David Craig, senior lecturer in Sociology at the University of Auckland, has has written an interesting piece about the state subsidising wages. Essentially he describes how the 1980s economic reforms left NZ a low wage economy which both National and then Labour addressed through wage and rent subsidies. Some of the policies he identifies are less obvious than others.
There can be no doubt that it is near impossible to live alone on the minimum wage. And that low wages drive people off shore. New Zealand needs higher wages. But when the state steps in with tax credit top-ups and accommodation subsidies the pressure on employers to lift wages or landlords to lower rents is reduced. Ironically it is largely the left that create these subsidy policies. They worry over rising inequality but inadvertently enable it to grow because their redistributive policies play back into the hands of those who own most of the wealth.
Tax credits have been proven to be the only way to get vast numbers of ex-beneficiaries in the US into work and earning enough to live on. In the short term I support them because having a parent in work will provide the best chance of breaking into the inter-generational state dependence cycle. But will their children also have to rely on top-ups as a permanent state of affairs?
I want to see a more egalitarian society. But I don't support the state being the instrument by which that is achieved. Neither however do I think the unfettered market will achieve it. I base that on human nature and the reality of greed.
I gather Craig supports the state as that instrument but is in a quandary as to how incomes can be lifted and inequality stemmed continuing on the current pathway. So where do statists go from here?
Professor Robert MacCulloch: What were they doing?
1 minute ago
17 comments:
Lindsay, could you expand on your opinion why the unfettered marked will be unable to achieve an overall more egalitarian society (and perhaps what you mean by that term)?
While you refer to "human nature and greed", those terms are in my view a) too vague and b)just as likely to prove precisely the opposite (i.e. human nature and greed also explain the drive for egalitarianism, and even the abuse of welfare).
Bez
By a more egalitarian society I meant a more even division of wealth. By greed I mean endless and unsatisfied acquisition with no underlying logical reason for it, of which we are seeing more.
Many people do the most menial yet vital jobs and get sod all pay for it. Yet most people I know don't give it a second thought. Or if they do are misguided activists clamouring for the state to fix it.
All very inadequately explained I realise. And you would probably be quite correct in saying that the natural extension of distrust in the unfettered market is trust in the state. In fact I trust neither.
Ok Mitchell...thats it,you are through!
Hand in your libertarian cards at the door and go stand over there in the pink corner and think long and hard about your whimpy selling out to socialism and maybe if you repent we will let you back in
.....and don't be suprised if you get de-friended on Facebook too.
;-p
Lindsay, as Ayn Rand would say, you need to go back and check your premises.
NZ doesn't need higher wages per se, it needs to increase added value in the products it produces, and increase in the efficiency of production as well as the total production output. The only way to achieve that is for the government to get out of the way and for it to stop interfering in the economy,directly and indirectly.
Human cooperation is always, and has always been, based on self-interest first and foremost. If you want to call that the "human nature and greed" I would agree in principle but can't see anything wrong with it (don't forget the 'higher' levels of the Maslov pyramid have to do with the benefits for the individual of social recognition, just think Carnegie for an example).
Also, individual wealth is not kept under a mattress, but necessarily invested, and hence available to investment and growth. Following that it is ultimately applied to activity that creates the largest productive output. It's government spending and lending that distorts the picture, as it is applied not in creating optimal growth, but in achieving political purposes.
Increasing pay for menial jobs should be achieved by reducing the supply of labour for those jobs, i.e. by creating sufficient better paid, alternatives, which requires the availability of capital, not by withdrawing that capital from investment and using it to artificially raise the value of low paid jobs.
Reducing inequality at the barrel of a gun (i.e. through government) works only marginally, and only to achieve a lower denominator, not a higher one, while class differences will persist anyway.
Just accept what you call 'inequality' and focus on raising the overall standard, I would suggest.
Bez
@James: I hope you were joking...
Bez
By a more egalitarian society I meant a more even division of wealth
Which makes you - like Douglas these days - a lefty.
Because we me a more even distribution of the costs of society: if the $60 billion our spendthrift government costs was spread equally, it would be just a flat tax of around $15,000 per person.
So a family of four would have a bill of $60,000 pa, while an individual would have to find $15,000.
That's true libertarian egalitarianism.
You may not like the numbers but that's why NZ is in such a mess: this is what we each should pay every year. Most "Kiwis" pay much much less - or in fact take from the govt. Only a few pay their way.
Of course, faced with that sort of bill, I'm sure there'd be huge demand to get say it down to something manageable:
George Osborne to cut £4bn more from benefits... on top of the £11bn savings set out in the June budget.
That's how you do it.
Tax credits have been proven to be the only way to get vast numbers of ex-beneficiaries in the US into work and earning enough to live on
We have a tax credit here - its called the In Work Payment - except that most workers, whatever their wages, get it. And, in the case of lower income families with kids, it is the preferred way they can get a tax credit as many get more in WFF than they pay in tax.
Once you've ruled out the state and private individuals, who is left? Aliens?
With regards to wealth,supposing people get it through creating value and not robbery or fraud, the more they make, the better for us generally.
Wealth redistribution happens in two ways - via the state or via the exchange of labour for reward. The second is superior because it puts all the right incentives in place and does not rely on coercion or confiscation. But even in the free market some will get exploited by bad employers or the monopolies that continue to occur. Greed is a different thing to self-interest as I argued here recently;
http://lindsaymitchell.blogspot.com/2010/08/matt-mccartens-diatribe-is-drivel.html
Of course I accept a level of inequality but it is heading in the wrong direction. The unfettered free market (an ideal not yet attained) necessarily puts a lot of store by philanthropic impulse as well as win/win cooperation. That there is enough of the first is what I doubt.
Comrade (:-) )Mitchell writes..."Of course I accept a level of inequality but it is heading in the wrong direction. The unfettered free market (an ideal not yet attained) necessarily puts a lot of store by philanthropic impulse as well as win/win cooperation. That there is enough of the first is what I doubt."
Its the ongoing circular argument... "We need the state welfare system to cover the shortfall in private charitible giving...but its the taxation required to fund it that leaves private people unable to give as much as they would if it didn't exist"....
Add to that the resentment that coercively funded state welfare breeds towards the recipients by the taxed due to the seemingly constant demands on their ever streached resources and one can see that its not a recipe for social harmony.
It will require a national "leap of faith" to trust and allow people to help others without needing to threaten them at gunpoint.
DPF has a relavant post on this here
http://www.kiwiblog.co.nz/2010/09/anzacs_most_generous.html
"Kiwis and Aussies have been ranked the most generous givers of time and money to charity.
The Charities Aid Foundation has published the World Giving Index. They use poll data from Gallup, and average out the percentages who say they have donated money, donated time and helped a stranger."
Theres the evidence that the welfare state is not needed to help the poor.Private sector people ALREADY give extra money to aid the less well off ,over and above what the state takes in tax to do the same job.
How much more would they give if they had more of their own money availible and could choose who gets it and who shouldn't?
I submit that if the State backed off,reduced itself down in size,allowed people to keep far more of own their money to spend as they choose and let people help those who they thought REALLY needed it (far less than thoses curently getting it) you would see a difference like night vs day.
And this country would boom.
"@James: I hope you were joking...
Bez"
Nope....shes out.I've added her name to "the list" and come the purges..opps I mean the "new enlightenment" she will be made to see the error of her ways...
;-)
Hullo Lindsay, and thanks for your thoughtful commentary. I think you are right to point out my ambivalence about the state as mechanism for stopping social pathologies. I think there is real damage done when people cant afford housing (ownership or rental) and when they cant see they or their children can get ahead, given they are not going forwards in terms of savings or assets, or the school down the road from them is becoming one they fear to send their kids to, because all the other kids there are struggling to. The instinct is to imagine things that would fix it quick, using the machinery to hand. But sometimes things have built up over time: such as the current concentration of housing ownership among older, better off NZers. Changing the tax settings on that will take a fair while to level the playing field again...
In the case of housing, basically it was a supply side market solution for rental housing that was proposed: raise supply through tax incentives, and rents will come down. No doubt rents have not risen as fast as they might have, but every quintile (bar the lowest, which is heavily subsidised)is now paying more for housing, and the proportions of all quintiles paying over 30% have been rising for years. Rents in Auckland at least (especially close in)have risen faster than inflation too, pushing the least well off out into the suburbs on the edge, a long way from, for example, regular paid part time work for sole parents. So, I agree that here an unfettered market solution isnt the whole answer either.
I also struggle with communitarian answers: there just isnt enough connect with the levers that change things.
Anyway, good to have a reasoned debate about the mix of individual, market, state, community and corporate responsibility that will move things ahead. We badly need this debate: currently we have a wierd and uneven mix of all of the above, and the only ones really able to pull substantial levers are those with large amounts of disposable income: or, the state. It's not a happy outcome!
David, Was it you who lambasted Sue Bradford and Gareth Morgan for focussing their WWG presentation on the UBI? I was in full agreement.
If an unfettered free market approach isn't the way then those advocating some form of state provision have to answer the questions...just who's rights will be violated to fund it all? Who is to be the sacrifical animal on the altruist altar of "the common good"? By what right does anyone,be they a politician or your neighbour have to demand your enslavement to them? By what right do the so called "poor" have to impose an unchosen obligation or servitude upon the so called "rich"?
As I posted above the Walfare State is not something that is actually needed...people are already giving to help the poor without coercion...with more money and choice they will help more.
@ David: the only real supply side issues in the housing market are also a consequence of government intervention, namely the restrictions on building and development(e.g. through RMA and building code issues), and the indirect (through regulation) creation of monopolies in building materials and supplies.
Another example where retraction of the state and enforcement of property rights would alleviate all the existing problems.
"...just who's rights will be violated to fund it all? "
The same people who's rights are violated now James.
That is the reality of what we live with. The best we can hope for and fight for is less violation.
That is the reality of what we live with. The best we can hope for and fight for is less violation.
At this time...but keeping the goal of a non coercive society firmly in focus as what we are aiming towards must never be allowed to slip.
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