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?
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