Wednesday, April 02, 2008

It's about distribution

Yesterday I highlighted The Standard's graph on how wages fell under National and have risen under Labour. It's a perfect illustration of the differences between the two parties' labour-market policies, but it also misses out the big picture of what these policies are all about. To see that big picture, we also need to look at GDP growth. Fortunately, Kiwiblogblog had posted a graph of that earlier in the week (which is what prompted me to think about this), and after spending some time digging up data-sets and mucking about with Excel, I was able to superimpose the two:

(GDP growth calculated from the most recent column of the Reserve Bank's time-series; average weekly earnings is the same data used by the Standard, and is ultimately sourced from the Quarterly Employment Survey and CPI via Treasury. Income figures are June years to avoid seasonal noise. I'd rather use median figures than averages, but those are the numbers I have).

This points out the real obscenity behind National's policies: while people's living standards were falling, the economy was in fact growing. The point of their policies wasn't growth, as claimed, but distribution - shifting money from the poor to the rich, and making sure that any economic growth flowed exclusively into the pockets of the latter. Meanwhile, under Labour, the rising tide really has managed to lift all boats1 - but only because they have used serious policy interventions (labour market reform, continual hikes in the minimum wage, using monetary policy to engineer a labour shortage) to make it happen. So, again, which would you rather prefer? A share in the economy? Or none at all?

1 - at least on average. Shamefully, it has still left people behind, but not nearly as many as National; they're a small minority, rather than the vast majority of the population.