Higher incomes need higher wages

Labour stands for higher wages.

National stands for lower taxes.

There's a big difference. One is driven by a need for higher productivity, and is good for all of us: it leads to more cash in the hand for workers, more tax to reinforce public services, and a higher standard of living for everyone.

The other is saying, actually we can't cut it in the world, and the only way to improve our incomes is to slice away at the public sector, to give a small, short term boost to people's pockets.

One of the most important debates this year is to work out how best to boost wages, so incomes can grow and New Zealand can be more successful. Tax cuts aren't really at the core of that debate.

Comments

[B Whitehead]

Your joking... right??

[leftie]

Couldn't agree more Jordan. Tax cuts are a shortsighted approach. However if they must be implemented, my vote will go to the Party that will let us, as workers, actually keep that tax cut. We have to be winning as there is no point in voting for a Party that will swipe it back in another way (the most vulnerable being employment rights and public services), if they get into power.

It is clear that BEFORE tax wages need to catch up to Australia's. When I go for a job interview, I don't ask what the after tax hourly rate is.

[Razorlight]

Ok...Why are Labour promising tax cuts?

I am very confused now????

[Swampy]

This post shows that you have no idea why tax cuts are important. What is important is getting the interfering Nanny state out of people's lives and we do that by cutting back on the size of government and the amount of income they have, giving the money back to people to make their own choices.

[Mark]

So why under Labour productivity has fallen to 0.7% per year?

Why has 150,000 NZders emigrated to Oz?

Why has our after tax income fallen?

Labour use to support lower taxes in 1981 with Bill Rowling. Why has this changed to the tax and spend party which costs the average worker more than they get back?

[Clint Heine]

I am shocked Jordan. As an absentee candidate deadly serious about getting into parliament you really have no idea about tax cuts vs take home wages.

Keeping money away from politicians in the first place is a damn good start. People like you seem to think this is a political football to play with, using it to threaten the public that they will lose "essential" services. Labour has fooled some of the people with this before, but thankfully the polls are showing us the public do not believe you.

1 in ten Kiwis are thinking about going to Oz and 80 a day are already going... Jordan, how can you sit there and spout this nonsense?

[burt]

Jordan

I can't believe you don't understand the connection between progressive tax rates, static taxation thresholds, inflation and take home pay. Let me explain.

A person earning $55K in 1999 would be the same dollar for dollar value as a person earning $69,144 today. (Using the Reserve Bank Inflation calculator see: http://www.rbnz.govt.nz/statistics/0135595.html )

Because of progressive taxation a worker earning $55,000/year in 1999 received accurate CPI adjustments would be worse off today on $69,144 - let me explain.

Tax on $55,000 with 1999 tax rates is: $13,020.00
Or. 23.67% of income.

Tax on $69,144 with today’s tax rates is: $18,236.16
Or. 26.37% of income.

Using the inflation adjusted total it makes a difference of about $35/week. So, inflation around static thresholds stealthfully increases taxation. Indexing the brackets and/or rearranging the rates is required and I think we all know that.

Calculating the same stats on a person earning $35,000/year yields about a 2% drop in take home pay due to bracket creep, do you still deny we need quite significant tax cuts?

[Spam]

So Leftie: You'll be noting that labour has not only not cut taxes, they have also started something like 47 new 'levies'.

And when they do cut taxes, it will be within a few months of new regional fuel taxes (for one).

So labour WILL swipe them back.

[Cactus Kate]

"I wouldn’t go into business if my life depended on it. I find trade immoral".

Jordan Carter - from http://www.whaleoil.co.nz/?q=node/6597

Higher wages need higher productivity Jordan. NZ has one of the lowest productivity rates in the developed world. It can only increase this given its natural constraints by an increase in trade with the rest of the world. The only people stopping NZ from suffering a severe recession at present are dairy farmers who are the largest subsidised pollutants in the Nation.

I never thought I would find someone less qualified than the McGillicuddy Serious to debate productivity and wages, but your attitude reinforces your inability to understand that productive qualified people wont work in an economy that steals from them.

[Whaleoil]

What I find amazing is that Jordan thinks that trade is immoral but taxation isn't, but without trade you have no ability to tax...go figure, and this guy wants to represent us in parliament.

[Andrew Bates]

Jordan,

I take it that econ paper you took with me was your last.

Higher (real) wages need higher productivity. Higher productivity needs more capital invested per worker. Capital is accumulated through savings, which are amassed out of take home pay.

Capital can also come from offshore - the more capital invested here from overseas the higher NZers' productivity and ultimately earnings. This is another reason why foreign investment here is a good thing and why Labour's banning foreigners from buying airports, ports, power plants or the like is bad for NZers.

Capital can also be reinvested by businesses from retained profits - which are diminished when governments introduce union building legislation. If unions help workers gain higher wages, ask yourself why American workers are the highest paid in the world when the yanks have comparatively little union-building legislation?

[Blair]

You FAIL at basic economics Jordan.

[bob]

Jordan : You find trade immoral? How do you live? What do you eat? What do you wear? Where do you live? How do you get about? How do you get your internet connection? Or are you highly immoral in all your dealings? Or don't you count the free and open exchange of your money for goods and services you want as "trade". Because in a nutshell, that's what trade is. The free exchange of things.

Unlike, say, taxation, which is the forcible removal of a part of someone else's income.

My god you are one fucked up individual. Labour needs more like you to help it remain in opposition for the years to come. Vote Jordan everyone.

[dave]

Hey, Im no economist, but how can higher wages be driven by a need for higher productivity? I thought higher wages result from higher productivity. And when higher wages do come through higher productivity theres more tax for public services and GDP increases. So boosting public services depends on increased productivity. Then you wouldnt need to slice at the public sector to pay for $20.00 tax cuts that wont even pay for the petrol price increases.

Now I could be totally wrong, I'm no expert on economics. Labour doesnt stand for higher wages, if it did it would not stand for higher state support to provide the marginal tax rates to lock us in to lower wages, wages we get purely because Labour does not have a clue how to lift productivity. So it plans tax cuts

[Seamonkey Madness]

Jordan, I'm amazed.

In the Anchorman context of course:
"What? You pooped in the refrigerator? And you ate the whole... wheel of cheese? How'd you do that? Heck, I'm not even mad; that's amazing."

[burt]

Jordan

Do you think you could address some of the issues raised in this thread ?

Apart from 'leftie' who appears to have been briefed with the same talking points as you have, everyting points to the fact that you have no F-ing idea what you are talking about. Your credibility as a potential MP is on the line here - stand up for yourself and prove that the dissenters in this thread are wrong!

[Policy Parrot]

Interesting how the right stresses the need for growth in productivity - yet no commenter from that perspective has actually pointed out how that they envisage that could happen.

Which decries the point, you are using low productivity as a brickbat to keep wages down.

When you have an argument on how to increase productivity without either:
- increasing inequality
- slashing the public sector
- increasing unemployment
- eroding the tax base

All of which occurred under the last National Government. None of which actually increased the potential for growth in productivity.

I'll be interested to hear. I think all of New Zealand would.

For Labour, at least - the others I can't speak to, Education is the key to increasing productivity. So is promoting access to Education. And,
- Combating distractions to education within the home, like poverty and family violence.
- Facilitating the rise of those who would be positive family and community role-models in areas dealing with loss of hope.
- Dealing with the root causes of crime rather than parking ambulances at the bottom of the cliff.
- Making workplace training valuable and worthwhile rather than a series of degrading hoops to be jumped through.

[Graham Clark]

All of which occurred under the last NATIONAL GOVERNMENT!
You say that like they go about business different to the LABOUR PARTY!

THEY ARE THE SAME!

Education may be the key to increasing productivity, and THAT is the VERY BEST REASON to remove government from the education sector.

All the highest achieving schools in the Bay of Plenty are PRIVATE SCHOOLS.

Give people back the tax that is stolen from them so they TOO can afford to send their children to private schools.

The root cause of CRIME is lack of personal responsibility, and lack of family values, BOTH OF WHICH have been systematically destroyed by both NATIONAL AND LABOUR over the decades.
My son went to get a job from JOBFINDERS! - They wouldn't introduce him to any of the hundreds of jobs they had on their books BECAUSE I HAD REFUSED TO LET HIM GO ON THE UNEMPLOYMENT BENEFIT - Thats right! - Because he was not receiving a benefit they would not offer him a job.

Whose SCREWED UP morality is THAT?

You are probably not a BAD person!

To join a political party in order to make a difference to the lives of those in unfortunate circumstances is ADMIRABLE

HOWEVER - I don't believe you have actually used your BRAIN to THINK about some of the things you have come to believe.

I mean to say "I wouldn’t go into business if my life depended on it. I find trade immoral".!!!!!!!

TRADE is the MOST MORAL thing you can do!
To voluntarilly agree to exchange something YOU have for something SOMEBODY ELSE has, and both go away from the exchange happy! -

WHATS IMMORAL ABOUT THAT?

Yet you are HAPPY to Take money from people by FORCE

COME ON - Please use your BRAIN FOR THINKING

[Andrew Bates]

burt wrote:
"Interesting how the right stresses the need for growth in productivity - yet no commenter from that perspective has actually pointed out how that they envisage that could happen."

I wrote:
"Higher (real) wages need higher productivity. Higher productivity needs more capital invested per worker. Capital is accumulated through ..." and then listed a range of alternatives. Glad to see burt acknowledge libertarians aren't "the right".

People should be paid in accordance with the value they create, not in accordance with some long ago debunked Marxian theory of value. So when burt bemoans increasing productivity leading to greater inequality (presumably income inequality) he is simply bemoaning the fact that those who produce more and more earn more and more and those who produce SFA earn SFA.

The rest of his lament is similarly ignorant. There's nothing to lament in eroding the tax base or slashing the public sector - we already work 42.4% of our time (on average) funding the state leviathan. And while letting go the least productive workers would, ceteris paribus, increase the *average* productivity of those who remained employed, we're all better off when those let go find work at justifiable (market-value based) rates of remuneration.

[burt]

Andrew Bates

That was Policy Parrot. However I agree with you that he/she is full of it.

[Andrew Bates]

Apologies burt.

[Spam]

Interesting how the right stresses the need for growth in productivity - yet no commenter from that perspective has actually pointed out how that they envisage that could happen.

Which decries the point, you are using low productivity as a brickbat to keep wages down.

Well, policy parrot; you see, the evils corporations actually exist to make money. If productivity goes up (for example, by investing in new plant), then they make more money.

Now: These companies would be more inclined to invest if the costs of capital were lower, or their returns were higher.

With Labour's tax 'n' spend policies of redistribution, there are higher interest rates (increase cost of capital) and lower returns (high dollar), and less money in the hands of the 'rich pricks' to actually invest in this stuff.

Unless of course your view is that companies prefer lower productivity at the expense of profits, because they're not about making money at all; they're actually just out to screw-over the workers.

[SPC]

Labour needs to say that New Zealand is part of the Tasman labour market.

This means moving our minimum wage up $1 pa until we reach their minimum wage level. This means no tax on the first $6000. This means paying young doctors 10% more pa of the next three years (and write-off their tertiary debt by 10% pa over 5 years and then the rest if they do some public service work for a year where we have real supply shortages) and also paying these sort of increases to senior doctors and nurses and teachers and defence staff and scientists.

[SPC]

PS Productivity has nothing to do with wage levels in the public sector or many service industry sectors (competing against others under the same terms).

Low wage levels actually discourage industry from modernising production and making labour efficiencies.

[SPC]

As for the "intelligence" of Cullen being applied on behalf of the poor.

Cullen says "The Labour-led Government recognises the need for relief across the economy, but we know that need is especially acute at the bottom end of the income scale."

"This would have seen, for example, the first $9500 of income not attract income tax. However, at a cost of $3.7 billion after three years it would limit options further up the income scale. Officials advised that the lower paid would not benefit as much as expected."

Classic - he's taken advice from people philosophically opposed to such a no income threshold. They have tried to say there are better ways to do it, if one is trying to help the poor.

As for not benefiting "as much as expected" - what total and utter misleading nonsense. A direct lie in fact. Everyone benefits by the same exact amount (it is the dividend each shares equally - whether student, young single/flatmate/couple worker, family provider, beneficiary, post family couple, person on super etc), if this is the means of the tax cut delivered.

Treasury officials want to lower the progressivity of the tax system - delivering tax cuts via a no income threshold undermines their ability to promote a system they would prefer (for market incentice pure economic model ideological reasons). Thus they stopped Cullen, because if we were to adopt the Australian style (whether at $6000 - $15 to everyone or $9500) - they have no tax on the first $11,000, we might follow them in increasing this to their 2012/2013 target of no tax on the first $20,000. This would prevent Treasury from enabling a future National government from gutting the surplus for a generation (via moving towards a flatter tax scale) so we could never ever consider doing such as this again.

While our Treasury opposes this Australian idea - yet if we do not adopt it, the after tax income gap between here and Australia is going to result in an exodus of workers across the Tasman.

Or is that Treasury's plan, to export the low income worker and focus on rewards for skilled workers here - like also paying our doctors, scientists, nurses and teachers and defence force staff Australian level pay rates - yeah right.

Whatever, we now await with baited breath for what exactly are the changes "up the tax scale" which are going to help low income people more than a no income tax threshold.

What Cullen has really said is that students and people on benefits are going to be screwed (he will direct help people on Super because they area large group of voters who remain on this fixed income). They will remain on 3% CPI linked incomes while their actual costs go up 10% pa and more (food, power, fuel and rental housing). And receive no tax cuts at all. This while unemployment will rise back up to 5%. They will need to allocate hardship grants in the budget for students and beneficiaries. Beneficiaries should really hate this government by now, last cab off the rank indeed.

Cillen said "Up to 90 per cent of those earning less than $18,000 a year were temporarily on low incomes, such as teenagers and students, or were on a benefit system or receiving Working for Families or superannuation. It would be better to give pensioners more through other tax changes, he said.".

"Households were under serious pressure, with rising mortgages, fuel and food costs."

I suppose students, and those on single or couples benefits, do not live in households ... . And because there is no competition for their votes but from the Greens (oh my gosh it's a save the Greens budget!, that also explains the emmissions bill). And as we know ... Greens are last cab off the rank.

There is one idea better than a no tax threshold of ones purpose is to help the poor.

Tax credits for those without children which abate as income rises. Thus the cost does not transfer to other workers. This leaving more available for families with children in a WFF increase. Is this what Treasury helpfully suggested? I doubt it.

Their idea would have been to increase the $9500 threshold and other thresholds upwards(they really hated the idea of higher minimum wages for young people and unskilled labour in general and they want there to be poverty amongst beneficiaries and for this to keep downward pressure on wage levels for the unskilled, so why would they want a no income threshold tax cut which helped such people as much as those of the "successful" economy - let the rich have the tac xuts too is their mantra).

Treasury does not give advice about how to help the poor ebst, it gives advice which is in accord with their own preferred economic mangement system.

These are the people ideologically committed to GST and a CPI system premised on the totality of spending being used to measure inflation (and income supprot payment increases). The figure only applies to those who can buy up everything with their disretionary spending.

If Cullen is not prepared to offer one cent in tax cuts to those on stident allowances or benefits without children - is he prepared to assess the real increase in their necessity costs over thwe past few years, as oompared to their income increases and then match the
difference?

If not concern for the poor, is it really concern for obtaining the votes of people who might vote National (maintaining the WFF voters of 2005 and those on Super) and obtain
support for the budget from United and NZFirst?

I suppose NZFirst is being allowed to offer no GST on food in their election campaign (right wing poor taking votes away from National) and Greens to offer increased income support to students and beneficiries without children (left wing voters supporting Labour).

Whatwever his reasons Cullen should admit that when he says a no income tax threshold
"would limit options further up the income scale. Officials advised that the lower paid would not benefit as much as expected", what he is really saying is that some of the poor have no where else to go (as voters) and he has been persuaded by experts in the fields of expertise in managing the gullible about what is good for them that he should focus the tax system on workers and not those on fixed incomes - benefits, Super and allowances.

His response should have been tax credits (which abated) for those on low incomes without children and to increase fixed income support payments - allowances and benefits by the real cost increases they face (not the lower rate including discretionary spending CPI currently used). Is this what he has
done?

If not, concern for the poor and their well being is not something he stands for.

One wonders what Labour's own election policy will be and how it differs from the budget (or is Labour's future policy determined by what it can get United and NZFirst to agree to).

[SPC]

Has Cullen considered the casualisation of labour in assessing the merits of raising thresholds rather than having a no income threshold? Some people work on call and do c25-30 hours a week on average.

As for student allowances - Labour boasts more people receive them. It should be boasting that most people cannot afford to study without working to supplement their inadeqaute allowance, and at least they have the necessary part-time jobs under Labour. But what if unemployment rises and forces people out of study?

I challenge Labour to compare what a student allowance or single or couple rate benefit would buy in 1999 compared for what they buy now. There has a fall in real standard of living equivalent to that caused by the 1991 benefit cuts.

As to people with children on benefits - how can Labour MP's sleep at night.