by frog
As part of the 1991 benefit cuts, the National Party’s Ruth Richardson and Jenny Shipley axed the Family Benefit that had been available as a universal entitlement to parents caring for children since 1946.
Despite strongly opposing the 1991 abolition of the universal Family Benefit, Labour failed to reinstate it when they became Government. In fact Labour even went as far in 2004 as refusing to allow a Green Private Member’s Bill to reintroduce a universal child benefit promoted by Sue Bradford to go to Select Committee for public submissions.
Now there is renewed support for a universal child benefit, and it comes from a somewhat unexpected source. The Government’s Tax Working Group reported this week, and its report suggests the reintroduction of a universal child benefit (PDF, page 56) as a measure to address the disincentive of high effective marginal tax rates to people receiving Working for Families payments increasing their incomes:
The TWG considers that, like the tax system, the existing social welfare system is in need of major review. In particular we recommend that alternative ways of dealing with high EMTR problems be addressed, recognising that there are no simple solutions. As one of its illustrative reform options, the Group considered a reduction in personal income tax rates along with a ‘semi-universal’ approach to WfF. That is, a non-abating component (of $2000 per child) paid to all families with children alongside a component that does abate as currently. This helps to meet objectives of reducing high EMTRs but at some additional fiscal cost (about $700 million in the case examined)…
Russel Norman is right to criticise the TWG for its main recommendation of aligning top personal tax rates with a corporate tax rate of 30% as creating a chasm of social inequality between the richest and poorest in New Zealand and for its shyness on taxing capital gain.
But the TWG’s suggestion of reintroducing a universal child benefit deserves serious consideration. Not only would it address the gentrification of the poverty trap created by the Working for Families’ effective marginal tax rates, but it would help address the declining home ownership rate issue raised by regular frogblog commenter SPC on the minimum wage thread a couple of days ago (Jan 19, 10:39 PM).
Currently, most people on low incomes cannot raise a deposit to buy a house, no matter how frugal they are in squirreling away savings, because of the cash asset limit for accommodation supplement. If a low income family receiving an accommodation supplement accumulates more than $16,200 in cash assets, their accommodation supplement gets cut off and they are expected to meet their accommodation costs from their savings until they fall below that level.
But a universal child benefit, such as the Greens and now the TWG propose, could be capitalised just as the old family benefit was prior to the 1991 benefit cuts. Capitalisation of a $2000 a year per child universal child benefit suggested by the TWG would provide sufficient capital for a large number of families currently excluded from home ownership by the accommodation supplement cash asset limit to come up with the necessary deposit for a modest home.
Published in Economy, Work, & Welfare by frog on Thu, January 21st, 2010
Tags: Family Benefit, Russel Norman, Tax Working Group, Universal Child Benefit, Working for Families
on the trolls and those who are unable to keep on topic
Yet the tax working group says that with working for families, 40% of househoulds (yes FORTY PERCENT) effectively pay NO INCOME TAX.
How can Russell’s statement, that those who earn less pay propotionately more, be even vaguely true, when 40% of all New Zealand households are contributing a grand total ZERO income tax in the first place – not a solitary income tax dollar between them.
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I disagree with the idea of a universal child benefit really strongly. Why should working people fund (through taxation) rich families?
A far better use of the money would be to provide fully state funded education and health services for all people. This would be of value to society as a whole. On the other hand, hand outs to rich families are likely to be spent on unnecessary luxuries.
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To stave off the comments I expect from the likes of BP, I will add that I disagree with most welfare (in the form of cash hand outs) for working people, irrespective of income. Rather than taxing workers and then handing it back, as cash handouts, I personally would prefer to see:
1) A more equitable distribution of incomes, perhaps achieved in practise by more progressive income tax than at present (but not through handouts such as WFF).
2) Taxation spent on providing services which are universally available. This could include things like childcare, education, health, state housing and so on.
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frog, I see you have found a way to entice me into supporting the arguement for a universal family benefit.
Yes, there do need to be ways to help people into home ownership. KiwiSaver also does this, because savings can be taken out and used for a deposit also. The problem is of course that many on lower incomes cannot easily afford KiwiSaver.
I am a little undecided on the general theme of universal provision or targeted assistance. Politically there is merit in universal approach as it ensures solidarity and acceptance. The problem is that it needs to be affordable. Targeting is seen as more cost effective, but at the price of the divisive politicisation of the support.
This idea has the sensibility to do a little of both. Going for a halfway house compromise is innovative, if nothing else.
But we have a budget problem at the moment. The government which was talking of tax cuts when they were affordable now talks of tax nuetrality (a bit like affording help to private schools by cutting adult education and the TIA).
The government which was accepting of a bi-partisan consensus on WFF (letting its value fall over time was their input as it was with Family Support during the 90′s), now has an alternative to tempt us with.
I’d only look at it seriously if it was part of a real programme to make housing affordable to first home buyers.
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There is no reason someone on low wages should be able to afford a deposit on a house. Owning a house is a luxury. If they can afford to rent, even with other people, then the need for housing is met.
As for the universal allowance; what a waste. Middle and upper class families do not need such a subsidy. If it is going to be implemented at all then it should be only the lower class and it should not be in bulk-funding form.
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samiuela, the thing is some families (most rent or own and don’t have state housing) get more support via WFF than they would in free health care and lower income taxes. And if they have a non working parent free child care does not apply. We don’t have the jobs or enough child care places available at the moment. As a way to target help to families it is very effective, just politically divisive (not just for tax efficiency reasons).
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Sapient
Well for one there is no way at all to have anything universal for only some people without there being some abatement (see the debate about tax efficiency).
You think owning a house is a luxury. Too good for most people? What a generation of peasants you lot will turn out to be!
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SPC,
Of course, it would not be universal if it was only for the lower incomes. I thought that it needing a name change with such limitations was something that hardly needed to be stated.
Owning a house is a luxury. By definition anything more than a necessity is a luxury and actually owning the house is not a necessity for one can rent a house.
It is not too good for most people, it is too good for people not willing to utilize or obtain the skills needed to obtain an income sufficient to make and maintain the payments needed for a mortgage. Apart from mental retardation there is no good reason not to have the skills. I cant even work in a supermarket due to my migraines and how that effects my reliability but I have trained up, and am continuing to do so, such that I have a highly flexible job where I can work around those limitations. If I wanted I could sit on invalids; I would certainly make more than I do during the semester. One need not do an advanced degree to earn enough. A simple six month or one year degree is more than enough to jump up several pay grades. Not earning enough is just their own laziness.
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PS
In the old days, MANY afforded their deposit by capitalising their family benefit. So this is not about low wage “workers” specifically.
If it’s a universal family benefit this is about “parents”.
Banks require between 10 to 20% deposits.
First home housing is around $250,000 for parents and one child (more in some areas, less in others), 300,000 for 2-3 children, $350,000 for more.
$2000 per child over 18 years is $36,000. 2 children and its $72,000. 3 children and it is $106,00. Of course the larger the family the larger the home will cost – and the smaller the wage income the greater the need for a large deposit to afford the mortgage. And some of those on low wages will still be unable to get a loan if they cannot service the mortgage payments.
The risk here is that if the mortgage rates go up or a job is lost, there will be a mortgagee sale (no risk to the bank because of the sizeable deposit). Then the poor family has no home and no access to their universal child benefit (not a problem when there was full employment in the old days and no double jeapardy of being dependent on two job incomes either).
Of courase for every family buying a home the government saves in accommodation supplement costs (and has no need to pay the child benefit/tax credit).
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Sapient
Once upon a time … a nation decided on the course where eveyone would have the “luxury” of having their own home. How last century that was A.
All you had to do was enjoy the full emploiyment, marry, breed, and cash your family benefit. Or otherwise live at home and save up a deposit, rent out the house to someone paying off the mortgage with their rent and do some OE, then come back with a partner and move in yourself. No worries.
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SPC,
If they can afford mortgage repayments then there is no need for them to be receiving the accommodation supplement in the first place. The point is moot.
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Not when the issue is capitalising the benefit, instead of saving the deposit and this applies to everyone on whatever income.
The relevance to those who were on incomes low enough to qualify for the accommodation supplement, is that they would only be able to pay the mortgage payments when interest rates were low and not across the economic cycle – thus a risk of them not being able to pay the mortgage at some point – especially as their total (WFF reduced sans the capitalised benefit) income would be less than before.
So basicly unless housing values were to fall back a lot, this would only advantage those it would assist into housing earlier (by enabling an earlier deposit). In return for this help there is less of a family tax credit break to them.
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This goes back full circle to the minimum wage thread, when the minimum wage was at a higher level to the average wage than it is now, being able to capitalise the family benefit meant the chance for most to buy a home. Now it means two incomes is required and two incomes close to the average wage and many couples do not have either on those wages.
Why, because we have incomes too low and particularly low compared to house (land) values – the second most expensive housing in the world relative to incomes.
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SPC,
I am a little lost here, you are going to have to back up a little.
What do you mean by capitalizing the benefit? Do you mean using it to save a deposit or do you mean using it as some sort of guarantee for the mortgage?
I have re-read your posts several times over but your second paragraph in the 01:53 post makes little sense to me.
As to the third paragraph, yes. But you have yet to provide any arguement as to why the government should pay this massive amount onf money to people just so that people may get in to their own houses earlier. People owning their own homes provides no benefit to the state unless they are all paid off and, considering the interest the government can get on the money, the state makes a far greater benefit by keeping the $2000 than giving it to the people to pay off their mortgage or save.
The minimum wage carries absolutely no blame in this. If there were industries offering higher wages to unskilled labour then the unskilled labour would be getting those wages. That there is unskilled labour at the minimum wage indicates two things; the first is that there is not enough demand for unskilled labour at higher pay rates and the second is that the unions are not doing their jobs and minimizing the profit lines of the companies. If you want higher paying jobs you need to encourage the investment, good luck with that when everything you propose discourages it.
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@samiuela January 21, 11:25 PM
The difficulty with tightly target social assistance schemes like WFF and accommodation supplement is that they create poverty traps through high effective marginal tax rates. Sure, with universal entitlements some wealthy people get money thay have no need for, but this can be clawed back through a progressive taxation regime.
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In other words, if everyone had equal income, these problems would disappear. Marxist nonsense. How come most of those problems don’t happen in Bangkok, a safer city to walk around than Auckland, and not one fatty anywhere?
Key is right to align the tax rates. There will be less avoidance and more time, money and effort given over to enterprise.
Heh. Better get you supply situation sorted out first, or all you’ll do is increase prices.
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Toad,
I appreciate the point you make. In my second post I pointed out that I don’t support schemes such as WFF either; I’d rather see the money go into universal services.
SPC: I realise that some families might get more via WFF than they would through a more progressive tax scheme and better funded services such as health. You say there are not enough child care places and state houses; well maybe that would be a good thing to spend some of the money saved by not providing cash hand outs?
By the way, assistance such as the accommodation supplement doesn’t really help low income families either. Landlords realise that government funding is available for paying rent, and so simply jack up the rents. The money ends up lining the pockets of property investors … which may have been the government’s intention all along.
I have some sympathy with what Sapient is saying about home ownership, but would qualify it quite a bit. For people who cannot afford to buy a house, society must ensure there is adequate long term rental housing (perhaps state houses) available. At present if you rent in the private sector the landlord can kick tenants out with relatively short notice simply because they change their minds about what they want to use the property for (I’m not talking about tenants from hell who probably should be kicked out here). Having to move house with a family every year or two or even three is not pleasant (I know from experience). It also can mean having to change the school children go to and so on. Is this a recipe for a stable society? Personally I would be quite happy renting if I knew that I could stay in the house as long as I wanted to. Being able to do things like decorating the house would also be nice, without having to worry about an anal landlord searching for the tiniest marks on the wall (and on the S-bend, knowing what some of them are like) and then trying to confiscate the bond when they find a single pin hole in a wall somewhere (OK, most of them aren’t this bad … but I think you get the point).
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Sapient
Capitalising the benefit is about enabling a deposit for the home purchase.
Say someone whose wage means they can pay the mortgage (and across the eeconomic cycle, not just when rates are low like they are now) but they cannot buy a home if 10 to 20% deposit is required. Under KiwiSaver they might save 4% of their income (with an employer 2% top up) and this is for them and their partner together about $4-5000 pa (say about $60-100,000 collectively). It might take them up to or over 10 years to save a deposit (depending on where they lived and local house prices).
By having access to the family benefit money, $2000 pa for 18 years for each child they could buy sooner.
This does not actually cost the government money – sure the government pays up the deposit, but it comes from the future government cost of paying the $2000 per annum child benefit.
An alternative already exists – what if a person accepted receiving Super only from age 70 and could capitalise the first 5 years of Super to put down a deposit.
It is fairly clear the tax working groups was looking at bringing new home buyers into the housing market when new tax policy on rental property came in (while also reducing some of the tax rate impact of WFF by making part of it universal).
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Samiuela,
For every “bad” landlord. I can point out an equally as “bad” tenant.
Regarding long term rental.
Most tenants want short term rents.
I have one proporty leased at a 3+3+3 fixed rental situation where the tenant is keen to remain in the area (kids are at school).
Due to the long term rental arrangement the tenant has negotiated a far better deal. They insisted on being allowed a dog (BJ take note) and we agreed. They look after the grounds more extensively then a short term tenant in exchange for the ability to have a dog on the property.
Together we have done renovations and additions that suited their particular need.
I would suspect that most tenants would not sign up for a long term rental arrangement.
Hence the landlord will provide a property that suits a quick turnover of tenants.
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Sapient
I don’t accept the “extra cost” to government of the interest in the capitalising of the benefit arguement (there is the saving in not paying the future cost of the child benefit or Super – as these amounts would go upward over time).
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Sapient
As to the second paragraph – it spoke to the issue of across the cycle mortgage cost affordability. The sub-prime context. Some people could access a deposit with help and even afford the mortgage cost some of the time, but when interest rates went up there would be a mortgagee sale.
As to the WFF context, halving the “continuing” WFF tax credits to provide half in a form for capitalisation aids in obtaining the deposit, but does not make affording mortgage payments any easier.
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Sapient, on the matter of a government interest in people having home ownership.
Well given your attitude to home ownership being a luxury I won’t speak to your deaf ears on the matter of our former way of life, home ownership is predicated in having a motive to save (paying off the foreign loan sourced debt). Whereas where is the motive for the rental landlord in paying off the mortgage. It is used to escape tax liability on the rent income (and more while LAQC’S exist), so many landlords buy up more and more property (maximising the number they make a CG off) as market values rise – which becomes a self-fulfilling trend (an asset bubble). Which means more and more properties with little equity in them. Thus high foreign debt levels and thus our exposure to foreign credit tightening. This leaves our productive businesses and government with higher borrowing costs.
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SPC,
10:32
Okay, I see what you are saying here. I would point out, however, that it does cost the government money to provide this deposit. Your statement that it costs the government no extra money to provide the deposit as it is an advance on the family benefit would be legitimate (ignoring interest) if the benefit was already provided but since that benefit is not provided it does pose a very real and very large cost to the government. Considering that you are making the no-cost argument based on the acceptance of the benefit we are debating, it is a particularly poor point. One could just have the government grant money for a first home deposit, it would be far more simple and cost effective.
As to the second paragraph, I will respond with a story. What many students do after graduation is continue to live in flatting, or communal renting, accommodation such that their living costs are tiny and they are able to save for a house. Normally this takes only a year or two, though most try to save past the deposit. I live in a central city flat with three other people about 100m from two supermarkets, two pizza places, three fish and chips stores, two video stores, the Saturday market, a fresh veges store, an organic products store, subway, two booze shops, its five minutes from the absolute centre of town and all the pubs, etc., etc., etc. (so one of the highest land value per square meter areas in palmy that are residential). It cost me $120 per week to live of which $60 is rent. Assuming it costs two individuals $400 per week to live if they are saving hard (rather generous I feel) then that comes to $20,800 dollars per year. I can not be bothered doing the tax calculations but if they are earning $60,000 between them they should have about $25,000 to save per year. Thats two to three years to save for a decent deposit. If they were earning your upper limit of $100,000 then that is a single year. There is no need for state assistance.
10:39
Again, you are basing this on the assumption that the family benefit/ universal child allowance is actually taken up. The allowance itself imposes a significant extra cost.
As to super, most people have plenty of assets by this age. Even those with relatively little should be able to pay for their rental for a prolonged period (hopefully by the end of which they will be dead). There is no point giving out massive money to everyone (essentially) with the hope that a few will cost us a little less latter.
10:45
I had been able to work that much out. But how is that an argument for rather than against? If they can only afford it when the market is down even with state assistance then why bother with the state assistance in the first place when they will just loose it latter? Furthermore, assuming they could afford it by themselves when the market was low, when the market is high one would need to have the state paying the majority of the mortgage. How is that fair to other tax payers? It would provide no benefit.
10:53
I know this. This is not, however, an argument for state subsidisation of people getting in to housing and is certainly not an argument for a universal benefit. This is an argument for removing the bias that encourages such investment and makes the price so high; something I have always been strongly for. In actuality your approach would make it worse as it would increase the amount landlords could charge and thus little would actually go to saving and landlords would be encouraged to purchase more property.
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Sapient
You seem to be forgetting the context, which is that the proposal is to transfer some of the WFF tax credits into Universal Family Benefit form so they can be capitalised for a home deposit.
“Your statement that it costs the government no extra money to provide the deposit as it is an advance on the family benefit would be legitimate (ignoring interest) if the benefit was already provided but since that benefit is not provided it does pose a very real and very large cost to the government.”
So no, quite wrong. The cost of the existing WFF programme would reduce by the amount that the FB was capitalised.
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SPC,
I think I may still be a little confused as to what you are suggesting, but I think I have worked out three options as to what it may be.
So: are you suggesting that individuals on WFF should be able to take an advance (and thus sacrifice a portion of future payments of WFF) on WFF sufficiently large that they may afford a down-payment on a home? Or are you suggesting that this $2000 per year to everybody be taken from the WFF fund (which would leave substantially less for those who actually need it). Or are you suggesting that We reduce the WFF amount by the value of the benefit and extend the benefit to everyone as well (necessitating more tax).
I think that the second option would be profoundly unjust, assuming that those on WFF actually need and deserve the money. The third option would be less unjust but would require a far greater tax volume (and would thus be unjust to those who actually pay the tax). The first option is much more palatable but raises one big question; if they are able to sacrifice future income from the WFF in favour of diverting it to savings then they must be able to survive well enough on that decreased amount. If they can survive well enough on the decreased amount then there would be no reason for them to be receiving an amount as high as the original amount in the first place and thus it would still be representing a substantial cost to tax payers.
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Sapient
When you claim that two people earning “$60,000 (after tax/$80,000 before tax?) can save $25,000 per year (at the higher income and
flatting with another couple and with a focus perhaps),
1. you have to remember that not all those saving are people without children, and thus they are not sharing accommodation with others. It would be wrong to exclude families renting now from owning their home one day.
2. if you claiming that two singles earning $30,000 each before tax
can save $25,000 a year, then by merely increasing the minimum wage to $15 an hour minimum wage all other couples can do this too. So your arguement here suggests that a minimum wage increase would enable those on this income to afford a deposit.
Of course even so, the problem at this level of income is affording mortgage repayments, particularly if the WFF tax credits was ever reduced. Could someone on only $60,000 pa between them afford the mortgage?
And why is saving a deposit so difficult for many couples, yet to have children, if saving is as easy as you say? Is it a refusal to share accommodation when single or when in couples?
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Sapient
Me confused. Yeah right, read the thread opening by frog. For one it’s not my proposal, it’s that of the tax working group.
And that is that some of the WFF tax credits be transferred into a universal family benefit form ($2000 per child) which can therefore be capitalised in return for forgoing future family benefit payments of $2000 per child.
And yes once again, the problem is still whether people can afford mortgage payments and get a loan.
Are you saying that if they can afford the mortgage costs they do not need the help with the deposit or the WFF tax credits … well that’s because it’s hard to quickly phase out such tax credits without creating tax distortions.
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Sapient
“10.45 I had been able to work that much out. But how is that an argument for rather than against?”
My first post indicates my position, I am not convinced by it unless there is a part of a wider move to reduce the cost of housing (which will make mortgages affordable and thus makes the point of helping couples with children raise a deposit useful).
“10:53 I know this. This is not, however, an argument for state subsidisation of people getting in to housing and is certainly not an argument for a universal benefit. This is an argument for removing the bias that encourages such investment and makes the price so high; something I have always been strongly for. In actuality your approach would make it worse as it would increase the amount landlords could charge and thus little would actually go to saving and landlords would be encouraged to purchase more property.”
We use to have a mortgage rebate tax deduction to assist loan affordability and allowed the FB to be capitalised to make the deposit. Were we wrong? I am not so sure, the housing market problem began when we moved away from this and instead chose to allow mortgages to be funded offshore, subsidised rents via the accommodation supplement and brought in LAQC to reduce tax liability.
For one transferring some of the WFF tax credits into FB form is not a subsidy it’s a transfer. That this transfer can be used to raise money for a deposit is not a subsidy of housing, it’s simply allowing people to use their (future) money earleir if and as they choose.
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Sapient
“10:39 Again, you are basing this on the assumption that the family benefit/ universal child allowance is actually taken up. The allowance itself imposes a significant extra cost.”
No it’s not an extra cost it’s a transfer from the existing WFF tax credit cost.
“As to super, most people have plenty of assets by this age. Even those with relatively little should be able to pay for their rental for a prolonged period (hopefully by the end of which they will be dead). There is no point giving out massive money to everyone (essentially) with the hope that a few will cost us a little less latter.”
What I said was, that there is an existing entitlement Super, which could be capitalised to afford a deposit on buying a home. It had nothing to do with people on super already. If someone was to forgo their entitlement to Super from age 65 to 70 in return for about $15,000 pa * 5 $75,000, that could be the basis for a deposit on a home when age 30 (the actual only problem is that the age of Super will probably increase from 65 to 70 around 2030-2035).
A better alternative is possibly their KiwiSaver account, where they can draw against their future contibutions out of pay of themselves and their employer. Thus instead of waiting 10 years to save the amount via KiwiSaver contributions they capitalise this – average wage worker c$45,000 – c $2000pa + $1000 from the employer * 10 years * 2 workers ($60,000 per couples).
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SPC,
It is, in my opinion, mostly the desire to have their own place (even if renting). Living with others is obviously a far less than ideal situation for many people. Having ones own place is not needed and it is uneconomical unless you have a relatively large income so while it may not be the most desirable situation it is practical.
The other factor is that people are stupid and mostly economically illiterate. Most people are spend thrifts. I have a wide range of associates; many live more cheaply than myself but use all the money saved on booze or other luxuries, some receive WFF and constantly complain about having no money when they are buying a new TV, stereo system, game console, etc. every second week and still getting massively intoxicated. One of my best friends falls in to the latter category and has a flat screen TV more wide than my king size bed (though she is pregnant again now so the drinking has stopped as of a month ago).
My $120 per week (x4 for total) includes rent of $240 or $260 per week, infinite high-speed Internet, food, electricity, etc.,etc.,etc.. It covers everything and we all eat about twice the average individual and we normally have about 6 computers running at the same time, innumerable gaming consoles and a good number of TV’s and other electronic appliances (we consume massive amounts of energy; bad Sapient). My point here being that even my $120 per week is excessive in Palmy, especially given our location. Most of the cost wont change even if one mosts to Auckland. Saving is not hard.
The claim of $60,000 was yours (or you meant that as the deposit, in which case your claim came out as $83,300 per annum) and I assumed was before tax. The $25,000 was the leftovers minus what I considered to be a rather generous tax take.
We would not be excluding those whom are renting from owning their own home one-day. It is they whom are excluding themselves. To say that we would be excluding them from owning their own home is like saying that we are excluding people from accessing their roofs simply because we do not give them a free ladder.
Assuming that a couple with a child needs two rooms it is not unreasonable to expect the couple to share a rented 4-room house with another couple with a child. It would work out at about the same total cost as flatting (plus diapers and baby food). $480 total for my flat each week. Half that to $240 as you are sharing with another couple, double the cost of rental of each room to $120 (assuming basic Auckland cost twice as much as Palmy prime locations) and you have $360 per week plus baby costs (for which I have no idea other than the prices of supermarket items). One person earning $12.50 an hour at 40 hours per week at 52 weeks per year will earn $26,000 ($500 per week) before tax and $21,288 per year after tax ($409.38 per week) assuming no public holidays or overtime are worked and no holiday pay is cashed in. A single individual working full time on the minimum wage could support themselves and the partner well, there is no need to increase the minimum wage; if they can support their partner it is already too high. If one takes in to account the tax credits of WFF or the other parent works a few small shifts (could work more than a few small shifts if the two families take turns looking after the children) then the minimum wage is entirely conductive of a family. If both are working full time on the minimum wage prior to having a baby then they are able to save over $20,000 per year easily without any tax credits of government assistance.
Regardless, they probably could not afford the mortgage repayments in the present situation (though the rate will decrease with a larger deposit). There is no need for them to own their own house. Even on the present minimum wage they can perfectly afford to live and support a child without state assistance. If they want their own house then they should gain the skills needed for a higher wage (easily done before children, entirely possible though less dynamic afterwards; even on the minimum wage as a couple can support each other. Ten hours more for one means ten hours less work for the other. Part time study is already tailored to work around full time work so there need not even be any decrease or redistribution of work hours).
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SPC,
The super idea does have merit but I would think we would just have them sitting on the sickness benefit for five years anyhow and thus there would be no ultimate saving of money.
From what I can see the working group is essentially proposing a citizens dividend that is extended on the basis of your proliferation. This extension decreasing the need for WfF. This would thus impose a significant extra cost on the tax take for it would only be offset by the WfF payments of individuals receiving more than $2000 per year from WfF. Again, I do not have a problem with this being cashed in early but the ability of an individual to survive well having cashed it in shows that it is unneeded in the first place.
I do like your KiwiSaver proposal. It actually ties in entirely with my proposed reformation of the benefit system as for all essential purposes you are making KiwiSaver act as a general-purpose interest-free loan. I do not, however see that it would provide much benefit as if they are unable to raise the deposit for a house they are rather unlikely to be able to afford the repayments and thus it is ultimately futile. If they could raise most of the deposit and then use the KiwiSaver to increase the deposit then they could obtain lower rates and it may become affordable. But ultimately they would need to have been able to raise it in the first place.
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I wonder what people in Haiti would think of these comments. Isn’t it about time to abolish the welfare state, free hospitals, schools, etc.
Abolish tax. Just have GST to pay for a smaller government, roads.
Privatise everything else. NZ will always be a poor country whilst it has the present mindset.
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Now theres a dumb idea. There are perfectly valid areas for a government to participate in the economy. Mostly areas of natural monopoly.
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SPC says “Thus instead of waiting 10 years to save the amount via KiwiSaver contributions they capitalise this – average wage worker c$45,000 – c $2000pa + $1000 from the employer * 10 years * 2 workers ($60,000 per couples).”
Problems
1/ they are drawing money that doesn’t yet exist – so who provides the money?
2/ They are withdrawing from future funds that they may not ever pay (they may lose their job, emmigrate, employer may go bust, they may die etc.
3/ if some one else (i.e. taxpayers) did provide an advance, who would pay the ten years interest?
4/ if you account for the interest, they would get an advance of more like $25-$30,000 and still have to pay back $60,000.
I think it’s a bad idea.
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genji
Posted January 22, 2010 at 4:47 PM
“I wonder what people in Haiti would think of these comments. Isn’t it about time to abolish the welfare state, free hospitals, schools, etc.
Abolish tax. Just have GST to pay for a smaller government, roads.
Privatise everything else. NZ will always be a poor country whilst it has the present mindset.”
Yes, I had noticed that countries like New Zealand and Finland that have public provision of things like hospitals, schools and roads always seem to end up much poorer than countries like Haiti and Somalia that don’t
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Oh Sapient, oh mores!
I have lived in Palmy, I escaped.
But I was immediately shocked at the cost of living anywhere larger.
FYI: rents in Welli come to anywhere between $100-$150 per room.
Auckland is worse, unless you’re in a run-down hovel miles from anywhere, in which case medical bills and transport costs fill up the difference.
Your scenario for two couples-with-a-child-each, while laudable, doesn’t completely take into account the realities of the energy inputs to small children’s lives that parents must make.
Trust me, tell the mother of a 6-week-old baby that you think she could share childcare with another similar mother, so they could each do some part-time work, and you’re likely to be quickly strangled by a women who has been sleep-deprived since the child was born, and is constantly tired and hungry.
This happens to every mother, and is the reason why post-natal depression is so common amongst women who have had high-powered careers before having a baby – they have no idea how much actual physical hard work is involved until they have to do it.
This comes as quite a shock to them, since we routinely hide the hard work, & pretend that it’s all very easy – and most of the policy around women and children has been created, historically, by men who have never gone thorugh childbirth or breastfeeding!
The other factor that you have no experience of, thus I will let you off for not including, is that we are now in a recession, where job losses are snowballing, and there has as yet been no resurgence in employment to join the much-hailed ‘economic recovery’ that the media so love to discuss.
In real terms, while there are few jobs on offer, women will be encouraged to stay home with their children, by simple virtue of employers not hiring them.
This is a pattern in our society which has long roots in the past, and recurs in every recessional period. Post-1987-crash, the PSA was restructured and women lost jobs left right and centre, as positions were redefined (technically known as ‘functional disestablishment’) and women trying to return to the workforce after a maternity leave discovered their positions no longer existed.
How is John Key suggesting to drag NZ out of recession?
By cutting the public service, reducing tax to families, and assuming that by giving some of the people ‘more spending money’, all of the people will benefit in the long term.
He’s forgotten that public servants have famillies too, and that if mummy or daddy (or god forbid, both of them) lose their public service jobs, no amount of income tax rebate will enable that family to consume their way out of a recession.
They’ll need the services of the MSD, as clients, and become a drain on the tax dollar instead….
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He’s a fool.
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Greenfly,
Who? Me?
~
Katie,
I accounted for the rent being 120 to 130 per room, that falls right in the middle of your stated range.
My scenario is for individuals on the minimum wage, the point of this scenario was to show that is is entirely plausible without subsidy, especially if sacrifices (not factored in) are made. Individuals on the minimum wage should not be having children, at least in my opinion. To bring a child in to sub-optimal circumstances is, like religious indoctrination, nothing less than child abuse.
If they bring a child in to the world without the needed financial support, and a guarantee of that financial support, then they should make all the sacrifices needed to ensure that child has a decent future ahead of them. Most of my friends have gotten through it with support from parents and their friends network.
My friends and associates have always been, in the vast majority, female. Most from lower classes. I have many female friends with children, many of which with run-away fathers. For many of these females I have helped out as much as I can, I have lost many hours to babies crying and many dollars to helping them bridge gaps. I have not experienced the full process of raising a child but I have participated in most of it and I have supported friends through all of it several times over.
Individuals whom become unemployed due to recession or whom loose support due to partner difficulties are exactly what the DPB is for. The DPB should cover this without any need for a universal child benefit.
We should not be encouraging people to have children, the world is overpopulated already. A universal child benefit will do little else.
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My scenario is for individuals on the minimum wage, the point of this scenario was to show that is is entirely plausible without subsidy, especially if sacrifices (not factored in) are made. Individuals on the minimum wage should not be having children, at least in my opinion. To bring a child in to sub-optimal circumstances is, like religious indoctrination, nothing less than child abuse.
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Sapient – no no, sorry, of course not! Key, he’s a fool.
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Sapient –
Unfortunately for your arguemnt, I was a parent when the Family Benefit was still around. At $3 per week, per child, paid fortnightly, it was not an inducement to have children, by any stretch of the imagination.
When my mother was a young woman (c 1960′s), that amount was worth capitalising across an 18 year entitlement to get a house deposit, and most families living in cities did just that, to get into their first home. It’s where the vast swathes of suburban housing sprawl in the major cities came from. Try researching the history of the State Advances corporation, or the Housing Corporation; Peter Lineham may have written some of the social history. Massey certainly had people working on it at one stage.
By the ’90′s, the amount was so little, that a pair of children’s school shoes would have cost about eight weeks’ worth of the FB ($48). The amount that is being suggested as universal child benefit would reinstate the level of buying power that it had in the 60′s.
As an indicator of household poverty, home ownership is usually regarded as a key indicator in NZ.
That we have a generation for whom owning their own home has gone beyond feasible (those who entered university or the workforce after 1992, when both the Employment Contract Act and the Student Loans Act came into force) was not an expected outcome of those pieces of legislation.
It has skewed the housing market towards older, already-propertied people, who are now at risk of having to cashup their property investments at a time when the natural market for such purchases, young families, cannot afford to enter the housing market. Thus, on the back of whining from Grey Power, is policy to aid young families into home ownership born.
National is inclined towards creating policy which will ‘correct’ the housing market pricing, by keeping sales volumes up, as they hold to the belief that consumption is the root of all progress.
I personally have stayed out of the housing market and rented, as a low income sole parent, through the last decade.
I also look overseas to economies where appartment-dwelling is the norm, and families aim to own nice furniture, but expect to lease a home all their lives – where only the rich own property.
If we go down that road, we will never return, and I suspect that the property bubbles of the past decade have done just that.
Average-income families in NZ can probably kiss home ownership goodbye, unless there is the political will for massive intervention to re-tread the housing market.
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Katie,
$3 per week is tiny. $2000 per year comes to $38 per week; much more substantial as an incentive.
If you want to make homes affordable one must take the reins from the grey and the baby boomers. Giving people more money is not the answer at all. If the grey have a house they have no need for super; bricks and mortar to cash. Solves many problems.
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photonz1
There is a difference between the amount that could be claimed 10 years at the current rate of KiwiSaver contribution and the subsequent actual contribution as wages go up each year. Wages generally cover the inflation component of interest costs. This amount difference would cover most of the cost to the funder. Some of the rest could be covered by loss of accommodation supplement liability to the funder.
Clue: The taxpayer currently provides interest free student loans. And note the same costs exist with capitalising FB.
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Sapient as the FB that is proposed is coming from existing WFF tax credits, it would not provide any extra support to people when they have children. Except for those not getting WFF, those on higher incomes and those on benefits.
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SPC,
Exactly. In a phrase terribly B-boy like; ‘show me the money’.
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Sapient,
Your estimate of $360 per week for living costs for two adults and a baby is too low. I remember making calculations such as you have made, and wondering why I needed more money. The problem is you haven’t budgeted for everything. Now I don’t know the cost of living in New Zealand very well, because I have been living in Australia for a few years now, but I suspect these figures will not be too far off for two people plus a baby. I’ve left out things like car costs, but I’ll discuss this more later.
Rent: $300 per week
Electricity: $15 per week, with quite a few basic cheap/free efficiency measures.
Gas: $10 per week
Phone: $10 per week
Water: $15 per week
Food and Groceries: $150 per week (not extravagent stuff either)
Public transport (one has to get to work somehow): $40 per week
Clothes, shoes etc: $15 per week, including lots of stuff from the op shop.
So there is $555 per week without car running costs etc. Maybe some costs are cheaper in NZ (food?); maybe some costs are covered in rates paid by the landlord (water?), but this ball park figure is probably not unreasonable.
But there is a whole category of costs you have neglected, and these are what usually catch out people on low incomes: crises and emergencies. If you get sick, there goes $50 for a doctors visit plus the cost of prescriptions. You get a rotten tooth; potentially hundreds (even if you opt for an extraction). Babies have a habit of getting sick in the middle of the night on weekends; there goes a taxi fare (since you don’t have a car and the bus isn’t running) to get to an after hours doctor or the hospital. What about appliances breaking down (the fridge etc). And these are only minor crises; then there are the big ones like funerals etc.
And you are suggesting a minimum wage for a working person which only barely covers these costs (and if my calculations are even remotely correct, won’t cover these costs).
Anyhow, I think you will find out about the real world in due course once you have a family to support.
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Samiuela,
The $360 per week was prior to child expenses and was assuming shared accommodation.
For my flat each individual pays the bills equally. Each pays $65 for rent (just checked, it went up from $60) and $55 for others. The flat is four person. That $55 each per week covers electricity, wood, phone, Internet, water, and food. The Internet is one of the more expensive plans and is totally above the needs of most people and our electricity usage is far over the top of what is needed. That $55 is excessive and mostly invariable through-out New Zealand. For two people that comes to $110 in a four person flat. I do not know prices for Auckland but if we assume your $300 is accurate then we halve that and get $150. $150 plus $110 is $260. $410 (minimum wage full-time for one individual) leaves $150 per week for fuel, insurance, clothes, doctors, etc. If we take the average of the prices provided by Katie as $135 per room then, assuming individual rooms, we get $380 and thus $30 left over. One person can thus easily support themselves and another, even assuming they have individual rooms.
The minimum wage is thus far above the levels needed as the minimum wage should only be enough to support a single individual and not any off-spring. With WfF one individual could easily support themselves, a partner, and a child. I would keep WfF as an optional low interest loan. I am also a proponent of state provided communal care services, I think these are vital – as Katie pointed out above – in allowing women back in to work and thus in making individuals and partners more able to support any children. My commune comment, while not necessarily tied to this, did actually have a serious note; communes are an incredibly cost effective way of dealing with the situation that maximizes benefits to everyone other than the parent whom desires independence.
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OK Sapient,
I still think your estimate is too low, especially when it comes to food and groceries, but this isn’t worth arguing over; you’ll find out what basic (ie only necessities) costs are if you have a family in the future. One thing you’ll find is that you just can’t linearly scale costs from when you were a student when you have kids; things like doing the grocery shopping without a car become much harder.
With regards your sharing a house amongst two families with babies; it certainly is efficient, but have you tried it? It is quite different from sharing a house when you are a student.
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Samiuela,
I am certain that it is different than flatting as a student.
I deliberately did not calculate the cost of a child for I have little basis for such.
In a four person flat two individuals living in separate rooms does scale linearly.
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Having had a busy day doing menial cooking tasks so that I can take my kids to a picnic tomorrow, I’ll try to give a coherent answer to all the above.
Samiuela,
I follow exactly what you are saying, and agree totally, although I think some costs here are scaling higher in the cities than in the regions, where Sapient is based – eg: food costs are often cheaper in Manawatu, as most of the fresh food that supplies Wellington is grown there, so distribution costs are cheaper to the locals.
Also dead on the money with regard to medical costs, although it depends where you go – some PHO’s are cheaper, and in my case, I’m charged $65 per visit to my Dr, who is at the more expensive end, but at least she know what to do with my various allergies and endocrinal system failures.
We don’t generally have water costs yet – Auckland is on the cusp – so that is covered in rates paid by landowners. (Landlords or homeowners)
Sapient,
I’d love to know what your internet plan is – my cheapest was $15 a month, dial-up, a couple of years ago, & the most expensive I’ve had to contribute to was in a shared flat where one of the flatmates worked from home as a designer, e-mailing large pdf files about the place; so we had a router & broadband access – communal cost via Slingshot of about $60 per month, but it also included our toll calls & some flatmates were from out of town, Auckland-way, so my memory of the average bill is hazy as it fluctuated.
BTW, when I quoted $100-$150, that would be either a council flat, or a scruffy student flat, similar to the sort you’d have in Palmy; most couples I know who are renting are in places where the rent is much higher than that, to get a house with a garden/open fireplace that works/clothesline outside – ad-ons that can improve the long-term budget.
Rents in Welli have been climbing furiously in the past 18 months, I guess because landlords have been made to cough up on the debt-to-equity ratio in their property portfolios by the banks, which leaves them short on running costs to do rates & repairs.
A lot of my friends have had problems getting maintenance done, as landlords don’t want to spend any money on the property while the market is down. In fact, one flat I moved out of because of those issues finally got some work done (overdue) when the toilet fell through the rotten wood on the bathroom floor & broke the connection to the sewer line. Problem had been there for over two years & ignored by landlords.
Most couples don’t want to live in that sort of house, so pay to go somewhere better. With small children, hygeine and safety issues are very important, so parents tend to look for a more upmarket property to rent than the sort of thing they put up with when they were students or in their early working days.
These are the kind of concerns that make scalability uneven from two single adults in a four-bedroom flat, to a couple with a young child.
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Katie,
$65? Sounds expensive for a GP to me. I pay $20 for my frequent visits, but there is a community card subsidy in there. Very good doctor, even if some people don’t like her lack of social skills.
Endocrine problems suck, I know that much well. Seems to be a large factor in my migraines.
Our provider made us change our plan just recently but it was about $20 per month and then $12 per 10 gigs (I think, I don’t do the bills and the one who does is away till Monday), we usually did about 60-70 gig per month though some times we went well over that (and yet it was still borderline affordable). Now I think it may be this one , though I am not entirely sure. At $60 per month that is about $14 per week or $3.50 per person per week. Not bad really. Especially considering how many foreign language shows I watch (legally, of course). Of course, it does not include the price of the phone so it would be more expensive than your most expensive plan.
I think that as a result of my trying to address multiple issues my price statements have drifted. My position is that someone on the minimum wage should not be having children in the first place. My position is that the minimum wage need only be sufficient to support a single individual. That it is enough to support a couple, without a child, shows that it is far too high and hardly needs increasing. My point in providing the pricing was that with a full time and part time couple on the minimum wage it is still entirely plausible to support a child without state assistance should they be willing to make some sacrifices; easily so if they are willing to make the sacrifice of moving to Palmy
.
People having a child when they know they can not support the child and a mother abandoned are totally different things (though I would still say that the mother should have known the father was scum). The former deserve to be shot while the latter needs support to get back on her feet. It is the same principle as the UB except with a child involved.
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Why not just eliminate the Income tax all together? Create more jobs, and those who cant afford a house at this time will have more job opportunities, better rates and more money. All in all, I don’t like the idea of taxing the poor to pay for the rich, and i don’t like taxing the rich to pay for the poor either. Howabout neither
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Sapient,
People on the minimum wage are presumably doing useful jobs; employers don’t just employ people for no reason. You claim people on the minimum wage should not be allowed to have children, and that the minimum wage is too high if it enables someone with children to survive.
You have previously written that it is easy to “upgrade” to a job above the minimum wage. Maybe this is true, but the job on the minimum wage still needs to be done, so someone else will start doing it.
So given that minimum wage jobs are useful (and if they’re not, I reckon they shouldn’t be being done at all), and someone is going to have to do them, why shouldn’t they be paid at a rate which enables one to support a family?
At this point the neo-liberals will start talking about supply and demand. To me this seems like a way of justifying their treatment of some people as “lesser beings”, not worthy of the same standard of living as the rest of society, or maybe it is a way of justifying what they know is their own personal greed?
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Samiuela,
In all honesty, I do see them as lesser beings. A drain on society. Prostitutes whom sell their body for their own selfish ends rather than using their mind for the benefit of society.
I am going to talk about supply and demand here, so you will have to forgive me. I see it as fundamental in a scarcity society, as much as I may desire a post-scarcity society.
If the minimum wage is too low then an individual is left unable to support themselves while working full time. Should this happen the costs to society increase, be they from crime, from destitution, or from income supplements. It is obvious that there is some benefit to society from having a mechanism that ensures individuals obtain sufficient wages; the minimum wage is one such mechanism. Given the costs it is apparent that the minimum wage can be set too low.
The problem with the minimum wage is that if it is set too high then the cost of labour can make many jobs uneconomic and this, too, ultimately brings about detriment to society through unemployment. The unemployment increasing crime, destitution, and benefit numbers. As such the minimum wage can ultimately be set too high.
A balance must be struck. The point where an individual can no longer survive on the minimum wage being the absolute minimum and the point where unemployment starts to increase being the practical upper limit. I would propose that an individual should be able to support themselves on the minimum wage working 30 hours rather that 40 simply because it allows for increased aspiration and for unseen events; thus less crime and destitution.
When people think of labour they tend to only think of the human variant. They tend to neglect the labour of machines. While the labour supply from citizens is generally rather limited, the labour supply for machines faces no such boundaries should the cost of human labour be sufficiently high.
If the demand for human labour is substantially larger than the supply of human labour then there is an excess of jobs and workers able to move to higher paying jobs will tend to do so; the various offerers of jobs competing for employees such that wage offers rise until it becomes more economic for competitors to use machine labour or the competitors are made to go bust. Raising wages the rest of the way, and thinning the profit line, is the job of the unions.
I have written, as you say, that it is easy to upgrade jobs. It is not true, however, that all jobs on the minimum wage need to be done by someone else. For jobs for which the demand is elastic the jobs will simply disappear – as happens when the minimum wage increases – as technology, efficiency, and machine labour are used to substitute the waged workers or the product being produced becomes uneconomic due to labour costs which can not be mechanised economically and thus the company collapses. For goods and services which are inelastic the story is different, the price of the goods and services will just keep going up with the wages until such a point that the demand for low-cost goods and services forces efficency and the implementation of mechanised work becomes economic; at which point the cost of the product or service is likely to drop substantially.
Jobs only exist because human labour is more economic that mechanical labour at that point in time. If there is a tightening of the supply of human labour then useful jobs will be lost due to companies going bust or replacing individuals with machines. In those areas which are needed but cannot be mechanised the wages will just increase until the supply meets the demand and the cost will be passed on to the rest of us.
So, in summary, the minimum wage could be paid at a rate which allows the a family to be supported but this would only be practical if that rate is below the point that increases unemployment.
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One given about a rising minimum wage is that it results in students not having to work as many hours to support themselves while studying. This opens up study to more people (of course peoploe dependent on work income are in trouble when jobs are unavailable).
Many minimum wage jobs are done by students (retail) by people returning to the workforce after having children (hospital service workers, cleaners, care workers).
Thus it helps study and supports families (second incomes reduce WFF costs). Otherwise it places upward pressure on jobs where some skill is required but where unions are in a weak negotiating position.
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SPC,
My economic viewpoints are informed by my understanding of the individual. I frequently make the mistake of overestimating people despite trying my hardest to be pessimistic, so it is entirely possible that I assign people too much logical power. My economic views have changed totally since I first started on this blog and they are very much informed by the different debates and the different arguments I have encountered. Where observed reality differs from what I would expect I investigate and search for any errors in my arguments; errors are normally the result of reasoning done while I could still be called a member of the far left which have simply not been revisited.
One of my main reasons for debating here is so that errors in my thinking may be brought to my attention, more often than not this comes to my mind as I write a response and no need from others is needed; other times it takes someone pointing it out to me. Even you have made me realise errors in my judgment, though you have never managed to, yourself, graze my arguments.
Deconstructionist nihilism? I stopped being a deconstructionist and started with nihilism before I finished primary school. I overcame nihilism and adopted existentialism in my first year of university. In all instances these were independent of other philosophers. I merely find it important to remember that all morals are arbitrary, even if they do serve a purpose.
It is true that my position may be considered ideological in the technical sense as I draw a should from it to motivate my actions and to construct a version of what is desirable. In the sense that the word is commonly used, however, I am not ideological in the slightest for I do not let intermediate goals and niceties interfere with my ultimate goal and I am willing, actively seeking even, reason to change my views. I am very much a pragmatist in pursuit of my arbitrary goal in life.
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Sapient, it is perhaps this
” for I do not let intermediate goals and niceties interfere with my ultimate goal”
which suggests the “methodology” of an ideological person
and this
“I am willing, actively seeking even, reason to change my views”
that is why I used the word “rationalist”
“I am very much a pragmatist in pursuit of my arbitrary goal in life”
The idea of having an arbitrary goal is not the usual terminology of pragmaticism. It may/can explain a process of learning and an attempt to relate that learning to the way the wider world of individuals and society is, but beyond that does it not become an ideological framework?
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SPC,
To look at ideology lets look at the Green Party, or you. Both seek to raise the minimum wage in some attempt to improve the life of those worse off. Both ignore anything contrary to their views and ignore that the higher minimum wage, while seeming to help those worse off, will actually make the worse off worse by decreasing available employment, increasing tax take, and decreasing investment. The Green party parrots on about mediocre little things which loose it voters when those voters would allow the party to promote those goals which are more relevant to the survival of society and thus the survival of any of the other goals.
My willingness to forgo the intermediate goals means that while I may desire something I am willing to discard it, at least temporarily, if it would compromise my ability to achieve the ultimate goal it is seen to assist. There is no point in inseminating your bovines if you don’t want them to give bring forth young. There is no point in shooting yourself in the head if you want to live. There is no point parroting on about spy bases if it compromises your ability to promote survival.
The ideological individual holds their views and looks for evidence to support them, the scientific individual looks at the evidence and then forms their views; the pragmatic individual takes their goal and uses the scientific approach to work out how best to achieve that goal.
Any ultimate goal is arbitrary, adopted because you want to adopt it. Other goals tend to be adopted in relation to achieving that goal; the intermediate goals. I use a pragmatic approach to learn best how to achieve my goal rather than relying on ideology and emotion to do so. I say pragmatist in place of the ‘ideology’ of the real politick. The real politick defines not what the goal is but how to achieve it: through pragmatism. It is thus not a true ideology. I am using two different senses of ideology here and it is starting to get confusing. I have no tinted glasses such as is held by the neo-liberals and the socialists, what I have is an approach which removes the tint such that one may perceive the real colour rather than what one wants to see and thus make the correct choice.
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Sapient,
Have you ever wondered why more high school students go to university now than did 10, 20 or 30 years ago? Is this because the skills required in the modern work force are higher? In some cases maybe, but I think more often than not its people trying to “upgrade” their job prospects as you put it. In fact, I suspect technology has resulted in a lot of jobs requiring less skills than in the past, but this is a different issue which I won’t address here.
OK, so what is the effect of more entrants to the work place having university degrees than in the past: its two fold:
1) Employers set higher entry levels for jobs, simply to stop themselves being flooded with hundreds of applicants.
2) I would be prepared to bet that relative to other jobs in society, a BA or BSc doesn’t give you as much pay (in relative terms) as it did in the past. For example, in the past it might have been possible to get a job as a research scientist with an MSc; now a PhD is necessary, and an MSc might get you a job as a research assistant.
Now follow this through to the logical conclusion, as everyone upgrades their skills, supply and demand will simply ensure that people with some extra skills will still receive the minimum wage (because now most job entrants have completed secondary education, whereas in the past a lot of people dropped out at form 5).
But there are other ways than supply and demand to look at the question of how much a job should be paid. If anything the success of the neo-liberals in the past thirty years hasn’t been the economic policies they have managed to get successive governments to implement (though they have been quite successful at this). Rather, there is now a whole generation (and I suspect you belong to this generation) who have swallowed their free market ideology hook, line and sinker. Many young people believe that the fact they have skills others might not have entitles then to a higher wage … but why should this be so … why should a research scientist’s job be paid two or three times what a cleaner’s job is? Another example, how many young adults expect to get a job for life? Why is a job for life a bad thing? No … young people now expect to move around from one job to another and one place to another. This is all very well if that is their choice, but at some stage many (most???) people want to settle down, but the free market in jobs means this is becoming more difficult, and demands workers tear apart their connections with extended family and communities in order to simply bring in the money to survive. This is the world the f8*^*((* neo-liberals are trying to get us to accept, and many of the young (and not so young) generation have brought into this ideology without even realising it.
At this stage I expect (no hope) some young people will tell me that I am wrong, and that they haven’t been sucked in by the neo-liberal ideology. Please do, it might cheer me up a bit
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SPC,
I call it the student loan. Wonderful thing.
~
Samiuela,
Yes, a lot of places set a bachelors as a minimum prior to entry just because it shows that someone can apply themselves (though by no means does someone need to for such a lowly degree).
A BA probably does not get you as much because the supply is larger, but it is still substantially more than without one, even outside of the degree area. The requirements for being a research assistant are debatable. I personally worked as a research assistant during my Bachelors and am working as one presently while I wait to start my Masters. That, though, is due to ability; I have no idea about the availability in general. I do know that tutoring is generally limited to doctoral and post-doctoral individuals but again ability can get you it earlier; I will be tutoring during the first and second years of my degree.
As to your fifth paragraph; yes, if this was global. Since this is not global that does not happen. That is why we have highly paid countries and lowly paid countries.
You say that most in my generation have been sucked in to the neo-liberal way of thinking. I would suggest that most in my generation do not think at all and that the remainder tend to be rather left. I myself did hold ideal, and in all truth still hold ideal, anarcho-communalism. That I have adopted a way of thinking similar to the neo-liberal ideology (I disagree with them on much but this blog does not exactly display much neoliberal ideology for me to argue against) is because I have come to similar conclusions independently.
There is no reason anyone should be payed anything. There is no reason anything should happen. A should is an ought and an ought can never be valid. We set a goal and we decide what we would like to see based on that goal. There is no amount that one should be paid relative to any other or for any given job. Supply and demand is simply a convenient and efficient way of allocating resources. It is the best way to achieve my goals in a scarcity society and, indeed, the goals of most.
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Sapient, like vs like. Student Allowance or student loan providing a living allowance. The student allowance/living allowance is not enough to live on and students are dependent on either parental support or jobs. Those reliant on part-time work while they study are better off with a higher minimum wage and working less hours.
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Sapient, you have fallen for “economic rationalism”, placing it within a wider philosophical framework. It appeals to your cognitic logical side, that makes you more ideological than pragmatic for mine.
Some people focus on a (micro level) rational order with societal organisation around this premise/principle, some people focus on outcomes (social goals emphasis/government intervention to realise them). You may think that the world should be better ordered than it is -in that sense you have an ideological goal – even if you call it a more pragmatic arrangement. But others who deal with the world the way it is, realise that because of
1. the variety of circumstances that occur within any generation (even those after any societal change to the optimum pragmatic arrangments you would prefer)
2. because of the reality that a society is made up of people from across various generations whose circumstances were formed by earlier arrangments.
any attempts to bring in a new order are more ideological than pragmatic.
So, whatever name you give your brand of neo-liberal deconstructionist nihilism, it’s still an ideology which will not prevail in the real world. If it really were “neo”-pragmaticism as you claim, it would focus on a moderated form and selected areas for implementation. If it’s a whole of society make-over, it is not pragmaticism – though you might perhaps continue to call resistance ideological to assert that it is.
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SPC,
The Student Allowance and Student Loan are enough to live off, and even if they were not the hours needed on minimum wage could be counted on one hand.
The student loan tops out at $165, plenty for one individual, especially if one works a couple of hours (easily done for a undergrad student). I used to work 20 hours while studying and I never had any problems, that was in my undergrad. I know many people doing their masters and doctorate whom have no problem fitting in 20-30 hours of part time work. The student allowance is not something I have ever been eligible for but I know some friends of mine were getting about 195 when the accommodation allowance was included; in palmy.
The student allowance and the student loan are enough to support a student and even in the most expensive cities they would need so little compliment from work that the student need work only a few hours. Your argument as to a higher minimum wage benefiting students is thus correct, assuming no effect on employment and thus tax, but in terms of weight it amounts to jack all.
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What happened to my pragmatism post from last night? Did I preview but not post? Damn.
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Amazing what can be thrown at a topic in a day’s worth of time I spent doing other things…
Sapient,
pretty sure the wordpress software was playing up last night, there were a few odd things going on (timestamps, etc), so you may have had a post vanish if you were on when the blog was behaving oddly.
Proofreading is the bane of the conscientious thinker…
FYI, here are some minimum wage jobs:
bus driving, office cleaning, hospital cleaning/orderlies, waiter/barista in café/other hospo, (flipping burgers counts here), childcare, delivering advertising material/newspapers, hairdressing apprentices (actually, below minimum wage, often), and other apprentice positions like plumber, mechanic, etc.
All of these are occupations that are essential to modern society, they perform tasks that professional people would never do for themselves, yet the first thing National policy always says is ‘no increase to the minimum wage’.
Would any of them want to clean the toilets in their offices? I think not.
Yet the net value to them of the services that low-paid workers do is higher than the cost of the wages for those workers.
I’ve left out factory workers deliberately, as while some industries pay lower wages, most are still higher than the youth rates/minimum wage levels. While youth rates have gone for ordinary hourly jobs, they’re still there in another form in apprentices pay rates.
The point of the minimum wage is to stop wages from sinking below a certain level, usually logically tied to the CPI. Since we’ve had massive inflation in food costs in the past 2 years, due to inputs like speculation in the grain markets overseas, and oil going up in price hugely at times, the minimum wage rate has not kept up with inflation during those two years of note.
This is why it’s an issue for those who are doing front-line interventions in poverty-stricken families, low-waged folk whether in work or beneficiaries.
BTW, the other function of the minimum wage is that it sets the level at which benefits are paid – which is a proportion of the minimum wage, not equal to it.
We used to have a minimum wage based on the capacity to pay for the needs of a male worker, with dependent wife, and up to two children – in other words, employers could not pay an adult wage lower than what it took to reasonably feed a family. This was only 20 years ago.
Now, the minimum wage is based on a SWM. It is only supposed to cover food & so on, for one person.
A couple with jobs paid at the minimum rate cannot do more than cover weekly expenses, there is no leeway for saving for the future, for a house deposit, for instance, or to be able to put money away to be able to afford the time out to have a family.
Your argument is based around a supposition that all employment categories have an induction level, at the lowest rate-of-pay, and that all workers can increase their income by showing skills learnt in the job environment, and get paid more as time goes by.
For working class people, that just isn’t true – there are jobs that a lot of New Zealanders are doing every day, where the top and bottom of the wage-scale are less than $2 an hour apart – workers have no ability to ‘move up’ through the pay scale, because employers don’t offer opportunities for advancement.
Your average bus driver is in this position, especially if employed by one of the big monopolies in the cities. Yet, we still expect the bus companies to keep buses on the roads, and they still keep putting prices up – the difference is that the profits go to overseas owners and investors. They don’t care if workers in NZ can’t feed a family on the wages offered.
I understand that you are operating from a purely theoretical model of human behaviour, and theoretical economic paradigms, but the reality is that employers are not all logical or just; and employment is not remunuerated in a logical or just manner, as education inputs do not create an even correlation with remuneration.
I dispute your claim that the student loan & student allowance are adequate, however – I’ve known a lot of people for whom the allowance barely covered accomodation, then they needed at least 20 – 30 hours work to be able to cover food, power, telephone costs.
If they got sick & missed a shift, straight in to the Student’s Association for a food parcel, ‘cos medical costs on top of missing a shift was enough to throw the budget completely.
WINZ weren’t allowing accom topups in Welli on student allowance, only on student loan living costs component….
Also, in the bigger cities, supermarket jobs are mostly done by high school kids, less uni students get that work, so it can be a case of ten hours here, ten hours there, in jobs with random rostering (making sure that no-one qualifies for sick pay or holiday pay by keeping their hours down).
Small uni towns do employ students much more decently than the big cities!
Our tutors all had their jobs cut back in 2008, too, so there’s not much student income from tutoring down here any more.
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Katie,
Quite possibly, the site was terribly slow.
I’m not sure how it is in the capital but here bus driving more than minimum wage, as are – for the most part – office cleaning, waiting, barista’, and child care. Apprentices are investing in their future. Delivering newspapers/advertising and flipping burgers are hardly vital (and newspapers are salaried and actually far below minimum wage as the job is not practical at minimum wage).
If we are educating ourselves out of the jobs and have no one to replace them with then it is logical to import people but, whilst I have known many unemployed graduates, they tend not to be unemployed for long and tend to be at the bachelors level (and wilfully take supermarket work). The people refusing work are, more often than nor, unskilled. At least in my experience. If they had to work for the dole (preferably in the railways form) then the dynamics would be different
People do not have a right to sit on the dole: If they refuse work then they can rot. If they want the dole then they can take the job they are assigned and do their best to improve on that.
There is no reason the minimum wage should support anything more than a single individual. There is no reason that some one should be able to save a deposit for a house while on the minimum wage.
I do not talk about movement within jobs only, but about movement between jobs as well. If they want a job that does not have an entry level then they need to train; to seek education. If they want a higher rate then they need to obtain the skills needed to get that rate.
Foreign investment is a different matter entirely and need not be addressed here outside of the effect the minimum wage has on it.
If they can not survive on 165 dollars plus 10 hours work on the minimum wage, even assuming that the boarding costs 150 per week, then they are retarded.
As to living costs, I think you got it the wrong way around. From memory there is no accommodation allowance for people on the loan as the requirement for eligibility is the same as that for the student allowance. You can get the accommodation allowance in full, at least in palmy, so long as you are remotely eligible for the student allowance.
When I was at the supermarkets it was mostly uni students. I guess its different there. 10 hours anywhere at minimum wage should be more than sufficient.
How apt, the university full of unionists had to cut back on employing useful workers.
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Sapient,
The ILO standard for work is the minimum wage, so you cannot pay people the dole if they work.
Your position is that the minimum wage need only be enough to support one individual, which is inadequate. Their non working partner is not eligible for the dole, so the amount needs to be at a minimum 2* that rate.
The Greens target is 66% of the average, my posiiton is above 50% and below 66%. It’s about 50% at the moment.
A ball park figure in terms of sustaining a couple over some period of time would be the rate for a couple on Super.
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Sapient, your post is up there a bit, but the order of posts has been compromised. The ball is now back in my court. Later on that.
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katie – You complain of high bus fares and low wages for drivers, with large profits going to investors. Are you talking about a real bus company or a made up one?
If it’s real, please let me know which bus company is making large profits for investors – I’d like to buy shares.
Most of the bus companies I know of stuggle just to stay afloat. There’s certainly no margin to put wages up unless fares go up.
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SPC,
Again, you are attempting to put plaster over a problem by making another problem rather than addressing the original problem. Yes, the dole is not paid to the non working partner. If the working partner desires work then the dole should be paid. This is a problem with how the dole is administered, not with the minimum wage; just as we would address a single individual not getting the dole as a matter with the dole.
Super is another matter, but that can wait for another time.
I have been doing a fair bit of thinking this day and as a result I am less concerned about unemployment. While I do consider the minimum wage as more than sufficient, I do not have any problems with the present rate of unemployment (though I do with the distribution). Thus, I do not have any problems with the minimum wage being where it is presently.
If I wanted the economy to grow strongly I would be taking a different stance, but since I desire a steady state economy without the booms and busts I can accept the present minimum wage. I could even accept a higher minimum wage if spending was curtailed. Spending is, at the moment, the only reason we need to lower the minimum wage; we can not keep building up foreign debt and expect to continue.
More later perhaps. I would take pains to point out, though, that the only thing that has changed is my perception of the acceptable level of unemployment (as a result of my spending my day going through charts and numbers) such that a decrease in the minimum wage is not necessary save for the balance of payments. The rest just follows logically from that
change. We must, though, work out a compromise between spending and income as a higher minimum wage decreases income available for the increasing unemployed. The point of balance is at present, arguably, off.
This post probably seems a bit of a mess, but ohwel. Basically I am saying that the present minimum wage, or a higher minimum wage, is acceptable if we can get our outgoings in order.
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SPC,
No, the first post is there but not the second. In the second I addressed the rationalist/pragmatist discussion we were having.
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Sapient,
I would tax incomes in such a way that take home pay ranged between about 80% of average an 120% of average. That leaves room to reward people for the range or skills and/or unpleasantness required in a job, and at the same time would lead to a much more equitable distribution of wealth.
The right often accuse the left of the “politics of envy”. To a certain extent there is truth in this. People do compare themselves _relative_ to other members in society. I suspect this is human nature, and probably explains why societies with large inequalities in how income is distributed are often more unstable than those with more equal distribution.
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Samiuela,
I can see where you are coming from but I do not think it is conductive of the society you desire. Forgive me for this, but I am going to sound like BB again.
People invest a lot of time, money, and effort in to starting up a business and they carry a lot of risk in doing so. It is people starting up businesses and expanding those businesses that allows others to be employed and for the economy to function without a monopoly in every area. By limiting profits such as you propose you will vastly limit the number of start-ups as the amount of time, money, and effort invested in most companies, especially when considering the risk, would have their maximum return (120% of the average wage) exceeded by simply putting it in a bank account or offshore locations; the return would not justify the risk and added effort. We would get less overseas investment and most, if not all, of the entrepreneurs we need will end up going overseas, as will many established companies and workers. The average wage would drop substantially and the poor would be worse off than any time during my life time.
~
This is just my theory, but I think that wage inequality is not the primary causative factor. I would suggest that wage inequality is, at best, a modifying factor. I would suggest that the causative factor is social mobility and wage inequality merely increases the degree to which that resounds within people and that this is what weakens social cohesion and increases crime.
Wage inequality is not the evil, social immobility is. The student loan is a wonderful invention in that it allows anyone mobility to long as they are willing to make the effort. We can go a lot further by encouraging parents to talk to and read to their children in a manner which encourages desirable cognitive styles. I would consider the cognitive styles -passed from parent to child- as the single biggest means by which social class mobility is stunted. We could encourage the teaching of logic in schools and get teachers whom actually enjoy their job and have a passion for the subjects. We can try to capture their interests and teach them at a level they can manage. etc., etc., etc.. (though I would personally also like to eliminate childhood indoctrination, this is a major cause of decreased cognitive ability and thus it further decreases class mobility – not to mention the effect of the focus of Christianity on salvation by faith)
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