"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).
Posts
I dunno where you get your stats from but my check of the OECD website shows Australias labour income share declining steadily from 51.2% in 1998 to 42.2% in 2005. Ergo more efficient capital deployment in the face of unionism.
ReplyDeleteNZ on the other hand has no stats from 2002 where it was 47.1%.
http://stats.oecd.org/wbos/default.aspx?queryname=345&querytype=view
Also your wrong in saying that I objected to your findings, I agree that the labour income share is declining as a result of more efficient deployment of capital. Its a wonderful thing.
ReplyDeleteSources kisekiman? Google these and you can see them first hand. And no I don't think that low labour productivity growth is a wonderful thing - quite the opposite actually.
ReplyDeleteBlack, M., Guy. M., and McLellan, N. (2003) Productivity in New Zealand 1998 to 2002, New Zealand Treasury Working Paper.
Hall, J. and Scobie, G. (2005) Capital Shallowness: A Problem for New Zealand? New Zealand Treasury working paper.
Also the sats you quote on labour income share are only manufacturing - not the entire economy. I'll give you the benefit of the doubt and assume that this was unintentional.
ReplyDelete(The figures for the entire economy show Australia's labour income share holding steady at about 60%. Interestingly New Zealand's labour income share is the lowest in the whole OECD - good old Employment Contracts Act hey?
http://stats.oecd.org/wbos/default.aspx?queryname=345&querytype=view
You are correct it was an unintentional mistake and I've had to dig a bit deeper into the data and fuck around with excel to check it but the figures you quote are largely correct for Australia's labour share of GDP for the period 2001-2005 declining from 56% to 55% with NZ rising from 45% - 47%. You can quote me in future. I haven't crunched the data for all OECD countries but I still believe Australia will be an exception. Also I think a higher proportion of NZ GDP is created from declining number of farmers compared with Australia's 92% urban population . I don't think it's fair to compare the two.
ReplyDeleteAlso you have a habit of putting words in my mouth, I agree that low productivity growth is not a wonderful thing. You seem fixated on labour gaining a greater share of GDP. If productivity were to rise then it follows then that labours share of GDP must fall.
ReplyDeletekisekiman:
ReplyDeletethe critical point for me is 1991 as that's when NZ's unions were busted. You'll notice that it's fairly soon after this that Labour Income Share begins its precipitous fall ...
"If productivity were to rise then it follows then that labours share of GDP must fall."
ReplyDeleteNot if wage increases matched the productivity increases ....
"Also I think a higher proportion of NZ GDP is created from declining number of farmers compared with Australia's 92% urban population . I don't think it's fair to compare the two."
ReplyDeletecare to elaborate/clarify on that point?
True but you may find the main productive driver of GDP growth in the NZ economy over that time has been the expansion of Dairy exports. Farmers investng and working harder for themselves.
ReplyDelete"I haven't crunched the data for all OECD countries but I still believe Australia will be an exception."
ReplyDeleteWhy do you need to crunch the data? It's all there on the screen isn't it?
"True but you may find the main productive driver of GDP growth in the NZ economy over that time has been the expansion of Dairy exports. Farmers investng and working harder for themselves."
ReplyDeleteWell if that's the case we should be bloody worried. Clearly we aren't pursuing the right industrial strategy - no doubt our distance from markets doesn't help in this global free-market mania though.
Yep I was struggling with the query settings but looking at the figures there seems to be general decline across the board not only in NZ and including your oft quoted Ireland which says to me that capital is being deployed more efficiently and that labour was uncompetitive at the levels of the early 90's so unions around the globe had to wake up to the concept of wage restraint.
ReplyDeleteYeah globalisation forcing wage restraint, be it through market mechanism or tripartite negotiations. New Zealand has the worse scenario though. Not sure why you think that workers being paid less means capital is being deloyed more efficiently - can you elaborate on that point?
ReplyDeletePut simply if wages are too high companies will make investment decisions (i.e. deploy capital) that will seek to raise productivity for proportionally less inputs of labour.
ReplyDeleteAlso low cost of capital and risk attitudes (at least until recently) has enabled companies to generate significant returns abouve said cost of capital.
ReplyDeletekisekiman,
ReplyDeleteCorporate bosses are shooting themselves in the foot by "efficient" deployment of capital, because a) it rapidly reaches diminishing marginal returns,especially in IT where the savings yielded from the labour productivity from the deployment of IT often doen't match the cost of investing in the infrastructure.
Now they have to use "intangible" benefits of IT investment to justify the expenditure. http://www.informationweek.com/637/37iucov.htm
and b) more fundamentally it compromises the market for the goods that the firm produces, because the labour productivity increases result in excess labour being laid off, which erodes the bargaining power of the employed workforce as increasingly we're seeing that other firms aren't able to mop up the excess labour, because there is no longer any need to employ them, but if they are hired they have to downshift to a lower paying job.
http://www.newyorkfed.org/research/current_issues/ci9-8/ci9-8.html
BTW Roger Nome
I've got a proposal to put by you in private.
I would appreciate it if you contact me at BluecollarGreenie@Gmail.com so that we can discuss it.