Tuesday, February 19, 2008

Counterproductive and evil

What's John Key's solution to emigration to Australia? Lowering wages in New Zealand. Yes, seriously. Here's what he said to the Kerikeri District Business Asociation in December [PDF]:

Another point raised by Ms Brookes-Quan concerned the exodus to Australia by New Zealanders, lured by attractive wage compensation, and the recent call for employers to pay more.

Mr Key would like to see the opposite occur.

"We would love to see wages drop," he says.

"The way we want to see wages increase is because productivity is greater. So people can afford more. Not just for inflationary reasons, otherwise it's a bit of a vicious circle as it comes back at you in higher interest rates."

"We really want to drive that out," he says.

(Emphasis added)

There are two words which can describe this policy. The first is "counterproductive". Emmigration to Australia is primarily driven by the wage gap, so lowering wages here is only likely to increase it. And as decisions on productivity increases are firmly in the hands of employers and driven by the relative cost of capital and labour, it will also result in lower productivity growth, and hence a lower sustainable standard of living for kiwis in the long term. If we want to improve productivity, then we need to raise wages, not lower them.

The second word is "evil". Because there's just no other way to describe a policy of deliberately lowering the living standards of the vast majority of ordinary Kiwis so your rich mates can enjoy higher profits.