The link between Imprisonment Rates and Inequality

A common difference between the left and right has to do with the perceived impact of wealth or income inequality on society. That is, people on the right commonly seem to think that inequality has little in the way of negative impact on society, where as people on the left assert that the negative impacts are severe and many. One of the primary concerns for many people on the left, including myself, is that extreme income inequality creates a large and separate disenfranchised group of people that lack the resources to effectively participate in mainstream society. Or to put it more specifically, to socialise within mainstream society often costs money - driving the kids to rugby or cricket practice, go to the cafe or bar, etc... So the people that lack the resources to do these things become a separate class that exists within, but at the same time outside of society. This alienation from mainstream society subsequently leads many within this separate class to feel little investment in, or loyalty toward society and its rules/laws. So it's hardly surprising that many academic studies have found that there are pervasive linkages between measures of socio-economic disadvantage and crime (Conger et al., 1992; Dodge et al., 1994; Farrington, 1990; Furgesson et al., 2004; Kazempiur & Halli, 2000; Kramer,2000; Ludwig et al., 2001; Sampson & Laub, 1993).

http://tinyurl.com/346e2s

So, if this line of reasoning is at all valid it would be expected that societies with higher levels of income inequality would also have higher imprisonment rates. This is indicated in the graph below, and although correlation doesn’t equal proof of cause, it does go some way toward supplementing the argument of the above model. Comments are welcome.


http://tinyurl.com/3cp2wf

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http://tinyurl.com/297mxh

Median personal income over time

Ok - over the past couple of hours I've been doing a bit of number crunching in response to a post on median wage increases over at kiwiblog. First up, I have a few contentions with David's analysis. Specifically they are ....

A) He provides no links to his sources, and gives no account of his methodology, which means his results are dubious at best.

B) He only measures increases in the median wage of full time workers - this leaves out around 40% of the working age population - so to me this is hardly a useful measure of how ordinary New Zealanders have fared comparatively under National and Labour.

As such, in my assessment I've used the median income of the entire working age population (provided by the 1991, 1996, 2001 and 2006 census data) - and I provide links to my sources, and a run through of my (simple) methodology, so my results can be replicated by whoever pleases.

So my findings were that "median personal income" in New Zealand rose at an average rate of 1.4% during the decade of 1991-2001 (roughly National's time in power) and 3.26% during the period of 2001-2006 (roughly Labour's time in power so far).

So, how did I arrive at these figures? Well - first I got the census data, which can be found here:

http://www2.stats.govt.nz/domino/external/pasfull/pasfull.nsf/00c9e0a06fee31764c2568470008f782/4c2567ef00247c6acc256c2f00139bf1?OpenDocument

and here (this link was too long so I had to cut it half - really need to learn that html coding stuff):

http://www.stats.govt.nz/census/2006-census-data

/quickstats-about-incomes/quickstats-about-incomes.htm?page=para002Master

Then I adjusted these figures for tax:

I deduced the 1991 and 1996 tax rates (19.29%) from David Farrar's post.

http://www.kiwiblog.co.nz/2007/10/

how_has_the_average_worker_done_under_labour.html#comments

And I calculated the after tax figures for 2001 and 2006 using this official IRD tax calculator.

https://www.ird.govt.nz/cgi-bin/form.cgi?form=incrates

Then converted all of the after-tax figures into 2006 dollars using this CPI calculator:

http://www.rbnz.govt.nz/statistics/0135595.html

And vola - there you have it.

(hat-tip: Sam Dixon)

Yet another reason why New Zealand needs its unions back

Well as statistical associations go it doesn't get much clearer. Workers who live in countries with strong unions work shorter hours and vice versa - period. In case anyone is wondering, New Zealand is one of the dots down the bottom right of the graph. Our "hours worked" figure is 1767 (6th highest out of the 20 countries), and our collective bargaining coverage is 27.5 % (3rd lowest in the OECD).
Sources:

http://en.wikipedia.org/wiki/Image:Yearly_working_time.jpg

https://www.oecd.org/document/12/0,3343,en_2649_201185_31781132_1_1_1_1,00.html

So it's established then: National's De-unionisation of New Zealand in the 1990s has created an economy that's characterised by low wages, low productivity levels and long working hours. If only the Labour party had the courage of conviction to turn this around.

A responce to IP

In the comments section of my previous post about the connection between Collective Bargaining Coverage, and Labour productivity growth the famed "Insolent Prick" had the following to say ...

"What your post shows is no correlation, whatsoever, between union coverage and labour productivity. Unless you choose to highlight a couple of examples, and ignore the rest of your data. Which isn't a pattern at all."

This made me think, well a simple scatter graph could solve this. So I whacked the two data sets into excel, and this was the result .....




In addition, I calculated the Average Annual Labour productivity growth for those countries with a collective bargaining coverage figure of below 40% and above 60%. The respective averages were 1.7% and 2%. So there's certainly a significant pattern, if not a drastically pronounced one.

I will say however that calculating any statistical significance is nigh on impossible because of the numerous other factors that would need to be included and accounted for. As such these findings should be taken as indicative evidence rather than concrete proof of any correlation between collective bargaining coverage and labour productivity growth.

Labour Productivity and Collective Bargaining Coverage. Noticing a pattern?

Why New Zealand needs its unions back: #5 - Labour Productivity

This has given incentive to employers to source increased output from labour rather than machines. Consequently New Zealand's comparitively lower rate of wage growth has lead to labour being much cheaper relative to capital than is the case in Australia.

(Source: Hall and Scobie, 2005: 20)

This has lead to a stagnation in the ratio of capital to labour (in terms of thier dollar value) within New Zealand's economy.

(Source: Black et al., 2003: 24)

This has obvious implications for New Zeland's labour productivity (output measured in $ per labour hour) growth as greater capital investment leads to greater efficiency and output. Hall and Scobie (2005: 32). estimate that 70 percent of the difference in labour productivity growth between New Zealand and Australia from 1995 to 2002 could be accounted for by New Zealand’s comparatively lower capital intensity (capital value/hours worked) growth rate. So because of this slow wage growth and concomitanat stagnation of capital intensity New Zealand’s labour productivity has fallen from being 85 percent of Australia’s in 1987 to 79 percent in 2003 (Parham and Roberts, 2004: 4). Labour productivity growth is extremely important as any growth in wages that isn't matched by growth in productivity leads to inflation (inflation 'eats up' what is gained in wage increases. Or as Dalziel and Lattimore point out, the most important source of sustained improvement in a country’s standard of living is growth in the productivity of its employed labour force (1996: 61). For these reasons the issue of labour productivity is extremely important.

Why New Zealand needs its unions back #4

Over at DPF's blog a commentator has objected to the findings of the research that I've presented on this blog, claiming that ...

"No doubt you will say that the decline in wages as a percentage of GDP has come at the expense of workers (and this is a global phenomena not just NZ)"

http://www.kiwiblog.co.nz/2007/08/the_peoples_mayor.html#comment-328380

Well, ok I say. Let's do a little comparison Australia to see how well this assertion stands up in reality.

In contrast to New Zealand, Australia had, until recently, retained it’s centralised bargaining regime and has kept its minimum wage amongst the highest in the world (NZERI, 2006: 29). Indeed, in 2004 80 percent of Australia’s workforce was protected in terms of base pay and conditions at least by multi-employer Awards and Industrial Tribunals (Wilson, 2004: 182). Consequently Australian workers have benefited more from the economic growth that has occurred since the early 1990s.












So, wage growth from 1991-2004 in Australian was robust at an average of 3.35 percent (0.6 percent higher than in New Zealand) while GDP growth was 0.2 percent higher than New Zealand’s averaging 3.7 percent annually. So during this period annual average weekly wage growth was 90 percent of average annual GDP growth (21 percent higher than New Zealand’s comparable figure) (Economagic, 2006 and OECD, 2006). Consequently labour income share (percentage of GDP paid out as wages) has remained steady at around 53 percent from 1991 to 2002 (Parham and Roberts 2005: 5).

Why New Zealand needs its unions back #3

So what has this meant for workers in terms of their material position?

Well, in 2003 a Canadian research report found that a drop of 6.5 percent in real hourly earnings occurred between the years 1980 to 2001, the worst of the sixteen OECD countries studied (in the same study Australian workers were up by 69.4 percent(Osberg and Sharpe, 2003: 22, cited in: Wilson, 2004: 178).

This is in spite of high levels of GDP growth, averaging 3.5 percent (well in excess of the OECD average) over the entire post labour market liberalisation period (1991-2004) (NZIER, 2006: 3, Statistics New Zealand, 1997, Statistics New Zealand, 2005: 76, and OECD, 2006).

So where has all the benefits of New Zealand's robust economic growth over the last 20 years gone if not to workers? The answer of course is that it has gone to capital. The is indicated by the fact that labour income share (percentage of GDP paid out in wages) from 53 percent in 1991 to be 49 percent in 2003 (Parham and Roberts 2005: 5).

Why New Zealand needs its Unions back #2

Ok, so this section follows on from my last post ..

















During the 1990s, an extensive shift occurred in both structure and content, in the determination of employment conditions for most of the workforce (Harbridge et al., 2000: 74). The Awards system disappeared, along with the controls on the use of non-standard employment such as casual and part-time work, resulting in a rapid increase in part-time employment (see Appendix 2) (Anderson, 1999). In the absence of Awards, the primary protection against exploitation that existed for most workers was the bare statutory minimum standards (ibid). With the predominance of enterprise bargaining under a purely contractual regime, the balance of power had tipped. decisively in the direction of the employer. This allowed employers greater flexibility in organising the supply of labour to their enterprises and in managing the labour process within them (ibid). Decisions regarding recruitment, redundancy, dismissals and the allocation of labour effectively became the domain of managerial prerogative (Deeks et al., 1994).

The ECA did not require employers to negotiate with an employee’s designated representative. This allowed employers to take unilateral control to determine who would bargain for their workers … because the law permitted it and the environment did not constrain them (Report of the Minority. 1993 cited in Danin 1997: 177). Indeed, a Labour Select Committee Minority Report found that no real negotiation was occurring, and that in most cases employers insisted and workers gave in out of fear of not being accepted for employment (Report of the Minority, 1993 cited in Danin, 1997:176).

Why New Zealand needs its unions back

Some may not remember but 1991 was a disastrous year for workers in in New Zealand, for it was in this year that the newly elected National party instituted the 'Employment Contracts Act' (ECA). The ECA was purposefully designed to limit the involvement of unions, by literally destroying the union movement, and it did this with great success as it was only three years after the introduction of the ECA when the union movement was all but an irrelevancy in New Zealand's labour market. For workers, the destruction of the union movement has meant two decades of pathetically low wage growth. This is demonstrated by the figure below, which shows a drastic reduction in wage growth relative to economic growth in the years following the introduction of the ECA.














For example, during the 6-year period prior to 1992, wage growth held consistently above GDP growth, whereas, during almost the entire ECA decade, annual GDP growth was higher than wage growth. This fall in wage growth relative to economic growth during the decade of the ECA seems to have resulted from the stultifying effect that the ECA had the industrial strength of unions, which was reflected in declining rates of industrial action.

Peak Oil Revisited

Ok, I've just re-read my last post on peak oil and decided that, for the benefit of people who haven't read a lot a bout peak oil I should provide a more detailed rescripition of peak oil. The explanation below comes from a fantaistic energy-focused website called "energy-bulletin". For a full explanatoin of peak oil I recomend visiting the page linked to below.

http://www.energybulletin.net/primer.php

What is Peak Oil?
Peak Oil is the simplest label for the problem of energy resource depletion, or more specifically, the peak in global oil production. Oil is a finite, non-renewable resource, one that has powered phenomenal economic and population growth over the last century and a half. The rate of oil 'production,' meaning extraction and refining (currently about 84 million barrels/day), has grown in most years over the last century, but once we go through the halfway point of all reserves, production becomes ever more likely to decline, hence 'peak'. Peak Oil means not 'running out of oil', but 'running out of cheap oil'. For societies leveraged on ever increasing amounts of cheap oil, the consequences may be dire. Without significant successful cultural reform, economic and social decline seems inevitable.

Of the 65 largest oil producing countries in the world, up to 54 have past their peak of production and are now in decline, including the USA (in 1970/71) and the North Sea (in 2001). Hubbert's methods, and variations on them, have been used to make various projections about the global oil peak, with results ranging from 'already peaked', to the very optimistic 2035.

Combined oil and gas, are expected to also peak around 2010. Other researchers such as Kenneth Deffeyes and A. M. Samsam Bakhtiari have produced models with similar or even earlier projected dates for oil peak. Other quite different types of analysis have provided supporting evidence to these 'early peak' scenarios, most notably UK Petroleum Review editor Chris Skrebowski's Oilfields Megaproject reports, and energy banker Matthew Simmons' analysis of Saudi Arabian oil fields.

But it's just oil - there are other fossil fuels, other energy sources, right?
To evaluate other energy sources it helps to understand the concepts of Net Energy, or the Energy Returned on Energy Invested ratio (ERoEI). One of the reasons our economies have grown so abundant so quickly over the last few generations is precisely because oil has had an unprecedently high ERoEI ratio. In the early days of oil, for every barrel of oil used for exploration and drilling, up to 100 barrels of oil were found. More recently, as oil recovery becomes more difficult, the ratio has become significantly lower. Certain alternative energy 'sources' may actually have ERoEI ratios of less than one, such most methods of industrially producing biodiesel and ethanol. That is, when all factors are considered, you probably need to invest more energy into the process than you get back. Hydrogen, touted by many as a seamless solution, is actually an energy carrier, but not an energy source. Hydrogen must be produced using an energy source such as natural gas or nuclear power. Because of energy losses in transformation, the hydrogen will always contain less energy than was invested in it.

Peak Oil - What is it? Should we be Taking it seriously?

I've personally been interested in Peak Oil for some 4-5 years now, primarily because of the potential drastic impact that it could have on our economy and way of life.

This is the first of a series of posts that I'll be making on the issue. It's main pupose is to show that it is now very much a mainstream issue, that is being taken seriously by many well recognised media agencies.

This article by business week serves to exemplify this point:

http://www.businessweek.com/magazine/content/07_26/b4040074.htm?campaign_id=rss_magzn

Here's a noteworthy passage from the article:

"Peak oil refers to the point at which world oil production plateaus before beginning to decline as depletion of the world's remaining reserves offsets ever-increased drilling. Some experts argue that we're already there, and that we won't exceed by much the daily production high of 84.5 million barrels first reached in 2005. If so, global production will bump along near these levels for years before beginning an inexorable decline.

What would that mean? Alternatives are still a decade away from meeting incremental demand for oil. With nothing to fill the gap, global economic growth would slow, stop, and then reverse; international tensions would soar as nations seek access to diminishing supplies, enriching autocratic rulers in unstable oil states; and, unless other sources of energy could be ramped up with extreme haste, the world could plunge into a new Dark Age.

GIVEN SUCH UNPLEASANT possibilities, you'd think peak oil would be a national obsession. But policymakers can hide behind the possibility that vast troves will be available from unconventional sources, or that secretive oil-exporting nations really have the huge reserves they claim. Yet even if those who say that the peak has arrived are wrong, enough disturbing omens—for example, declining production in most of the world's great oil fields and no new superfields to take up the slack—exist for the issue to merit an intense international focus."

My next post will be looking at the issues involved with Peak Oil in a little more detail. In particular I will be looking at what peak oil could mean for New Zealand's economy and New Zealander's lifestyles.

Should the voting age be lowered to 16?

Green MP Sue Bradford has drafted a Private Member's Bill aimed at reducing the voting age from 18 to 16.

DPF over at Kiwiblog has had this to say on the issue:

"Sure one can argue for 16. You can also argue for 12? Or even eight? I mean at eight years old I had a view on who to vote for. All age restrictions are somewhat arbitrary."

This is where his argument is quite weak. There is in fact a rational age at which people should be able to start voting, and that's 16.

Say for instance that we based voting age on ability to comprehend the relevant issues involved with the voting/political process. Quite a reasonable idea I think most people would agree.

Well, IQ research has found that scores in IQ tests flatten out at the age of 16 (or shortly before or after). http://www.psychologicaltesting.com/iqtest.htm

So, apart from probably having read a bit more, the average 18 year old is no more qualified to make an informed decision when it comes to voting. On the other hand the average 16 year old has a substantial advantage over the average 14 year old because their comprehension skills are substantially higher. So by this reasoning it can be said that 16 is the least arbitrary age to allow voting to start.