Matt Nolan

Selling holidays: A more detailed discussion

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In my previous post on the issue I said that the idea of making the 4th week of holiday’s tradable sounded like a good idea to me. In the comments I was forced to discuss this issue in detail – and as a result, I aim to clarify why I think making the 4th week tradable is an improvement on not having a tradable 4th week.

Fundamentally, I believe that the argument for the 4 weeks of holiday’s is:

  1. It is costly to negotiate holiday’s on an individual basis,
  2. Firm’s prefer labour to be “available” during a given period of time,
  3. As a result, firms set up general contracts mainly, and these contracts involve a lower level of holiday’s than the general employee would like.
  4. “Society” more heavily weights the welfare of the employees,
  5. Therefore, the level of holiday’s is too low.

Now, I am NOT saying I agree with this argument – it is just the justification that I see for the policy in the first place.  Taking this as given, the government has set it up so employees get 4 weeks off.

What does the voluntary exchange of a week of holiday do in this case?  Well all contracts have “4 weeks off” in them.  If an employee is willing to exchange this week for some cash they can strike a deal with the employer – who is likely to be willing to given that the value the availability of workers.  In this case, the ability to trade the week off benefits both the employer and the employee at an individual level – and the welfare of other employers and employees is unchanged.

As a result, this must be a pareto improvement.  I am happy for the government to do things that don’t leave anyone worse off and make some people better off – that is why I appreciate this policy.

Matt Nolan

Housing supply and rents: The issue of indicators

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Over at the Rates Blog there has been a lot of talk about how we can’t have an under-supply of property – as rents are rising very slowly.

Now their are two issues I have with this claim.

  1. The general idea is that their is the risk of an under-supply of property later in the year – because of rising net migration and a collapse in building. The claim isn’t that there is an under-supply right now.
  2. Even if there was an under-supply relative to fundamentals, there are still reasons why rent growth may be slow.

Now the first statement is fairly self-evident. So let’s focus on the substance of the second statement and the idea of when under-supply matters.
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Matt Nolan

Hmmmmm….

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I heard on the news last night that the Greens are against the voluntary sale of a holiday week – because in a tough economic climate people may well have to sell the week.

However, how this is bad doesn’t make sense to me.  People are struggling because of the poor economic climate, so the value to the employee of selling a week of holiday is very high – they really want to do it.  When we prevent people from doing this aren’t we actually hurting them more?

It is like the Greens are saying that they don’t like the policy because people will use it – and the Greens think there is some reason (maybe externalities?) why people should HAVE to have this holiday, even if they would rather have the money to feed their family …

Beware emotive language that is used to hide the logic of the argument!

Matt Nolan

Tim Hunter, which report do we believe

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The Sunday Star Times seems to like the issue of energy prices.  So far in March they have had:

  1. A report stating that energy companies are  setting prices too high,
  2. A report stating that energy companies are setting prices too low.

Both of these come from Sunday Star Times reporter – Tim Hunter.  So I wonder which report he believes?  I wonder what report I would believe if I actually got to see them.  I wonder what report you guys would believe!

Matt Nolan

The labour market and wages

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David Farrar has a very good reply to this post from Tane at the Standard.

There are a few points I would like to make as well though. Tane says:

David Farrar made the same fallacy the other day, the minimum wage isn’t there to make us all rich, it’s there to ensure that people on low incomes are able to live their lives with some basic dignity and security

Well, the minimum wage is a poor tool to do this. The best wage to ensure that people have a minimum income is from the state to provide it directly – which they do with the unemployment benefit. In this case everyone has a minimum living standard, but by joining the labour market they can improve on this. Although I believe there is a case for a minimum wage – the case for “increasing” it is much more debatable.

The next section is the bit David discusses:

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Matt Nolan

That is very interesting: HLFS revision

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When I was cruising the data freeway that is Stats NZ today I noticed this on pg 15 of the HLFS (which has been revised):

The fourth highlight in the Hot Off The Press that said “Seasonally adjusted total actual hours
worked per week fell by 1.9 percent” now says “…fell by 0.5 percent”.

This is an enormous revision.  Annual growth went from -2.8% to -1.2%.  This should have some impact on people GDP forecasts methinks.

The revision was out on the 20th.  They will have been working on their GDP numbers.  Productivity may have seemed a bit strong – then they discovered this error when checking over the figures.  That is my suspicion here (I know, very conspiracy theorist of me 😉 ).  Very interesting.