Just Left

Why the minimum wage must increase

This Monday the government will decide whether or not to increase the minimum wage, a decision that will have a direct impact on the living standards of hundreds of thousands of New Zealanders. While being cognisant of the more constrained financial position of many businesses this year, the government must also consider the economic and moral case for an increase.

The economic case is a strong one. While organisations like Business New Zealand argue in a seemingly logical fashion that an increase in the current economic environment is unaffordable, this line of thinking entirely misses the lessons of history and is inconsistent with other action being taken across the economy to deal with the crisis.

One of the key problems facing our economy at this point is a lack of purchasing power. Consumers, lacking confidence and facing the squeeze are shutting their wallets. This contraction in spending worsens the recession as businesses reliant on cash flow face a further downturn in sales. As these businesses close, unemployment increases and the cycle repeats. This is why governments and central banks the world over are doing everything that they can to increase the purchasing power of consumers  - witness historically low interest rates and the willingness of even conservative governments to take on huge debt to fund infrastructure projects.

The very same arguments apply to general wage rates, and in particular the minimum wage. Economic recovery will only occur when workers have the confidence to open their wallets again, and one important part of restoring that confidence is ongoing wage increases. Remember – workers are shoppers too. This argument applies particularly for workers at the bottom end of the labour market. The evidence is overwhelming that low income workers spend a proportionately bigger share of their income as opposed to higher income workers who have a greater capacity to save. Therefore an increase to the wages of low income workers offers us the best opportunity to increase purchasing power in our economy which will be one key driver of recovery.

Importantly, the minimum wage is the best lever we have to increase the wages of the lowest income workers. People working at or just above the minimum wage tend to have little bargaining power with their employers for several reasons. Firstly, these workers tend to lack skills that are in short supply meaning that they cannot act as ‘traders’ in the labour market. Secondly, for the most part low income workers are not organised into Collective Agreements meaning that they cannot regularly and effectively bargain for terms and conditions. Finally, low income workers usually lack salary progression arrangements like many other workers that allow wages to increase over time due to service, skill attainment, or performance. Whereas workers with these arrangements can ride out small percentage increases in lean times, minimum wage workers are generally solely reliant on the annual increase.

For the one hundred and twenty thousand or so workers on the minimum wage, and the three to four hundred thousand who are just above it, a reasonable increase in the minimum wage each year is the only way that their household purchasing power can be increased.

If the incomes of low wage workers are depressed through a nil minimum wage increase we will reduce the capacity of our domestic economy to recover from the recession, and also risk entrenching a low wage labour market that will prove problematic after an economic recovery as workers see better opportunities overseas.

These economic arguments aside there is also a strong moral case for the government to increase the minimum wage on Monday. Considering the issue from a moral standpoint is important as decisions of this nature directly impact upon the welfare of hundreds of thousands of people. This point is even acknowledged in the governments own framework for their annual consideration of this issue which states that “fairness” and "income distribution" are central objectives in setting the minimum wage.

The touchstone for a government considering the moral dimensions of incomes policy must be the impact on income inequality. A growing gap between rich and poor acts like a cancer on the body of a nation, leading to resentment, a lack of social cohesion, economic segregation, and an increase in crime and the diseases of poverty. As discussed, low income workers have little bargaining power (particularly in a recession) to win the reasonable ongoing wage increases necessary to preserve or improve their relative position. It therefore lies with the government to lay down clear guidelines about the fair treatment of these workers, including the need for a reasonable minimum wage (and remember here that a “freeze” in the minimum wage is actually a real decrease).

The current government implies that it wishes to shake off the legacy of the 1990s when a virtually frozen minimum wage and associated policies led to a massive growth in inequality in our country. Tax cuts (the other pro’s and cons to one side) are not the answer to this issue as they will dis-proportionately benefit the already well off, perversely increasing inequality. Rather, the government must act with some courage on Monday, shrug off the limited thinking of some of its business allies, and accept the economic and moral case for a reasonable sized increase to the minimum wage.

Education: Carrot or stick?

As Michael Cullen said in Parliament recently – “You won. We lost. Where’s the plan?” Standardised tests at primary school is the only National Party education policy I recall hearing articulated during or since the campaign, apart from the new minister’s ad hoc announcement that the 90 Day No Rights Bill would not apply to teachers.

 

To see what’s in store, all we have to go on that I can find is a major speech John Key gave to the University of Auckland School of Education in 2007 when he declared that on the strength of one visit to one school, he had decided that standardised testing would be a non-negotiable element of any new government’s agenda.

 

The speech identified problems in education that we should all be aware of, and looking for solutions to. Principally, one in five kids are emerging from primary education ill equipped for NCEA and with a poor grasp of the simple skills their prospective employers need such as basic numeracy and literacy.

 

The solution? Well if you set up a nationwide, one size fits all, bureaucratic monster that will test every primary school child, then share the results with their parents, teachers, principals, and boards of trustees of the failing children… they will… act! They will take action… of… some kind. They will do… something… The thing is I have looked through all National’s policy utterances on education that I can find and despite really wanting to find that magic solution, I can’t find a single idea.

 

So what is the silver bullet we would all love to find?

 

There is a vast array of policy ideas to tackle education problems that politicians like to trumpet. They tend to fall into two categories – carrot and stick. As with many policy areas, the right seem to prefer the stick, while the left tend more towards the carrot.

 

Stick policies are things that punish schools seen as ‘underperforming’ like removing school zones and implementing voucher systems – the idea being that parents will vote with their feet, removing their children from poorly performing schools and place them with others that they perceive to have better results.

 

This approach goes hand in hand with bulk funding – Give schools a lump of money and let them spend it how they want. Good schools will use it wisely and triumph in the market. Others will waste it, wither and lose pupils. Trouble is, the most widely used kind of stick when governments go down this track is the one the principle of Auckland Grammar needs to beat away all the parents that perceive high decile as equating to superior.

 

National’s standardised testing policy fits well within the stick grouping. However we still don’t know what will happen in the schools whose results are not acceptable in the eyes of the government. We might guess based on stick policies often including the idea that teachers should be paid according to performance – as if teachers are not motivated enough simply by wanting the children they teach to succeed.

 

Carrot policies on the other hand, are geared towards more support for schools, teachers and pupils. They recognise that there are environmental factors outside schools that contribute to how well a child does, and how engaged and motivated they are.

 

Things that are not obviously education related can be key, like the ability of a parent to pay for, and to cook, a good nutritious diet. Parents working multiple low paid jobs to make ends meet do not have as much time to spend ensuring homework is completed. A massive problem that is very topical at the moment – health issues arise from poorly insulated homes. How can a child perform at school while constantly sick with colds and asthma due to a damp living environment?

 

Carrot policies invest more money in low decile schools. They ensure teachers are well paid so the profession can attract the best and brightest graduates. They invest in teacher training. They invest in special education programs for children that are struggling. They try to reduce class sizes so that children get extra help when they need it and have things explained a second time when they don’t get it the first.

 

Most of all, carrot policies recognise that one size does not fit all. Every student is an individual that suits a different method of teaching to the kid next to him/her. Children learn at different speeds. They excel at different subjects. They are inspired by different things.

 

Good teachers recognise this. Good schools encourage this. Good governments support this with policies that accept first and foremost that at the heart of all this is the teacher. Teachers need support and they need to be given the trust, the resources and the class sizes to get the most out of their pupils.

 

Aristotle said “Those who educate children well are more to be honoured than they who produce them; for these only gave them life, those the art of living well.”

 

Hint to National – there is no silver bullet. But this is the place to start:

 

The starting salary for a teacher with a 3 year degree and a diploma of teaching is $45,643 per year

 

The average yearly wage in June 2008 for people with a Bachelor or higher degree was $56,056

The median yearly wage in June 2008 for people with a Bachelor or higher degree was $46,176

 

Contributor #4

I am the original bad blogger having started several sites in a fit of enthusiasm only to lose interest after a period of some months in much the same way that we all have with some thick worthy classic  that we subsequently pretend to have completed reading. A group blog that a number of we like-minded Labourites can chip into withhout too much pressure to post hourly is therefore attractive.

With the least active government in place since the Continuous Ministry at the same time as a once in a century economic crisis crashes on to our shores I hope to be able to contribute on a range of political issues as they become pertinent. In addition I have particular interests in the union movement, tertiary education, and the world of progressive christianity, all of which will undoubtedly feature in future posts.

By way of a brief bio I am a born and bred Aucklander living in Mt Roskill and splitting work between home (where I spend most of the week looking after my one year old son) and Kinglsand where I work as a union negotiator for Finsec. I've been active in the NZLP for about a decade, have stood as a candidate at the past three elections, and am currently active in Mt Roskill. In various ways I am involved in governance in the tertiary sector, community healtcare, and the Anglican Church. My main leisure activity is growing vegetables.

The Maori Party

I must admit I have felt very ambiguous towards the Maori Party since it was created a few years back.  As a Labour Party member I've been dismayed to lose 5 of the Maori seats to the Maori Party, see them take a large chunk of Party vote which would otherwise have gone to Labour, and watch them take a more conservative and at times identify focused stance on issues.  On the other hand they have engaged in the democratic process some otherwise disengaged Maori (particular younger Maori), taken principled stands on some key issues, and provided an alternative voice on race relations in New Zealand.  I've aways been of the view that we should not judge too quickly today's radical voices because tomorrow those views may be the mainstream.

My ambiguity towards the Maori Party contrasts with the Greens whose positions I agree with (although not necessarily their tactics and methods) more often than not.

I think quite a few Labour Party members have felt equally ambiguous towards the Maori Party.  Do we attack them and strongly contest the seats they hold, or should we be more conciliatory and co-operative?

National has the luxury of not needing to be ambiguous.  John Key is cleverer than Don Brash.  Don used race as a wedge issue and attacked the Maori Party.  He lost.  John realises that a friendly and co-operative relationship with the Maori Party can help secure Labour votes for National.  How?  Look at the results for National in the Maori seats.  National is lucky if they get 10% of the Party Vote.  But the Maori Party wins a large chunk of vote that would otherwise go to Labour.  National has no interest in competing in the Maori seats; they have nothing to lose and everything to gain by building a good relationship with the Maori Party.

So what do you do if you are the Labour Party and a significant portion of your voter is from Maori?  Build a constructive relationship with the Maori Party, attack them, or somewhere in between?  It's an important question and one Labour will need to answer. 

3.5% - a 150 basis points cut

That's pretty staunch action. Shows how seriously bad the indicators are looking that the Bank would make such a cut.

Will it be enough, along with the burgeoning Budget deficit? Remains to be seen of course, but now we are for the first time in a spot where there isn't that much more left to cut in interest rate terms.

Oh and - the dollar is down another cent, trading at around 0.5262 against the USD now (9.05am).

First Labour caucus of 2009 focuses on economy

It is encouraging to see the new Labour caucus energised and focused around the key challenge facing us - the economic crisis.  It is also encouraging that they are brining in people from outside the party to present information and offer advice about how best New Zealand can weather the global storm.  While NZs 2008 recession was mostly driven by domestic factors, including a drought, 2009 and 2010 are going to be mostly influenced by the global economic outlook.  We are a trading nation.  As Colin James points out in his latest ODT article (not yet online), if Australia and the US suffer, we will too.

But let's also be clear about this.  New Zealand is a wealthy nation.  Even if we have a protracted recession, we will still be a wealthy nation.  And what we must remember is that there is no reason why an economic downturn must cause poverty and hardship.  We have enough wealth in our country to eliminate poverty and provide free heath care and education all.  It is about the choices we make and our priorities.  Ultimately, it is about the way in which we distribute the wealth (not how much we have) that determines whether or not people live in poverty and hardship. 

Or to use Obama's words, a nation cannot prosper if it only favours the prosperous. 

What comes next?

So, we know now that the intellectual ascendency of the "Markets are Always Right" point of view in public life has come to a shuddering halt. 

We also know and have known for a long time that any vision that saw the abolition of markets and their replacement by some kind of planned society and economy could not work.

The most interesting question is what comes next. In principle, a restoration of what some IR scholars would called embedded liberalism may return to the scene on the global stage: far stronger international regulation of world economic flows both in trade and of capital, and better institutional backing to prevent the emergence of large debt or asset bubbles.

At the domestic level, there will be public calls for less risk to be worn by members of the public, and more shouldered by the community - especially during the sharp recession that is looming across the developed world. Those calls are reasonable, for at their heart is a simple argument: that working together we can provide a level of security and comfort for all of us, no matter what the global economy throws our way.

This marks a major opening for social democratic politics. Not the old politics of smokestack social democracy, but a continuation and development of what the Clark government was trying to do: combine a greater measure of economic security and development with proper care for the environment and a fairer, more just society.

Those things do appeal to the punters when you talk about them. If people come to the issues in a non partisan light, they end up on the same side unless they have direct economic interests at stake that are tied to the status quo. 

What are the implications for domestic politics? 

I would not put it past the National Party to clothe itself in the rags of social democracy. National doesn't believe in a fairer society but it knows that most Kiwis do, and since its major reason for existence is to win elections, it would not find it too much to bear to adopt a sort of vaguely liberal, vaguely conservative, vaguely sensible policy framework. The problem is that National activists, many of their backers, and their allies in ACT reject that approach entirely. They want the return of the 1980s/90s liberal experiment, because their thinking is stuck in the past. 

For Labour the challenge is relevance. We have the advantage of actually believing in a balanced approach, and an ideology that is relevant for the times. To overcome incumbency of a first term government requires much more than that, though: it calls on us to critique justly, to argue hard and to show not only that we are relevant, but that our vision of a different society is the one New Zealand needs.

For ACT, it means an ongoing decent into irrelevance. And for the Greens it poses the hardest challenge of all, given Labour has no choice but to bring Green politics further and further into the heart of its manifesto. If we don't, we will fail the test of delivering the policy the country needs. If the Greens buy that, they become more marginal. If they fight on issues like closing trade, being anti-science, etc, they will simply limit their constituency.

It's a very interesting background for the debates of the next couple of years. Every honest person in politics knows we cannot do things the same way, because of the financial crisis and the challenge of global warming. The contest will be about who can deal with those things best.

Introducing - Tony Milne

Some of you will know me from "I See Red".  My intention is that I will continue to post on that blog, but will occasionally post here - and thanks to Jordan for the opportunity!  Here is a short bio for those of you who don't know me.

I was born in Invercargill in 1981 and come from a working-class family (my parents are both at the freezing works).  I moved to Christchurch in 2000 and went to Canterbury University majoring in English and Political Science (Hons).  I stood as a candidate for Labour in Rakaia in 2002 when I was 21 (Jenny Shipley was the MP but stood down), and again in 2005 against Brian Connell (who came and went).  I continue to do a lot of work in the Ashburton community.  While I was at University I also did a certificate in youth work, and worked as a peer supporters for 3 years at the 198 Youth Health Centre in Christchurch.

I worked for Tim Barnett in Parliament for a few years, including doing a lot of work on the Civil Union campaign, and for the  past few years for the 5 Christchurch Labour MPs in Christchurch.  I was on the Government Board of the Labour Party for 4 years (and was on the 2005 campaign committee) and involved in Young Labour and Rainbow Labour for several years.  My first involvement with the Labour Party was election day 1999 when I helped Mark Peck in Invercargill. 

Last year I got married to my partner of 9 years (who thankfully is into computers and not politics), bought a house and changed jobs: I now work for the Problem Gambling Foundation doing public health work and liaising with local and central government around policy.  I also spent 8 weeks in the US last year doing volunteer work for the Service Employees International Union and spent 4 weeks working on the Barack Obama campaign in Pennsylvania during the primaries.

I am interested in politics at all levels - local, national, global.

My particular interest on this blog will be how each NZ Political party responds to our new environment: a National-Act Government supported by the Maori Party.  A Labour-Progressive-Green opposition.  A global economic crisis.  The challenge of climate change.  

A few years ago I began talking about a new New Zealand - the growing majority diversity coalition - and argued that neither Labour nor National could win elections without getting that majority diversity coalition on board.  That was why Don Brash lost in 2005.  I laid out a platform for how each Party could win-over that majority diversity coalition.  John Key followed the template perfectly.  His 2008 victory was in large part because he reached out (rather than attacked, as Don Brash did) the majority diversity coalition - Maori, women, new migrants, gays, pacificka.  He boldly went into Labour heartland and didn't accept that it was Labour heartland.  In an electoral system where elections are won or lost by 1-2%, it was enough to pull over some Labour voters to National or suppress some Labour turnout.

So my key question, and what I'll be looking at over the coming three years is, how will National try to maintain that support and how will Labour respond to that challenge.

Please allow myself to introduce… myself.

I’m Jeremy, formerly known for my irreverent (!) ‘blog Aucklander At Large, which has largely fallen by the wayside. Like everyone else here at Just Left, I’m a member of the Labour Party. However, unlike everyone else here, I have not made a run for Parliament under the Labour banner (or any banner for that matter).

Having served seven years in Wellington (including one year as a public servant), I recently moved back to my turangawaiwai – North West Auckland. Waimauku to be precise – right in the heart of John Key’s Helensville electorate. I was actively involved in Grant Robertson’s successful election campaign in Wellington Central (I was the man behind camera for Grant’s YouTube clips), and was involved in Marian Hobbs’ campaigns in 2002 and 2005, as well as local government and student politics. Having completed my great tome, I spent a year working as an investment advisor for the Tertiary Education Commission, and now work as a Senior Manager at the Manukau Institute of Technology in South Auckland – continuing to build on my passion for higher education.

It was rather inevitable that my politics would end up in the Labour camp. My father (a history teacher) installed in me from a very early age the intrinsic worth of collective action, workers rights and the welfare state; I clearly remember – at the tender age of nine – my father lecturing me on the evils of the Employment Contracts Act, and explaining why he and his fellow teachers were striking throughout the 1990’s. I was taught that a society should be judged on how it treats its weakest, most vulnerable members, and developed philosophies of tolerance and social democracy.

I did not agree with everything that Labour did during its nine years in government (the Seabed and Foreshore Act and involvement in Afghanistan spring to mind), but its long term vision for a better society can not be denied. Because of Helen Clark’s Labour-led government, we can be thankful for four weeks annual leave and paid parental leave, modern apprenticeships, the Civil Union Bill, prostitution law reform, an increase to the minimum wage every year, the repeal of Section 59 of the Crimes Act, and New Zealand not being involved in Iraq – to name but a few.

My contribution to this ‘blog is going to be simple. As well as commentary on national politics, I hope to give a perspective on political life in New Zealand beyond the belt-way. I want to find out what makes middle-New Zealand tick, Joe Bageant-style.

Anyway, let’s see how that works out and take it from there.

JGH.

Just Left: Group Blog

After some reflection, I've decided to invite a set of posters to join me on Just Left.

The logic is simple. Some of the best blogs and spots of political writing out there now (Hand Mirror, Pundit, PublicAddress, The Standard) are sites with more than one author. They usually share a point of view, but they have diversity within that. The dynamic interaction between authors improves the quality of everyone's writing.

Perhaps more importantly, I think there's a niche for Labour aligned activists to post in a way that is less "agent provocateur" than The Standard, but which is undoubtedly connected to the labour movement as a whole.

I hope that Just Left can evolve into a community of people writing some interesting, thoughtful content that is insightful, and that comes from a perspective of being both activist and inside a major political party.

Obviously that constrains to some extent what is written here, depending on the topic. Some of the posters will be anonymous, and some will use their own names. Some might do both, issue by issue.

We'll try it for a while and see how it goes.

I will leave posters to introduce themselves as they see fit, in their first posts. I hope that what emerges is a good read for you, and makes you think.