Posted on Dec 01, 2018
For some perhaps it is a time to be jolly. But for many, the sound of jingle bells ringing out in the mall portents a season (or more) of debt and despair.
For increasing numbers, and not just those on minimum wage, trying to live up to expectations, and the resultant financial burden, has become increasingly difficult. The gap between rich and poor has widened dramatically, and the relatively homogenous society we knew only a generation or so ago has long disappeared.
There is a growing Inequality. Not only the gap between rich and poor, but more importantly between those with hope and those who have given up.
We don’t subscribe to the hyped up “housing crisis”. When we roll out of bed of a morning and jog around our suburban neighbourhood there are literally dozens of empty houses. In one area alone there are rows of empty homes side by side. The crisis is not about enough houses – it’s about the ability of many to buy them. And that’s a very different issue. Often that inability to afford housing, whether rental or ownership, is the start of the slide into giving up.
The current government used the catch cry “let’s do it” during their election campaign. What they neglected to tell the voters was that the “it” they would do was setting up dozens of committees, working groups and inquiries. And they have been remarkably successful at that. But anyone who creates wealth knows that working groups and committees don’t solve problems in the real world. To make a difference, people need to research concepts, think about them, form an opinion, and then work very hard at making them a reality. Doing something is what counts. Forming a committee (or an inquiry, or a working group) doesn’t count.
If our society continues on the current trajectory, then we will just end up with more of the same – more inequality, and an underclass with no skills, no jobs, and no hope. And they will need taxpayer support from the cradle to the grave.
It’s traditionally the time of year for reflection, so we put on our thinking cap to come up with just a couple of concepts which we believe could actually make a difference. Much more of a difference than the million seedlings which will never be planted. These may run totally against conventional thinking. But then, conventional thinking only ever gets you to conventional places. Not that we expect the current crop of politicians to be prepared to do anything other than what they know. Their gravy train is far too sweet.
RAISE THE MINIMUM WAGE
Currently the minimum wage is $16.50 per hour. The “Living Wage “ is $20.55 per hour. The Living Wage is defined as “what workers need to earn to live a basic yet decent life”. We know that to live on the minimum wage is incredibly difficult, and in most cases needs topping up by the taxpayer – with Working for Families, accommodation supplements etc. By raising the minimum wage substantially – and we mean to well in excess of the “living wage”, and stretching the gap between benefits and minimum wage, it becomes more attractive to work than to bludge, the need for top ups reduces, and let us not forget, all those extra earnings go straight back into the economy.
The argument against raising the minimum wage dramatically is largely going to come from employers, citing the cost.
There is undoubtedly a cost, but the greater cost to us as a nation is that productivity is currently slipping. And that is in part because we are too reliant on cheap labour. If labour was priced more realistically, then employees would need to think more strategically about investing in systems and technology. We have talked in the past about becoming a “Knowledge economy”. But the real challenge is to become a smart economy.There are more than enough countries around the world who need to utilize their abundant cheap labour. We will never compete with them, so we need to focus on being smarter. If labour at the cheap end of the scale, was more expensive, then we would be forced into running our enterprises smarter. With the bonus that as taxpayers we would have to support those on minimum wage to a much lesser extent.
Obviously in order to be a smarter economy, there is a part of our labour force that need greater skills. Which means that our education sector needs turning inside out.
LIGHT A FIRE UNDER THE EDUCATION SECTOR
Our education sector was designed during the Industrial Revolution, and was meant to transition workers from a rural agrarian economy, to be compliant factory workers. It has changed little since then. It’s all about regurgitating facts for examinations, and preparing people for jobs which will no longer exist when they are in the workforce. Education should be about learning – as opposed to teaching. And it should be about learning how to think. And acquiring skills to enable us to adapt, and then go on to acquire specific skills. I think that those who do acquire the ability to think, and analyse, and discriminate and discern (and more), often do so in spite of the system, rather than because of it. Some of the skills needed to cope with an increasingly digital society, such as financial literacy, and the ethics of citizenship rarely have a mention in schools, as they are so focused on credits for NCEA. There is a case for going right back to basics – to teach children how to think, and the skills to learn specific technical skills. Once they have those basics, they can then go on to acquire the technical skills required for their chosen career. The skill of knowing how to learn is essential, as we need to learn over the course of a lifetime multiple sets of technical skills, as the world changes around us.
Unfortunately at present our education sector is largely anchored in a mindset that says “parents want children to get NCEA credits, so that is what we do”. Obviously no forward thinking there as to what education really should be.
REDUCE COMPANY TAX
In very simple terms, company profits are either re-invested, or paid out as dividends. When they are paid as dividends, the difference in tax rates between company tax (28%) and personal tax (33%) has to be paid.
Which means that if the company tax rate was reduced, for profits paid out, the government tax take would not be reduced, it would just mean the proportion of the total tax paid by the ultimate recipient is greater. A lower company tax rate would make New Zealand more competitive internationally as a choice for investment for multi-national enterprises. That is often touted as a rationale for reducing our corporate tax rate, but we believe this argument only applies to a relatively small number of larger enterprises. What is more salient is that reducing the company tax rate would theoretically encourage greater re-investment for those business that already are domiciled in New Zealand. And if it encourages re-investment, that is great for the economy, particularly as much of that re-investment would be in assisting us to work smarter. And if profits are paid out, then the IRD doesn’t miss out at all. Surely a win-win?
And for our bonus thoughts on increasing productivity – ban social media during working hours!
As we spend time around multiple work sites we are astounded at the numbers of forklift drivers, apprentice plumbers and accounts clerks who spend a substantial portion of their working day glued to their smartphones. If employers converted that Instagram and Snapchat time to actually working, the nation’s productivity would leap overnight.