage? – Part II

19 November 2011 3 comments

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Throughout this election, John Key has been criticising Labour’s policy to increase the minimum wage from $13 to $15 an hour, citing a Department of Labour (DoL) report that such a move would cost the country 6,000 jobs. Key even referred to this in his Leader’s Debates with Phil Goff.

Except… that Treasury has dismissed the DoL’s “claim” by stating that raising the minimum wage “has not been true in the past“.

John Key has been well aware of  Treasury’s debunking of DoL’s “claims”, according to a Official Information Act request made by TV3,

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Full Story

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Unless Treasury has become a  satrap of Socialist International, it seems pretty hard to dismiss their  conclusions. The DoL’s case is not helped by their own contradictions,

“…research from the United Kingdom suggests minimum wages may have no effect on employment, or that minimum wage effects may still exist, but they may be too difficult to detect and/or very small.” Ibid

I believe that the so-called  DoL “report” can be safely dismissed as not very intellectually rigorous.  And not even half clever.

The government claims that recent taxcuts, last year and in 2009, were “fiscally neutral”. But even this is not true.

National’s first round of tax-cuts, which took effect in April 2009, benefitted high income earners the most. Low income earners recieved very little,

The cuts are proportional to wages. Those earning $100,000 or more a year will get at least an extra $24 dollars a week. Anyone on the average income of $48,000 a year will get an extra $18 a week, and low income earners will get a $10 a week tax credit.

On a monthly basis, both tax cuts together will see those earning $100,000 pocketing an extra $225, and low income earners an extra $95 a month.” Source

The October 2010 round of tax cuts were just as bad for low income earners, and generous for high earners,

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Those on minimum wage recieved an extra $6.36.  Meanwhile someone earning $120,000 benefitted from between $46.08 to $89.04.

With growing inflation reaching a 21 year high, to 5.3%;  increasing ACC charges and rates; any gains made by low income earners and those on social welfare and superannuation were quickly eroded.

Little wonder that the end result was a transfer (“trickle up”) of wealth from the poor and middle classes, to the wealthy.

The report’s 2004 data – the latest available – reveals the richest 10 per cent collectively possess $128 billion in wealth, with median individual wealth of $255,000. In contrast, the poorest 10 per cent collectively possess $17.2b, with median individual wealth of $3200. While the richest 1 per cent held 16.4 per cent of the country’s net wealth, the poorest 50 per cent owned just 5.2 per cent. ” Source

Which, unsurpringly, means we are seeing more headlines like these in our media,

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The Dominion Post article goes on to state,

Data from the Organisation for Economic Co-operation and Development shows New Zealand’s income inequality climbed dramatically in the 1980s and 1990s after sweeping economic reforms and deregulation of labour markets.

Disparities have plateaued since 2000, largely thanks to Working for Families tax credits, bigger pay packets for middle and low-income earners and declining investment returns for the rich.

But the gap between rich and poor still ranked ninth worst in the developed world in 2008.” Ibid

How well have the top richest done in New Zealand?

About this well,

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The top 150 Rich Listers’ wealth grew by 20%.

That’s quite an achievement during one of the worst recessions in recent history. But even that increase in wealth isn’t sufficient for the Rich Listers. They wanted more,

Jeweller Sir Michael Hill, worth $245 million, told NBR: “Could not the Government give us a little freedom to be able to make common sense decisions for ourselves?”

John McVicar, managing director of a forestry group that puts his family’s worth at $70 million, said economic policy should be based on reducing costs for business and increasing productivity and revenue.

Construction company head Sir Patrick Higgins, worth $100 million, said: “The country needs to address excessive regulation if it is to improve wealth creation.”Ibid

Although at least one  United States think-tank and the “Wall Street Journal”  “rank New Zealand as already having the highest level of freedoms for business in the world.  The Heritage Foundation’s “index of economic freedom” puts New Zealand fourth overall, with a score of 99.9 for business freedom.

Clearly, tax cuts and increases in profits have shifted wealth upwards – not shared it around. Certainly the “trickle down” theory now applies only to meteorological services predicting upcoming rain falls.

This “gushing up” of wealth has been written about in the US “New York Times”. A very simple illustration showed where wealth has been accumulating – and who has been missing out,

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Interestingly, the great divergence of wealth, productivity, and incomes started around the late 1970s, early 1980s.  It was also about the time that Ronald Reagan and Margaret Thatcher were elected into office, and began neo-liberal, “free market” policies commonly referred to as “Reaganomics” and “Thatcherism“.

The New Right were ascendent, and implemented their policies with ruthless efficiciency. Those policies benefitted the rich – to the detriment of the unemployed, low-paid, and middle classes (who were too busy fighting each other to notice what was happening to them them).

New Zealand’s turn for a dose of  New Right came only a few years later, when Rogernomics took effect in 1984.

As wealth is accumulated upward (as the NBR so vividly illustrated), the real reason for denying low-paid workers an increase in the minimum  wage becomes more apparent; the rich would be forced to share some of that wealth. Their profits would be a little less.

Of course, this doesn’t stop some from gaining some very substantial wage increases,

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How They’re Paid

PRIME MINISTER New salary (backdated to July 1): $411,510. Was: $400,500.
DEPUTY PRIME MINISTER New salary: $291,800. Was: $282,500.
CABINET MINISTER New salary: $257,800. Was: $249,100.
MINISTER OUTSIDE CABINET New salary: $217,200. Was: $209,100.
SPEAKER AND OPPOSITION LEADER New salary: $257,800. Was: $249,100.
BACKBENCHERS New salary: $141,800. Was: $134,800.

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So remind me again, why we can’t increase the minimum wage? I’ve heard all the nonsensical, reactionary reasons – but they seem more predicated on a pathological disdain for the poor,  from  uninformed  middle class aspirationists, rather than any clear logic.

If New Zealanders want to continue  down the road of increasing wealth for the rich; growing disparity in incomes;  worsening poverty – this is the correct way to go about it. Our current policies and inequalities will achieve a society where the 1% Haves control most of the wealth; the vast majority remain in poverty or near-poverty; and the middle classes stagnate, blaming those on social welfare (the worst victims of these wretched policies) for their lack of upward mobility.

But the middle classes are looking the wrong way.

This may all sound like extremist left-wing politics. Maybe it is. But I don’t think so. The information I’ve gathered is freely available and easy to gather. The realities are all around us and the media – despite it’s glaring faults and preoccupations with trivia and crime stories – does present us with a view of what’s happening around us.

Many of us just choose not to look.

It’s easier to blame the poor; the unemployed; those of welfare.  And yet, if the current economic situation was not as distorted as it currently is – we wouldn’t have so many poor, unemployed, or on welfare.

An increase of $2 an hour would be a step in the right direction. Just ask the Prime Minister – taxpayers are paying him an extra $11,000 a year.

I wonder if paying all our MPs  those wage increases will result in any job losses?

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National’s Grand Victory in Employment?!

8 September 2011 5 comments

The number of people on the unemployment benefit has dropped – but more people are claiming welfare.

Social Development Minister Paula Bennett said the figures dropped last month by 1145 to 55,974, the lowest it had been since July 2009.

But, because of a rise in those claiming the DPB and sickness benefits, total beneficiaries were up from 327,990 to 328,355.

In July the overall number rose by 0.1 per cent and an extra 855 people began claiming the unemployment benefit, mostly because of a drop off in seasonal work.

Bennett said more young people were finding work. “Unemployment benefit numbers dropped last month by with half of the decrease due to more young people going into work.”

Last month 7238 claimants found a job.  There were a number of short-term Electoral Commission jobs currently among 15,000 jobs with Work and Income, she said. 

Source


+++ Reality Check +++

The number of people recieving the unemployment benefit does not reflect the true numbers of unemployed. The actual numbers are determined by the Household Labour Force Survey.

This is because not everyone who is unemployed registers with WINZ. For example married/de facto couples where one is working and the other has lost his/her job, cannot claim for the Unemployment Benefit.

Currently the HLFS figures for unemployed are:

For the March 2011 quarter: 155,000 (6.6%)

In the June 2011 quarter: 154,000 (6.5%)

And youth unemployment remains unacceptably high, at over 19%.

The government has a long way to go before they can announce victory over unemployment.

Worse  still, with the government cutting back on youth training to the tune of $146 million, I think we can start to see where our economy is headed: low wage; “McJobs”; and easy investment, as Bill English suggested, not to long ago;

And to achieve those low wages, government has implemented the appropriate cuts;

Which means that, as government investment in education, training, science, and research is cut back, we get this;

But not to worry, fellow New Zealanders. The government is onto it.

16 and 17 year olds will be given a Purchase Card so they cannot buy booze and ciggies.

What’s that? It’s already illegal to sell 16 and 17 year olds alcohol and tobacco products??

Never mind – bene-bashers love it.

From “Nanny State” to “Daddy State”…

I don’t think there’s much question that  serious social problems in this country  are not being addressed in any meaningful way by this current government…

So is the Prime Minister, John Key, really  aware of what is actually going on in New Zealand right now?  Well, judge for yourself…

So what is National doing about soaring youth unemployment?

At their recent Conference, held in Wellington, they came up with this…

(Article abbreviated)

They’re going to clamp down on booze and cigarettes?!?!

That’s it?

Oh good lord! And people thought that Labour was “Nanny Statist”?!?!

I wonder who will be next to feel the iron fist of National’s Polit-buro state control? The retired? Civil Servants? Anyone using state hospitals???

Congratulations, my fellow New Zealanders: we have gone past Nanny State to Big Brother.

It might be worthwhile considering that,

  • Not all unemployed youth smoke
  • Not all unemployed youth drink
  • Even if they do,  Key says that they will still receive “a limited amount of money for young people to spend at their discretion“.  Like… on booze and ciggies?!
  • Even if they won’t have enough “discretionary pocket money” – what is to stop them stealing it? Or selling their Food Card for cash, and then buying ciggies and booze?

In the meantime, how many jobs will this piece of neo-Nanny Statism create?

The answer, I submit, is:

Even the NZ Herald was quick to acknowledge this simple fact in their August 16 editorial,

Yet there is also nothing in the Prime Minister’s announcement that creates jobs for young people. There, the Government still has work to do.”

Meanwhile, as National blames the young unemployed of this country for the world recession, and proposes to penalise them by tinkering with their only means of survival – the problem continues unabated,

The last time youth unemployment was this high was in 1992…

1992?

Wasn’t that the previous National government led by Jim Bolger, with Ruth Richardson as Minister of Finance? And didn’t she implement a slash and burn economic policy in her “Mother of All Budgets” that resulted in unemployment reaching over 10%?!?!

Why, yes. It was.

Are we starting to see a pattern develop here, folks?

It is abundantly clear that National has no clue how to address this problem. Attacking welfare benefits which keep people from starving to death, or more likely, breaking into our homes to find food, is not an answer. It is a cheap shot geared toward winning votes from uneducated voters who hold the illusion that living on a benefit is a cosy arrangement (it is not).

There are no policies being announced to create jobs, or to train young people into a trade or profession.

National should be throwing open the doors of our polytechs to train young people into tradespeople that the community desperately needs. With the re-building of Christchurch shortly to commence – where are the necessary tradespeople going to come from? (Most have buggered of to Australia.)

If this is the best that National can come up with, then, my fellow New Zealanders, we are in deep ka-ka.

Meanwhile…

Dr Mapp said the research science and technology was the way to create jobs, economic growth and a higher living standard for the country.

“To that end, it is vital that high-tech, exporting companies maintain their competitive edge in global markets.”

The grants range from $300,000 to $5.9m and run for three years.

They are valued at 20 per cent of the research and development spend in each business and provide a maximum $2.4m a year for three years.

Dr Mapp said they provide the businesses involved with more financial security over that period.

Businesses to get grants in the latest round were involved in  software development, biotechnology, manufacturing and electronics.

Wellington companies which received grants:

Core Technology: $629,400

Open Cloud: $2,394,920

Xero: $4,040,000

Xero was founded by Rod Drury in 2006,  who made $65 million in the same year after selling his email archiving system AfterMail. Xero purchased Australian online payroll company,  Paycycle, in July of this year for A$1.5 million.

Which begs the question as to why the government has given away $4 million of tax-payers money when the owner is ‘flush’ with $65 million and has enough capital to buy off-shore  companies elsewhere.

Is this a prudent use of tax-payers’ money,  especially when,

* government is cutting back on social services?

* government has cut back on youth training programmes?

* government is borrowing $380 million a week, and telling the rest of us to “tighten our belts”?

At a time when government is berrating unemployed 16 and 17 year olds for being on the dole and  “smoking ciggies”, instead of  providing meaningful training and/or employment, it seems that National is still “picking winners” in the field of commerce.

$4 million could go a long way in providing training, and a future, for many 16 year olds.

By contrast, how much do young people, living away from home, recieve from WINZ? It must be a grand sum, to earn the Prime Minister’s stern attention. The answer is:

It’s a shame they’re not “picking winners”  with our unemployed youth.