Late Labour unspinning

Again Labour have launched policy proposals without any apparent plan to manage the publicity nor the reaction.

The Universal Basic Income idea is worth discussing (this doesn’t necessarily mean it’s worth implementing) but Labour seemed to quickly lose control of the narrative, with focus on the Gareth Morgan suggested $211 per week level of payment and the overall potential cost.

A couple of days ago:

Mar 21
Who is in charge of strategy?
Mar 21

Apparently Rob Salmond, mostly. Matt McCarten is said to have little influence these days.

It was Salmond who popped up yesterday to try to put out UBI fires and to complain about the media not doing Labour’s job, with Home-spun non-truths at Public Address.

Versus David Farrar who was quick off the mark for National:

Enter David Farrar. Yesterday he decided he can put a cost figure on this policy, despite nobody having said what the policy is. Here’s his headline:

Labour’s $38 billion bribe!

Ohmigod! $38 billion! That headline sounds massively expensive. But it’s also utterly, hopelessly dishonest.

Versus NBR:

Somehow the editorial staff at the NBR missed this obvious dishonesty, and reposted Farrar’s article on its website, screaming headline and all. That’s shoddy journalism.

 Versus Tracey Watkins:

So what happens when one of these not-true-home-truths becomes ingrained? Well, a small corner of Tracy Watkins’ weekend column provides a clue. In this post I’m not taking any particular issue with Tracy’s assessment of Labour’s performance last week – certainly it was a tricky wee period. I’m taking issue an important, but false, asserted fact:

“Labour used to have a stranglehold on the ethnic vote. No more. “

 Salmond closed his post:

I’ve learned to expect this kind of manufactured-made-up-trope from David Farrar and Cam Slater and other tools of National’s publicity machine. But it shouldn’t take someone like me to point out when its been making it up. That’s the fourth estate’s job, too, yeah?

Is it the fourth estate’s responsibility to manage Labour’s PR?

Surely it’s up to Labour to at least manage the launch of a major policy discussion and have prepared and prompt reactions. Labour’s PR machine should have been all over MSM and social media if they wanted to have some control of the narrative.

It should have been very predictable that the potential cost of a UBI would become a major talking point and target of attack.

Complaining about the media a day or two after initiating a major discussion is not good party communications.

Is Salmond in charge of strategy? Or does he step in because no one else is managing things competently?

And where does Little fit in to this? Is he being pulled in different directions? Or is he leaving communications to his team and being let down?

Little appears to be struggling and so does Labour.

One thing’s for sure, Farrar and the media won’t do their job for them.

Coming in late trying to unspin predictable reactions is not a smart strategy.

UBI at $211 a week?

Grant Robertson and Labour are talking up the idea of a Universal Basic Income. I agree with them that it’s a discussion worth having, but it’s going to be difficult coming up with an affordable policy.

NZ Herald: Labour considers ‘universal basic income’ policy

All adult New Zealanders could be given a Government handout of at least $200 a week under a new policy being considered by the Labour Party.

The co-leader of a global network promoting a “universal basic income”, British professor Guy Standing, will be a keynote speaker at a Labour conference on “the future of work” in Auckland next week.

He said yesterday that a system “where every legal resident of New Zealand should be entitled to a modest monthly basic income” would reduce inequality and give some security to people who increasingly have to earn a living from insecure casual and short-term work.

And Labour finance spokesman Grant Robertson said Labour was considering a local version of a scheme developed by economist Gareth Morgan, who proposed paying every adult a basic income of $11,000 a year ($211 a week).

“I’ve spoken to the Morgan Foundation about it. They are continuing to work on the idea,” Mr Robertson said.

“We are looking at how do we ensure income security, and one of the things we are looking at is whether or not a universal basic income could form part of that policy. It’s very early days.”

Robertson was questioned about the level of payment on Twitter and he made it clear it was only a suggestion from Morgan and was nowhere near Labour policy, yet.

They are talking about it being a universal payment from age 18 but that would have to exclude superannuants.  The current living alone super rate is significantly higher than that at $374.53 going down to $288.10 for one partner of a couple.

It would be an increase for youth on Jobseeker Support, which is 156.51, but substantially less than other rates that go up to $244.54.

They can hardly cut Super and Jobseeker rates to a universal basic income level.

A lot of people currently not on benefits would presumably get it, for example non-working partners of people who are working.

There’s a lot of discussing to do on this if it is to become policy for next year’s election.

More Labour information: Towards a shared prosperity

Future of Work Conference — Towards a shared prosperity here.

 

Little promises ‘debate’ on UBI

Andrew Little has confirmed that Labour are considering a Universal Basic Income as a part of their Future of Work considerations – “We are keen to have that debate about whether the time has arrived for us to have a system that is seamless, easy to pass through, [with a] guaranteed basic income and [where] you can move in and out of work on a regular basis.”

So it’s far from being policy (at this stage publicly anyway) but being considered as an option.

Stuff: Labour leader Andrew Little promises debate on universal basic income

The Labour Party is considering a universal basic income as part of its Future of Work project.

Leader Andrew Little confirmed his party was exploring the concept during a visit to Trevor Mallard’s Hutt South electorate last week.

Little said significant changes to the way New Zealanders worked were unavoidable.

“The possibility of higher structural unemployment is actually what’s driving us,” he said.

Pure universal basic income (UBI) systems, in theory, would give adults a regular income from the government regardless of their income or assets.

They would replace other forms of welfare, such as pensions, benefits and student allowances.

Although only trialled on small scale overseas, the idea is that a UBI would be set at a level which people could subsist on, but not at a high enough level to serve as a significant disincentive to work.

Little said a UBI would be discussed at Labour’s Future of Work conference at the end of March.

Discussion and debate on a UBI is certainly worthwhile. It’s an interesting concept, but the obvious drawback is the cost. New Zealand has major issues financing universal superannuation now. If that level of income was guaranteed to everyone – and it’s hard to see Labour being able to reduce national super – the economics could be prohibitive.

“We expect that in the future world of work there will be at least a portion of the workforce that will rapidly move in and out of work,” he said.

Little said advances in technology and changes in personal preferences would affect how people chose to work.

“They’re going to move rapidly in and out of multiple jobs over a period of time but there could be some weeks where they get little or no income.

That happens already to an increasing extent, work availability and changing requirements have been changing significantly for several decades, since the 1980s.

“But they need a basis on which they can go through the down periods as well as enjoy the up periods.”

Little said a UBI would make navigating such a work pattern “much easier”

Yes, but being able to afford it won’t be easy at all.

“The question is whether you have an income support system that means every time you stop work you have to go through the palaver of stand-down periods, more bureaucracy, more form filling at the same time as you’re trying to get into your next job.”

If higher state incomes were guaranteed to people moving in and out of work – in theory a good idea – then more may choose to stay out of work for longer because they can.

It would have to mean that those in work would have to be taxed much higher.

It’s unlikely Labour would go into next year’s election with a UBI as a definite policy. It would be such a massive change I think it would have to be a second term project.

There’s been debate already on this, at The Standard: Labour considering Unconditional Basic Income where there was a very mixed response.

Wayne Mapp challenged them with some reality on what it would cost:

BI may have superficial appeal, but the economics kill it.

To replace benefits and super it has to be really high, at least $15,000 per person. That, as a number of posts already indicate, would cost around $70 billion, or about 80% of existing govt expenditure. A UBI at this level involves a dramatic increase in overall govt spending by at least $30 billion, around 50% above existing levels, with a consequent effect on taxation levels. Labour is never going to be that radical. And in my view neither should they be. But no doubt that will be a reason why it might appeal to the Greens.

At more modest levels of say $5,000, you still require the full benefit system, albeit that benefits can all be trimmed by $5,000. But then what really is the point? The people most likely to benefit will be students, but wouldn’t a universal student allowance be easier.

Anyway I guess Labour will have its debate, they will raise false hopes, then dash them by saying unfortunately it just cannot be done.

Colonial Viper responded:

Not sure why you think that the NZ economy can’t support every NZer to a basic level of living, say $250pw.

You do realise that the government gets most of that additional spend back via taxes, duties and levies over time, right? The money spent into the community doesn’t just go *POOF* and disappear – it comes back in as GST, charges on petrol and booze, PAYE as more people are hired, etc.

The current living alone super rate is significantly higher than that at $374.53 going down to $288.10 for one partner of a couple.

https://www.sorted.org.nz/#/guides/this-years-nz-super-rates

Vto:

Think of it this way… NZ is a wealthy country. There is enough wealth and income to ensure everybody has enough to live on.

NZ is entirely wealthy enough to provide a UBI for everyone ….

Colonial Viper:

Everyone I know who earns $30K to $50K pa will vote for a $200pw UBI.

After all that $200pw extra represents a fucking big pay rise on top of their weekly wages.

Except that it will have to be financed from somewhere – much higher PAYE, and or much higher GST or other taxes.

Alwyn does some calculations:

Just for the discussion what would that cost?

Suppose we replace all benefits and student allowances. That currently costs about $24 billion/year.

$400/week gives a number of roughly $94 billion/year or an increase of about $70 billion/year. That is about equal to all current core Government revenue, most of which is taxes. $400/week is about the National Super for a single person living alone or about a third more that a married person rate.

It is quite generous. I very much doubt that that is the figure Mr Little has in mind. After all Labour at the last election claimed we couldn’t afford the current National Super costing about $12 billion pre-tax this year.

Thus we would have to double taxes collected each year. Double the income tax rates and double GST. A good chunk of the UBI would thus be immediately reclaimed.

Taxes currently provide about $66 billion. Mainly Income tax and GST.

To get the extra $70 billion you would need as much again. That could be done most easily by doubling GST and income tax rates. In that regard, yes I am suggesting they would need to double to come anywhere near balancing the books.

Colonial Viper has suggests another way of financing it – creating money.

If we insist on funding a UBI through taxation and borrowing rather than by issuing new money, then it is predictable that the UBI will be set at low poverty levels.

To have a decent UBI we have to realise that the Crown can issue money to fund its needs.

Bob challenged that:

Are you serious? That is short term thinking at its worst!
Sure, that is no problem at the moment while inflation is low, but if we set up a UBI based on forever creating money to pay for it that is a sure fire way to end up with hyperinflation!

Colonial Viper:

That’s a silly statement as a UBI will help NZers become more creative, productive and competitive. In that environment, hyperinflation cannot occur.

Paradise By Alexei Talimonov

Minimum wage and social welfare

Last week the Government announced that New Zealand’s minimum wage would increase 50 cents to $15.25 per hour on 1 April (2016).

The starting-out and training hourly minimum wages rates will increase from $11.80 to $12.20 per hour. It is set at 80% of the minimum wage.

“An increase to $15.25 per hour will directly benefit approximately 152,700 workers and will increase wages throughout the economy by $75 million per year.

For a 40 hour week that works out at $610. Annually it is $31,720.

“With annual inflation currently at 0.1 per cent, an increase to the minimum wage by 3.4 per cent gives our lowest paid workers more money in their pocket, without imposing undue pressure on businesses or hindering job growth.

“The Government has increased the minimum wage every year since coming to office, from $12 to $15.25. This is an overall increase of 27% compared to inflation of around 11%.”

New Zealand was the first country to set a minimum wage, in 1894. Relatively we have one of the highest minimum wages in the world. The current Australian minimum wage is higher at A$17.29, but is as low as US$7.25 in the USA (it varies state to state).

Yesterday Radio NZ had a debate on at How high should the minimum wage be set? (link to audio there).

Eric Crampton, who is an economist and the director of the New Zealand Initiative…

…said among developed countries New Zealand already had the highest minimum wage in relation to the average wage.

Mr Crampton said it was unreasonable to set the minimum wage high enough for people to live off it without any subsidy.

“I don’t think that there is any problem that is solved by the minimum wage that is not better solved through things like wage subsidies and Working for Families,” he said.

The minimum wage was poorly targeted and welfare systems were better placed to support lower-income workers, he said.

“We should look at where the burden of supporting lower productivity or lower income workers should fall,” he said.

“Should it fall on the employers and customers of firms that supply goods and services that are produced by lower income workers? Or should it fall on the tax base more broadly?

“We’ve got a tax system that’s progressive – it tries to spread the burden to where it can be afforded. When we instead put that burden onto employers of lower productivity workers, we knock them out of work.”

Former MP Laila Harré, now the co-owner of a living-wage restaurant…

…said full-time workers should not need to rely on government handouts.

“If people go to work, one should expect to learn a living from that job,” Ms Harré said.

“We have many non-viable businesses keeping themselves viable by surviving on these incredibly low rates of pay, [and] often extraordinarily dangerous working conditions.”

University of Auckland economics professor Tim Hazledine…

…said businesses generally had a great degree of ingenuity to adjust to change.

New Zealanders had a social and cultural expectation that adults should go to work and receive a living wage, he said – and the economy could adjust to that.

The Living age Movement Aotearoa New Zealand increased their suggested minimum to $19.80.

The Movement calls on Government, employers and society as a whole to strive for a Living Wage as a necessary step in reducing inequality and poverty in our society.

Striving for a ‘living wage’ is fine. Whether a much higher minimum should be imposed is debatable.

A problem with a set ‘living wage’ is that one size doesn’t fit all workers.

And if it is set too high then some businesses (and jobs) may not be viable, so the risk is that it would result in higher unemployment and make it more difficult for low skilled and especially young people to get jobs.

New Zealand also has an extensive and increasingly complex social welfare system that supports the unemployed and the unemployable, and also substantially subsidises many low paid (and not so low paid) workers through Working for Families.

Working for Families on it’s own is complicated enough with four types of payments:

  • family tax credit
  • in-work tax credit
  • minimum family tax credit
  • parental tax credit.

As well as that Accommodation Supplements are available and their are subsidies available for pre-school and out-of-school care.

Few would argue over having a minimum wage, although the level will always be debatable.

A higher ‘living wage’ is much more questionable except as an aspiration.

Both broad and targeted social welfare to some extent is expected in a modern society but the levels and availability will always be up for debate.

One problem is that social welfare tack-ons make it increasingly complex, at risk of being in inefficient use of taxpayer resources.

Some call for a Universal Basic Income (UBI):

An unconditional basic income (also called basic income, basic income guarantee, universal basic income, universal demogrant, or citizen’s income) is a form of social security system in which all citizens or residents of a country regularly receive an unconditional sum of money, either from a government or some other public institution, in addition to any income received from elsewhere.

A UBI may simplify things but would be difficult to transition to if it meant (as it would probably have to) that some people would get less than they do now, unless it was encumbered with supplemental assistance.

It’s easy to tack on increases, but reducing benefits and subsidies when people have adjusted to and become reliant on current income and welfare levels is tricky and risky.

Some sort of overhaul and simplification of our wage and welfare systems has some merit but would be very difficult to implement unless the country suddenly became rich enough to pay a lot more.

Universal Basic Income

Is a Universal Basic Income worth considering? Our tax and welfare systems have become very complex and uneven and at the very least could do with a radical simplification.

(Emmerson at NZ Herald)

There’s been an interesting discussion running at The Standard on a UBI (see Basic Income at Wikipedia). Slow news (especially political news) and spare time for many has contributed to a more in depth and thoughtful discussion than usual.

It started with a repost of Why we should give free money to everyone which detailed a number of examples where people were given money and they improved their lives.

In the 2010 work Just Give Money to the Poor, researchers from the Organization for Economic Cooperation and Development (OECD) give numerous examples of money being scattered successfully. In Namibia, malnourishment, crime and truancy fell 25 percent, 42 percent and nearly 40 percent respectively. In Malawi, school enrollment of girls and women rose 40 percent in conditional and unconditional settings. From Brazil to India and from Mexico to South Africa, free-money programs have flourished in the past decade. While the Millenium Development Goals did not even mention the programs, by now more than 110 million families in at least 45 countries benefit from them.

OECD researchers sum up the programs’ advantages: (1) households make good use of the money, (2) poverty decreases, (3) long-term benefits in income, health, and tax income are remarkable, (4) there is no negative effect on labor supply – recipients do not work less, and (5) the programs save money.  Free money stimulates the entire economy: consumption goes up, resulting in more jobs and higher incomes.

Obviously “free money” has to come from somewhere, and the Standard discussion acknowledges it would require a large amount of money. This means larger amounts of tax for those already paying the bulk of the tax. That is a tough sell.

And while the post claimed that it always worked well there are criticisms and studies have highlighted contradictions. From Wikipedia:

One critical view of Basic Income theorizes that it would have a negative effect on work incentive and labor supply. Even when the benefits are not permanent, the hours worked—by the recipients of the benefit—are observed to decline by 5%, a decrease of 2 hours in a typical 40 hour work week, in one study.

We have already experienced difficulties with welfare dependency and disincentives to work here.

However, in studies of the Mincome experiment in rural Manitoba, the only two groups who worked less in a significant way were new mothers, and teenagers working to support their families. New mothers spent this time with their infant children, and working teenagers put significant additional time into their schooling. Under Mincome, “the reduction of work effort was modest: about one per cent for men, three per cent for wives, and five per cent for unmarried women.

What studies don’t show are the longer term effects. Problems with welfare dependency have increased with time. But it is still worth considering.

The idea has been propagated by some of history’s greatest minds. Thomas More dreamt of it in his famous Utopia (1516). Countless economists and philosophers, many of them Nobel laureates, would follow suit. Proponents cannot be pinned down on the political spectrum: it appeals to both left- and right-wing thinkers. Even the founders of neoliberalism, Friedrich Hayek and Milton Friedman supported the idea. Article 25 of the Universal Declaration of Human Rights (1948) directly refers to it. 

The basic income. 

And not just for a few years, in developing countries only, or merely for the poor – but free money as a basic human right for everyone. The philosopher Philippe van Parijs has called it ‘the capitalist road to communism.’ A monthly allowance, enough to live off, without any outside control on whether you spend it well or whether you even deserve it. No jungle of extra charges, benefits, rebates – all of which cost tons to implement. At most with some extras for the elderly, unemployed and disabled.

A relatively rich country, Switzerland, has had groups actively campaigning for a Basic Income.

The association BIEN-Switzerland (affiliated to the Basic Income Earth Network) promotes basic income in the francophone part of Switzerland. In the German-speaking part of Switzerland a group called “de:Initiative Grundeinkommen” is very active in promoting basic income.

Daniel Häni and Enno Schmidt produced The Basic income, a cultural impulse, a movie that explains and praises the idea of a basic income.

In September 2013, the initiative achieved the collection of about 126,000 signatures and handed them over to the government on October 4thereby triggering a nationwide popular referendum, which would be the first of its kind on this issue, anywhere in the world.

It will be interesting to see how the referendum goes and if it succeeds. And if it succeeds, on how it works out in practice. Back to The Standard where the post quotes:

Milestones of civilization are often first considered impossible utopias. Albert Hirschman, one of the great sociologists of the previous century, wrote that utopian dreams are usually rebutted on three grounds: futility (it is impossible), danger (the risks are too big) and perversity (its realization will result in the opposite: a dystopia). Yet Hirschmann also described how, once implemented, ideas previously considered utopian are quickly accepted as normal.

Those utopian ideas that work. Many utopian attempts have failed – I recall the idealistic communes of the seventies having a wee burst of interest and then winding up.

A number of people at The Standard are very keen on working together and taking the idea further. It’s something that’s certainly worth exploring.

We have a very complicated system of tax and social welfare. Substantially simplifying it and providing a basic level of income for everyone without a mass of confusing rebates, credits, benefits, top-ups, supplements and whatever else is available in our convoluted mish-mash could have some merit.

One exchange at The Standard:

KJT:

i would advocate also for a meaningful UBI. Say about the same level as current super, with a lesser amount for children under 18, and a more progressive taxation.

Say 45% top rate of 250k per year on today’s figures.

Colonial Viper:

Heck, with an 89% rate on incomes over $1M pa to efffectively hard cap what our society will accept as a maximum income: 25x the median working wage.

KJT:

shh..sh. Better keep that part quiet for now.

High tax rates have problems of their own. And they would be very hard to sell, voters have an aversion to raising taxes.

If the universal income idea is to get anywhere here it will have to be well thought through, well constructed and well sold to the electorate.

And it that succeeds then it might become a long term experiment. Big stakes.

I don’t think this year is the right time to make it happen. After a number of years of difficulty there are predictions of a big economic lift in New Zealand.Voters will be looking forward to reaping the benefits of that and will be wary of upsetting it.

If the country booms that is the time to look at radical changes. Initial costs would be high and they have to be able to be afforded.

But the sooner the homework and the groundwork are done the better prepared for the right time.

If you are interested it’s worth having a read through the Standard thread, it’s one of the better ones there – http://thestandard.org.nz/ubi/

I’m not convinced a universal basic income will solve all our problems but it’s certainly worth exploring in conjunction with reforming our tax and welfare systems.