jamesz

Greens on poverty

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The Green party has recently released their policy program for helping the poor:

[Turei’s] party wants to extend Working For Families tax credits by $60 a week for the poorest 140,000 households, reinstate the Training Incentive Allowance for university-level courses to help beneficiaries get educated and into work, raise the minimum wage to $15 an hour and create minimum standards for rental properties to ensure they were warm and healthy.

I like the idea of helping poor families but is the best plan really to:

  • raise marginal tax rates on them,
  • give them cheaper bachelor’s degrees,
  • increase the barriers to entering the workforce at the minimum wage; and,
  • increase the cost of rental properties?

I’m sure Matt will have a more thoughtful analysis up soon but does this policy really tackle the problems that our poorest citizens and their children face? I don’t know for sure but I imagine that the cost of a university degree isn’t a binding constraint for many of them, for example.

It’s going to be fascinating to see all the parties releasing more meaty policy agendas as we approach the election!

Matt Nolan

Media uses wrong data to reach wrong conclusion … again

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“Wages not keeping up with inflation” that is the headline we get here.  While I’m sure that will get a lot of people wound up and complaining about something, its a load of cr*p.

Actually looking through the numbers, we see that gross wage growth is roughly inline with the growth in consumer prices excluding GST.  Why do this?  Well the increase in GST was met with a corresponding cut in income taxes, so that NET wage growth is that much larger than gross wage growth.

But lets ignore this, and lets focus on what they said:

That took annual wage inflation to 1.9 per cent … well-short of the 5.3 per cent annual pace of inflation.

Looks like a big difference.  And that is what you can do when you cherry-pick and compare incomparable data series to fit the story you want to write.  Let me explain step-by-step.

The 1.9% figure comes from the Labour Cost Index – this is a quality adjusted index that captures growth in wages that are unrelated to the type of job or changes in productivity.  This doesn’t tell us anything about income gains for people – in fact, I use this as a measure of inflation expectations not wage growth.

If we want wage growth we should probably look at … wage growth figures right.  So, average hourly earning according to the Quarterly Employment Survey were up 3.1% from a year earlier.  Taking into account hours have risen, total wage income (excluding sole traders and agriculture) was up 4.7% from a year earlier.

Given that the changes in tax cancel each other out we have to ignore the increase in GST when talking about the cost of living (or include the tax cut in the wage growth figure above).  As a result, labour income growth has well beaten increases in the cost of living.

Furthermore, again inflation is a whole different concept – however, I’m not going to ping them too hard for using that term here.  What I will ping them about is the fact that:

  1. They didn’t understand (or wanted to misrepresent) the data and used the wrong series
  2. They didn’t understand (or wanted to misrepresent) the data and inappropriately included/excluded tax changes

Overall, both of these “adjustments” were to make the data fit their narrative – which is a load of bullsh*t.

How about writers either learn what the data is before writing this sort of thing – or talk to someone (either at Statistics NZ or an economist) who knows.  Then they wouldn’t write factually false pieces like this.

Matt Nolan

Question for the next couple of days

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Does the US have a marginally functional government?

We already know they don’t have a fully functional government, or a reasonably functional government.  But we are waiting to see if the government really exists at all, and is able to muster itself together enough to avoid accidentally defaulting on debt and starting a new financial crisis.

Whether we think they need to cut spending or not it doesn’t matter – we are talking about the next week where they will exceed their debt ceiling no matter what.  So lets hope they extend it.

And even when they do, after how absolutely useless they have been can they really avoid being downgraded?  If they don’t get downgraded the credit rating agencies will be seen as to be just as hopeless as they were following the global financial crisis …

Update:  So the President, house leader, and senate leader all agree on a deal.  But it still needs to get through the senate, and the house, tomorrow.  Man, how last minute is this!

jamesz

This is not about cycling

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An Australian cycling magazine claims that you could save $3.5 million over your lifetime if you ride instead of owning a car. They say that their calculations are solid and we have no reason to doubt them, but this is not a story about how great it is to ride a bike.

Their calculations assume that you save every cent you don’t spend on a car in an account earning 6% interest. Unsurprisingly, the magic of compound interest — and probably a complete absence of discounting the value back to today — gives huge savings over a forty year career. Do cyclists really save all that money? No. Is it misleading to add interest on top of the savings and not discount the value back forty years to today? A bit. Does this really tell us much about the benefits of bike commuting? Not really, it’s just a story about how easy it is to make big numbers with daft counterfactual assumptions. Are they more misleading than most headline numbers in the newspapers? Probably not.

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