Yesterday’s debate was more fact heavy than the last two, so now the smoke has cleared we thought we would give you some more detailed (and verified) information about the issues that were discussed.
Minimum wage and employment
National has focused on creating jobs, and New Zealand has done remarkably well by any international measure in weathering the biggest global economic shock since the Great Depression. There are over 127,000 more people in work since National took office (between September 08 and December 13 quarters).
David Cunliffe believes you can artificially raise wages without effecting employment, he said that there was no evidence that raising the minimum wage increases unemployment, based on US studies.
The problem for Cunliffe is that the minimum wage in the US is much lower than New Zealand’s at $7.25 per hour. New Zealand’s is $14.25. Labour wants to increase it to $16.25 and the Greens will go all the way to $18.00.
Probably the best measure of how high the minimum wage is relative to our capacity to afford it is how high the minimum wage is as a percentage of the median wage. New Zealand does very well on that score with the minimum wage being the 3rd highest as a percentage of the median wage in the OECD (paragraph 19). That suggests that our minimum wage workers do very well comparatively, but also that if we radically raised the minimum wage it would place us in unchartered waters. That’s why the Department of Labour said that raising the minimum wage all the way to the living wage would cost 24,000 jobs (table 1). Treasury actually recommended that National not raise the minimum wage in 2014. National went against that advice by raising it by 50c.
Housing is a complex issue, but generally we know the reasons why house prices are increasing from the Productivity Commission report on Housing Affordability published in April 2012.
The first thing we know is that the tax structure is NOT a factor. The Commission concluded that the tax advantage of property speculators is “much smaller than often suggested”. This tells us that a Capital Gains Tax is unlikely to make housing more affordable.
What did the Commission suggest are the drivers? A lack of land for development, and a difficult consenting process were major factors. That’s why National has worked with local government to release land to build 18,000 houses in Auckland and redevelop or build 5,700 in Canterbury. National has also worked hard on RMA reform (which Labour played politics over and the Greens opposed) and has reduced the cost of building materials by eliminating tarrifs.
The problem with Labour’s ‘Kiwibuild’ Policy to build 100,000 houses (a big round number which works well in a headline, but isn’t realistically how development works) is that it’s a poorly targeted policy doesn’t address the actual supply constraints which experts have identified. As former World Bank principal planner Alain Bertaud said in Christchurch recently: “The solution is to increase the supply of land. I would not bother so much on the construction of the housing itself, I think that can be taken care of fairly easily by the private sector”.
You often hear David Cunliffe talk about the ‘haves and the have nots’, implying that inequality is increasing under National. Put simply, it hasn’t. Brian Perry at MSD is New Zealand’s leading expert on inequality. Here is Brian in his own words. The full report is here:
“There is as yet no evidence of any rising or falling trend in the Gini [coefficient] in recent years.”
“The impact on incomes of the GFC and the associated downturn and recovery has led to some volatility in the index between the 2009 to 2012 HES. It will take another survey or two before the post-crisis inequality level becomes clear.”