Nice rhetoric in Little's speech – pity about the details

ACT Leader David Seymour

This morning the new Labour Leader gave his first state of the nation speech – a chance to see the new direction, if any, that Labour is taking. As they say, talk is cheap, and this speech was bargain basement.

Fully embracing minimalism, the speech didn’t just skimp on details; it tried to make a virtue of it. It was chock full of “finding ways to”, “ensuring that”, “getting serious about”, “harnessing the power of”, “developing a programme of”, “will make sure that”, and so forth.

The speech sought to embrace small business, but made only one hard commitment - a rehashed promise to ban zero hour contracts. As with all policies, you need to think about what happens next.

It would destroy those businesses which don’t have fixed hours of operation. Those activities will then tend to be done by self-employed contractors, who by definition are on a zero-hour contract – they only get paid when they work. That applies to numerous trades, and to freelance work of all kinds.

He railed against viewing work as transactional and contractual. But is he really suggesting that when Labour MPs build an extension on their house, they don’t seek quotes? Or that the output of a market gardener is not sold at auction? Or that people don’t negotiate and haggle over the price of goods and services? If so, I have a car to sell him.

We can congratulate Mr Little on focusing on the need for wealth creation, but not for his use of entirely bogus statistics from Oxfam on global wealth distribution, suggesting that the richest 1% will soon exceed the bottom 99%. The Oxfam data shows that China has zero people in the lowest decile of world income, while the US has 7.5% of their population in that bracket. Why? A modern financial system. Because these statistics don’t count human capital, every student borrowing to get an education has negative net worth, which puts them below all those people in China and India with zero net worth. The same applies to every entrepreneur, and many small businesses which are borrowing and investing to build up a business. If Labour is going to embrace small business, they should start by understanding it.

The rhetoric included the usual bogus statistics on the incomes of the top 10% versus the bottom 10% in New Zealand. But we know that, as with wealth data, these aggregate statistics mainly show age distribution. Most of us over the life cycle go from negative net worth and very low incomes, to a peak in income in late middle age, a gradual decline until retirement, with net worth peaking around retirement age. That is largely what these statistics are measuring.

Finally, he referred to an OECD report – actually just a working paper – which claims to show that the level of inequality is holding back economic growth in NZ. But the report has been soundly trashed by other academics, and as I wrote in my December 18 newsletter, when you dig into the details of this report, the implication is that all that matters for growth is the difference between the average income and the level just below - the 4th decile. The difference between incomes at the top (the 9th and 10th deciles) and average incomes have no influence on growth. If you took that result seriously your policy recommendation would be to increase the tax on average earners to give money to people slightly poorer than them. An odd result.

Nobody now is defending the data analysis or the conclusions of that report – Labour should stop using it.

The rhetoric included cutting red tape, but we all know that Labour is the Party above all that specialises in creating red tape, introducing poorly crafted regulation and endless interference in business activity.

As for announcing a bold new target for the unemployment rate, of 3.5%, to be achieved by working with small business: this is entirely empty puffery, the usual bidding and bluffing in a political poker game where most hands are weak.

Look at the data: those with some post-school education have a 3.9% unemployment rate, those with just a school qualification 6.4%, with no qualification 8.4. Focus on education!

Consider age: those 15-19 years of age have a 19.3% unemployment rate, those 20-24 10.3%. Think about the combined effect of poor education combined with minimum wages in keeping kids out of work.

Consider ethnicity: those of European descent aged 15-24 have a 10.6% unemployment rate; Maori 22.8%, Pacific peoples 26.7%, Asian 14.2%. Again, it is education and labour market laws that are doing the damage to young people and ethnic minorities.

If Labour truly wants to have a lower unemployment rate, they need to focus on education, and the regulatory and minimum wage barriers to employment. Here’s a tip for Labour: use the tax and benefit system to support the lowest income workers; don’t use regulation to price people out of jobs.

If you really want to get unemployment down, a good start would be to join the modern world and start supporting Partnerships Schools.

ends

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