Wednesday, February 27, 2013

$13.75 an hour? Schweet!

The Minister of Labour, Simon Bridges, has announced an increase in the minimum wage from the current $13.50 an hour to $13.75 and hour, effective from 1 April.

Mr Bridges' press release is a bit of a gem: 'the increase seeks to strike a careful balance between protecting (protecting! no less) low wage workers and ensuring jobs are not lost.' Ensuring jobs are not lost? Has the man been living under a rock? Mr Power's press release goes on: 'The government is firmly focussed on growing the economy and boosting incomes.' Which is an odd thing to say in light of reports this week that the gap in wages between Australia and New Zealand (you know, the gap National was going to close) has grown from $60 per week to $180 per week since 2008. And no, we don't buy the global recession excuse. National's economic mismanagement runs far deeper than that. 

One can only imagine that the working poor will no longer need the support of foodbanks, but are racing to trade up their Nissans to Porsche 911s and perusing adverts for McMansions in Karaka as we speak.

Or maybe not. A quick nosey at the IRD's tax calculator suggests this generosity on the part of a government committed to alleviating financial hardship may not have cleaners living high on the hog after all.

Take a minimum wage worker working 40 hours per week with two small children. Suppose also for simplicity our worker's partner stays at home to care for the child/ren. We'll also ignore student loan repayments and Kiwisaver contributions. Gross wages will increase from $540 to $550 per week. According to IRD, net income therefore increase from $455.17 to $463.25. Fortunately, that great employer subsidy Working for Families comes to the rescue. WFF tax credits of $641 remain the same. Net gain? $8.08. Wow. This looks kind of generous until you realise that the taxpayer is subsidising cheap employers, and rent on a two-bedroom flat in Auckland is about $400.

For single people there is only the increase of about $8 as they don't qualify for WFF.

And how does this increase in the minimum wage intersect with the government's drive to move sole parents into work at any cost? At the moment sole parents are required to seek work of at least 15 hours per week when their youngest child turns 5. Looking at the IRD's website again (bearing in mind eligibility for WFF depends on work of 20 hours per week):

Hours worked Per hour PAYE etc Nett Less benefit abatement Net gain from working
15 13.50 24.70 177.80 23.34 154.46
15 13.75 25.16 181.09 24.33 156.76

Net gain from increased  minimum wage$2.30

Oops. That's $2.30 for 15 hours work, an increase of 15c an hour. In other words, the families with the lowest incomes stand to gain the least. So much for boosting incomes. In a civilised society this would be a cause for public outrage. Time to support the living wage campaign (it's a campaign that's older than you might think).

Thursday, February 21, 2013

Is Bernard a broken record?

A recent column by Bernard Hickey in the NZ Herald entitled 'Buy now, pay later' brought forth the comment that 'Bernard, u are a broken record.'

The column was mostly about the benefits to consumers of the high exchange rate but did point out at the end that cheap prices for consumer goods were great for those with a job and income, or a good line of credit. 

Now I'm willing to wager that Bernard and I disagree on a few things but since he's a cyclist we're prepared to cut him quite a lot of slack. Plus...we think in this case he's right.

New Zealanders borrow a lot of money, and our total debt is among the highest of any country in the world. Contrary to what the government would have us believe, most of that debt is private debt. Private borrowing went into overdrive during the 2000s as Kiwis borrowed on the equity in their properties or simply borrowed to buy more property. Plenty of others borrowed just to stay afloat. As the economy continues its downward death spiral, Bernard quite rightly points out that the other side of cheap flatscreen TVs is an export sector losing jobs (the subject of another post when I get round to it).  

As nerdy types, Spider and I thought we'd look at what the data was telling us. The first thing is that, in a supposed sign that the economy is picking up, credit card spending picked up in December. This money was spent on 'consumables such as food, liquor and fuel'. Day-to-day expenses being put on the credit card by the newly minted unemployed, one suspects. Oops.

Statistics New Zealand's 15th February release on December 2012 retail sales (indexed to September 2010 dollars) shows from the previous December, while sales of groceries, food and beverage services and recreational goods sales fell, hardware and electronic goods sales jumped, as predicted by the 'high dollar cheap goods' thesis. (In fairness, it should be noted the data is presented in several ways and the actual unadjusted sales data presents a slightly different picture). But hidden away in the data (Sheet 11) is the fact that most retailers accumulated stock during 2012 (unadjusted dollar values) with the exception of recreational goods and electrical goods - expensive items that are largely imported. Tick for Bernard.

All of this is sort of ho-hum but for the fact that as exporting manufacturers close their doors, New Zealand is increasingly unable to pay for all those luxury cars and TVs we seem to like so much. Treasury's January economic indicators include a graph of New Zealand's current account deficit, which has been creeping up since 2010 (below). We're some way off the peak of 2006-09, but we aren't getting out of our debt hole, either. Another tick for Bernard.

Far more low-rent punters, you know, the ones with no credit cards and no or low-paid work, there's still plenty of opportunity to get into debt. Spotted across the road from the local high school was this gem:

Not exactly subtle.

Here's an outfit with a complex company structure that has undergone at least one name change flogging overpriced cars and expensive credit to people who can't spell.

Remember those finance companies that hit the wall in 2008-2009 losing the equivalent of about 5% of GDP? Many of them held debt on motor vehicles - sort of like New Zealand's version of the sub-prime real estate collapse.

Reinforcing the message that it's OK to bilk the poor, this popped into our letterbox a couple of days ago. 

Now it's true people make the choice to get into debt but you'd need to be desperate to pay $1,716 for a 7-piece dining set ($11 per week for 36 months) when you can get the same for about $400 on TradeMe. Who has that little cash on hand? Our growing army of the working poor and beneficiaries borrowing to stay afloat.

In other words we're behaving pretty much as we did in 2007 except that the number of low-income borrowers has increased and they are even more cash-strapped. And in a country with ever-diminishing options to earn a living, there's no shortage of sharks willing to prey on them.

Bernard might be a broken record but we think that's because we're back to borrowing and spending, tragically in many cases to cover basic living expenses. An emerging real estate bubble, cheap cars and expensive finance? We appear to have learned nothing.

Friday, February 15, 2013

Green(?) prescriptions

In keeping with the government's commitment to not dealing substantively with major issues, today Health Minister Tony Ryall told a waiting nation that exercise was still - STILL! - the best medicine.

The best medicine for what, we found ourselves asking. Mr Ryall explained: "The government wants more New Zealanders being physically active to help improve their health and that’s why a record thirty six thousand people were issued with a Green Prescription for exercise, an increase of nearly ten thousand compared to 2008." 

A 'green prescription' appears to be where you go to the doctor to get some assistance to lose weight and the doctor tells you to do some exercise. It's not particularly green unless all those patients start eating rabbit food as they are undoubtedly advised to do. Oh yes, and this bogus tripe has the advantage that it doesn't cost the government any money.

And a one and a two....shake that thang...
Now there's no denying that most New Zealanders could stand to get a bit more exercise, especially those of us who can't even turn our heads to look when we drive because we're too fat. But the reasons people are overweight is way way more complex than simple indolence.

Most weight problems in developed countries arise from what we're shoving into our gobs. Sugar, fat and processed carbohydrates are the main culprits, especially in the lethal combinations found in junk food. If Tony Ryall wants people to lose weight and improve their health, he should be issuing press releases urging people to give up soft drinks and candy bars. But wait! This is a government who couldn't wait to eliminate food standards in schools when they got into government in 2008, has already tried to ditch the Fruit In Schools programme, and has dismissed almost any form of food labelling. In other words, they're letting the fast food industry do what they want and are hoping like heck people will work the excess off.

Except that they won't. The link between exercise and weight loss is weak at best. While it's true fat Olympians are reasonably rare, most lesser mortals don't have the resources to work out full time while someone else supports them financially. More importantly, exercise makes people hungrier so they eat more, and can have unintended consequences for people's metabolic rates (ie their bodies adjust so they continue to store energy). And there are plenty of people in South Auckland who are technically overweight but are active in social sports such as touch or volleyball. The Mr Ryall's of the world are doing the rest of us a disservice by equating 'lean' with 'healthy'. An active overweight person generally (ie on a population basis) has better health than a lean couch potato.

This problem (because it is a big problem in several respects) also needs to be seen in the light of the lives people lead. Many overweight people work unsociable hours that mean the only food available to them when they knock off is greasies and shakes. Who, working 30 hours per week for $13.85 per hour (that's right, Mr Ryall's office cleaner) can afford steamed chicken breast with pasta garnished with rocket salad? And get it a 2 o'clock in the morning? Is Mr Ryall seriously suggesting his office cleaner should add to her load and commence an exercise regime so she loses weight?

There is no doubt that the diabetes tidal wave is well on its way but let's be realistic about how we can start to manage it. We could begin by having the Mr Ryall's of the world not being afraid to step on the toes of multi-national death merchants. Start by limiting advertising junk food to children, introduce a traffic light food labelling system, and think about how people on low incomes can start to afford good quality food on a regular basis. Green prescriptions are not even a band aid: for most overweight people they're a false promise.