Wednesday 3 September 2014

Jobs for Everyone

It has been more than a week since Internet-Mana had their official launch promising nationwide full employment. Their policy platform got overshadowed a bit by the strange comments of Kim Dotcom and the outburst by Pam Corkery, but it is still surprising to me that the policy itself has been met with almost complete silence. This I take to be a comment on the seriousness with which Internet-Mana is being taken, but there is one aspect of their jobs policy that deserves a further look.

First, here are the highlights as reported in the Stuff story linked to above:

  • a plan to create 50,000 permanent jobs and 50,000 shorter-term jobs a year over the next five years at a cost of $1.3b; and 
  • funding to come from redirecting a fifth of ACC current reserves and future employer and earner ACC levies.
There are some obvious questions to ask about the first bullet:

  • What is the process by which a flow of spending each year generates an on going stock of jobs?
  • How exactly is the spending going to create the jobs?
  • What is the model of labour-market interactions, wage determination, etc. that currently has the economy generating jobs for a bit more than 94% of those working or actively seeking work, that will not continue to have a 94% success rate after the new policies are put in place? 
But it is the second bullet that struck me. Steven Landsburg would have loved this one. (See his posts on the man who can't be taxed, here, and Scrooge as a great philanthropist, here.) The joint leaders of Internet-Mana, Hone Harawira and Laila Harre  are quoted as saying that "it was widely accepted that ACC reserves and levies were excessive and redirecting some of these would allow them to pay for their policies without increasing taxes". This may be true, but that doesn't mean that this is a free lunch. If ACC are investing their reserves in New Zealand, then redirecting those reserves to the employment policy will pull money out of New Zealand capital markets, making less available to investors or inducing more capital inflow with the resulting pressure on the exchange rate and export earnings. If they are investing the reserves in overseas markets, then redirecting them to the employment policy will put pressure on the New Zealand exchange rate and exporters directly. 

Now one might want to take the view that our savings rate in New Zealand is too high, and consequently that the exchange rate is too low and exporters having too easy a time. If so, redirecting ACC reserves would be consistent with that view. But the fact that the reserves might be excessive in terms of future ACC payouts does not imply the policy comes with no opportunity cost. Further, the leaders need to explain why they think that aggregate savings rates are excessive in New Zealand. 

1 comment:

  1. Start with the assumption that there is an available travel corridor, in which a train could run.

    Then, compare two similar uses:
    1. Build a train that runs in that corridor
    2. Build a busway that runs in that corridor

    Compare and contrast.

    Both have similar travel times.
    Both can move enough passengers (a train can have a higher throughput at peak than buses, but Chch is unlikely to be anywhere near the maximum throughput of a busway)
    With the right vehicles, both are ecologically friendly (electric trains or buses, hybrid or natural gas buses)

    A busway is, I believe, substantially cheaper
    A busway allows many different point-to-point routes to all share a central fast route into the city, whereas a train will require people to get to the train station, and from the train station at the other end
    A busway is more flexible in allowing reuse of the assets if travel patterns change

    I think that if we're going to have public transport, a train makes no sense at all.