Alex's politico economic blogroll: Crampton on why a youth minimum wage was good; Brownlee's caravan failure; John 'rates hike' Banks a joke for ACT

Alex's politico economic blogroll: Crampton on why a youth minimum wage was good; Brownlee's caravan failure; John 'rates hike' Banks a joke for ACT

Here's my blogroll for the week. Starting with the economics blogs (blog) this week because I missed them out last time round. 

And before we get into it, I came across this government website just before advocating foreign investment in New Zealand. Why invest in New Zealand? Because it has no capital gains tax.

Perhaps that's why National doesn't want to change things...

Deregulation over the past two decades has created an open, globally competitive economy which operates on free market principles. The economy is well geared for long term international competitiveness, with other key benefits for business and investors in New Zealand that include:

  • No restrictions on inflow and outflow of capital
  • No capital gains tax
  • Research and development is 100% tax deductible
  • Tax incentives for activities including motion picture and petroleum exploration
  • Raw materials may be imported tariff-free.

Economics blogs

1. Why is youth unemployment so high? Because the youth minimum wage was scrapped. Economist Eric Crampton at Offsetting Behaviour takes a look at how much lower the 27.5% unemployment rate for 15-19 year-olds might be if the minimum youth wage hadn't been scrapped. He thinks it's safe to attribute five to eight percentage points of youth unemployment to the abolition of the youth minimum wage. He has a model for his argument too.

And so it's time to update the estimate of how many kids aged 15-19 are currently unemployed because Labour, at the behest of the Greens, eliminated the differential lower youth minimum wage. And let's not forget that National, who opposed the abolition when Labour was doing it, decided that they liked pricing kids out of the labour market when they had a chance to change things. 

The model expects, given the current adult unemployment rate, that the youth unemployment rate would be 19.3% if the youth unemployment outcomes were no worse (relative to adult outcomes) than in the worst quarter from 1986 to 2008. As the actual youth unemployment rate is 27.5%, the rate is 8.2 percentage points higher than would have been expected under the prior trend. That translates to 12,350 kids who don't have work who we would have expected to be in work had the prior relationship between youth and adult unemployment rates continued. 

Crampton says he’s less confident about this quarter's figures because of the February earthquake.

If the earthquake differentially affected firms employing youths (compared with those employing adults), the residual for this quarter will be picking up that effect. It's not implausible that kids employed in retail were hit harder than folks whose jobs shifted location. 

But it seems fairly safe to attribute five to eight points of youth unemployment to forcing employers to pay sixteen year olds as much as older workers. Hit the "minimum wage" tag for further background and responses to counterarguments.

From the left

2. What's next, a Keymobile? Can't help putting these comments in from Gordon Campbell at Scoop on the PM's protection squad budget blowout. Pic HT @lyndonhood

Can we assume that if the health system needs to treat more people it too, will be allowed to blow out its costs?

Isn’t that [operating within a budget] what doctors and nurses have to do almost every day of the week? Consistently, they are forced to balance the quality of care against the need to defend the health budget. Such decisions of course, affect only the lives of ordinary people though – and not the very important people who qualify for diplomatic protection squad care and protection. Just one more sign that this government believes some lives are more important than others.

3. Brash may expose the cracks between National's centre and right. Tim Watkin at Pundit wonders if Don Brash really is the saviour of the right wing or if he will produce more trouble than it's worth for Key.

Most of all, Brash will be ruthless on urging more immediate cuts to the deficit (although that may be something National will be happy to respond to). In other words, he won't be worried about frightening the horses, otherwise known as the centre votes Key has worked so hard to tie down. Brash gives Labour something to kick against, giving them hope, and will force National to issue and repeat a bunch of denials that otherwise would have been taken as read.

One of the biggest worries for National's strategists will be whether they will be forced to choose between ACT and the Maori Party. Ask yourself, how can the Maori Party, even with Tariana Turia at her most pragmatic, say it will go into a coalition arrangement with the man who delivered the Orewa speech, questioning whether Maori can even call themselves Maori these days?

Key made efforts to keep Rodney Hide in charge of ACT when the Heather Roy challenge came. He has dominated the centre and right of New Zealand politics for so long. But this he could not control. Brash and his backers, some of whom I've spoken to this week, dismiss Key as a "smile and wave man" who doesn't adhere to true National principles. Closer to the truth is simply that Key has created a National party that's true to the legacy of Sir Keith Holyoake, rather than that of Ruth Richardson.

But Brash and his backers will not stay on message as Hide did, and may even expose cracks between National's centre and right-wing. It will be a test of party discipline that Key hasn't had to face before.

4. Brownlee's campervan disaster. Against the Current takes to Eathquake Recovery Minister Gerry Brownlee and Christchurch Mayor Bob Parker over the caravan park set up for temporary accommodation, while Japanese authorities are building temporary housing.

These campervans were placed in the middle of a field (Canterbury Agricultural Park) and the Government expected people to put up with living in these campervans during the harsh months of winter. 

But Earthquake Recovery Minister Gerry Brownlee also demanded that folk, already under considerable financial pressure, to pay market rents for the 'privilege' of living in cramped accommodation in a field that would quickly turn to mud once the wet weather set in. 

The whole project was ludicrous and, not surprisingly, the camper van 'village' has crashed and burned. Only one person wanted to live in a crappy camper van - but only put up with it for a few days.

Despite Christchurch's urgent need for temporary homes, Sideshow Bob has kept his mouth shut about this latest Brownlee blunder. Bob is the Government's little lapdog and he won't say or do anything that risks embarrassing his mate Gerry. Expect Sideshow to be suitably rewarded for his loyalty in the New Years Honours list. 

But another housing disaster is unfolding as we speak.

The Government's intention is to build just 2.500 modular homes but they won't be all be available until September at the earliest. 

In stark contrast Japan started building temporary home two weeks after its quake. 

Three hundred portable homes are supposed to go up this month. Although some parks have been earmarked for homes it is expected that most of them will go on people's own damaged properties - who will have to pay the installation costs. 

It took Gerry Brownlee over two months to announce the contractors for Christchurch's modular homes. 

5. CCC pay rises while Cantabrians tough it out. Against the Current is also angry about a pay rise for Christchurch City Councillors.

Times are tough for too many people in quake hit Christchurch but the elected 'representatives' of the good people of this fair city are doing just fine, thank you very much. 

Christchurch's city councillors are in line to receive a $2000 wage increase which would take their basic salary to nearly $89,000.

The increase would come at a time when many of the Council's powers have been transferred to the Canterbury Earthquake Recovery Authority (CERA). 

But we're talking basic council salaries here. There are also the 'add ons' that many councillors receive.

Four councillors in particular are rolling around in a big vat of cash while the queues at the local food banks continue to grow longer. 

Councillors Barry Corbett, Sue Wells, Philip Carter and Mayor Sideshow Bob are also merrily double dipping. They receive another $35,000 as directors of Christchurch City Holdings (CCHL).

From the right

6. Youth unemployment a disaster because of Labour policies. David Farrar at Kiwiblog thinks National should pledge to lower the youth minimum wage.

It is a crisis, but one created by Labour (and not changed by National). Labour made it illegal for a teenager to accept a job for less than the adult minimum wage. They abolished the lower minimum wage for youth.

A 16 year old generally has no skills, no experience and lives at home. They would love to be able to earn a bit of money for say $10/hour. But Labour has priced them off the market. If an employer has a choice of an experienced 25 year old or a novice 16 year old, of course they will not choose the 16 year old.

The fact that teenage unemployment levels are increasing, while the overall unemployment level is falling, shows that getting rid of the youth minimum wage was a disaster for our teenagers. They deserve the chance to gain employment, and National should pledge to reintroduce a lower minimum wage for youth.

7. John Banks standing for ACT and promoting fiscal responsibility is a joke. Peter Cresswell at Not PC thinks getting rid of Hide was good, but bringing in the former Auckland City Mayor would be terrible. He has some good points.

What would have been a clinical coup producing a party representing accountability and financial rectitude has been poisoned at birth by Don Brash’s bizarre insistence that Minister-of-Rhyming-Slang John Banks be given the post of Act’s anchor in Epsom.

Which will see the man who campaigned on stopping rate rises and who then raised them every year of his reign—the man who left Auckland ratepayers $887 million in debt when he left office—carrying the flag for financial responsibility.

That, ladies and gentlemen, is a joke.

8. The rich might start paying more tax...but you don't have to raise the top rate for them to do so. Roger Kerr finds an interesting chart from the US:


In a recent article Is ‘Tax the Rich’ Good Policy(ODT 25 April 2011), I made the point that those in the top income brackets in New Zealand are already taxed relatively heavily by international standards.

I also noted that because cuts to high tax rates encourage economic growth and reduce tax avoidance, they may actually produce more government revenue.

And I quoted President John F Kennedy who said, when cutting US tax rates in the 1960s, “It is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise revenues in the long run is to cut rates now.”

This chart from Mark Perry’s blog Carpe Diem illustrates these points.


9. Very funny on John Key's Kiwi accent.

10. Make your own billboard. Good fun from Labour.

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Not only are the CCC 'hogs' taking more pay for doing feck all more work...but this news must really please CCC ratepayers...


"Five Christchurch City Councillors are to visit San Francisco later this month to learn about the city's recovery from the devastating earthquake which struck the city in 1989.

Deputy Mayor Ngaire Button and councillors Jamie Gough, Aaron Keown, Tim Carter and Jimmy Chen will leave for San Francisco on May 16 and return on May 22." herald....


Interesting Wally. Is the visit being funded by CCC ratepayers? Is the purpose of the visit worthwhile? Should CCC be looking to learn from others who have had similar challenges?

You dont have to go visit some holiday destination to 'learn from others' about earthquakes.

I'm sure there is plenty of research material they can access and experts they can consult without leaving Christchurch.

Rate payers freezing in their wrecked homes or tents, while footing the bill for overpaid pollies to go visit the Golden Gate Bridge and shop in the late spring weather.


Oh yes sure is....each of them gets $4000 to blow on 'training' each year....will it be worthwhile...the hotel they stay at will think so...and no doubt the airline...but will they learn anything they couldn't get on the net....NO....will the 'contacts' prove helpful in deciding how to blow taxpayer they give a rat's arse....NO....

Wolly, South Paw, Phil B - cynisism may well be justified, but it also said the following in the article Wolly quoted:

Each have chosen to pay for their expenses including accommodation and meals, and Air New Zealand has gifted free airfares.

The delegation will meet former San Francisco Mayor Art Agnos, as well as experts and key stakeholders on a variety of subjects including urban design, public transport, housing reconstruction, restoring business confidence and tourism recovery, building code and building resilience, liquefaction, private sector partnerships and governance.


"Nothing compares with seeing first-hand what works and talking face-to-face with those who played a major part in the recovery. I would like to thank Air New Zealand and also the City of San Francisco for their generous support to our Council," Mr Parker said.

Up to five members of the Canterbury Business Recovery Group have also been invited on the delegation and they will be required to pay for their own travel and expenses. 

Air New Zealand is also offering to fly four councillors to Melbourne to study urban regeneration. The councillors and the timing of this delegation has yet to be determined.

"Melbourne is a city which also has so much to offer us from its experience in urban regeneration," Mr Parker said. 

Hopefully useful relationships and access to relevant information will be one outcome of this trip and they can then use other means of communication to make best use of the knowledge resources. If they didn't do this, they'd equally be open to critisism that they have been negligent in learning as much as they can from others preferring instead to do things the 'one-eyed' way.

I get the impression they know people are monitoring and expect performance. If 'people' aren't monitoring, I know at least one person who is:

Woe betide them if they don't perfom.

Cheers, Les.

PS - Wolly, here's a link you might find useful:

What if they got told they were going to failed state Haiti  to see what lessons could be learnt  and had to spend a week there in a 3rd world city flattened by an earthquake, ravaged by deadly epidemics and political violence.

Bet they would say they had no time for such frivolous jauntas as they were needed in Christchurch working hard for the good citizens to get their beloved city up and running  again,

Going to San Francisco to learn how to rebuild a city? Oh, GREAT, a new ChCh with SF traffic congestion and housing unaffordability, coming up, thanks to "war on cars" and "urban containment" insanity.

But it won't happen, ChCh hasn't got SF's critical mass, if they use those policy settings, ChCh will wither, not "regrow". Still, if that's what they want.....? To become a nice little regional town?

"a nice little regional town "With peak oil thats what Chch set to become anyway. 

"War on cars" no need to war on them, petrol will be un-afordable to be used like it is now within 5 years, a decade anyway.


#8:  can a similar chart be put together for New Zealand please?

Can a similar chart be done on WATEFUL TAXPAYER EXPENDITURE by the elite of this fair nation.

8. From Roger Kerr...thats funny, he should stand for ACT as well...hasnt done a thing in the USA....its just made the mega rich, richer....and made the poorer a lot poorer....


@Stephen:  Yes, it would be hilarious if it wasn't so scary.  Since the top income earners dominate the wealth-earning in the US more and more, of course they now pay a higher proportion of the tax.  A case of "last man standing".  No link to reducing the highest tax rate at all.  In fact, tax-avoidance by top income earners is a national scandal. 

Roger Kerr would love to introduce the US model here.  Lucky us.

Cheers to all.

#8  So the top 1% must be earning a s##tload of money if they are paying 40% of all income tax amirite?  Maybe we should tax them even less so they can pay more tax?

You know, you're damned if you do, damned if you don't. One moment people claim others are not  consulting and listening to other people views and experiences, the next, they're criticising people who want to get on a plane and try and learn from someone with a simialr experience.

I am absoluetly amazed at a time when we're talking $15-30bln number to rebuild Chch that anyone would for one second think that spending a few thousand on a trip to San Franciso warranted criticism. It was exactly what I have been saying from day one has to be done while the demolition is done,and while, and  part of, a city plan being developed.

Just seen a picture somewhere on the web of an American demo...a heap of people with "I want a job"  posters raised high.....................did they ask each other what they do to reduce their splurge on imported 'stuff'...were they recently demanding politicians vote to cement in place health and pension rights and tax cuts and other boondoggle benefits rorts....

What do you think?

 "MAORI ARE losing their multimillion-dollar fishing industry to companies using Asian charter fishing boats.

But tribal leadership is largely silent on how deep-sea fishing, once touted as an economic saviour for Maori, now depends on Asian and Ukrainian foreign charter vessels, many of which are little more than high sea sweatshops.

One leading operator had admitted Maori fishing would close down without the boats, which iwi sell quota to, with the operators shipping the catch to China for processing.

About 2500 men from Third World countries work ageing boats, and many are beaten and forced to work for days without rest to earn as little as $260 a month, according to government documents previously reported in the Sunday Star-Times." stuff

First off the quota belong to Maori and if they want to sell it to an Eskimo that's their bloody business...However.....this decision to take the money means kissing goodbye to the employment option and if these iwi have young people collecting dole payments then it amounts to double dipping....

The state should have the right to refuse dole payments to iwi members who would otherwise be employed fishing for the quota the tribe owns were it not for the fact that the tribal bosses have grabbed the cash up front.

Unfortunately New Zealand's fishing industry is a bloody farce thanks to idiocy in govts over many years. The fish stocks have been pillaged to near extinction and the potential as an employment base for young Kiwi has been tossed on the refuse dump.

Not one foreign vessel should be working inside NZ fishing waters...not fecken one!

"pigmy clown"...gosh that's not very PC of you tlawn....small is beautiful.. you should know that.....I'll allow you the "clown" bit.

The answer re the fishing is for the public to make it clear to the fools in the Beehive that either the foreign boats go...or the pollies will. Then you would see some prompt action. Better to earn less foreign dosh and have more Kiwi doing the fishing!

As for the endless political circus of morons and fools wanting to park their arse in Parliament and their snouts in the pig will never end because they reflect the cultures and the attitudes that prevail in NZ.

The ponzi economy will carry on as is....the rorting scams and related political stupidity are par for the course. Either learn to adapt or bugger off. Many have opted to bugger orf across the ditch where they discover yet bigger rorting scams and political corruption to boot.... all wrapped up in racial hatred and growing violence...and they get the spiders snakes and crox for free!

I see that John Key took a ride in the fishing barons Vela Brothers chopper the other day and then paid them $2,000 for the ride "as it would not be a good look if the ride was free". I think it was from Hamilton to Auckland. These are the same boys that used to fly and dine Winstone when he was Minister of racing. After they got their big stallion tax writeoffs from Winney I think the relationship cooled. I remember later Winney telling some flunky to "tell those barstards to send me the chopper now" The chopper stayed in the Hanger! The games and deals go on. Cheers

And so we approach the promise of the end of the benefit splurging vote buying days...a time when the finance minister can display his intention in the budget to start with the prudence and terminate the splurge...will he or won't he?....sadly I have to predict bullshit will win out over all else...oh we will get lots of fuzzy projections of surplus and be told the light in the tunnel will soon be seen...soon be seen...not long now....hold your breath why don't you....

Meanwhile the game to debase the dollar and wash away the debts continues unabated. The real rising cost of living is masked in the index of indexes before not being told to Kiwi Kev. If the fool thinks saving in a bank account will make his future then he is a real Kiwi...!

Soon we will emerge from behind the election and discover bugger all has changed...but the first breeze on the immigration rorting front will start to sweep in with new spin aimed at convincing Kiwi Kev et al that inviting in a million or so who wish to escape the world's shitehole nations and be made into Kiwis, will dominate the poodle media.

Are you ready for it?

FYI all, Roger Douglass is obviously reading Eric Crampton's blog (media release):

With youth unemployment at the highest level since records began a youth minimum wage is needed now more than ever, which is why I intend to resubmit my Minimum Wage (Reduce Youth Unemployment) Amendment Bill into the ballot, ACT New Zealand Finance Spokesman Sir Roger Douglas said today.

“New Zealand’s youth unemployment has reached crisis point. Nearly one in three young people are now jobless.  Since National voted against my Bill last year the level has climbed to 27.5 percent.  It’s never been higher.  Scrapping youth rates has clearly been a failure,” Sir Roger said.

“My Bill allows for a different minimum wage to apply to youth workers.  Young people have less experience and skills than older workers so it should be no surprise that employers won’t risk taking them on if they’re forced to pay them the same as adults.

“But a Youth Minimum wage will allow young people to get their foot on the job ladder.  As most of us know from experience, once they get that foot on the ladder, their pay quickly rises.

“Economist Eric Crampton estimates that there are 12,350 young people currently out of work because the youth wage has been abolished.  That is over 12,000 young people who could be self-sufficient on their own income but are instead forced to sit at home earning $150 a week on the dole.

“The biggest cost of youth unemployment is not the money it costs to keep young people on the dole.  It’s the fact that an entire generation of people are missing out on the satisfaction and self-sufficiency that comes from working for a living.  If they don’t get that when they’re young, they often don’t get it at all.

“National is desperate to reduce the number of unemployed young people – just last week they announced a scheme to pay employers $5,000 to give a youth a job.  Instead of tinkering around the edges National should give young people a real chance and agree to support my Bill,” Sir Roger said.