In the wake of the recent release of labour force data (Household Labour Force Survey, HLFS, Nicola Willis bemoans ‘glass half empty’ view of unemployment figures, RNZ 6 August 2025), 1918-1920 National Party Leader Simon Bridges, has called for economic “stimulus” to rescue in particular the dire Auckland economy. (See Call for government to help Auckland as unemployment rises, RNZ; contrast the Minister of Finance Nicola Willis’s retrospective and ongoing advocation of fiscal suffocation Dangers of Excessive Spending Highlighted, Scoop; both 7 August 2025.)

My focus here is to look at the historical and recent employment rates of older women (aged over 55), and to consider the importance of their spending to the health or otherwise of the New Zealand economy. My reference is the first chart highlighted in Employment in New Zealand – especially of women – at the Age Margins, Evening Report, 7 August 2025.

The chart shows that there is a huge increase in the percentage of older women who meet the official definition of employment. (This generous definition includes wage/salary workers – fulltime or part-time – self-employed workers, active employers, and people working without wages in a family business.) The data reveals a huge increase in the ‘participation rate’ of older women in the labour market.

The age group 60-64 had a particular impetus to retire later, namely the rise in the early 1990s of the age of entitlement to New Zealand Superannuation from age 60 to age 65. But the pattern is essentially the same also for women in their late fifties and in their late sixties.

The appropriate benchmark year is 1987, by time the HLFS was bedded in and before the economic consequences of the financial crash in late 1987. While the high period for employment of older women is 2022 or 2023, when jobs were plentiful, we can be sure that the actual participation rate has not fallen since 2022, and has probably continued to rise. (We can disregard participation rates published in the HLFS; they are based on definitions of unemployment which only realistically apply to men aged 30 to 60. There is much ‘hidden unemployment’ amongst older women.)

For women aged 55-59, we see a rise in labour market activity from 43 percent to 80% in 2018 and 2023. For women aged 60-64, we see a rise in labour market activity from 18 percent to 70% in 2022. (The dip for this early-sixties age group in the late 1980s and early 1990s is unemployment masquerading as ‘retirement’.)

For women aged 65-69, we see a rise in labour market activity from 8 percent to 44% in 2022. For women aged over 70, we see a tenfold rise in labour market activity from 1995 to 2025. (We desperately need a ’70-74′ age category in the published data; this ‘early-seventies’ cohort is likely to now be New Zealand’s fastest growing employment demographic.)

Overall, this truly massive labour force participation of older women in the last thirty years has been a barely noticed social revolution. The increase of employed older women is even more dramatic than these figures look, because New Zealand’s highest birth numbers were in the late 1950s and the early 1960s. These women are now in their sixties, and born with higher life-expectancies than their parents.

It seems unlikely that this increased labour force participation is a result of the rise of feminism in the 1970s; an increased advocacy for paid work was one plank of that feminism. Though feminism may have played a significant but lesser role in this huge social change. It seems far more likely that the main driving force is economic pressure upon households; stresses that have increasingly required all adult household members to be attached to the labour force, rather than the pre-1980s’ emphasis on an individual (typically male) ‘breadwinner’.

The stresses initially hit households hardest in the late 1980s through massive rises in mortgage interest rates, and in the more frequent revision of interest rates by banks during the lifespans of home loans. To that we can add an increased reliance on other forms of personal debt, such as credit cards. The ongoing stresses relate to both the increased precarity of paid work for men and women – meaning women increasingly having to make significant contributions to household budgets – and the failure of hourly wages to keep up with gross domestic product per capita. In order to be able to buy the goods and services which made up our GDP, we needed ever more hours of household labour.

Older households were able to hold out for longer against these pressures, but not forever. Hence, most of the increases of labour force engagement for these households have taken place in the last thirty years.

Older Women’s Spending

What all this means is that, in the 2020s, a critical component of consumer spending is done by older households, and in particular older women. Their spending is a major source of ‘stimulus’ in the 2020s’ economy. It is already apparent that suburban cafes, for example, survive very much with the help of patronage from groups of older women.

By and large, most policymakers worldwide have now forgotten the lessons of the Great Depression of the 1930s. One of the most important lessons was that countries which had inbuilt means to keep incomeless households spending suffered much less in the peak years – the early 1930s – of that Depression. (These countries included the United Kingdom and Sweden; they contrast with France and the United States, which were still in Depression in 1939.)

France in particular could not get out of that Depression. In part because of World War One deaths and injuries, it relied very much on immigrant labour (mainly from North Africa). It also relied on female and male urban labour from people with rural connections. So, when the Depression hit, the redundant workers – having no access to benefit incomes – simply returned to either Africa or to their parents’ small farms.

Most of Aotearoa’s older women cannot emigrate if they lose their incomes. But most of them will not be able to draw on a benefit to offset their lost wages. Some are already receiving New Zealand Superannuation, and that will rise a little as the marginal tax rates on their ‘Super’ will come down. What of those under 65 who lose their incomes, noting that many employed women age 55-64 live in households which pay mortgages or rent? Most will not qualify for an MSD benefit; they will be fully reliant on their partners’ or adult children’s wages. Some, who do qualify for benefits, will face stand-downs of several weeks or months; and time engaging with MSD that would be better spent with their grandchildren or elderly parents.

One particular group of older women is those, mainly in their early sixties, who used to be able to get a ‘non-qualifying spouse Superannuation benefit’, ie if their partners were superannuitant pensioners with minimal other income. (With zero fanfare, one of the first things the Labour Government did, in October 2020, was to cancel these women’s entitlement to what was an important form of transitional income support.) These women, grandmothers in large part, are the ‘breadwinners’ in their senior households. If they lose their jobs (or their ‘roles’ as we are now supposed to say), that means a potentially catastrophic loss of household income. (We should note as an example that the New Zealand Polytechnic sector, currently undergoing significant restructuring and financial downsizing, has a particularly important portfolio of older female employees; many of these workers have substantial institutional memory, keeping their organisations functioning more than many of the younger managers appreciate.)

MSD should be focussed on helping young people to find paid work, and not having their resources logjammed by older women who would have previously had access to income support without red tape.

The Laws of Stimulus

The First Law of Holes, is ‘stop digging’. (We note that a ‘depression’ is, literally, a hole.) Finance Minister Nicola Willis is digging furiously, burying alive suffocating Kiwis.

The first law of stimulus is to stop public-sector retrenchment. That is the main single lesson from the near-forgotten Great Depression. The second law of stimulus is to have rights-based alternative sources of income that individuals of all ages can fall back on. The third law of stimulus is to stop pursuing a monetary policy that jacks-up interest rates; the ‘cost-of-living crisis’ is substantially a ‘cost of jacked-up interest rates’ crisis. (As I have already noted, debt is something that drives more people into the labour force; it’s not just the amount of debt, it’s also the cost of that debt.)

We may note that New Zealand got out of the Great Depression by adopting all three laws of stimulus. And a fourth law, by using the cheap money to embark upon a very successful ‘state housing’ program, New Zealand recovered in 1936 to 1938 with double-digit economic growth and near-zero inflation. Some of those houses, well-built, are worth a fortune now. Fletchers and other capitalists made a fortune, too; this is the kind of stimulus which would meet Simon Bridges’ business-perspective criteria. Homelessness was not acceptable to New Zealanders back then, as it seems to be now. Are we looking at a coming decade of escalating homelessness for older women?

When just about every adult is ‘in the labour force’ – unhidden or hidden – desperately needing income while employment ‘roles’ are in decline, the social stresses cannot be contained forever. Younger people may revolt, turning to the underclass-politics of the street. Older people are more likely to die unseen, as too many did in July 2022 (many denied desperately-needed second-booster vaccines) when the Covid19 pandemic really hit Aotearoa New Zealand.

Do any groups of influential people out there have the imagination and capacity to answer the call for humane economic revival? Or is it a case of those who would can’t, and those who could don’t?

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Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

The above chart shows – in red – the annual percentage increase (since 1988) in numbers employed of women aged 65-69, based on Household Labour Force Survey employment data. (And it shows, for comparison, males aged 30-34; in blue, their percentages are shown on the right-hand side of the chart. I explain below why I contrast older women with younger men.)

The employment growth of older women is particularly variable. But there are some clearly discernible patterns. To help show these, I have used “vertical gridlines” 33 months apart; 2¾ years is the persistent period of New Zealand’s trade cycle.

There are several reasons why employment may go up or down. First is simply the growth of the population for the demographic portrayed. For the latest data, the most recent women portrayed (the 2025 data point) were born around 1957 (ie born in 1957±2). Birth numbers in New Zealand peaked in the decade from 1955 to 1964; so, there will be many more women still alive in this birth cohort than in previous cohorts, and recent international migration will be low for that age group. Especially as life expectancy has been rising, population growth is a major reason for an increase in women aged 65-69 who are employed. So, growth of employment in this demographic should be well above the zero showing for the last two years.

Another reason for higher employment numbers is ‘labour force participation rates’. Charts that I posted recently from the same dataset show participation rates for women aged 65-69 having risen to 44% in 2022, the last peak of the cycle. (See my Employment in New Zealand – especially of women – at the Age Margins.) It’s unlikely that the actual participation rate has fallen since 2022; more likely it has risen in line with the trend this century (participation up from 10% to 44% of the available population); although the official participation rate has fallen. The difference between the actual and official participation rates is known as ‘hidden unemployment’)

The third reason for changing employment for ‘retirement-age women’ is the ‘added-worker effect’. This effect, highly apparent for this demographic, means that employment and actual labour force participation move essentially counter to the economic cycles (including the 33-month trade cycle). This countercyclical effect, similar to the enrolment patterns for tertiary education, is particularly apparent from 1988 to 1997. And it’s understated by the employment data, because the times when more older women want to be employed will be times of generally high unemployment. The data peaks here – eg in late 1988 and mid-1991 – reflect both the increased desire for paid work, and the reduced ability to secure paid work.

The ‘added-worker effect’ operates when other sources of household income are reduced, or when major costs such as mortgage interest or rent are high and/or rising. For this demographic there is also a ‘subtracted worker effect’, meaning that these women choose to retire whenever they can afford to retire.

It is apparent that, for the most part, the peak increases in the employment of older women follow the 33-month trade cycle. The red peaks are on or close to the charts’ vertical gridlines. There were however disruptions to the cycle caused by the 2008/09 Global Financial Crisis, and in the 2020s thanks to the Covid19 pandemic.

Males aged 30-34

The blue graph for males aged 30-34 shows the economic cycle as we would expect. This is a demographic with a very high and stable labour force participation rate. As is apparent, the blue plot is to an extent countercyclical to the red plot. The main male employment cyclical peaks were in the mid-1990s, the mid-2000s, the late 2010s, and in 2023.

We particularly note that employment growth for youngish men was weak in the late 1990s and the late 2000s. Rising young-male employment was particularly strong between 2024 and 2018, reflecting strong immigration for this demographic.

Since the present government has been in power – ie from November 2023 – employment growth for youngish men has plummeted, despite high levels of net immigration, and despite this being the baby-blip generation born in the early 1990s. Basically, the economy ‘tanked’ in 2024 and 2025.

Female birth cohorts

The second chart shows women’s employment/participation for different ‘generations’. For women born around 1957, employment peaked at just under 80% of the available population, when they were aged about 47. For the next generation, that peak is even higher, at about 83% of available women; and this is despite more women having babies later in life.

Generally, younger generations of women have had markedly higher participation rates, especially between ages 25 to 40.

Finally

Once upon a time ago we ‘worked to live’. Since the neoliberal and feminist revolutions, we have ‘lived to work’. I am not convinced that this is progress. Progress is supposed to be productivity growth; more outputs per unit of (labour and other) inputs. What we have seen is much more input – with labour inputs being shown here – yet economic growth if anything seems to have slowed.

To have a sustainable future, we should be stabilising output, while contracting inputs. Employment counts, as defined by the HLFS, are crude measures of inputs. It is perfectly possible to have more people employed, wanting and getting fewer hours per week on average. That’s not what we have here. Rather, we have more and more people desperate for employment to pay the bills, and a substantial decline in time committed to the other non-income-focused aspects of life. Women have been on the frontline of this seek-more-work play-less zeitgeist.

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Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Quarterly Labour market data in Aotearoa New Zealand was released today. Much of the data is functionally useless, because of definitions which disguise rather than reveal important trends and turning points.

I have focussed on employment data (although the definition of ’employment’ is too generous to be optimally useful) relative to estimated populations for age groups at the younger and older margins of the ‘working age’. (For me, ‘active in the market economy’ means meeting the official definition of employment. Unlike the International Labour Organisation, I am not classing unemployed people as ‘active in the market economy’.)

The first chart focuses on older women, a group particularly impacted by recent and ongoing economic changes. Many of these people neither qualify for benefits when they become redundant; nor do they even make the official unemployment data because, compared to people aged 25 to 55, they are more often regarded as withdrawing from the labour force when they lose their jobs.

We can see that the post-1980s’ trend for all depicted age groups is one of rising ‘participation’ in the labour market; much of this is for financial reasons (eg needing to pay mortgages or rent), rather than for lifestyle or feminist reasons. Some of the change of course is linked to the increase of the age of entitlement to New Zealand Superannuation, from 60 to 65.

We see that recent (ie post-2022) data shows a flattening of the trend, or a fall against the trend for 65-69-year-old women. Most of these are actual unemployed people who are counted as ‘discouraged workers’ or ‘retired’. In reality, the financial pressures on older women to stay working are stronger than ever. 2022 represented the year of peak-grandmother-labour.

The second chart shows the trend fall in older men and women NOT employed. We note that New Zealand Superannuation – a Universal Basic Income for Seniors – incentivises people to stay working after age 65. (Australia has a substantially lower proportion of people over 65 in employment.) The trend in falling non-employment has been arrested by the greater difficulty since 2022 in finding paid work.

For younger people, the trend is for more employment and less higher-education (although many people in higher education also meet the definition of being employed). It would appear that many New Zealanders in their twenties have returned to higher education in lieu of being employed, looking to live from student allowances or student loans.

The third chart compares the teenage workforce with workers of peak working age (45-49). For peak working age we see convergence of male and female participation, despite more women in their late forties with children aged under 10 in their care.

For teenage workers, the male data fluctuates more than the female data. In this decade, more teenage males are not employed than teenage females; a clear change from the 1980s. There was a dramatic ‘flight to employment’ for teenagers after covid; a return now reversed as the job market clams shut.

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Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

The academic study of history, more than anything else, is about the relationships between social elites and the lower classes.

Yet, when it comes to the present, the relationships between elites and wider society is under-discussed, both popularly and academically. (In academia, it is the province of sociology, a social ‘science’ both arcane and riven by ideology.) This wasn’t always the case; for example, the classic critical text of elite sociology remains ThorsteinVeblen’s 1899 book, The Theory of the Leisure Class. In more recent times, I would include the recently late (2020) David Graeber as a successor to Veblen; Graeber’s titles include Debt, The Utopia of Rules, Bullshit Jobs, and The Dawn of Everything.

Even more than Veblen, the two most renown economic sociologists have been Karl Marx and Joseph Schumpeter; with the relatively contemporary Schumpeter only having died in 1950, just 72 years ago. In addition, more recent than Schumpeter, was John Kenneth Galbraith (1908-2006); a political economist and critic of industrial capitalism still familiar to modern readers, and who regarded Veblen as one of his most important mentors. I still remember Galbraith’s The Age of Uncertainty TV series (BBC, 1977), with its discussion (in episode 2) of the gilded age in American (especially New York) history. (Here we may note the recent HBO TV drama, The Gilded Age a time when the New York ‘old money’ elite going back to Dutch times and the ‘new money’ robber barons’ jostling for status through their mansions in Park Avenue [New York] and Newport [Rhode Island].)

A good metaphor for the relationship between elites and non-elites is the sedan-chair. However, the simple sedan-chair is now too small for the late-modern era in which mankind still lives. Not all elites are ostentatious, and not all elite individuals are one-percenters. Let’s imagine, for now, a sedan chair in 1972, a year fifty years ago when men – especially white men – (and a few dynastic women such as Indira Gandhi) ruled the world; a carriage with four working-class bearers and two male passengers.

Right- versus Left-Wing Elites

Elites are people – indeed classes of people – who have privileged sources of income, and as a result have shared interests and a shared sense of their own societal importance. Elites are the ‘beneficiaries’ (in the original sense of that word) of their economies; if not the only beneficiaries, then at least the predominant beneficiaries. In ancient times distributable economic surpluses tended to be small, so elites were a small proportion of the population. In the modern era of industrial capitalism, however, there is much more distributable wealth; elites are a much larger share of the population, and they split into a variety of sub-elites.

When we think of elites we traditionally think of the long and evolving history of private fortunes, and of conservative ‘right-wing’ ‘Tory’ politics. We may go back to the emergence of tribal chiefs and their loyal henchmen; a ‘warrior-class’, the chiefs being warlords rather than landlords. These chiefs and their acolytes gained their kudos by being prominent in the protection and advancement of their tribes. Ruling elites emerged from such warlords, their dynasties, and their henchmen’s dynasties. Governments are today’s substitute for kings, ruling to a greater or a lesser extent through the consent of their subject non-elites.

The classic form of right-wing elites were aristocrats who owned productive lands, which, on account of their lands, would engender rents; rents payable by serfs as labour-service, or, in capitalist history, payable in money. In many (if not most) cases these aristocrats initially gained their lands as a reward for services rendered to kings. Indeed we may define such ‘public servants’ – vassals of Kings, and of subsequently constituted governments – as left-wing elites. Thus, historically, the route to private dynastic fortunes was, for many, public services. (In more recent times, we understand that the Russian oligarchs got their head-starts in Soviet Union times.)

The ‘new money’ robber barons of the gilded age were an exception; they were never ‘public servants’ in any sense of that phrase. They – through a mix of cunning and good luck – gained considerable ‘economic rents’ by getting into their ‘game’ early. These were the ‘self-made-men’ who created ‘trusts’ (meaning monopolies, cartels, and the like); some of their types – in the present Internet Age – in 2022 are still young men. We also have a right-wing class of ‘financial elites’ – a class with a long and interesting history – who have made (and sometimes lost) fortunes by selling financial services to elites and by trading ‘assets’ (mostly promises and real estate) for ‘capital gain’.

In present societies then, we have mixes of dynastic ‘old money’ elites (right-wing today, though descended initially from public servants), ‘new money’ right-wing elites who made their fortunes selling goods or services to the non-elite masses (and which include today the executives and principals of ‘big business’ corporations), financial elites, and ‘new money’ left-wing elites. The latter owe their elite status to providing public service – services, expertise, narrative advice – to democratic and socialist governments.

Left wing elites are those whose status arises from the patronage of rulers, especially revolutionary or democratically-constituted governments. Right-wing elites are the captains of industry, ‘robber barons’, and people who make their money selling financial and corporate services and assets. Inheritance elites – dynastic elites – can be regarded as ‘right-wing’, even if the founders of those dynasties were servants to democratic or republican governments.

(In public choice theory, which became popular in the 1980s – in New Zealand, think of Eric Crampton, whose mentor was Gordon Tullock – writers such as Mancur Olsonthought of these early warlords as ‘roving bandits’; a kind of necessary evil in early times, an iniquity from which governance and governments ultimately evolved. Following the advent of agriculture, kings and princes emerged from nomadic chieftains; Olson called these and their landed acolytes ‘fixed bandits’! The more usual name for a landlord class is ‘aristocrats’. Olson’s 1982 book, The Rise and Decline of Nations, was influential in New Zealand Treasury circles in the 1980s, becoming an inspiration for Rogernomics; we should note, however, that Roger Douglas was somewhat played, at that time, by Treasury’s rising stars. While the tenor of public choice theory is a critique of left-wing elites, the 1980s’ Treasury in New Zealand was itself very much a left-wing elite. Further, while far from the only target of public choice economics, there was an alleged left-wing ‘aristocracy of labour’, with an emphasis on the monopoly powers that some trade unions may have held; powers which certain politicians such as Margaret Thatcher were able to break.)

What makes the label ‘left-wing’ especially appropriate for privileged servants of today’s states is that, by their very natures, left-wing ideology favours a ‘big state’ – a big apparatus of government service – whereas right-wing ideology favours a ‘small state’.

A complex question here relates to the status of academics. In short, we may note that the management layers of academic institutions are very much a part of the left-wing elite, while untenured teaching staff are clearly not. For tenured research-active scholars, some have a career focus which is not unlike that of their disciplinary colleagues in or close to the public service; others are genuinely independent scholars who ask pertinent (rather than patsy) research questions, and who follow the trail of evidence wherever it takes them, even if they end up ‘biting the hands that feed them’.

Finally, we should note that there is another group of ‘self-made’ men and women – in that sense like the former captains of industry, and like the moguls of the internet age (such as Mark Zuckerberg) – but who should not be categorised as right wing ‘private-property entrepreneurs’, and who do not fit any above definition of left-wing elites. These ephemeral elites are the successful sports stars, media stars, entertainment stars, and lottery-winners who have made fortunes as a result of their popular talents or sheer good luck. (There are also ‘criminal elites’; a complex story in itself, given that ‘criminal’ has both narrow and wide definitions.)

Follow the Money

To understand much of what happens in the human world, the technique to adopt is ‘follow the money’; that is, to observe where the money comes from, and where it circulates to; regardless of what goods or services may or may not be being purchased, or what labels (eg ‘mental health’) may be on the ‘money bags’ dispensed by government.

Government is the biggest single monetary pump in any modern economy. We should note however that, from the early twentieth century, central banks (ie Reserve Banks) have played a partnership role with governments; and that, mainly in the 1990s and in western liberal democracies, this relationship changed.

(The essence of the change is that, before the 1990s, governments were the biggest customers of their countries’ central banks. Central banks would [create and] lend money directly to governments [as well as to client commercial banks] largely at the behest of those governments. Since 1989 (with New Zealand playing a globally leading role that year) the relationship has changed, with the central banks gaining the power to deny finance to governments; though these banks are still owned by governments, and they implement ‘monetary policy’ in accord with contracts dictated by governments. So, if governments want to borrow newly created money, they have to do it indirectly, by borrowing existing money [selling new government bonds] in the [secondary] money markets, and then the central bank [if it so chooses] lending to the money market by buying those ‘bonds’ [or other existing assets]. An alternative situation is that the central bank wants to create money and lend it directly to government, but is not allowed to do so. So the central bank attempts to finance government indirectly, by buying existing (rather than new) government bonds; and hoping that the government will ‘issue new bonds’ [ie borrow from] the money markets. This alternative situation represents what happened in New Zealand in mid-2021; with the [debt-averse] government not taking the bait, ie with the government thwarting the Reserve Bank. The result was that the parties who sold those existing government bonds to the central bank became awash with new money, and interest rates on medium to long-term debt fell lower than the central bank wanted. The government spent too little, barely addressing the issues the people expected to be addressed; and the housing market and sharemarket were pumped up due to that money not going where the RB had wanted it to go.)

Regardless of whether the government should have spent or dispensed more than it did in 2021, the government was still New Zealand’s biggest spender. A government of a democracy exists to purchase ‘collective goods and services’ (such as healthcare, education, defence) which (at least in principle) benefit all New Zealanders; to dispense collective benefits if not in practice equal benefits.

Further, up to a point and generally with the consent of the demos (the people), some of that spending may be targeted towards particular groups – deserving groups – of people with (or allegedly with) specific disadvantages; ie, these deserving groups are (by definition of ‘deserving’) non-elites. (Dispensing benefits to the deserving is called ‘vertical equity’.) In addition to the purchase of services, the government manages direct monetary flows (accounted for as ‘transfers’); either universal (to all equally; or at least to all who meet a criterion other than financial means, such as age or disability), or targeted to deserving members of deserving groups, or means-tested.

In practice, most of this money – even much of the money set aside for ‘transfers’ – is paid directly to specific intermediate destinations (public ministries, or contractee organisations); ie not directly to non-elite people as universal or targeted transfers. We note that the constitutionally intended recipients of universal ‘transfers’ are mostlynon-elite, and the constitutionally intended recipients of targeted transfers are all non-elite; money for non-elites is filtered through organisations managed by elites.

The problem is that much – in some cases, most – of these monies intended to support the well-being of non-elites do not reach their constitutionally intended recipients. (Note above my ‘mental health’ example. Little of the money in the ‘mental health’ moneybag ends up with the mentally unwell – as money, or as consumed services or other palliatives.) My challenge here, however, is to reflect on where the money does go, and not to wail about the failure of much of it to get to the needy and the deserving.

The elite legacy of the Neoliberal Reforms of the late 1980s and early 1990s

During the first term of the Fourth Labour Government (1984-87), the policy emphasis was on financial deregulation, and on boosting elite incomes by establishing positive real interest rates. For most of the time since the 1920s, interest rates on deposits and mortgages had been lower than inflation rates; this was especially true in the 1970s. This policy on interest rates is what the private elites wanted.

At the same time, especially in 1985 and 1986, the public service was boosted both in salaries and in personnel, as that government both aggravated inflation (knowing they could blame the previous government) and received a huge tax windfall in large part as a result of that inflation. New elites were being created, while old elites were being kept happy. (As a diversion for the more conscionable public servants and academics and pressure groups, from 1986 to 1988 we had the super-doorstop, the 1986 Royal Commission on Social Policy, and its soon-to-be-forgotten five-volume report.)

The neoliberal policy process accelerated after 1987. The Treasury prescription was a long ‘public choice’ document called ‘Government Management’, and it sought to thoroughly reform the public service using a process of internal market contracting. The bureaucracy would become like a giant corporate marketplace where all agents and agencies were expected to contract with each other. The non-elites at the ‘coalface’, doing the actual work of healthcare etc., would be the least-well-paid. Many of us still remember the CHIs (pronounced ‘cheese’) and we still have the CRIs (‘cries’) in place of the DSIR (think CSIRO in Australia). Alphabet soups remain today, as agencies populated by left-wing elites. The 1980s was the decade of the rise of ‘managerial economics’; the new assumption that non-elites could not be trusted became to some extent a self-fulfilling prophecy.

These changes were extended in the early 1990s, under National, with the ‘Mother of all Budgets’, the Employment Contracts Act, the swathe of benefit cuts, and later the 1994 Fiscal Responsibility Act. (I remember seeing the ‘burn Shipley burn’ graffiti on the Rakaia Gorge bridge in 1991.) The result was huge cutbacks in the provision and maintenance of public infrastructure, unemployment rates which were in truth vastly higher than the official maximum of twelve percent, and the departure to Australia of many of those now coming back to New Zealand as 501 deportees.

This was the culture of government management and highly rationed services, created between 1984 and 1994; the culture which still exists, thanks in large part to the ongoing workings of the 1989 Reserve Bank Act, the 1994 Fiscal Responsibility Act and the cultural switch from universal to highly targeted (ie highly administered) public charity in lieu of the social safety net. Highly administered systems are inevitably full of cracks through which people fall, while proving lucrative for the executive managers of these systems of rationed welfare.

As a result of this new culture, the level of services to the non-elites became highly compromised. The ‘government management’ nexus, to whom the money-bags were passed, retained too much of this revenue for itself. An extended left-wing elite was delivered; an elite dependent on government patronage. Left-wing elites make their money by retaining it, circulating more within their own contracting and investing communities than is allowed to trickle-down to the non-elites for whom the monies are ostensibly intended.

New-Left Elites as ‘Rationers’

At the bottom layer are the managers who are themselves tightly managed. David Graeber called their income streams “bullshit jobs”. At the higher layers of elitedom there are lots of travel obligations, cultural formalities, symposia, and networking. As in the contrived behavioural norms of the traditional elites we watch in film and television dramas, it is not always much fun to be trapped in an elite regimen.

The essence of the left-wing elites and the reforms which created their neoliberal verson, is the process of rationing. This process is one of systemic underfunding as an elite mechanism.

In the years prior to ‘government management’, Budgeting was a hit-and-miss affair, because social need was (and still is) inherently unpredictable. In those post- World War II ‘old days’ – nowadays lampooned in New Zealand as ‘Muldoonism’ or similar – unexpected needs were met, the safety net worked, there was a social contract that it should. While there were swings and roundabouts, government finances roughly worked out in the medium term.

In those days, public choice economists lambasted public servants and institutionalised pressure groups as “distributional coalitions”. They proposed a mechanism attributed to Joseph Schumpeter – ‘creative destruction’ – as the heavy-handed remedy for the ‘lazy public service elites’ who had supervised New Zealand’s greatest ever quarter-century of expansion.

The remedy was to replace these undermanaged servants with highly managed servants doing the ultimate ‘bullshit job’, rationing public services. The application of the remedy created lazy government ministers. All the new ministers were required to do was to shuffle (and subdivide) labelled money-bags, with the Minister of Finance not only being shuffler-in-chief, but also deciding the aggregate amount of money in those money-bags. This is in essence, ‘bulk-funding’; the critical rationing decisions are devolved, while the rationing servants have no powers other than the power to ration. Whatever the scale of a problem, an already determined bulk fund would have to address it.

As a way of managing the unpredictability of need for the social safety-net, the expectation is that needs will be unmet; that is, that some (maybe many) will miss out on needed goods or services, and will fall through ‘cracks’ in that net. So, with regards to a particular unmet social need, Treasury may grant safety-net support for X people (specified as just enough dollars to treat X), while expecting that Y people will want such support (where Y is unknown, but believed to be more than X). Under this method of social support, there will always be unmet demand for those supports or services.

All the Minister of Finance has to do is to fund a particular kind of support for X people, leaving it to the rationers to decide who among the Y will be supported and who will miss out. And salary increases to ‘coalface’ staff would mean less money to meet clients’ needs When the government is feeling generous, they may increase X by putting more money in that money-bag (possibly transferring it from another bag), though it will still be less money than can meet the level of need that is Y. When the government wants to tighten fiscal policy, it may simply reduce X. Thus, the art of government becomes an exercise in greater- or lesser levels of under-funding. Because funding is pre-ordained (ie not responsive to needs as they arise), the principal task of the public service and its contractees will always be to ration; that means hiring layers of rationers, all of whom ‘clip the ticket’, retaining much of the allocated funds within the government-dependent elite. This is the mechanism of systemic underfunding, which means that the rationing process itself siphons-off a significant proportion of what is from the outset an ‘underfund’. (Think of Pharmac, the New Zealand drug-buying agency, as an exemplar for this process.)

One other key component of the systemic retention of public funds is the whole ‘optical’ industry; the process of managing perceptions; of making it look like governments are doing much of what people expect of them, when in reality much less of that money is trickling down to the people indicated by the labels on the money-bags. This system of public relations becomes like a game played with elite media; this echelon of the left-wing elite is commonly known as the beltway.

A large part of the wider-beltway that constitutes the expanding left-wing elite is the employment sector: ‘professional, scientific, technical, administrative, and support services’. This, in the 2000s and 2010s, was the country’s fastest employment growth-sector; and is a mish-mash of professional occupations. But the key question is, who is buying their services? The answer would appear to be a mix of professional elites, including those elite-employing organisations which depend on government-initiated income streams. This employment sector is largely superstructure; the edifice through which the money retained by the elites circulates.

Marketing

Funding for different projects is not neutral. Elites hustle for funding, for their various ‘good works’ and other projects.

An issue then, that may help to explain some of the career-building within the network of organisations seeking access to government money flows, is the matter of statistical manipulation. While I don’t wish to make any accusations, I am aware that the quality of many of the statistics that make the headlines leaves much to be desired. It is not without reason that the phrase ‘lies, damned lies, and statistics’ retains its popular currency today. So instead, I’ll note an example from the acclaimed Danish political television drama, Borgen (Season 3, episode 5, 39′); while fiction, this drama deals with real contemporary political themes.

Sex-workers’ representative Helena: “The studies they carry out. They manipulate the data … the figures from the shelter are exaggerated.” Katrina: “What would the shelter gain from lying?” Helena: “They get money from each girl they help. We’re not the only ones who get paid by the customer.” … Katrina to her political boss: “It looks like Helena’s right; the shelter accrues its figures year-on-year so the women already in the system are counted again as new entries, 400 double-counted out of 1200 clients. … It’s in their [political] interest to make the problem seem as big as possible; they support a ban [on sex-work]”. The issue here was the conflation, for political purposes, of sex-working with people-trafficking.

The underlying problem is that all sorts of statistics are bandied about to make political points, including to attract public revenue to NGOs (non-governmental-organisations); and there’s usually minimal professional scrutiny of those cited data. Statistical manipulation is a trade with many tricks, which include sample self-selection, leading questions, overly broad definitions, and ways of grouping data so that a small number of serious cases are mixed in with a much larger number of marginal cases.

(In the case of Covid19, the most ubiquitous offence – and repeated by even the most reputable of media networks – was the misleading citation of country-aggregate-data when it was appropriate to cite country-per-capita data. Brazil was not the worst-affected country in South America! Here it may not be marketing, rather it’s a mix of journalistic ignorance and the desire to simplify a story; however, the tactic of simplifying and sensationalising stories is a form of competitive marketing by news media.)

Back to the Sedan Chair

The 1972 cartoon for the growth of left-wing elites should be modified. Rather than four working-class ‘chair’men (the carriers of the chair) and two elite male passengers, our cartoon needs more people in the chair, and more diversity. Say, for the 2020s’ New Zealand version of the cartoon, the ‘chairmen’ could be a man in a black singlet, a westie woman, a Pasifika woman, and a South Asian man. The two Pakeha men in the sedan cabin remain, but they are saying “come on up, we have problems to solve”, dropping a ladder down to a Māori man and a Pakeha woman.

The main point, of course, is not the diversity; it is that the load is getting heavier.

*******

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

The government’s latest scheme is a form of government unemployment insurance. Interestingly, both the anti-poverty groups and the neoliberal New Zealand Initiative think tank see this scheme as problematic, very much as a ‘solution looking for a problem’. In other words, its ideology. In this case it’s not capitalist ideology; it’s labourist ideology. Indeed the scheme has been cooked up with the collaboration of the CTU (Council of Trade Unions) and is fully supported by the E tū union.

Some history.

New Zealand and Australia both played key roles in the formation of ‘the twentieth century welfare state’. But different roles. In Australia, with a longer and more entrenched unionised labour movement, and with Labour Governments a generation before New Zealand, the dominant cry was for a workers’ welfare state. In New Zealand, on the other hand, where the debate was more informed by the realities of the Great Depression (1930-35), the call from the electorate in 1935 – and answered by Michael Joseph Savage – was for a citizens’ welfare state (universal ‘social security’). Hence the key phrase associated with Savage: ‘from the cradle to the grave‘. The citizens’ welfare state explicitly included women, all older people, the self-employed (many of whom were unemployed in all but name, in the Depression), and all others who for whatever reason were neither capitalists nor principally attached to the labour market.

Essentially, in the first half of last century, Australia got its workers’ welfare state, and New Zealand got its (universal) citizens’ welfare state. But the Labour Party in Aotearoa New Zealand always struggled with the concept of a universal welfare state, Savage notwithstanding.

In the years in which Robert Muldoon was Minister of Finance, 1967 to 1972, two major – but divergent – welfare reports were published: the Woodhouse Commission on workers’ compensation and the McCarthy Report on social security. The McCarthy Report was in tune with the times, in fully recognising the full citizenship of women; ie independent of their then secondary status in the workforce. In 1972, equal pay laws were passed. And, as a result of the McCarthy Report, the Domestic Purposes Benefit gave dignity to single parents.

The Labour Government (Dec 1972 to Nov 1975) was most interested in the earlier Woodhouse Report; the result was ACC (Accident Compensation) that explicitly provided benefits to workers, with higher-earning workers getting the lions’ share of those benefits. ACC conformed with a worldview full of masculinist assumptions about labour market roles. The major champion of such workers’ welfare was the then junior minister, Roger Douglas. Following in the same vein, Douglas introduced a contributions-based New Zealand Superannuation scheme (became effective, 1975) which fully followed this already outdated masculinist labourist world view, as a government supported workers’ retirement scheme.

Fortunately for the upholders of the citizens’ welfare state – of whom Robert Muldoon was prominent – this legacy project of the Third Labour Government was immediately abandoned in 1976, and replaced by the citizen-welfare-based National Superannuation (now called New Zealand Superannuation). Contributions to the Douglas workers’ scheme were refunded.

The Helen Clark led Labour government of the 2000s continued the labourist line that workers (and capitalists) were superior kinds of citizens to everyone else. This was fulfilled – for workers – in extended the Working for Families targeted income support, which built upon an earlier 1980s’ Labour Government policy (means-tested ‘Family Care’) to replace the universal (ie citizens’) ‘family benefit’. The universally-minded Child Poverty Action Group has always railed against Working for Families as a form of family income support that largely excludes beneficiaries.

The proposed Unemployment Insurance is simply this Labour Government’s tilt at this labourist ideological windmill; the workers’ welfare state.

The Workforce as it Actually Is

For a brief period from the 1950s to the 1980s, the predominant model of work (in New Zealand and in the world) was that of fulltime employment. The feminist solution to this initially masculine reality had been for women to join what they couldn’t beat, and this century a typical salaried worker may indeed be a white collar working woman, a demographic that the CTU and the Labour Party now strongly represents. The workers’ state only became inclusive to women once they took the Hobson’s choice to embrace it.

In Guy Standing’s seminal work on the twentyfirst century labour force, the key distinction is between ‘the salariat’ and ‘the precariat’. The present Labour government makes policy for the salariat, just as the second (late 1950s) and third (early 1970s) Labour governments made policy for a male unionised labour force.

In history – and not according to Marx – labour has always been dominated by either a precariat (not a proletariat), or (as in pre-modern times) a forced-labour workforce (slaves). We still don’t understand the Great Depression of the 1930s, because we still want to know what the ‘unemployment rate’ was; this concept cannot be applied, meaningfully, to the precariat. (In an important sense, and following today’s definition, the unemployment rate in the depression was zero. Many people – especially ‘married women’ – were deemed unavailable for work; other demographics were precariously self-employed in huge numbers.) The middle-middle-class salariat is largely a product of the twentieth century post-war world.

Since the New Zealand Employment Contracts’ Act of 1991 – and similar directional shifts in other countries – the salariat has been progressively dismantled in favour of fixed-term labour contracts, variable-hour contracts, and the ‘gig economy’. Ask any young person.

The reality of the labour force is that it is a spectrum from permanent fulltime salaried (or waged) positions through to ‘free-lance’ self-employment. Various parttime options come within the spectrum – options sometimes favoured by workers, but more generally suited to the flexibility requirements of employers. Generally, those people we use to call workers we now call contractors.

It’s further muddied by the new reality that much of the new salariat – eg managers in larger corporatised organisations, and the smaller ‘nimble’ professional organisations that provide services to these large organisations – are in fact the beneficiaries (in the original sense of the word ‘beneficiary’) of the new capitalism. Labour has become capital.

(Just watch the brilliant Australian satire ‘Utopia’ on Netflix to get a sense of the productivity of the new entitled workforce.)

Nowadays, old-fashioned workers have become the cost-accounted precariat. And the remaining salariat are their bosses and managers.

Unemployment insurance is a new benefit that will mainly be paid to the salariat; that is, the new beneficiary salariat.

It will be largely funded by the precariat. In this respect the new social insurance levy will be like the unemployment tax that all working women and girls paid during the Great Depression, even though they did not quality for the benefits. Another analogy is the taxes paid by New Zealand working denizens in Australia; taxes that fund benefits only payable to Australian citizens. For the new scheme, many precarious levy-paying employees will not qualify for payouts; their work will not be structured in a way that allows them to qualify for benefits. And those low-paid workers who do quality will receive only a small share of the total paid-out benefits.

New Zealanders have to focus – and focus hard – on how to redirect welfare policy to a citizens’ path (with citizenship broadly defined), and away from its present workers’ path (with workership narrowly defined). The new salariat can and should find their own market-based income insurance.

————-

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

Unemployment Insurance Will Mean More Tax – NZ Initiative Report, 11 November 2021

The Labour Government’s Proposed Social Insurance Scheme Will Entrench a 2-tier Welfare System, Auckland Action Against Poverty, 2 Feb 2022

Next Steps for Social Unemployment Insurance, E tū Union, 2 Feb 2022

Social Insurance Proposal Would Likely Bake-in Existing Inequities And Drive Inequality, Says Anti-poverty Organisation, Child Poverty Action Group, 2 Feb 2022

The Wage Earners’ Welfare State Revisited, by Francis Castles (1994)

A Decade of Confusion: the differing directions of social security and accident compensation 1969 – 1979, by Margaret McClure (2003) [Victoria University of Wellington Law Review]

Australia’s union for journalists says Australian journalism is in crisis after years of disruption, undermining and neglect, and swift action is needed to halt the decline.

A new study pointing to the crisis in public interest journalism demands urgent government action to safeguard democracy.

The Media, Entertainment and Arts Alliance (MEAA) commissioned the Centre for Future Work at The Australia Institute to prepare the report, The Future of Work in Journalism, to examine the state of Australian journalism and to develop recommendations that could be used to address the serious decline in public interest journalism that has taken place over the past decade.

The report says journalism is a “public good” that can only be sustained by a dramatic renovation of government supports, including:

• a new $250 million fund to sustain journalism;
• expanded funding for public media organisations;
• rebates (refundable tax credits) for the employment of journalists;
• tax concessions for consumers of news media; and
• a stronger Mandatory News Bargaining Code with dedicated funding for small and new media.

MEAA media federal president Marcus Strom said: “It’s abundantly clear that the slow erosion of Australia’s media industry over many years has taken its toll on public interest journalism.

“As this study shows, failure to take dramatic steps now places our democracy at risk.”

Disappearance of dozens of outlets
He said the crisis was most stark in the disappearance of dozens of outlets and hundreds of jobs from regional, rural and community media in the past few years.

The Australia Institute’s study reveals that the number of journalists has fallen dramatically over the past decade; that decline will continue without effective policy and regulatory changes.

Efforts to support journalism have, to date, been inadequate and poorly targeted.

Media workers have delivered massive productivity gains in an environment of ongoing cost-cutting, but have been “rewarded” by stagnant wages, and ongoing restructuring and shifts into freelance and casual work, which now make up about one-third of the media workforce.

A significant and unacceptable gender pay gap persists above the national industry average.

The report highlights the upheaval caused to the Australian media ecosystem by the arrival and rise of digital platforms.

The government’s response, the News Media and Digital Platforms Bargaining Code, has not achieved the rebalance needed to promote public interest journalism.

Call to disclose Bargaining Code ‘deals’
The report recommends that the deals struck under the code be disclosed and that dedicated funding be provided to the small-to-medium media sector, which has been “treated with contempt” by the major digital players.

Among the other remedies recommended in the report, MEAA supports calls for certainty around and restoration of the funding of public media including the national broadcasters ABC and SBS; and expansion of the government’s existing Public Interest News Gathering programme to include all classes of journalism, including freelancers, and media content production.

The amount of support needed has been estimated at $250 million a year.

“This storm has been coming for many years,” Strom said.

“The media industry has been savaged. Thousands of journalism jobs have been lost. Print and broadcast media have all been hurt: mastheads have closed, networks have been cut back.

“Local community and regional reporting has, in many places, disappeared altogether. The number of media players have been reduced to a handful of very powerful players, and that power concentrated in the hands of a few reduces the variety of voices and choices for Australians.

‘Cynically avoided regulation’
“The News Media Bargaining Code offers a partial remedy to the revenue losses by Australian media, but the big digital platforms have cynically avoided regulation under the code by promising to do ‘just enough’.

“Outside the code they are showing their ‘just enough’ is wholly inadequate with not only small publishers missing out, but SBS and The Conversation being excluded.

“Public interest journalism is a public good. It informs and entertains Australians, ensures the public’s right to know and holds the powerful to account.

“If we want that to continue, then there is no time to waste to address the many challenges facing those working in journalism and the entire media industry.”

In other media developments today, the video Your ABC vs Their IPA, funded by ABC Alumni and the ABC Friends, was released on YouTube in response to an attack by the rightwing Institute of Public Affairs (IPI) on the ABC. The ABC itself is not involved in any way, but the presenter is former ABC Media Watch presenter Jonathan Holmes who says that “the mainstream thinks that the ABC is the most trustworthy source of news in Australia”.

Article by AsiaPacificReport.nz

While I am always happy to celebrate any accolades my country and city might garner on the international stage, seeing Auckland/Tāmaki Makaurau awarded the top ranking in a recent “most liveable cities” survey left me somewhat flummoxed.

In particular, I would argue that many Māori whānau in Auckland do not enjoy the benefits of this supposed “liveability”.

This is important, given Māori comprised 11.5 percent of the Auckland population in the 2018 Census. Roughly one in four Māori in Aotearoa New Zealand are living in the greater Auckland region.

The survey was conducted by the Economist Intelligence Unit, sister company of The Economist, and looked at 140 world cities. Auckland was ranked 12th in 2019, but took top spot this year for one obvious reason:

Auckland, in New Zealand, is at the top of The Economist Intelligence Unit’s Liveability rankings, owing to the city’s ability to contain the coronavirus (COVID-19) pandemic faster and thus lift restrictions earlier, unlike others around the world.

Most cities in Europe plunged in the rankings this year as the EIU’s liveability index incorporated new indicators related to covid-19 https://t.co/8555hY1f2U

— The Economist Data Team (@ECONdailycharts) June 9, 2021

Alternative liveability criteria
Each city in the survey was rated on “relative comfort for over 30 qualitative and quantitative factors across five broad categories: stability, healthcare, culture and environment, education and infrastructure”.

Overall rankings depended on how those factors were rated on a sliding scale: acceptable, tolerable, uncomfortable, undesirable, intolerable. Quantitative measurements relied on “external data points”, but the qualitative ratings were “based on the judgment of our team of expert analysts and in-city contributors”.

The methodology, particularly around culture and environment, seems somewhat subjective. It’s predicated on the judgement of unnamed experts and contributors, and based on similarly undefined “cultural indicators”.

To better understand the living conditions of Māori in Auckland, therefore, we might use more robust “liveability” criteria. The New Zealand Treasury’s Living Standards Framework offers a useful model.

This sets out 12 domains of well-being: civic engagement and governance, cultural identity, environment, health, housing, income and consumption, jobs and earnings, knowledge and skills, time use, safety and security, social connections and subjective well-being.

The Māori experience
Applying a small handful of these measures to Māori, we find the following.

Housing: According to recent reports, Auckland house prices increased by about NZ$140,00 on average in the past year. That contributed to Auckland being the fourth-least-affordable housing market, across New Zealand, Singapore, Australia, the US, UK, Ireland, Canada and Hong Kong.

Next to that sobering fact, we can point to estimates that Māori made up more than 40 percent of the homeless in Auckland in 2019. We can only assume this rapid increase in house prices has made homelessness worse.

Poverty: Alongside housing affordability is the growing concern about poverty in New Zealand, and particularly child poverty. While there has been an overall decline in child poverty, Māori and Pacific poverty rates remain “profoundly disturbing”.

Employment: As of March 2021, the Ministry of Business, Innovation and Employment recorded a Māori unemployment rate of 10.8 percent, well above the national rate (4.9 percent). This is particularly high for Māori youth (20.4 percent) and women (12.0 percent).

Health: Māori life expectancy is considerably lower than for non-Māori, and mortality rates are higher for Māori than non-Māori across nearly all age groups. Māori are also over-represented across a wide range of chronic and infectious diseases, injuries and suicide.

The digital divide: The Digital Government initiative has found Māori and Pasifika are among those less likely to have internet access, thus creating a level of digital poverty that may affect jobs and earnings, knowledge and skills, safety and security, and social connections.

Making Auckland liveable for all
Taken together, these factors show a different and darker picture for far too many Māori than “liveable city” headlines might suggest.

I say this as someone who has lived in Auckland for the majority of the past 60 years. It is a city I love, and I acknowledge the grace and generosity of the mana whenua of Tāmaki Makaurau, with whom I share this beautiful whenua and moana.

I am also part of a privileged group of Māori who enjoy job security, a decent income, a secure whānau and strong social networks.

But, until we address and ameliorate the inequities and disadvantages some of our whānau face, we cannot truly celebrate being the “most liveable city in the world”.

Dr Ella Henry is an associate professor at Auckland University of Technology. This article is republished from The Conversation under a Creative Commons licence. Read the original article.

Article by AsiaPacificReport.nz

The Government’s wage subsidy scheme may have incorrectly paid out billions of dollars to ineligible businesses, and this is not being audited. That’s the conclusion to be taken from the Auditor General’s report, released yesterday. It is highly critical about the lack of checks and balances on a scheme that has doled out $14bn to businesses.

Although some reports see it as simply an issue of bureaucratic management, it has huge financial consequences for the state, and for public trust in government. Auditor General John Ryan says the money being paid out in what critics warned was “corporate welfare” has not actually been audited, and the public cannot have confidence that the Government is on top of this.

The issue goes back to the launch of the wage subsidy scheme, when questions were raised about whether the scheme would be vulnerable to fraud and corruption, and cost much more than was required to keep the economy going. In response to these concerns, the Government promised audits would take place. Since then, whenever critics have again questioned the probity of the scheme, politicians have deflected this by claiming that the necessary audits were being carried out. It turns out that audits have not taken place, and various assurances about the integrity of the system amount to political spin.

The report by the Auditor General says that what the Government and Ministry of Social Development (MSD) have claimed are “audits” are, in fact, loose phone calls to the recipients of the billions of dollars, checking they still believe they qualify. The report can be found here: Management of the Wage Subsidy Scheme.

Reporting on the Auditor General’s investigation, the Herald’s Hamish Rutherford highlights this report’s conclusion that MSD has been being entirely lax in its approach to checking businesses were actually entitled to receive the wage subsidy. Rutherford says the Auditor General “did not believe MSD had determined the scale of the problem”, and he criticised the department for labelling their low-level checks as “audits” when they were clearly nothing of the sort – see: Auditor-General says ‘audits’ of wage subsidy applicants simply sought verbal response.

According to the report, the so-called audits “mainly consisted of a verbal confirmation of information by employers”. Instead of vague telephone calls, the Auditor General recommends MSD actually “seek written confirmation from applicants of their compliance with the eligibility criteria and the obligations of receiving the subsidy”. Independent and documentary evidence is also recommended.

Public confidence and trust in the scheme is vulnerable, according to the report. Therefore, it is recommended that MSD toughen up their approach, including prosecuting businesses who incorrectly claimed the wage subsidy, and recovering this money.

In a follow-up article, Rutherford reveals: “The Ministry of Social Development is yet to begin any prosecutions for abuse of the $14 billion wage subsidy scheme, as it comes under fire for its work to establish the extent of misuse” – see: MSD under pressure to announce prosecutions under wage subsidy scheme amid criticism of ‘audits’ (paywalled). Rutherford says “The Auditor-General also urged MSD to prioritise its enforcement work, including prosecutions, not only to recover money, but also hold businesses to account ‘for potentially unlawful behaviour’.”

BusinessDesk journalist Brent Melville highlights the Auditor General’s lack of confidence that MSD is identifying cases where prosecution is required and money should be returned – see: Auditor-general: Covid wage scheme admin was lax (paywalled).

MSD comes under further fire in RNZ’s coverage, with a focus on the government department diverting staff from beneficiary fraud investigations to this issue, rather than employing additional staff – see: MSD told to further investigate wage subsidy scheme payments.

According to RNZ: “How those resources will be deployed over the coming months remains a concern, as efforts to recoup wage subsidies continue. The report stated it was likely between 40 and 50 MSD staff who usually worked on benefit fraud would be working on subsidy investigations for another 12 to 18 months.”

The report warns this may encourage corner-cutting: “We understand that the public organisations involved in administering the Scheme want to get back to their core services as quickly as possible. However, we are concerned that this will disincentivise continued efforts on post-payment integrity work.”

RNZ has also reported the views of inequality researcher Max Rashbrooke who highlights that MSD are inconsistent in taking a “softly-softly” approach with businesses when they are much tougher on beneficiaries: “If MSD thinks you might be a benefit fraudster they pursue you to the ends of the earth, and with this scheme, MSD just rang people up and said, you know, ‘did you do everything correctly?’ and if people did then that was it.”

Wage subsidy critic and tax researcher Michael Gousmett is cited as saying the Government should have insisted businesses also have their applications audited at the start of the process, saying “There was no requirement to demonstrate your financial ability to sustain yourself for a period.”

See also Thomas Coughlan’s article on the report: Auditor-General gives seal of approval to Covid-19 wage subsidy, with some suggestions. He highlights the Auditor General’s criticisms of the design of the wage subsidy scheme in regard to the criteria for eligibility, which includes the very vague requirement that businesses have first taken “active steps to reduce Covid-19’s impact on their business”. This is criticised as “open to interpretation”, making verification of legitimate applications difficult.

Previous questions about wage subsidy auditing

The Government and MSD have been claiming for a long time that “auditing” was taking place into recipients of the wage subsidy. For example, back in October MSD asserted that the audits were happening on an apparently large scale – see Nita Blake-Persen’s Wage subsidy questions raised after more than 10,000 audits.

It turns out that even this figure of 10,000 was relatively low, with Victoria University of Wellington tax professor Lisa Marriott telling RNZ, “I think that does need to be much higher, particularly because there are around eight per cent of those cases that are being referred onwards for some level of investigation.” Marriott is reported as saying “there are grounds to look for more” abuses of the scheme hoping “the same rigour will be applied to the companies as is applied to benefit fraud.”

In January, Christchurch philanthropist Grant Nelson warned of the lack of auditing taking place, and called for much tougher measures to ensure the subsidy payments had only been given to businesses truly in need – see Nita Blake-Persen’s Estimated $5b in wage subsidies paid out unnecessarily – philanthropist.

Drawing attention to the small number of applications being checked, Nelson argued “any audits they do really are only reaching a very, very few of those who received the wage subsidy. And that is why I think everyone who receives the wage subsidy should be contacted. If they can prove that they are entitled to it well, they can retain it. Otherwise, they should be repaying it.”

Another critic of the scheme, Jilnaught Wong, an accounting professor at the University of Auckland, suggests that rigorous auditing of payments is required because large private companies make use of “opportunistic accounting gymnastics” like “delaying revenue recognition” so that they would qualify for Covid payments while generally making large profits overall in 2020 – see Kate MacNamara’s Was the $14b wage subsidy well-spent? (paywalled).

Finally, the Auditor Generally has recommended a bigger review of the successes and failures of the wage subsidy scheme, and for a must-read view on this topic, see Bernard Hickey’s article from March: Where did the wage subsidy money really go?. The gist of the piece is that the wage subsidy was successful in its purpose, but also a tragedy in the wealth inequality that it has caused, and he raises questions about whether alternatives to employee subsidies could be used.

Is Labour supposed to be the party of labour or of capital? It’s often hard to tell these days, and many in the labour movement and the political left are feeling betrayed this week by the Government’s announcement of a pay freeze for public sector workers.

The Government has essentially directed all their departments and agencies not to give any employees earning over $60,000 any further rises for the next three years, except in “exceptional circumstances”.

It’s effectively a pay cut for the vast majority of public sector workers, as the cost of living and inflation will drive down the value of their incomes during that time. It will apply not just to those in government departments (or the core public service) but also to workers in other government agencies such as schools, hospitals, the police force, prisons, defence forces etc.

Why is Labour doing this? According to Public Service Minister Chris Hipkins it will save money, and allow the Government to pay off debt. Finance Minister Grant Robertson has attempted to frame the move as being about improving inequality, because the directive doesn’t apply to the bottom quarter of income earners in the public sector. But the reason is probably to send a strong message to centrist or more conservative voters that the Government is fiscally conservative and not too pro-worker.

If Labour needed any sign that this anti-worker stance was achieving the desired impact, blogger David Farrar (National-aligned and also founder of the Taxpayers Union) was able to assure them that they’d done the right thing, praising them for doing even what even a National Government would never dare to do – see: Robertson and Hipkins become honorary members of the Taxpayers’ Union.

Condemnation of Labour’s pay freeze

Others see Labour’s pay freeze as an outrageous assault on a work force that doesn’t deserve such a punishment. Yesterday’s Stuff newspaper editorial took one of the strongest stands for public sector workers, saying that their hard work throughout the last year of crisis has been unrewarded and spurned by an ungrateful government – see: Pay freeze stretches public sector loyalty.

Here’s how the newspaper sees Labour’s message to the workers: “well done, New Zealand, you magnificent team of five million. Well done to the essential frontline staff who worked so long and hard in the fight against Covid-19. Well done to the border workers; the MIQ, customs and immigration staff; also the defence force, police and healthcare workers. Well done all. We offer our thanks but no other reward. In fact, as part of that ongoing struggle against this stultifying pandemic we offer only more pain, and the prospect of no pay rise for four years. You’re welcome.”

The editorial points to a new survey out this week by Colmar Brunton, which “highlighted unprecedented faith in our public sector, largely because of its response to Covid-19”. You can see the survey here: Public Sector Reputation Index 2021.

Financial journalist Frances Cook made a similar point yesterday, parodying the Government’s message to Covid workers: “Thanks very much for your service, everyone please clap. But also take a pay freeze you greedy fat cats” – see: Of course I go to work for money, and so do you (paywalled).

Cook explains that the freeze is an “astonishing kick in the guts” because it is actually a “pay cut” in real terms for public sector workers: “Keeping this pay freeze in place over three years is brutal, especially considering they’ve already been under a pay freeze for the past year. Then factor in inflation, which according to Reserve Banks records is on average just over 2 per cent per year, and the people who worked tirelessly to protect us through a pandemic are actually going backwards. In real terms, those in the public service are facing a pay cut of about 6 per cent. It could be more, as some economists are predicting higher than usual inflation over the next few years.”

Economist Brad Olsen is reported as saying that for public sector workers the freeze is “a bit of a slap in the face. An interesting kind of kindness” – see Susan Edmunds’ Do people really earn more in the public sector?. This article also deals with some statistics on average salaries, and public and private sector increases in recent years.

Writing in the Herald today, political editor Claire Trevett also points out everything that is wrong with Labour’s decision, suggesting the Government has “served itself up what may end up being the biggest steaming pile of trouble of its term” – see: Labour in trouble with public sector pay ‘freeze’. She argues that the decision is out of step with traditional leftwing principles and that by attacking core supporters such as teachers and nurses they are “biting the hand that feeds”. Unsurprisingly, this has resulted in “a very rare firestorm against Labour from its own supporters on social media.”

Trevett says the decision was especially “foolish” because “no compelling reason was given beyond a show of almost symbolic fiscal rectitude”. And this was made worse, when “the very next day the Crown accounts showed the books were $5.2 billion better off than forecast in December”.

Some analysts have therefore taken the announcement as confirmation that Grant Robertson is still obsessed with fiscal conservatism. Branko Marcetic points out that this austerity orientation puts Labour out of sync with even conventional politicians and economists around the world at the moment – see his column: Labour’s public sector pay freeze isn’t just a betrayal of frontline workers – it’s a rejection of mainstream economic thinking.

The political editor of Stuff, Luke Malpass, has also been highly critical, suggesting that it has been a case of the Government “looking tough for the sake of it”, and that it has “backfired” on Labour – see: Pay freezes and fair pay agreements: the unions get their biggest win in decades.

Here’s Malpass’ main point: “The fact that neither Finance Minister Grant Robertson nor Public Service Minister Chris Hipkins appeared to have any idea how much this initiative would save suggested that it more fits into the political symbolism end of things. Labour clearly thought this would sound good – and Robertson would be keen on any amount saved – but given that Wellington bureaucrats are a relatively small proportion of those affected, it now just looks a bit capricious.”

TVNZ’s political editor Jessica Mutch McKay also paints the decision as a cynical one designed to symbolise how conservative Labour can be – see: Ardern penny pinching on nurses and police pay makes no sense. She explains: “It’s a bad move because: 1. Everyone has had a tough year. 2. The government can’t even say how much money it will save by doing this 3. It’s a poor political move by Labour because it irks the unions.”

Outrage from workers and unions

Progressives and those in the union movement have been outraged by the freeze. Especially the Public Service Association (PSA). Writing for the Spinoff, Alex Braae reports that “it’s quite possible the Public Service Association is the angriest it has been towards the Labour Party in literally decades”. He quotes the union’s National Secretary Erin Polaczuk saying “We expect better from this government” – see: Shock and anger at public sector pay freeze. And Braae suggests that Labour may have mis-stepped with the policy: “it may well be that the government has simply misjudged how warmly people feel towards public servants.”

Braae invited public sector workers to provide feedback about the freeze, which he has published here: Furious feedback: Bulletin readers respond to public sector wage freeze. Summing up the emails he’s received, Braae says: “It has also been almost unanimous: A reaction of anger, disappointment and betrayal, particularly after the sacrifices and hard work of 2020.”

The PSA also spoke out yesterday about the lack of consultation on the pay freeze, as well as the Government’s failure to communicate it to the unions or staff – see Henry Cooke’s Public servants ‘blindsided’ by hearing about pay freeze in the media first.

Other public sector unions have also lashed out. For teacher reaction, see Caryn Wilkinson’s Educators slam three more years of pay restraint for public servants. For the reaction of health workers, see Jordan Bond’s Fears Kiwi nurses and doctors will leave NZ due to salary freeze. And the views of the Police and Corrections workers unions are represented in George Block’s article, Cops, prison officers slam public sector pay freeze ‘bombshell’.

Sympathy for the workers goes well beyond the union movement. Newstalk ZB’s Kerre McIvor criticises the announcement, saying: “Talk about a kick in the guts.  There’s money for everyone it seems, except the workers” – see: Public sector pay freeze rightly labelled ‘bombshell’.

Will unions and workers fight back?

Are the unions angry enough to actually cause trouble for the Labour Government? That’s yet to be seen. Yesterday the PSA put out an open letter to the Government to say “Your pay restrictions at this time are unacceptable”. And CTU President Richard Wagstaff told the Herald: “Don’t expect us to take this lying down”, and “We will not be accepting this. We won’t be accepting a pre-determined announcement by the Government” – see Jason Walls’ Union bosses to Government: We won’t take public pay freeze ‘lying down’.

Blogger No Right Turn has labelled the freeze “a vicious attack”, and called for a “public-sector-wide strike” if the Government don’t agree to negotiate “a fair pay agreement for the entire state sector” which includes decent rises in pay – see: Incoherent.

PSA member and socialist Cory Anderson argues that workers should fight back against the announcement, pointing out they don’t legally have to accept what Labour is trying to impose: “We can, and should, make this announcement a dead letter. Collective agreements are not dictated but, in law, negotiated” – see: Make the pay freeze a dead letter.

Anderson likens the situation to the increased class conflict of the late 1960s: “It was a nil general wage order in 1968 that sparked workers’ struggles in New Zealand after decades of quiet through the 1950s and 1960s. Could this new attack do something similar? It is too soon to tell, but there are reasons for us to be confident in a push back.”

A Blue wash?

The pay freeze wasn’t the only announcement made this week concerning workers’ rights. Yesterday the Government released its decisions on how unions and employers would interact to set fair pay agreements – see Hamish Rutherford’s One in 10 workers could trigger fair pay agreement process, in step towards collective bargaining.

The timing of the two announcements this week was obviously no coincidence. In retrospect, it seems likely the Government ensured this relatively pro-worker announcement was preceded by a balancing anti-worker announcement, so Labour couldn’t be accused of being too leftwing or in the pocket of the unions and can keep Labour’s new-found and former National voters onside. Basically, the announcement was a way to “blue wash” the Government, selling it to conservative supporters, especially to inoculate Labour from business criticisms over the new fair pay agreement framework.

This cunning method is applauded by blogger Martyn Bradbury, who argues that it has allowed Labour to more easily introduce “the greatest increase in worker power for 30 years” – see: Universal unionism vs 100k gold plated public servants – a masterclass in Machiavellian theory.

However, there’s no consensus that the fair pay agreements announced yesterday will have such a big impact. Business journalist Hamish Rutherford writes today that although the FPA will be better for the unions, the pay freeze will actually be more consequential for workers, especially in the short term – see: Pay freeze and fair pay agreements; this week was more about unions than workers. He says, “Given the sheer number of public sector workers likely to be hit by the pay freeze, this week appears to have been much more about improving the strength of unions than it was about helping workers.”

But will the pay freeze work for the Government, helping convince the public that it’s fiscally competent? Heather du Plessis-Allan doubts that, arguing the message will backfire, creating the idea that the Government has run out of money – see: Pay freeze shows Government can’t manage the books.

Here’s du Plessis-Allan’s main point: “they’re hoping to convince us voters that they are good financial managers: that they’re prepared to rein in spending.  But they have misjudged this badly, because it is sending completely the opposite message. Reining in spending is a good thing, but if you don’t have enough money for something as important as lifting the wages of our hardest working public servants to decent levels, if you’re run out of money that badly, then you’ve just sent a message to voters that actually you are having trouble balancing the books. Because where’s the money gone?”

Many commentators also argue that the clampdown on pay will be detrimental because public sector workers will simply shift to the private sector, or even to Australia. With the Government embarking on some serious reforms, this could all occur at the worst possible time.

And, will the pay freeze actually work to keep costs down? The Government won’t even say how much money it is expecting to save from the freeze. And they haven’t included contractors in the freeze either – see Phil Pennington’s Pay freeze hits public servants but not contractors. According to this, the average public sector worker earns $40 an hour, while the average contractor earns $137 an hour, with the Government spending more than a billion dollars a year on contractors.

Some commentators are actually expecting that the pay freeze will lead to the use of more contractors – especially as talented but dissatisfied staff leave government agencies only be brought back on expensive short-term contracts. For more on this, see Dileepa Fonseka’s Why is a Labour government encouraging its employees to become contractors?.

Finally, for satire about pay cuts and inequality, see my blog post, Cartoons about public sector worker and CEO pay.

On Tuesday, March 30, we lodged a series of questions to the Minister of Immigration Kris Faafoi, seeking answers to allegations that 10 Chinese workers, who were detained in custody pending deportation orders, were in fact victims of a human trafficking scam.

Throughout last week, the ten workers’ lawyer, Matt Robson, and union advocate Mike Treen of Unite Union, had been racing against the clock, seeking to halt deportation orders that Immigration New Zealand officials were advancing – seemingly with haste.

Two days later (April 1), two of the ten workers in fact received their deportation orders and were en-route to Auckland International Airport, escorted by Police.

Then, as the Police vehicle neared Auckland Airport on George Bolt Memorial Drive, one of the two, Ning Yu ‘escaped’!

How? The Chinese worker simply unbuckled his seatbelt, opened the Police car’s unlocked rear door, and ran away. Apparently, back in China, Ning Yu is a marathon runner.

While a number of Police units (including from the Police Dog Section, and Police helicopter) searched unsuccessfully for him, Ning Yu took refuge in a tree near a Golf Course on Nixon Road, Mangere. Then, once the Police helicopter flew off, he wandered about Mangere throughout the early hours of the morning.

After dawn rose on April 2, Ning Yu noticed a Chinese man jogging. As he passed, Ning Yu spoke to him in Mandarin. They had a conversation. Ning Yu told him his predicament. The jogger convinced him to hand himself in to Police. He agreed, and made his way to Auckland Central Police.

On arrival, Ning Yu told Police he absconded because he wanted to collect some money owned to him; “So he could take it home with him”. He was arrested, and later appeared before the Courts charged with escaping Police custody.

The charge sheet states: “At approximately 1952hrs on Friday the 1st of April 2021, Police were dispatched by the Northern Communication centre to assist NZ Immigration in escorting two deportees to the Auckland Airport as their flight was scheduled to depart from Auckland to China later in the evening.

“Police arrived at the Mount Eden Correction facility and received into their custody Ning YU, the Defendant in this matter.

“Due to the demeanour and background of the Defendant, he was not handcuffed. The Defendant was seated at the back of the Police Vehicle.

“On the way to the Airport, as the vehicle approached Cyril Kay Road on George Bolt Memorial Drive, the Defendant opened the petrol [sic] vehicle door and escaped,” The charge sheet stated.

On Saturday April 3, Ning Yu appeared before the Courts in Auckland. While there, the Police charge of absconding was withdrawn. He was returned to Police custody pending renewed deportation orders.

***

At this juncture, it is worth checking this worker’s allegations.

Throughout the ordeal (since Immigration investigators identified Ning Yu and the other nine as illegal workers) Ning Yu’s position was simple. He insisted he wanted to stay in New Zealand to work and earn some money. The wages he earned, he intended to send home to China for his wife and child. Ning Yu believed he was owed wages by an employer in Auckland, and that he had not earned enough, yet, to cover the USD$20,000 he states he paid an individual in China – who had initially arranged to expedite his Visa application to enter New Zealand. Back then, after paying the agent, Ning Yu said it took two days for his Visa to be allocated to him.

If true, this suggests corruption. Remember New Zealand is regarded as the least corrupt country in the world, equal to Denmark. If agents are demanding money from hopeful foreign workers, securing entry visas within days, and on arrival at Auckland Airport, these people are scooted off to work for employers as black labour – then that situation questions the corruption-free status New Zealand enjoys. And that, is clearly a public and national interest issue.

The seriousness of these allegations also draw forward concerns that New Zealand Government’s practice of out-sourcing Immigration New Zealand visa applications to agencies inside China, may have been corrupted.

Such concerns, in a democracy such as New Zealand, demand an expectation of thorough and transparent investigation. This case however, draws forward examples of bureaucratic control, silence, and an obvious ministerial convention being observed that prevents open and accountable oversight.

Far from answering allegations of serious crimes, questions remain unanswered.

Questions such as these:

• Who is the individual (the agent) that received approximately USD$20k from Ning Yu, the agent who allegedly managed, in two days, to acquire a Visa for this person to enter New Zealand?
• Who was the initial ‘employer’ that received Ning Yu and the other nine workers, and put them to work illegally in Auckland?

• Why were there no employment records held for Ning Yu and the nine other Chinese workers?
• Why were there no IRD numbers? No tax records?
• How many dodgy employers were Ning Yu (and the nine other workers) handed over to, to be exploited, paid under the table, under the minimum wage, without holiday pay, without health and safety protection, without the rights that a legitimate working visa demands?
• Why were New Zealand Government employment and labour inspectors prevented by Immigration New Zealand, and the Ministry of Business Innovation and Enterprise (MBIE), from interviewing the ten Chinese workers about their situation?
• Does this bureaucratic refusal-to-interview prevent an investigation from taking place into allegations of human trafficking and illegal employment by New Zealand-based companies and contractors?
• Do not the ten workers come under the protection of New Zealand Government’s Migrant Exploitation Policy?
• What is the definition of human trafficking that applies to victims of this type of crime in New Zealand?

On that last question, the United Nations defines human trafficking as the recruitment, transportation, transfer, harbouring or receipt of a person by deceptive, coercive or other improper means for the purpose of exploiting that person.

The United Nations definition appears relevant to the allegations in this case.

Despite the concerns as noted above, the Ministry of Business Innovation and Enterprise (MBIE)’s ‘Delegated Decision Maker’ replied to the Chinese workers’ lawyer, Matt Robson, on Thursday April 1 stating:

“Under the immigration delegations, the delegated decision makers have the authority to make certain ministerial intervention decisions on behalf of the Associate Minister of Immigration. I have carefully considered your representations. I advise I am not prepared to intervene in this case. As section 11 of the Immigration Act 2009 applies, I am not obliged to give reasons for my decision. Your clients will be deported from New Zealand at the discretion of Immigration New Zealand.”

***

Back to Thursday April 1, Minister of Immigration Kris Faafoi’s office continued to resist answering specific questions, electing rather to issue this statement:

‘Investigations are continuing and the Minister does not consider it appropriate to comment further than the statement he has provided to other media requests, which is:

“Ministers do not get involved in enforcement. That is an operational matter.

“We have been assured that the appropriate processes have been followed and Immigration NZ has not found any evidence of trafficking.

“Agencies are satisfied further investigations around employment and immigration breaches can be carried out without the need for the men to remain in New Zealand.

“As investigations are continuing, and this is an operational matter, it would not be appropriate to comment further.”’

The questions that were put to Minister Faafoi, prior to Ning Yu escaping from Police custody included:

Should New Zealand Police be heading an investigation into alleged human trafficking?

12: If so, has NZ Police been approached by you as Minister of Immigration or by your office or by Immigration New Zealand? And, is an investigation underway by New Zealand Police on this element of this issue?

The lawyer acting for the ten workers found there were:

a: No written employment agreements;

b: No wage and time records;

c: No paid holidays;

d: No legal wages;

e: No training in health and safety measures on construction sites.

13: Do you accept that the above points (a – e) are an accurate assessment of the ten workers situation? If not, why not? If so, does this suggest that they fall within the considerations of the Migrant Exploitation Policy? And if so, as suspected exploited foreign workers, do they have the right to seek recourse via New Zealand’s judicial process, and does this recourse halt deportation proceedings from occurring?

Regarding answers to these questions, the silence from the Beehive prevailed.

For the record, through their lawyer, Matt Robson (a former minister in the Labour-Alliance coalition government) and union representative Mike Treen (of Unite Union), the ten workers allege they:

• Were recruited by agents in China to go to New Zealand to work
• Paid the agents between USD$15,000 – $30,000
• Received their Visas within two to six days of applying
• Were met by agents (on arrival) at Auckland Airport
• Were taken to prearranged accommodation in Auckland
• Worked for various ‘employers’ at building sites around Auckland
• Never had employment contracts, wage or time records, or paid tax
• Were paid in cash
• Were put to work by the employers without work visas.

In a letter to Minister Faafoi dated April 1, 2021, Robson and Treen asserted that the above allegations demanded a robust investigation – that this situation meets the New Zealand Government’s Migrant Exploitation Policy, and, as such, the ten workers are witnesses to an alleged breach of New Zealand’s immigration and employment laws, and also human trafficking crimes.

They questioned why the Minister Kris Faafoi (who is also Minister of Justice) was determined to be satisfied with Immigration NZ officials who insisted to deport the workers with haste.

Minister Faafoi’s response, as noted above is, that it is an operational matter and that he is satisfied that Immigration has investigated the situation, including the allegations, and found no substance to them. The Minister was also satisfied that New Zealand’s employment and labour agencies can continue to investigate allegations of employment law breaches even after the ten workers have been deported back to China.

Also, for the record, the ten Chinese workers were scheduled for deportation on five flights to China leaving New Zealand between April 1st to 15th, 2021.

CONCLUSION:

The New Zealand public seldom has an appetite for bureaucracy. It is especially intolerant of government officials operating behind a shroud when issues of public and national interest are in question.

In reviewing this case it is clear, the allegations underlying this case demand an open and transparent investigation be held – even if that investigation should unearth cases of corruption and human trafficking – victims of exploitation between the People’s Republic of China and New Zealand. To avoid public scrutiny to the satisfaction of a reasonable standard, well, that is a national disgrace.

***

Ref. Questions from Selwyn Manning to Minister of Immigration Kris Faafoi, dated Tuesday, March 30, 2021.

For an article/editorial for EveningReport.nz (an associate member of the New Zealand Media Council)  and syndicated outlets, I request the Minister of Immigration, Kris Faafoi, answer the following questions regarding the ten Chinese nationals detained (nine in Mt Eden Corrections Facility and one in Police custody) pending deportation proceedings. Thanks in advance for your considerations:

Regarding Employment Status (I ask this as it appears this has relevance in determining whether the ten fall under Migrant Exploitation Policy as exploited individuals):

1: Did the 10 workers (as individuals) have employment contracts while working in New Zealand?

2: Did their employer calculate tax PAYE deductions from their gross pay and pay Inland Revenue Department for money earned in New Zealand?

3: Did their employers calculate the cost of labour on their respective company accounts?

4: If not, is this a breach of New Zealand employment law and should this be investigated? If it should be investigated, what agency should conduct this investigation?

5: Do you believe under the currently known circumstances, that Mt Eden Corrections Facility is an appropriate place for the ten to reside pending the outcome of any inquiries?

6: On the facts so far, do you feel the 10 workers have potentially been exploited?

7: If you do not feel they have been exploited, why do you feel this is so?

8: If you do feel they have potentially been exploited, who or what do you feel is culpable? And, do you accept that they ten workers are key witnesses in an alleged human trafficking ring?

The lawyer representing the ten workers, the Honourable Matt Robson, said on Radio New Zealand’s Checkpoint programme (March 30, 2021) that he believed the ten workers are victims of exploitation by a human trafficking ring.

9: Do you believe this element has been satisfactorily investigated, and if so why?

10: If not, what should happen now?

11: Should New Zealand Police be heading an investigation into alleged human trafficking?

12: If so, has NZ Police been approached by you as Minister of Immigration or by your office or by Immigration New Zealand? And, is an investigation underway by New Zealand Police on this element of this issue?

The lawyer acting for the ten workers found there were:

a: No written employment agreements;

b: No wage and time records;

c: No paid holidays;

d: No legal wages;

e: No training in health and safety measures on construction sites.

13: Do you accept that the above points (a – e) are an accurate assessment of the ten workers situation? If not, why not? If so, does this suggest that they fall within the considerations of the Migrant Exploitation Policy? And if so, as suspected exploited foreign workers, do they have the right to seek recourse via New Zealand’s judicial process, and does this recourse halt deportation proceedings from occurring?

14: Has the Minister of Foreign Affairs been alerted (corresponded with) to this issue by your office, if so, what was the nature of that correspondence?

Thank you for your attention to the above questions. Your consideration is appreciated, and I request, that due the urgency relating to the situation and potential deportation of the ten workers, that your answers be given a priority.

Looking at Chart 1, the gross domestic product (GDP) of the economy is shown as the combination of yellow and orange. (We note that these charts represent another aspect of pie economics; earlier pie charts showed the GDP by looking at its distribution rather than its composition.)

GDP is a measure of market production, not a measure of living standards. Nevertheless, we can picture living standards as the combination of yellow and purple; consumption and leisure. (Orange represents the production of capital goods – such as commercial buildings and machinery – which do not directly contribute to living standards, but which are necessary to maintain or increase economic productivity.)

Unemployment (coloured olive) represents labour made available at current market conditions, but not hired by employers or clients. Strictly, involuntary unemployment is measured by counting unutilised work-hours rather than unutilised people. Nevertheless, we generally measure unemployment as ‘people’, and we accept that normal ‘fully employed’ economies may have four percent of people unemployed. Such economies with ‘full employment’ also tend to have a number of unfilled jobs, but not jobs in the same places – or with the same skill specifications – as the unemployed people.

The absolute maximum capacity of the economy is represented by all four colours combined. But, in normal circumstances, living standards are maximised with a work-leisure balance; and not by replacing all leisure with work.

Some unemployment is practically unavoidable (eg four percent of the labour force), and means that unemployed people should have access to non-labour income. Further, the actual boundary between work and relaxation – essentially the yellow-purple boundary – is not necessarily the optimal boundary. For example, some people may prefer to reduce hours worked and take a proportional pay cut; the only reason that they do not do this is the rigidity of their employment contracts. (Some other people already working fulltime may wish to increase their hours for more pay, and reduce their leisure time; these people would like to give up some leisure so they can have more consumer goods.)

Looking at Chart 2, a pandemic has struck, causing emergency restrictions to be imposed, meaning that parts of the economy have to be suspended; that is, to go into ‘hibernation’. The result is reduced GDP and increased unemployment, labelled ‘hibernation’.

As the period of hibernation progresses, people reassess their choices – in particular, their work-leisure balance. The principal outcome of this personal reflection appears to have been that many people would prefer to work less for pay, and to simplify their lives; they are wanting to work less and are willing to earn less.

Looking at Chart 3, we see that about half of the new involuntary unemployment (‘hibernation’) has morphed into a preference for more relaxation time, combined with a willingness to adopt a less consumerist lifestyle.

Looking at Chart 4, the pandemic is over, and the economy is free to become normal again. However, as a result of the pandemic the optimal work-leisure balance has changed, compared to Chart 1. (The optimal balance is the one that maximises happiness.)

The remaining hibernation unemployment in Chart 3 becomes employment in Chart 4, leaving only the regular four percent unemployment. Structurally, Chart 4 is just like Chart 1. The really important change is that, post-pandemic, the purple relaxation zone is much larger than it was before the pandemic.

The pandemic has given us a mechanism – a catalyst – that enables us to find our new normal balance. However, to properly achieve that new normal, fiscal and monetary policies will need to be responsive to these changing preferences. Businesses responding to changes in household preferences may be the easy part of the adjustment; getting policymakers to respond to these changes in household preferences may be harder. (That will be the subject of my next contribution to this important discussion.)

Budget 2020’s focus on “jobs, jobs and jobs” is understandable, commendable and vital.

COVID-19 poses the largest threat to paid employment since the Great Depression almost 90 years ago. The number of people receiving Job Seeker Support (Work Ready) – the main benefit available for the unemployed – rose almost 50% between February and early May, from about 80,000 to 120,000.

That is a crisis in anyone’s language. Paid employment is not only important economically, it is about social and psychological health. This is reflected in a long-standing cross-party commitment to high employment levels and a high labour market participation rate. Significant and protracted unemployment serves no good purpose.

To combat this, the budget aims to protect existing jobs where possible, generate new jobs through targeted public investments, and ultimately create the conditions for a return to sustainable job growth.

But worse is still to come. Treasury is forecasting an unemployment rate of close to 10% before year’s end. Given the unprecedented impact of the pandemic, however, all such forecasts are highly conditional.

Read more: Will New Zealand’s $50 billion budget boost Jacinda Ardern’s chance of being re-elected?

So can the 2020 budget help avoid mass unemployment? Are the measures announced sufficient to address the scale and distinctive aspects of the current crisis? A little context helps in answering such questions.

New Zealand started from a good position

By OECD standards, New Zealand entered the pandemic with a relatively low unemployment rate. In March 2020 the official unemployment rate was about 4.2%, slightly up on 4.0% in December 2019. This compared with pre-pandemic unemployment rates of around 4.0% in the UK, 5.2% in Australia and 7.4% in the Euro zone.

Fortunately, too, the government’s comprehensive wage subsidy scheme has so far limited the spike in unemployment. By contrast, the US unemployment rate rose dramatically from 4.4% in March to almost 15% in April, with more than 20 million jobs lost in recent weeks.

Goldman Sachs estimates the US unemployment rate may peak at 25%, comparable to the depths of the Great Depression. The real jobless rate, which includes those who want to work but have given up trying, is forecast to reach 35%.

Of course, the depth and duration of the economic downturn remains highly uncertain. Hence, policy responses must remain flexible and adaptive. Wisely, this budget recognises that. Finance minister Grant Robertson has reserved significant fiscal resources should they be required.

The impacts of this pandemic differ from any previous financial or seismic shock, so it poses distinctive and unusual policy challenges. Specific industries and sectors have been disproportionately affected (tourism, aviation, hospitality, retail, international education, and the arts), as have particular communities (such as those heavily dependent on international tourism).

Targeted and tailored policy interventions are essential, along with more broad-brush responses.

Again, the budget reflects this. Key policy measures include the targeted extension of the wage subsidy scheme for a further eight weeks for businesses experiencing more than a 50% reduction in turnover, a $400 million package for the tourist sector, a substantial boost to the infrastructure investment fund, and some additional support for research and development.

Read more: The pandemic budget: moving New Zealand from critical care to long-term recovery

Young people need the most support

Unfortunately, as with previous recessions, COVID-19 will have a disproportionate impact on younger people. Since March, the increase in unemployment has been particularly marked among those aged 20-29. Tertiary students are among the hardest hit by the loss of job opportunities.

Significant and continuing efforts will be needed to minimise these inter-generational effects, and the budget goes some way to addressing these.

It includes a substantial trades and apprenticeship package (worth $1.6 billion), along with additional subsidised places for tertiary students, a modest increase in per student subsidy rates, extra support for employment services, specific initiatives for Māori and Pasifika students, and a new hardship fund for students.

But more assistance for the university sector will likely be needed over the next few years – not least because of the substantial loss of income from international students. Specific measures could include a strategic tertiary investment fund, an increase in the value of targeted student allowances, and a rise in student loan borrowing limits.

The recovery must be environmentally sustainable too

Finally, it is vital that the rush to protect and create jobs must not jeopardise future employment opportunities by contributing to poorer environmental outcomes. “Shovel-ready” projects must not be carbon-heavy.

New Zealand needs a genuinely sustainable economic recovery, one that enhances societal resilience, protects ecological values, and reduces greenhouse gas emissions.

To that end, the $NZ1 billion environmental jobs package is welcome. It will enhance pest control and ecological restoration, while also improving facilities in the national parks and reserves.

But investments of this kind will be undermined if the planned reforms to the Resource Management Act result in greater urban sprawl, the loss of valuable agricultural land, and higher transport emissions.

Ultimately, sustainable employment requires a sustainable environment.

Stay in touch with The Conversation’s coverage from New Zealand experts by signing up for our weekly NZ newsletter – delivered to you each Wednesday.

– ref. New Zealand’s pandemic budget is all about saving and creating jobs. Now the hard work begins – https://theconversation.com/new-zealands-pandemic-budget-is-all-about-saving-and-creating-jobs-now-the-hard-work-begins-138523

Fact Checking

On Mondays – or Tuesdays after public holidays – National Radio’s Kathryn Ryan runs a session called ‘Political Commentators’. On 28 April, from the right was regular commentator Matthew Hooton. From the left was Neal Jones who is listed as: “Chief of Staff to Labour Leader Jacinda Ardern, and prior to that was Chief of Staff to Andrew Little”.

It was good to hear Hooton now becoming something of an advocate for a Universal Basic Income (UBI), though (given past comments) I am not clear yet that he understands it fully.

It was concerning, however, to hear Jones – a man close to Prime Minister Jacinda Ardern – repeating falsehoods about Universal Basic Income. Jones said that a key problem with UBI is that it would be paid to New Zealand’s richest man, Graeme Hart. That comment reflects an attitude that is dismissive of universalism. Universalism is the basic principle that underpins democracy; and, more generally, underpins ‘horizontal equity’, the idea that we are all equal in our economic and other civil rights.

Perhaps even more importunately, Jones’ comment on Tuesday was false.

It was me who in 1991 first coined the term ‘Universal Basic Income’; my aim was to connect the established concept of ‘Basic Income’ (‘Citizens Income’ in the United Kingdom) with insights gleaned from New Zealand’s tradition of universal income support, as established in the 1938 Social Security reforms and as reaffirmed in the 1972 Royal Commission on Social Security.

The mechanism I envisaged in 1991 is: “a universal tax credit available to every adult – the universal basic income (UBI) – and a moderately high flat tax rate”.

(Refer to my ‘Briefing Paper’ From Universal Basic Income to Public Equity Dividends (2018) which in turn links to a report that links to, among other papers, my original 1991 University of Auckland Policy Discussion Paper. To the best of my knowledge, this was the first ever published use of the name ‘Universal Basic Income’. The name started to be used internationally after I presented a paper at the Basic Income European Network conference in Vienna in 1996.)

Since the 1990s, the concept of Universal Basic Income has become poorly defined, and tends to be seen, simplistically, as an unfunded handout, a kind of regularly paid ‘helicopter money’. In that sense, it is true that some proposals that use the name ‘Universal Basic Income’ would raise Graeme Hart’s income. But not all versions of UBI. In those versions that are truest to the underlying concept – Graeme Hart’s income would be unaffected.

So, once again, for the remainder of this essay, I am going to avoid the term ‘Universal Basic Income’. The term I will use here is ‘Universal Income Flat Tax’ (UIFT, if you will). This is a mechanism made up from a universal income and a single (flat) rate of income tax. Thus, the universal income is funded by the removal of the lower marginal tax rates. In the New Zealand case, that means the universal income replaces the 10.5%, 17.5% and 30% marginal tax concessions. With a single tax rate of 33% and a universal income of $175 per week, Graeme Hart would be completely unaffected, at least in the implementation phase. This represents a reconceptualisation of income tax rather than a redistribution of income.

The Mechanism at Work

Rather than labour the point about how we introduce the UIFT mechanism, it’s good to get the vision of the mechanism in action. It is a mechanism that addresses the issues of stability, precarity, equity, and sustainability. UIFT is not a sufficient panacea to cure all our economic ailments, just as the introduction of MMP did not remove the politics from politics. UIFT is, however, a mechanism that makes the necessary possible. It is an enabling mechanism for the evolution of liberal democracy. The Covid19 global emergency has shown more clearly than ever that our present ways of thinking about public finance are disabling, and as such threaten to bring about an end to liberal democracy in some parts of the world.

(Much of the disabling is due to the fact that many welfare benefits continue to be delivered to us in the form of tax exemptions, allowances, concessions and graduations. These are attractive to recipients because they are unconditional – they do not have to be applied for – and to policymakers because they barely contributes to public debates about social welfare. The big problem with this kind of benefit is that, when a person’s income declines, these tax-related benefits also decline. We tend to think of benefits as a cushion, or a safety net. These tax-related benefits represent the cushion being removed when we fall. The best benefits are cushions that are there for us when we fall, rather than cushions given to us when convalescing from an uncushioned fall.)

So, imagine that we already have in place a 33 percent income tax and a weekly basic universal income of $175. (For present beneficiaries, this $175 per week would represent the first $175 of their present benefit. This situation does not represent any substantial change from the income distribution we have become accustomed to. It is a conceptual change.)

How could we use this tax-benefit mechanism to address the four issues: stability; precarity; equity; sustainability?

Stability.

Stabilisation is the familiar issue of how societies use fiscal and monetary policies to manage normal economic downturns and upturns in the economy. Governments expect to pay more welfare benefits in an economic contraction (eg a recession), fewer benefits in an expansion. And governments expect to collect fewer taxes in a contraction, more taxes in an expansion.  Thus, we expect the government to run budget deficits during contractions and budget surpluses during expansions.

When we have welfare benefits that are easy to access, this process is known as automatic stabilisation. While such automatic benefits are good for the recipients, they are especially good for the stability of the economy as a whole. (Countries that already had a system of benefits in place before the Great Depression of the 1930s – notably Sweden and the United Kingdom – emerged from that emergency comparatively quickly, in 1932. Other countries – for example France and the United States – were still in economic depression at the onset of World War 2.)

The more bureaucratic the process of accessing benefits – and the more conditional those benefits are – the less efficient is the stabilisation process. (Reliance on benefits delivered as tax concessions is especially destabilising, because these benefits are lost when they are most needed. A particularly egregious example of a destabilising benefit in New Zealand at present is the In-Work Tax Credit, which, as its name suggests, is lost when recipients lose their employment. Another such benefit is the KiwiSaver annual tax credit of $521, which is progressively lost as a person’s gross weekly income falls below $1,043.)

Under the UIFT mechanism, the full universal income is retained when a person loses their job, or suffers a reduction in wages. And it’s instant, a genuine cushion; not a subsequent palliative. Further, this cushion benefit cushions people with partners still in work; many people (especially married women) do not qualify at all for present targeted bureaucratic Work and Income benefits.

When there is an economic expansion, under this UIFT regime, government income tax revenue increases by 33 cents in the dollar for every extra dollar of gross income; thus, during a normal economic upturn, the government moves into surplus more quickly and more automatically.

Precarity.

Precarity is the situation where many people are employed on short-term contracts; some may be expected to be ‘on call’ without being compensated for that restricted time. It also refers to many the self-employed people – free-lancers and small business operatives – whose labour incomes fluctuate with little predictability.

For these people, a basic universal income works as a personal economic stabiliser – a cushion allowing some income tide-over during down times – with a higher marginal tax rate which offsets this cushion in the good times. With the UIFT mechanism in place, these people can remain self-reliant, and will have minimal need to engage the welfare bureaucracy which needs to prioritise those people with structural income incapacity.

Further, the unconditional benefit component of the UIFT creates some incentive for self-employed workers to retain work-life balance, by not overworking at certain times, and by not penalising them when they need some downtime, such as family time.

Equity.

Equity is a central component of democracy. And equity represents the equal ownership of productive resources. Private equity represents the equal ownership rights of the principals of private businesses. Public equity represents the equal ownership rights of all economic citizens over those many productive resources which are not privately owned. Equity-holders expect to receive an economic return on their equity. There is no law of economics that restricts this capitalist expectation to private shareholders.

The consequence of this liberal democratic reasoning is that the universal income component of UIFT can be properly understood as an economic dividend; interest on the public equity represented by the public commons. And it also means that a universal income that is basic (ie low) need not remain low under all possible future circumstances.

Just as political citizenship reflects the universal suffrage, one person one vote, so, in a mature democracy, economic citizenship requires a universal publicly-sourced private income. One person, one equity dividend. A reflection on equity principles suggests that the universal income part of the UIFT mechanism should be understood as a public equity dividend.

A universal publicly-sourced private income is capital income, not labour income. It is a social dividend, not a wage. It is a yield on public capital. It is social capitalism at work, not socialism.

The word ‘equitable’ must be associated with an equalising mechanism. Here we may consider both financial inequality and time inequality.

A liberal democratic dividend means that one substantial part of the economic pie is distributed equally, and that the remainder of the economic pie is distributed unequally in line with market forces. It means that people experiencing substantial declines in their market incomes retain a personal stake in their liberal democracy, through their rights to an income from the public share. And it means that people experiencing increases in their market incomes do not simultaneously draw increases from the public share. Financial inequality is mitigated.

Time inequality is addressed, because the inclusion of an unconditional universal income gives encouragement to the overworked to work less, and for the underworked to work more. Without such an equalising mechanism, workers, who also lose public benefits when they lose private incomes, are disincentivised from reducing their work overloads. Likewise, people with little or no work know that, with UIFT, they will retain their publicly-sourced private income when they take on increased market workloads. The overworked work less and the underworked work more. For the unemployed and the underemployed, a basic universal income is work enabling; it facilitates rather than restricts labour supply.

Sustainability.

This issue relates to both the issue of robots and the issue of climate change. It relates more generally to the possibilities of being able to enjoy high living standards in a more relaxed form, and having a supply-elastic economy. At present we try to have a full-capacity (ie, ‘maxed out’) growing economy where we have little choice but to overproduce and overconsume. At present, our overconsumption is someone else’s livelihood.

The robot concern is that our economies will become too productive. The only thing scary about that scenario is that, at present, we have no social mechanism to distribute the proceeds of that productivity. In the absence of such a mechanism, the endgame is extreme inequality, which means (among other things) extreme poverty. An advanced society with extreme poverty has high unemployment of bothpeople and robots.

How does a mature UIFT mechanism address this issue? It addresses the issue by both raising the amount of universal income and by raising the income tax rate. If done in a neutral manner, then the overall extent of economic inequality (measured by the Gini Coefficient) would be unchanged.

In order to avoid increased inequality, both the universal benefit amount and the tax rate would need to increase. This would be a simple reflection of increasing capital income relative to labour income; more gross income accruing to ownership relative to income accruing to effort.

(At this point we might note, Graeme Hart, as a likely robot investor, would be even richer than he is now, before tax. While the UIFT mechanism would give him an increased public equity dividend, he would also pay more income tax. The net effect of these three influences on Hart’s income should be that his ‘disposable income’ would increase at about the national average.)

As this process of rising incomes and rising income taxes unfolds, it means that the public share of the economic pie increases relative to the market share. This increases the willingness of the overworked to work less. And it increases the understanding that paid work is a cost rather than a benefit. Rising public equity dividends relative to total income gives the necessary signal to the entire workforce to work less for money, and to embark on more projects that may not deliver financial returns. More voluntary unemployment, less involuntary unemployment. More ‘slack’, in the sense that slack represents market supply elasticity. An economy with more slack has the capacity to increase production when it needs to. In normal times, liberal capitalist economies should not be ‘maxed-out’; only in certain types of emergency.

We can now imagine a democratic capitalist world order, in which people choose to both earn less and spend less, while being assured that basic economic needs are covered, as well as many higher-order needs. Ironically, in our Covid19 lockdowns many of us gained a sense of that, though missing the coffee and ambience of the local café. But not missing the wider rat-race.

It is this slower living – which we have seen briefly – that has the potential to bring about environmental sustainability. We have heard more birdsong. We have smelled the flowers. We have heard that the people in China have lately seen the stars in the firmament.

We can have a high productivity economy without maxing-out our countries’ GDPs. We just need a mechanism to make the necessary possible.

What is the First Step?

In New Zealand, the first step is to reconceptualise our tax-benefit system, and in the process to apply a little relief to those who work hard without receiving high wages. This step would have easily been funded through tax revenue in 2019, pre-Covid19. Today this first step should be funded – and immediately, eg through the 14 May 2020 Budget – by Reserve Bank credit, just as the emergency wage subsidies have been funded.

See my Five Examples for any further clarification about how the transition to UIFT would affect different people.

In many other countries, the process will be more difficult. They have more complexities to unravel (compared to New Zealand) in their present income-tax scales. Australia could make the transition quite easily, with a 37% tax rate and a basic universal income of $240 per week.

We need political commentators with open minds.

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References:

Universal Basic Income (or Basic Universal Income) and Covid19. Scoop or Evening Report, 7 April 2020.

From Universal Basic Income to Public Equity Dividends (2018); Policy Observatory Briefing Papers, AUT, Auckland

Public Equity and Tax-Benefit Reform (2017); Policy Observatory, AUT, Auckland

The Universal Welfare State incorporating proposals for a Universal Basic Income, Keith Rankin, University of Auckland Policy Discussion Paper No.12, 1991

Constructing a Social Wage and a Social Dividend from New Zealand’s tax-benefit system, paper presented to the Basic Income European Network (BIEN) international conference; Vienna, Austria, 12-14 September 1996.
(Note that in this paper, I used the terms ‘full universal basic income’ and ‘adequate universal basic income’. My use here of words such as ‘full’ and ‘adequate’ are suggestive of the aspiration that a basic income could be more than a basic dividend; rather a substitute for a wage, and therefore a possible disincentive to engage with the labour market. However my emphasis in this paper – and subsequent papers – was the ‘social dividend’, a basic universal income that might eventually evolve into a non-basic payment.)

The received wisdom is that they represent the ‘time‑value of money’, and therefore should always be positive. Low interest rates are supposed to indicate a high willingness to postpone consumer pleasures. Interest income is also understood as an entitlement, a reward for hoarding rather than spending money.

In macroeconomics, we are told that low interest rates indicate ‘loose money’, which in turn means higher inflation. And we are told that we must engineer interest rates upwards as a means of curbing both residential land prices (‘house prices’ in common parlance) and consumer prices. Recessions are known to be collateral damage of upwardly‑engineered interest rates; but recessions pass, we are also told.

Much of our evidence is from individual nations’ statistics. The problem here is the way countries’ currency exchange rates confuse the picture. By looking here at G7 data, we have the worlds predominant capitalist countries taken together rather than individually. The exchange rate movements between their currencies largely cancel out.

On its own, the charts shows an ambiguous relationship between interest rates and inflation. We should note however, that conventional wisdom suggests it takes around two years for rising interest rates to curb inflation, and for falling interest rates to raise inflation.

The chart shows interest and inflation rates, using the percentage rates on the left‑side axis of the chart. Unemployment rates are read using the right‑side chart axis.

There are certainly instances where falling interest rates are followed by rising inflation – eg early 2000s. And falling interest rates (2009, 2012) followed by rising inflation. We might note that the rising inflation in 2010 and 2011 was mainly due to fiscal stimulus (rather than due to low interest rates); governments choosing to run the very high budget deficits that enabled recovery from the Global Financial Crisis.

In recent years, falling interest rates since 2011 have not been able to raise inflation above the annual two‑percent that is optimal to keep the wheels of capitalism spinning. And interest rates sure have come down. The key global interbank rate – the LIBOR – has been below zero since 2015.

We see that the relationship between interest rates and unemployment is rather more compelling than that between interest and inflation. Rising interest rates clearly bring‑about higher unemployment. Further, it is the rising unemployment that typically – but not always – induces lower inflation. In the chart, falling interest rates were followed by falling unemployment. Unemployment rates, our most critical indicator of recession, show that recessions have been the critical instigator of low inflation.

Indeed, it is fair to say that rising interest rates only curb inflation by creating contractionary conditions; creating recessions or near‑recessions. There is no direct connection between ‘loose money’ (indicated by low interest rates) and ‘high inflation’; or between ‘tight money’ and low inflation’.

By pre-2015 conventions, the developed world liberal‑capitalist economy is now in a sweet spot; low inflation, low unemployment. Annual economic growth is at potentially sustainable levels (eg 2% rather than 3%+). Yet there is much anxiety. Much of the anxiety among the richest 10% is because there were other motives – other than disinflation – for past high interest rate policies. It was through these monetary policies that the 1980 to 2008 ‘class‑war’ between capital and labour was waged. High and compounding interest was understood then as a free lunch by the rich, a means of transferring wealth directly from the poor to the rich.

The 2020s will bring new economic challenges; the challenge of low inflation and negative interest rates as the new norm. This happy state of affairs will not last though, so long as we have economic policy frameworks rooted in the 20th century. Labour shortages are now the big challenge of global capitalism. If policymakers fail to see this – and persevere with fiscal austerity policies (as we see in New Zealand) – then in the late 2020s we should expect a new form of stagflation; high inflation and structural unemployment.

Allegations of bullying and illegal activity in Parliament continue to dog National MP Maggie Barry, with leaks and anonymous interviews from former staff coming out daily since the Herald broke the story on Saturday. 

The latest startling allegations were broadcast this morning on RNZ, in an 11-minute interview with an anonymous former employee of Barry’s. The person claims: “She would call staff stupid, say that she couldn’t believe that they had been given a degree; she would talk about their sexuality behind their back to me and other staffers”. The whole interview is well worth listening to: Ex-staffer speaks out.

The complainant describes working for Barry: “It was Jekyll and Hyde stuff. It was terrifying at times. It rocketed from absurd one moment to terrifying the next. She would be absolutely lovely and then a small thing would trigger her and she’d be absolutely furious, just red-hot fury.”

The former staffer also made allegations that Barry requested that National Party campaign work be carried out which, if true, would be against the law. The former staffer said “about 50 per cent” of his work was actually for the National Party.

He claims: “The very first piece of work that I did on my very first day was to create her email newsletter which campaigned for Dan Bidois… and which also asked people to join the National Party… We collected membership funds, people would pay their membership dues at the electorate office… she would solicit membership from the office… All of those things are unlawful.”

Some of Barry’s conversations were recorded by staff, but he says: “She told staff to record her – and I wasn’t the first staff member to record her, other staff members recorded her. She told us that was a good idea because then she could go off to another meeting and we could go back and check the tape.”

He said Parliamentary Service had also encouraged him to make recordings after he complained to them about Barry’s behaviour. They told him to “document interactions” with the MP. And these recordings have now been supplied to RNZ and other media outlets.

This is well covered in Craig McCulloch’s news report, Maggie Barry bullying claims: Ex-staffer speaks out. This article confirms that “RNZ has seen text messages which appear to show Ms Barry requesting the staffer carry out political work during office hours.”

McCulloch also reports on another employee of Barry, who disputes the above allegations, saying “she had never been bullied by the MP in the six years she had worked with her”.

In terms of the recordings, she says she feels “betrayed and violated” by them. Similarly, Barry is also quoted objecting to this process of accusations: “It is a little odd and unfair having to answer allegations anonymously and also to be taped without my knowledge.”

Earlier allegations about Maggie Barry

The scandal actually broke on Saturday, when the Herald published Kirsty Johnston and Derek Cheng’s in-depth account of bullying in Barry’s office – see: Former staff accuse National MP Maggie Barry of bullying. Here’s the original list of Barry’s alleged crimes: “swore and yelled at staff; called an employee ‘stupid’; used derogatory terms about other elected officials, which made staff uncomfortable; referred to people with mental health issues using offensive terms like ‘nutter’; discussed her employees’ sexuality in the workplace; expected staff would do work for the National Party during office hours, which they felt unable to refuse while knowing it was wrong, because they were scared.”

The article appears to be based on claims made by the same person in the RNZ interview. He explains that he had gone to the media with his allegations in the wake of the Jami-Lee Ross scandal when National was downplaying bullying in the party: “When you’re the subject of bullying investigations it takes gall to claim that Jami-Lee Ross was a one-off, that there are no other bullies that the party is aware of”.

On Sunday, further allegations were published in Nicholas Jones and Kirsty Johnston’s National backs Maggie Barry as more allegations detailed. This article is based on details “outlined in a document by Parliamentary Service, summarising a meeting” with the former staffer.

Then on Monday, Newshub published yet more allegations, apparently from a different complainant, who described Barry’s office as a “toxic” workplace – see Anna Bracewell-Worrall’s Exclusive: National MP Maggie Barry hit with fresh bullying allegations.

Here’s the key part of the story: “the source said Ms Barry would lash out at staff and that she was ‘totally intimidating’. ‘She would attack and belittle your work in front of other people.’ They worked in her ministerial office, and said staff would break down in tears. The staff member said Ms Barry would treat everyone below her station with ‘utter contempt’ – including referring to officials in her ministerial departments as ‘hired help’.”

The article also presents Barry’s response: “I can’t comment on individual employment issues, but there were no investigations or formal employment complaints laid during my three years as Minister, nor were there issues raised with me by Ministerial Services”. However, Bracewell-Worrall reports, “No formal complaints were laid, as the staffer said they were worried it might harm their chances of getting more work at Parliament”.

Allegations of illegal use of taxpayer resources for electioneering

Although the Maggie Barry story has mostly focused on her alleged bullying, perhaps the more potentially explosive allegation is that she had her staff do party political work instead of parliamentary work. Of course, this is common in MPs offices, but because it is unlawful it is not normally made public. Party political work is not an allowed use of taxpayer resources, and parliamentary staff are supposed to only do work relating to parliamentary purposes.

This misuse of taxpayer funds is one of those open secrets in Wellington that isn’t normally reported or debated because all the parties do it, and therefore none of them have an interest in exposing it. Occasionally, information comes to the surface – as it did after the 2005 general election, leading the parties to have to pay back hundreds of thousands of dollars – but generally it remains hidden. It’s possible that now, with the allegations about Barry, we’ll see much more coming out about this misuse.

This allegation was made in the original report on this scandal, but yesterday Newshub published information about the existence of an email allegedly from Barry: “Newshub has seen an email from Ms Barry instructing a ministerial staff member to work on a letter to National Party members. The email was sent during a work day to a parliamentary email address. National refused to discuss the email without a seeing a copy of it. Newshub had agreed with its source not to share the email” – see Anna Bracewell-Worrall’s Exclusive: Leaked email reveals Maggie Barry told parliamentary staff to do National Party work which could be unlawful.

The analysis of electoral law expert Andrew Geddis is reported in the article: “When you have an email like this sent during work time, it looks very much like they are being asked to do it on the taxpayer dollar – and that’s what they are not allowed to do.”

Geddis is also quoted by Audrey Young in a previous report: “Taxpayer funding to hire MPs’ staff is given so that they can do their jobs as elected representatives, not to help them win re-election… If it gets misused for party purposes, sitting MPs get a massive advantage against their unfunded challengers” – see: Bridges says Barry management was no cause for concern, welcomes advice on definition of ‘political work’.

Geddis believes that “the situation may need closer scrutiny”, and he cites the Auditor General launching an inquiry into a similar issue in 2005, which “found that parties in Parliament had unlawfully spent $1.17 million on what he deemed to be political advertising”. He says that “It may be something similar is needed in this case”.

Debates about bullying

In dealing with some of the allegations about Maggie Barry, Simon Bridges and Paula Bennett have been emphasising that Parliament is a “robust workplace”, the implication being that what some people call “bullying” might well just be the natural high-pressure behaviour of an intense place like Parliament. Bennett has also said there needs to be a balance where people aren’t “too scared to have a joke or say something that could be cut and pasted and misconstrued in some way.”

It turns out that some of these statements have been created by National’s spindoctors, and distributed to all National MPs so that they can repeat them to the public – see Jason Walls’ Internal National Party email advising MPs on what to reply to bullying questions has been leaked.

But it’s not just National questioning what is considered bullying. Deputy Prime Minister Winston Peters has also spoken out on the issue this week, saying “The reality is that we are upon a new PC age where half the zing, excitement and enjoyment of life is being gutted and sucked out of society by people who decide that they will be the language Nazis” – see Scott Palmer’s Winston Peters blames ‘language Nazis’ for bullying scandals. This was in response to RadioLive’s Mark Sainsbury pondering whether the whole debate is “all a beat-up”, suggesting “everything is bullying these days” and it seems like “bullying season.”

Peters has also explained that the nature of Parliament leads to difficult interactions with staff: “If you’ve got a crisis on, that’s a serious crisis on, and someone is not stepping up then tempers tend to be raised and people tend to react. But that’s part and parcel of life. If you think we can have a tranquil, peaceful, calm life while you’re trying to handle crisis after crisis, and difficulties and all sorts of tension then I think we’re in dream land” – see Jamie Ensor’s Deputy Prime Minister Winston Peters can’t be sure he hasn’t been a bully.

For the best discussion of bullying in Parliament, it’s well worth reading the observations of RNZ’s Peter Wilson, who is a 30-year veteran of the Parliamentary Press Gallery, and has probably seen more of what goes on in the institution than almost anyone – see his opinion piece, Bullying and bad behaviour: Parliament’s perfect storm.

He says: “High stakes, high stress, bad temper and bullying often go together and in Parliament it’s a perfect storm.” But here’s his main point: “Parliament is by its nature a hostile environment. Opposition MPs criticise and vilify government MPs, and they in turn are attacked by the other side. That’s a way of life in an adversarial political system. However, the hostility can and does boil over. An MP who comes out the debating chamber furious about being humiliated and encounters an errant staffer isn’t likely to be an understanding boss. And when a mistake made by an official leads to public embarrassment, such as relying on incorrect information, the reaction can be dire.”

Wilson also points to the fact that a lot of recent allegations are against women, so “the problem isn’t restricted to powerful men”. Also, he makes the point that not all MPs are bullies or involved in bad behaviour. He cites Bill English as a good example, saying he “had a reputation for being a really good boss to work for and the pressure he was often under was as high as it gets. He was said to never raise his voice in the office.”

Finally, could the current allegations against Maggie Barry have an element of internal National Party dirty politics? I made the case for this on Monday on Newshub’s AM Show – see: Maggie Barry bullying claims possibly a ‘Nat-on-Nat attack’ – Bryce Edwards.