Scoop Election 08: edited by Gordon Campbell

On Phil Goff’s debacle in Christchurch

November 3rd, 2011

Any points Phil Goff may have won in the television debate a few days ago went west during last night’s public debate in Christchurch – which, as Vernon Small says, had turned into something close to a rout by night’s end.

The centre-left can feel justifiably furious at Goff and his minders for going into this debate without a narrative (much less a credible defence) for Labour’s election costings. Sorry, but “We’ll have them for you by the end of the week” doesn’t really cut it. Somehow, Goff managed to make Key look like a hard-headed and credible manager of the economy.

One can only feel sorry for David Cunliffe going into the Radio Live debate tonight with Bill English, Russel Norman, Pita Sharples and Stephen Whittington of Act, subbing for Don Brash. If Cunliffe fluffs and stalls in the way his leader did last night he’ll lock Labour into being the punching bag of this election. If Cunliffe does better – and it would be hard for him to do worse – it will be taken as a leadership challenge. This “live” exchange bodes well.

Normally, political journalism shouldn’t try to tell politicians how they should have played this or that gambit, or how it did or didn’t go down with the punters. That’s not the job. In this case though, incredulity is the only response to Goff’s line of defence on Labour’s intention to raise the minimum wage.

The issue is important because it is enabling National to deflect criticism from its own failure in government to have a credible plan to create jobs for young people. Instead, the public debate in this area is being focussed on the alleged impact of Labour’s minimum wage hike on youth employment.

Last night, Goff’s line of defence was (a) to decry the low wage economy and (b) to play the politics of envy by painting Key as a rich prick who begrudges paying a bit more for his muffin so that café staff can earn a living wage. This was astonishingly feeble. Shouldn’t Goff and Labour know by now that personal attacks on Key only rebound?

In the circumstances of this debate, an economic argument was required, and it exists. Here and here and in the Department of Labour’s own 2010 report on the minimum wage available here.

What the DoL found last year (page 17) was that relatively few employers hiring young people treated the minimum wage as a barrier. Only one in ten employers had hired 16 and 17 year olds during the previous three months, and only a third of them had paid the minimum wage:

The most common reason for not paying the new entrant’s minimum wage was that the rate was too low, or was not fair, or that the job was skilled… The Mayors Task Force for Jobs submitted that continued minimum wage protection was necessary for young people to encourage employers and others to invest in skills development, particularly in the trades… When young people are working alongside others doing the same work, there seems no justification for lower wages on the grounds of age. Information from Mayors around the country suggests that the level of wages and any increases have not resulted in constraints on job creation for young people, or fewer opportunities for young people. There is no evidence that raising wages has resulted in young people leaving school early.

While confessing (para 60 page 16) that there is little in the way of reliable data on the impact on unemployment of raising the minimum wage, the DoL goes on to say that boosting the minimum wage to $15 an hour last January would add one percentage point to the unemployment rate by the March 2012 quarter, to 5.7%.

The evidence of the last 20 years is that wider issues – commodity prices, export performance, exchange rate and interest rate movements etc – determine the decisions about job creation, much more so than increases in the minimum wage. (In the boom conditions of the 2000s the more the minimum wage went up, the faster the unemployment rate went down.) During a recession, the argument for raising the minimum wage turns on whether it will (a) simply raise costs on small business and cost jobs or (b) provide a boost to the economy (especially at retail level) that will create jobs far more effectively than the recent round of tax cuts. Goff could have chosen to make the second argument.

At the very least, surely Goff and Cunliffe can mount a more robust defence of the $15 an hour minimum wage than John Key being a meanie over the cost of muffins. According to press reports, Richie McCaw has a lot of his money invested in rest homes and aged care:

McCaw’s All Blacks salary was about $750,000 – plus a $100,000 World Cup bonus – with much more reaped through third-party contracts. The skipper signed to stay on with the NZRU until the 2015 World Cup.

His property portfolio consisted of houses in the Christchurch suburbs of St Albans and Shirley, three in Omarama, plus a new holiday home in Wanaka.

He also had directorships or shareholdings in 16 companies, mainly in the retirement home and aged care industries.

While aged care/rest home enterprises like Ryman are making stellar profits, the workers in such homes are notoriously poorly paid – as the Greens and Labour revealed a year ago in this comprehensive report on the dire conditions that are rife within the sector.

Much of the caring work for our elderly people is being done by Pasifika women. Metaphorically speaking, these are the mothers and the sisters of the Tongan and Samoan players who made such a signal contribution to the Rugby World Cup. Given his investments in the sector, would Richie McCaw be likely to oppose aged care workers getting a fair deal, and having their wages lifted to $15 an hour? Does John Key begrudge a decent wage to the people who wash and feed and care for our old people, and who sit with them while they are dying – at a time when their employers (such as Ryman) are reaping such handsome profits?

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    1. 15 Responses to “On Phil Goff’s debacle in Christchurch”

    2. By Emett Kay on Nov 3, 2011 | Reply

      Yes Goff’s tactic of fluffing over costings is unacceptable.
      Yes Richie McCaw is part of the problem of low wage workers in rest homes if he does not become part of the solution.
      In my experience in Auckland new immigrants from India-Pakistan form an increasing demographic of rest home workers. Either way, wherever the workers hail from, I have been appalled at the standard of care I regularly observed.

    3. By Craig Ranapia on Nov 3, 2011 | Reply

      A bit of unsolicited advice for both Key and Goff: Trying to shout each other down make you look more prickish than ballsy.

    4. By ben on Nov 3, 2011 | Reply

      Gordon, good post overall, but there is actually strong evidence on the effect of the youth minimum wage on youth unemployment from Eric Crampton. Rare have such an unambiguous picture emerge in the social sciences, but this is it.

      Here’s a start and follow the tags for more: http://offsettingbehaviour.blogspot.com/2010/02/youth-rates-revisited.html

    5. By Eric Crampton on Nov 3, 2011 | Reply

      Gordon,

      I think you’re confusing the New Entrant’s Wage with the minimum wage. The former is a lower minimum wage available for young workers for the first couple hundred hours of work. Few employers’ used it, likely because it was a big hassle in figuring out how to work it – the number of hours applied to the worker, not to the job, so you could never tell if a new applicant was going to be eligible or for how long. So the minimum wage was binding rather than the New Entrant’s wage. And, that’s also what the most recent Hyslop and Stillman piece found for the DoL – employers really didn’t use the New Entrant’s wage. So I think you’re conflating employers paying above the New Entrant’s wage with employers paying above the minimum.

      There’s a reasonable amount of international evidence on the minimum wage. When it’s high as a fraction of the median, it’s damaging for employment; when it’s lowish (40% or less), it doesn’t do anything measurable (that’s part of the reason for divergent findings on the effects of the minimum wage – some times and places, it really doesn’t matter; other times and places, it really does).

      The NZ unions, whose summary you cite, draw a lot on US evidence of lack of employment effects where US minimum wages are very low. It’s a bit heroic to conclude from that that effects would also be low where minimum wages were $15/hr.

    6. By Peter Clareburt on Nov 3, 2011 | Reply

      And so we are still in a position where if Labour wins the election who would be the person representing the country as Prime Minster. We all know that the PM is chosen by the caucas but in today’s world of international media – I think it is important that we know especially if we are thinking of changing government – Goff doesn’t really seem to be backed by his party – and running around yelling liar Liar is not a good image – neither is not having a clue where all the money is coming from for all the policy they keep thinking up every day to make good sound bites. Cunliffe will be better – it is his job – but mostly his line is – oh the detail on that will come later under consultation with the unions. I think National need to do more – but I am more concerned with not letting labour get back in – you just need to watch the news on Greece to see what happens when you give people money for nothing. It doesn’t help the poor either for more than a couple of weeks as it just fuels inflation – better we start a “Kiwi-Foods” company to sit alongside Kiwi-Bank to keep the overseas people honest and reduce the cost of food through competition.

    7. By alan bonard on Nov 3, 2011 | Reply

      It is interesting to read cramptons reservations about youth unemployment rates in his ‘offsettingbehaviour’ blog.

      “This remains very much a first cut: something I may someday assign as an honours project for more thorough sorting out. The econometrics here are very simplistic and do nothing to account for differences in labour force participation rates or the obvious problem of serial correlation in the time series data. But the simple model is still pretty telling. If we allow youth unemployment rates to vary both as a level shift above the adult rate and as a multiple of the adult rate, which is what we’re doing when we run the simple regression with a constant term, we still have a jump in the current youth unemployment rate that is well above that seen in prior recessions.”

      It is often wise to remind followers of pseudoscience that correlaton is not causation.

    8. By Joe Blow on Nov 3, 2011 | Reply

      And Goff was doing so well! A RadioLIVE-HorizonPoll of 1,147 voters yesterday has National dropping to 35.7 percent. Forty-two percent of those polled say they back a National-led Government, and 41.4 percent back a Labour-led one:

      Read more: http://www.3news.co.nz/Labour-within-striking-distance—poll/tabid/419/articleID/231470/Default.aspx#ixzz1ccBclfX3:

      Read more: http://www.3news.co.nz/Labour-within-striking-distance—poll/tabid/419/articleID/231470/Default.aspx#ixzz1cWduUi8K

      Thank heavens Goff didn’t gaff on national TV!

      I agree. If they rose the wages for caregivers, more people on the benefit might like the idea of doing those kinds of jobs more! Now that’s real job creation!

    9. By Kate on Nov 3, 2011 | Reply

      How I wish we paid scientists, nurses, care-givers, teachers, and every functioning worker in this country as well as we pay sportspeople for their frivolous and fleeting occupations. Don’t give me that barf about they’re “improving the economy”. The world cup just came in at 39 million under. Sell a few houses to pay for the shortfall fellas?

    10. By Bryan on Nov 3, 2011 | Reply

      Going into the debate without a narrative?

      They’ve gone right thru this term and right thru the campaign without a narrative, so why should they grow one now?

    11. By Cullen's Sidekick on Nov 4, 2011 | Reply

      Hmmm, John Key won the debate? How come a hard core Labour supporter and the defender of high taxes on rich pricks can make a statement like that? I am confused really

    12. By Eric Crampton on Nov 4, 2011 | Reply

      Do check the updates (most recent one here: http://offsettingbehaviour.blogspot.com/2011/09/unemployment-and-youth-minimum-wage.html ).

      I agree completely that absolutely nothing in my method allows for strong causal claims. But something happened, starting in 3rd quarter 2008, that led to a really big increase in the youth unemployment rate relative to the adult unemployment rate. It is hard to think of anything else that could have done it: you need something where the timing is right and that affects youths rather than adults in a way that hasn’t happened in the prior time path.

      It isn’t just the recession – I’m modeling the time path of the relationship between adult and youth unemployment rates from 1986 through 2011, and there were far worse NZ recessions over that period with much higher adult unemployment rates but still far lower youth unemployment rates. It isn’t changes to training funding, as the numbers there just aren’t big enough to have done it.

      Note also that Hyslop & Stillman’s better data (individual rather than aggregate) allowed for more sophisticated techniques. They found a sharp drop in youth employment, with most of the displaced youths hanging about in school longer. And so we have reports from school principals complaining of kids who really ought to have left for the workplace sticking around and disrupting schools as there are no jobs for them to step into.

      By my best guess, maybe 7-8 points of the youth unemployment rate comes down to the youth minimum wage changes. That’s a bit less than a third of total youth unemployment over the period – youths always have higher unemployment rates as they’re moving into their first jobs from no jobs rather than looking for work while in employment (among many other reasons). But it’s a third that something can be done about.

    13. By Joe Blow on Nov 4, 2011 | Reply

      Maybe he’s not doing as good as I first thought:(

      Guyon Espiner: Poll is a kick in the guts for Labour
      http://tvnz.co.nz/election-2011/guyon-espiner-poll-kick-in-guts-labour-4502038

      There were 400 more people interviewed in the Radio LIVE poll. Not sure if that makes any difference…

      Let’s hope Goff keeps it together on National TV!

    14. By Joe Blow on Nov 4, 2011 | Reply

      Noooooooooooooooooooo!

      More poll gloom for Labour
      http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10763639

      At least ACT looks dead in the water. I’m starting to think that Don’s takeover was a National Party conspiracy to destroy the party so that National could absorb their voters. Na, Don was for real….

    15. By Peter on Nov 4, 2011 | Reply

      Labours latest policy announcement – they are going to change basic accounting practices – They will be pointing out to Moody’s and other such agencies – that if you borrow against an asset then that is not considered a debt! Too bad if the asset reduces in value – but that would only happen if perhaps the world was facing an economic crisis – oh yes the world is facing an economic crisis.

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