Friday 6 July 2018

Paying for more hostages

Ok, here's a fun one.

Set up an industry through heavy subsidies. An ancillary education sector sets up around it, training workers for that industry. Then when it comes time for an economic impact study, count as a benefit of maintaining the subsidies that workers trained for the subsidy-industry would have a drop in wages if they had to shift to another industry. Meanwhile, keep ramping up training schemes to build up more hostages for the subsidy-industry.

Or, in other words, Gordon Campbell didn't like my take on New Zealand's film subsidies. Here's Campbell, taking issue with the bit Matt Nippert quoted from me in the Herald:
Crampton said the Sapere report - in concluding the subsidies generated more than $2 of economic benefit for every taxpayer dollar spent - was flawed in concluding most of the workforce would be left stranded out of work or in lower-paying jobs. "While that may be true during recessions, it is not true either on average or currently. And it is especially dubious where most of the film activity occurs in Wellington and Auckland," Crampton said.

Sure. Everyone knows there are 2,000 high paying, high skills jobs ready and waiting out there in Wellington. Or maybe they all could go north, and pick kiwifruit. Despite his vested interest in this issue, Peter Jackson was probably closer to the mark in the same NZ Herald article, to which he offered this observation:

"You seem to be asking whether New Zealand needs incentives. In my mind it's very simple: Does New Zealand want to have a film industry?"
There are two things going on here.

The Sapere report looks at multiplier effects through the rest of the economy with film subsidies. That's the part where I'm really dubious at current employment rates. In the absence of film subsidies, folks in the flow-on-effect industries wouldn't be jobless. There'd be some reduction in wages, but it wouldn't be substantial - and at least not in the medium term.

People directly employed in the industry currently would see job losses, shift overseas, or take employment at lower wages - yes. But where government is also helping to fund industry training for the next generation of hostages [zero percent student loans; normal tertiary subsidies], we might need to look at dynamic effects.

In the absence of subsidies, people would train for other industries instead, with smaller effects. Heck, it's plausible that while those who otherwise would have trained for and worked in the film industry would be made worse off training for other work, their salaries could be higher if film work carries a wage discount because of the prestige.

Anyway, it just seems odd to justify continued subsidies for an industry on the basis of wage and employment costs to workers who have specific skills in that industry when we're also training up new workers for that industry.

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