• Making Sense of the News

    Making sense of the news is always difficult and becoming more so. News stories come at us from all angles. It is hard to see how they relate to each other or to detect patterns in what is really happening.

    A case in point is the report a few weeks back of a poll that showed Bill English as the most highly rated Cabinet Minister. The news value of the story was apparently that the government’s number two had outscored the Prime Minister. Students of politics might also have speculated on what the story might mean for the succession when John Key eventually steps down.

    But the real significance of the story surely lies in the identity of those polled. The poll was conducted among the country’s leading CEOs. What it showed was that business leaders recognised how much they owed to those who were directing the government’s economic policies. John Key might provide the public face, but Bill English is the one who actually delivers what business wants.

    It is no surprise that business leaders are grateful for the favourable treatment they have received. Whether it is the sacrifice of the environment to mining interests or the 35-year increased pokie deal for Sky City, the over-ruling of the Commerce Commission to protect Chorus profits or the $30 million gift to Rio Tinto, the government is increasingly overt in its solicitude for the interests of big business.

    What is perhaps less obvious though is the corollary – the government’s willingness to make life easier for business leaders by further weakening the claims of working people on our economy. Perhaps not surprisingly, the government is a little more coy in advertising this aspect of what it is prepared to do for its friends.

    That thought was brought to mind by the latest unemployment figures published last week. At first sight, for many ordinary readers, the figures represented something of a puzzle; while there was a small increase in the numbers of those in work, the rate of unemployment actually rose.

    The answer to this conundrum casts a revealing light on an important part of the government’s strategy. What is happening in the labour market is that, particularly in Christchurch (what would we have done without it?), demand for labour is rising; as that perception takes hold, many of those who wanted work but had given up trying have come back into the jobs market.

    There is, in other words, a large but unquantifiable pool of people available for and wanting work, but who do not show up in the unemployment statistics. They have been forced to drop out by a series of government measures designed to deter them from claiming benefits; they emerge only when they see some hope that there might actually be a job for which they could compete.

    And “compete” is the right word. Because at the same time as we saw the unemployment figures, it was also revealed that the already small growth in average wage rates had slowed further. As these hidden unemployed emerge from hiding, in other words, they compete for the few low-paid jobs available, and they compete by being prepared to work for lower wages than are paid to those already in work.

    We can conclude, therefore that business leaders have an additional reason for feeling grateful to Bill English. Here, at least, is one government economic strategy that is working brilliantly. On top of the other measures the government has put in place to hold wages down – the weakening of rights at work, the lower than minimum wage rates for young workers, the much tighter rules designed to force beneficiaries back into the job market, the failure to maintain the real value of the minimum wage itself – we can now see the real rationale for the government’s relaxed attitude to unemployment.

    It suits employers very well if workers are in constant fear for their jobs; if their job expectations are increasingly weakened and made conditional on accepting even lower wages, life is made much easier for those whose main (indeed, it seems, only) task is to maximise profits for their shareholders.

    But, as so often, this kind of thinking may produce short-term benefits to profitability but is bad for both the economy and our wider society in the long term. It encourages those who run our economy to treat labour as just another production cost, to be driven down at every opportunity, rather than as representing the lives and livelihood of real people and their families, members of the same society we all live in.

    We pay a social price for these attitudes, in terms of wider family poverty and greater disparities leading to a less integrated and more conflicted society, but we also pay an economic price. What is economically efficient about driving down the real value of wages and therefore purchasing power of those on whom business depends for custom? What is economically efficient about maintaining a pool of unemployed so that we permanently lose their productive capacity?

    Sadly, our business leaders see no further than their own immediate self-interest. Higher profits and a more quiescent workforce seem to be all that matter to them. Shouldn’t we expect better?

    Bryan Gould

    11 August 2013