Ryan Greenaway-McGrevy on talking about Auckland property, the gender pay gap, the labour market, Shakespeare in Klingon, Dilbert & more

Ryan Greenaway-McGrevy on talking about Auckland property, the gender pay gap, the labour market, Shakespeare in Klingon, Dilbert & more

Today's Top 10 is a guest post from Ryan Greenaway-McGrevy who is a senior lecturer at the University of Auckland. Prior to this he was a research economist in the Office of the Chief Statistician at the Bureau of Economic Analysis (BEA) in Washington DC.

As always, we welcome your additions in the comment stream below or via email to david.chaston@interest.co.nz.

And if you're interested in contributing the occasional Top 10 yourself, contact gareth.vaughan@interest.co.nz.

See all previous Top 10s here.

1. Can… can we still talk about Auckland property? 

The Auckland Council announced a policy to target house prices: By 2030 the median price-to-income ratio in Auckland is set to be 5. We should applaud the Council for adopting this target. It is a step in the right direction.

But does anyone believe them? 

As any good central banker knows, simply announcing a target can achieve that target. Why would you buy a property now if you know that it will be cheaper later? As demand falls, so do prices, helping the policy-maker achieve the target.

But that virtuous cycle requires that the policy-maker has credibility. And if it is one thing that politicians do not have, it is credibility. This Council, and this Mayor, is certainly no exception. 

The Council faces a credibility gap. In order for this policy to be successful the Council has to back up its words with actions. Bernard Hickey has provided some sensible policy options that the Council should adopt in order to achieve it’s stated goal. (OK, OK. I realize this is sounding very similar to his column. I promise you, I began writing this Top 10 before his column came out. And it is about to get different).

But I would go a few steps further than Bernard. It is not good enough to relax urban density and building restrictions. It is not good enough to abolish historical character preservations. The Council must demonstrate to the market that it is committed to the target. And the best way to do that is to align the incentives of the Council with the policy target.  

How can it do that? Let’s get the ball rolling. I have a couple of suggestions below. But please use the comments thread to add your own suggestions.

- Let’s make council compensation inversely proportional to the median house-price-to-income ratio. The price-to-income ratio goes up by 10%, then Council salaries go down by 10%.

- Cap property rates at the average level per dwelling in Auckland, so that aggregate funding levels can only increase through an increase in the supply of dwellings in Auckland. 

Too drastic? Too arcane? Too medieval? Too bad. Dark times call for dark measures. Put these policies in place and the market does not need to understand the details of the Council’s housing plan. 

2. Why should we care about the high cost of property anyway?

Well, for one, it is bad economics. Restrictive urban planning and the consequent high property prices are bad for economic growth. It gives our best and brightest another reason to build their lives overseas, and we need young Kiwis to stay in New Zealand. How else are we going to pay for the baby boomer’s retirement and health costs? 

3. The pay gap between what men and women earn widened for the first time in a few years, to just over 11% (based on Statistics New Zealand’s preferred measure). 

If you believe that the gender pay gap is a good measure of the extent to which women are underpaid, then little old New Zealand is doing pretty well compared to the rest of the world. Based on the OECD measure, New Zealand is even ahead of those old Northern European stalwarts of social progression.

4. But … but the problem is that the gender pay gap is not really a good measure of whether women are getting equal pay for equal work. 

There are many factors that determine an individual’s wages. If there are systematic differences in these factors between men and women, then these will be reflected in the average wages across the two groups. And these systematic differences may exist for reasons that have little to do with discrimination by employers. 

What is one of the biggest factors that determines a person’s wage? No prizes for those of you that guessed education. On average, a person with a tertiary education earns 25% more than a person who only completes high school in New Zealand (see number 8 below). 

In terms of tertiary education, women are more educated than men, and have been for some time now. Based on this observation alone, we would expect women to earn more than men on average if we had equal pay for equal work. And yet, despite the fact that they are better educated than their male counterparts, women continue to earn less than men on average. So, even if that gender pay gap eventually reaches zero, it would not mean that women had finally achieved pay parity with their male counterparts. 

Of course there are a variety of other factors apart from education that we would also want to account for, such as experience and occupational crowding (men and women tend to differ in terms of what sectors of the economy they choose careers in). The fact that there are differences in these other factors between men and women may be telling us something about broader gender roles and discrimination within society as a whole. For example, why is it that so few women choose to become engineers? Why is it that women are more likely to sacrifice their careers in order to be the primary caregiver of children? These are questions worth exploring. 

5. While we are on the topic of labour market discrimination: Here’s some definitive evidence of discrimination from days gone past against women (scroll down to the minimum wage for ladies and for gents), and against Maori. You have got to love government bureaucracy, detailing all the minutia of the wrongs of the past. 

6. And here’s some definitive evidence of ongoing labour market discrimination against women in the STEM (science, technology, engineering and mathematics) fields, and against African Americans. Discrimination is still happening, no doubt about it. It is just harder to spot. 

7. I enjoyed Matt Nolan’s previous Top 10 on the labour market. But I feel like he left out a key trend – the substitution of part time for full time employment over time. When expressed as a proportion of the working age employment, we have never recovered the full time jobs lost after Rogernomics.

Now it could be that this is a good thing. Perhaps part time workers want that flexibility. But it is also true that part time work is paid less on average than full time work. 

8. People with a tertiary education earn 24% more compared to people with a high school education. In the international context that is not too much – College grads in the US earn almost 80% more. 

This is no doubt a big part of the explanation for why income inequality in New Zealand has remained flat over the past two decades: The skill premium in New Zealand is so low compared to what is going on in the rest of the world. The key question going forward is whether the skill premium will be coming to New Zealand or not. 

For those of you who think the Gini coefficient is too narrow a measure of income inequality: Almost all measures of income inequality have remained flat over the past 15-20 years in New Zealand. Consider, for example, the share of income going to the top one percent of households: 

9. Nerd Alert!

Paul Krugman, Brad Delong and others debate the economics of the post-scarcity world of Star Trek. I’m man enough to admit that I’ll watch a bit of the old Trek if it’s on. 

What?! You think you’re better than me just because you wouldn’t dare watch Star Trek?! You prefer the so-called classics of literature?! Fancy yourself a bit Flaubert, do you?! You tell your friends that you totally get James Joyce?! Ok, maybe just some Sir Vidia Goddamn Naipaul? All I can say to you is you've not experienced Shakespeare until you have seen it performed in the original Klingon.

Hear that sucking sound? That’s the internet pulling you into the endless list of Star Trek parodies. Tell your boss you’re taking the rest of the day off. Enjoy. Here’s your number 10:

10. Epic rap battles of history: Captain Kirk vs Christopher Columbus.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

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#1. What a wonderbar idea. Magnificent. "Let’s make council compensation inversely proportional to the median house-price-to-income ratio. The price-to-income ratio goes up by 10%, then Council salaries go down by 10%."

Yes, I must remember to tell this fairy-tale to my grandchildren

Somewhere in a little town in Europe the village was missing its idiot .

He was right here in Auckland working for the Council , penning nonsense suggesting that house prices were going to miraculously adjust in the next few years , and everyone will be able to afford a home , and we will all live happily ever after.

Perhaps a little harsh, but the proposal made me smile too. Goes against everything the giant government union stands for - more for them.

#2. "Why should we care about the high cost of property anyway? " Because the point of having any system is so the inhabitants can live cheap, and in luxury, sustainably and have fun. Is there any other objective ?

Being ... good? Sharing with less lucky people, raising taxes for assorted refugees, party pooping in the name of climate change --- just joking :-) ... of course you are right. Epicureanism is a firm part of our cultural heritage.

Point taken. We should be good people. Still - we can do that in good quality houses readily obtainable.

13
up

Certainly - and I dont think we or our parents were horrible people 20 years ago, when life was a lot easier. I actually think that today's youngsters are not so much paying the bill of the boomers but probably much more so for the ascent of China. Their well-paying jobs are in China now. And their government feels a lot more committed to the well-being of the global upper class than that of their own kids.

#8. "People with a tertiary education earn 24% more compared to people with a high school education." Also remember that it's almost definitive of third world countries in these modern times that there is a mass of unemployed university graduates.

#4 "For example, why is it that so few women choose to become engineers? Why is it that women are more likely to sacrifice their careers in order to be the primary caregiver of children? These are questions worth exploring." Kidding. These questions have been explored for decades. Hint: women are not genetically identical to men and hence the two groups have different interests and talents.

#2 "It gives our best and brightest another reason to build their lives overseas, and we need young Kiwis to stay in New Zealand." Dont worry about it. Global central bank market rigging has priced out young people globally. They have nowhere to go and just as well stay. Minus countries which are a lot less developed than the Western countries which are traditional destinations for Kiwi expats.

#5/6 What is it about you and perceived discrimination? Maybe you should repent on everyones' behalf and surrender your job to a Maori or female or African. Or what makes you think you got your job on the basis of merit? I have a feeling you are a few decades behind. Ok, the quota lunacy will probably go on for a while longer, just wait how Hillary will mess up the US, but the concept has seen its day. There are really more pressing issues these days, such as "climate change", harharhar ...

"Hint: women are not genetically identical to men and hence the two groups have different interests and talents."
.
Men are not genetically identical to men.....the only people who are genetically identical to eachother are identical twins. And even those have different personalities.
Your genes and your sex have nothing to do with your interests.
Unfortunately, there is still a huge conscious and unconscious bias against women, in some countries more than others, but pretty much everywhere.
Girls are not as encouraged as boys to study STEM, which means they often end up in the soft sciences and hence get jobs in 'nurturing' professions, which not as valued as science jobs, and thus get paid less.
Even if a woman manages to get a science degree, she will find it harder than her male peers to land a good job in her field - and will more than likely get paid less to do the same job.
.
Of course, this gender bias we all have, has a negative effect on men, also: they don't feel as comfortable as women to be the primary caregiver, even if they wanted to be. They will find it harder to get jobs as nurses or primary school teachers. The latter, especially, is required, because primary age children should get taught by both men and women.
.
.
Your responses for number #5 and #6 show how biased you really are.
it is simply inconceivable that all Caucasian men, a class over represented at the top, everywhere, got their job on merit.
Most of the National Government is a point in case.
.
I'm not arguing that your gender automatically makes you good at something, I'm just saying that the world is pretty much 50/50 male/female, and it would be nice to see that percentage reflected in most professions.
If you think that Maori or Pacific Islander, or Asians, are NOT discriminated against in this country, you are simply refusing to see reality.
.
If you'd like to read about a different perspective on sex, gender, and whether or not there is such a thing as a male or female brain, I can recommend "delusions of gender" by Cordelia Fine.

This.

the world is 50/50 male/female, and it would be nice to see that reflected in prisons (9:1) and workplace deaths (9:1). Men make bad decisions but women are only "discriminated" against.

Not quite sure if I understand your comment correctly.
First of all, I don't like the idea of prisons, to begin with. I think as a society we focus too much on punishment, and not enough on rehabilitation, re-education.
Secondly, women are from a very young age taught to 'behave' more than men. Boys will be boys, after all, or so we're told. Which probably is the reason why men use violence and aggression as a response to a situation, more than women.
Hence - prison.
Not the only reason why, but it's a start of the explanation.
Please note that I'm not arguing that any of this is inherent. All of this behaviour is taught. Which is good news, in a way, because it means it can be un-taught.
.
Workplace deaths: this is why we have occupational health and safety. OHS in a workplace is largely down to culture.
Men are often in a 'who can be toughest/hardest' race. Rampant testosterone. Hey - we celebrate it in our All Blacks culture. It's nurtured into boys to toughen up/harden up.
If a certain occupation is more hazardous to health than another, then the cause of that should be investigated. Most accidents can be prevented, with sensible rules - and people sticking to them.
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All of us make bad decisions. And most of us are discriminated against.
But if you are a caucasian man, you happen to be a member of the most exclusive club in the world, and suffer the least amount of discrimination.

#9. Klingons. Baaah. Probably outclassed by the actual wordless performance of King Lear at the Globe Theatre in London. Performed by a dance troupe from Kolkata.

"......remained flat over the past 15-20 years in New Zealand. Consider, for example, the share of income going to the top one percent of households"....

Incme measure by what? taxable? if so, then meaningless.

Agreed, it's a stupid metric to use. It's probably a totally different story if assets are taken into account.

Great Top 10;
#1 Can a local body put a bylaw in that caps the rents in their jurisdiction? If so the Jaffa Council could cap rents (at an affordable amount), which would help drive property prices down (by severely restricting yields), and leave a bit more disposable income in peoples pockets thus working to address poverty and horror of horrors actually look after your constituents!! (rather than pandering to money)
#3 it would be disgusting that two people working side by side, doing the same job with same responsbilities, and same experience get different pay rates irrespective of gender or race. But I have not been able to identify any specific instances where that has happened. Indeed the pay gap arguements actually point that there are some serious disparaties between different jobs rather than being gender based.
Finally nothing wrong with Star Trek, it pondered on the "what might be possible?" question, and William Shatner (and crew) is a great entertainer.

Hi David,

Just a quick note to say that I really enjoyed your article.

I spotted a typo: in "the Council should adopt in order to achieve it’s stated goal," its is a genitive showing possession or authorship etc (like his or her), so it's spelled as one word, its.

Kind regards,

Alexandra

Alexandra Balm Dumitrescu | Executive Assistant | The Fund Master

021843636 | www.thefundmaster.co.nz | www.facebook.com/dev.dhingra.73

Right, so house prices are all the council's fault - nothing to do with the government...

The council can't control money laundering, property speculation or over-investment - this is where the National government has fallen over completely. There are thousands of empty homes in Auckland because there are tax incentives for investing in property.

Why do you not hold John Key's government to account? National party supporter I take it?

Now I know not to do my MBA at Auckland at least - that's all I took from your top ten.

...heres an interesting exercise for an acadmemic or similiar looking for a project. Obtain domestic power use data from Auckland power retailers. Analyse useage with a view to estimating the number of empty dwellings - water meters would be another data source.

Actually it maybe simpler to and less invasive of privacy to take an address list in the council rates register (is there such a thing?) and match it to a) the voter enrolment register, this is I assume public info? Also b) phone/broadband accounts to those addresses might be more accurate than electricity accounts? ie if there is an address but no voter registered and no Internet or phone account its quite likely the property is not occupied as its not unknown for ppl to leave a heater on to prevent dampness, or run a burglar alarm.

From Dev above:
," its is a genitive showing possession or authorship etc (like his or her), so it's spelled as one word, its."

Here, "its quite likely the property is not occupied as its not unknown for ppl to leave a heater on to prevent dampness, or run a burglar alarm." both its should be it's, i.e., it is.

Just sayin'

They do have a part to play though. On this blog the discussion has gone on for a long time, and most agree that there are many factors that are at play, and that the down side means that while a few profit, many more ordinary kiwis are bleeding big time because of it. The problem is neither the national nor the local Government are doing anything to seriously address it. They are all standing back and hoping that the RBNZs tinkering on the periphery will succeed. In other words none of them are living up to their contract with their constituents!

Agree, but the feel good factor of higher and higher prices was banked on by HC and co, National just continued to want the same play, ie there was no real incentive to fix this problem, just can kick it.

In terms of factors much of it is who pays. To put in infrastructure like roads, schools and services costs a hell of a lot and no one wants to pay. Not the ratepayers (and why should they?) and not the developers (but the end buyers can only pay so much). So until someone is forced to take some losses and no Govn will force that, we will go nowhere.

Then of course there is the argument of just how many more houses are really needed. ie what is real demand and what is speculation.

So sorting if you have the "balls" is really easy, IMHO. Bring in a CGT and land tax and force sales at an agricultural price on the land bankers so land becomes cheap. Legislate to make this legal if it isnt already. Then convert the agricultural land to residential en mass and I mean en mass, has to be enough for 100,000 homes so prices are held down or the developers will just be the next greedy.

Probably this would take central planning by central Govn and hence cost a lot ie the old works consultancy...and take a long time, ie years. Which of course brings us around to who pays.

#2
There is a significant difference between having a $500k mortgage at 7% and a $700k mortgage at 5% because in the end the extra $200k has to be paid back and even worse is if the market drops and puts you under water whence the bank comes calling.

#1 Sorry, Ryan. Not drastic. Not mediaeval. Just off-beam.

You are right that credibility is a major problem but whose credibility and concerning what?

If good intentions and a change of heart over fringe development were all that it took, the Special Housing Accord (between Auckland Council and the government) would be a roaring success. Not the flop that it is.

The two reasons that the SHA is a failure are:

1. there is no commitment to building the necessary infrastructure to allow Auckland to expand ; and, therefore,
2.the amount of land "released" is not enough to allow developers to bargain the land-bankers down

And when we talk infrastructure, central government are equally in the frame. In Auckland the government funds about half the costs of land transport and is responsible for schools and hospitals.

As long as the government and Auckland Council keep their hands in their pockets Auckland houses will remain severely unaffordable and the the national economy will, as you say, suffer.

Speculators who want to clean up pay no attention to press releases. They simply go to the current Auckland Ten Year Plan, Vote Transport, Vote Health and Vote Education and work out that the odds remain stacked heavily in their favour.

Of course actually the money in the Govn's pockets is NZ wide tax payers. The money in the council's pockets is rate payers.

I would also suggest the land bankers wont be bargained down, they are in no hurry to sell, ditto developers when it is their turn to bite the cherry. About the only way you have a possibility to bargain is when you introduce CGT and land tax ie un-productive land is now taxed as if it were, making it uneconomic to hold.

"stacked" yes indeed but even if larger sections are released there is no incentive to sell more at a lesser price.

#4 27 miners were killed at Pike River. How many of them were female?
I suggest that women who complain about pay inequality be told that they could get better pay by getting a job in a coal mine. Do they really think that men should do the difficult work, the dirty work and the dangerous work but that women should get the same pay for sitting in a warm comfortable office?

I think it was 29 Earthling. Possibly if it had been a bunch of women down there they might have paid attention to the hazards that were mounting and the mine would have been shut down. Apparently the proportion of men getting killed or injured in farming is way higher than women. Yet we have to pay the same ACC rates. I guess thats the same in other industries. A job may be dirty and hard physically, so is that more important than the job that is mentally exhausting and stressful...I guess men are just greater more deserving people cos they can lift heavier things.