Matt Nolan

Why the minimum wage trade-off is important for the left and right

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When it comes to conclusions about the broad labour market that are accepted world wide, the idea that a higher minimum wage leads to lower levels of total employment is one of the most accepted.

That is why it was interesting to see Patrick Gower suggest that Treasury didn’t believe this was the case – and use this as justification to push for a $15 minimum wage.  However, I would argue that we need to be more careful interpreting the evidence he has put forward – and that it is in the interest of both the left and the right (and of course society) to not significantly increase the minimum wage.

Update:  Eric Crampton at Offsetting behaviour raises good points here and here.  Interestingly he calls me too kind – I’m not used to that, from others I usually hear arrogant, narrowminded, or ignorant 😉

Update 2:  In the Dom, they are calling the opinion in a letter a “Treasury report”.  Seriously, is our media this bad all the time, or do they just save it for elections …

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Matt Nolan

A point on Europe

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Generally, Europe is already in big trouble.  Current negotiations are around how far Europe wants to drag the rest of us down with them.

Hopefully they go down this track.

jamesz

A fair price for asset sales

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Matt has posted about asset sales and believes that they’re a good idea as long as the government gets a fair price. He seems to be saying that the government’s decision to sell assets should be the same as a private company’s. Only the government isn’t a private company, so the costs and benefits to be weighed are a little different.

To begin with, once the government has committed to asset sales it is politically committed to selling. That puts it at a disadvantage relative to potential buyers; one that they will be all to happy to take advantage of, as Rob Salmond has recently discussed. The fact is that government asset sales are a political manoeuvre, not a commercial decision, and that puts the government in a weak bargaining position with whoever offers to buy the assets. That’s one of the reasons why assets always seem to be sold at a low price, relative to their commercial worth.

So, if governments struggle to extract a good price for their assets, why sell them at all? The late Roger Kerr had an excellent series on his blog in which he detailed some of those reasons. The main two are that

  • Asset ownership is risky and the costs of that risk fall largely on those who depend on the government for their livelihood; and,
  • Privately owned companies tend to be run more efficiently and profitably

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Matt Nolan

More on occupying Wellington

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People who read the blog will remember how vehemently opposed to the occupation of the Reserve Bank I was.  And I stick to that – every word, even the misspelt ones.

But I’m glad to see that this isn’t how the movement has evolved.  From what I can tell the focus is very much on the fact that things don’t feel right – there is injustice, and they are finding a peaceful way of expressing their distaste for it.  To me, this form of protest makes sense.  We have had a massive financial crisis, a lot of things that have happened aren’t fair – and people are suffering through no fault of their own.  Expressing that this isn’t right makes complete sense to me.

I am sure that when it comes to policy conclusions I would disagree with many of the protesters – but many of them would disagree among each other as well.  Policy conclusions are not the point of the protests.

Personally, I am not going to join the protests  – I would prefer to spend the time trying to understand what is going on with the crisis, so I can try to figure out what I believe is appropriate action.  This is part of my job, a job I love to do, and it allows me to express my feelings regarding the world.  But the idea of protesting just to show that you do not feel comfortable with what is going on in the world, and feel disenfranchised, makes sense and is part of democracy – and in this context I agree with the protesters.

Matt Nolan

Thinking straight on asset sales

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As far as I  can tell, National only has one policy at the moment [Update:  When I wrote this on Wednesday morning this felt like the case – now I see they are talking about the ETS … I will get to that another time].  That is to sell down part of the governments stake in assets, and use that money to build schools.

Now, I hope that since they have no other policies they don’t intend to really do anything during the next three years.  For the sake of it, I’ll assume this is the case.

On the note of their policy, I have to say I have no real problem with asset sales as long as:

  1. The country has a good legal system (CHECK)
  2. The country has clear and consistent competition policy (CHECK)
  3. The asset is sold for at least fair value.

So, if they are going to do this we have to make sure there is a fair price.  Excellent. [Update:  Here is a good piece from Rob Salmond on why the price issue can be a difficult one]

Now, if this was the whole policy we could end there – but it isn’t.  They then want to invest this money into schools.

Is this really the best use of the funds?  Is the rate of return on new schools high enough to justify the sale of assets?  If New Zealand had an undersupply of school space then this could make sense to me – but I was under the impression that our schooling infrastructure was actually pretty good.  As a result, why the hell are the funds being invested there?

Conclusion

So when looking at National’s policy, we have to ask:

  1. Are they going to get a fair price
  2. Are they investing the funds in the right way.

Hopefully they can achieve the first criterion, but currently it doesn’t seem that they are really willing to meet the second criterion.  If National is just going to waste the funds that come in from assets sales I would prefer them to just not do it.

jamesz

The story of this election

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Well, if it’s frustrating to see major parties wrangle over spreadsheets it’s heartening to see someone try to unravel the narrative of each party’s campaign. Bill Kaye-Blake has laid out what he sees as the story of each party’s policies. He gives a nod to Deirdre McCloskey but I think Bill probably has a career in marketing with stories like this!

For National he thinks:

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