Pick Me..

It is election time here in three months and the billboards and campaigning have already started. I spotted a Labour Party billboard at the weekend which beside the shining face of the candidate had “Vote Labour” (naturally) “Minimum Wage $15” (For anyone who is interested this is an increase from $13) So I have rubbished the idea of a legislated minimum wage before and if this was the answer to a low wage economy why don’t they suggest $25 or $45 an hour? Any way the over arching thought I had was that this sort of blatant electioneering nonsense is what needs legislative change. Therefore here is my answer to a change of governance structure.


Firstly as a society we have limited difficulty coming up with collective desired outcomes or “policy” if you will where the debate starts is the best way about achieving the required outcome. The increase in the minimum wage is an example the policy requirement is a liveable wage for all employed persons. Just about everyone will agree that sounds ok (I am going to walk past the definitional issues for the moment) It is the how we get there where it all goes wrong. In this instance the best people to answer this question are probably economic researchers and potential social analysts. Not well meaning, slogan wielding, power hungry, ego driven, vested interest politicians. (some or all of the list normally applies to all of them)

So first it is clear that we need to arms of governance, we need the policy arm and the implementation arm. The Policy arm, let’s call that the Peoples Parliament (PP) would have the same elections, party politics etc that we know and love now but no power to pass any legislation, only the power to pass Policy in the form of Legislative Requirements. These Requirements would be passed to the Governing Parliament (GP) for implementation.

The GP would propose the method for enacting the Policy and design the legislation to give effect to the Policy, this would be referred back to the PP Passing into Law or Veto. If they Vetoed they could offer comment of course but there would be no requirement on the GP to do anything further. The PP would have no right to alter the legislation.

Contained within the GP would be the Prime Minister character and Ministers as we know them now and the various Department Heads would answer to this group.

So the obvious question how do you get into the GP? Answer the PM would be appointed by an Electoral College and they (the PM) in turn would appoint Ministers. The PP would have the power of Veto over any given Ministerial Appointment but not the PM.

Who is this mysterious Electoral College? These would be people elected by the citizens to appoint the PM and after they had completed this task they would go into recess only to reappear between elections if the PM needed removed for some reason (governed by a constitution). To be able to stand for the Electoral College you would have to have no political affiliations, have a suitable level of education and passed a simple test on the constitution. Anyone could stand for Electoral College if they qualified.

What’s the point? Well that way hopefully we get a legislative and implementation arm of government less effected by political influence (no one is totally unaffected but hopefully better than now). You get people in the GP who are suitably qualified for the roles they hold without having to pander to vested interest groups etc.

This is unashamedly designed to put a buffer between the masses and the leadership of the country, hopefully allowing a rational consideration of the facts to dictate government decisions in pursuit of an agreed vision provided by the people.

The opportunity for such a radical experiment seems remote but that’s my idea for what its worth.

Expediency over Logic

So a little while back I wrote an entry titled My Child Your Taxes where I discussed the government’s decision to cut funding for early childhood education. I think their decision at that time was rational based on the likely economic benefit versus the cost to a government that is struggling to balance its books.

So yesterday it was disappointing to hear that the government has reversed its decision and is now going to continue to fund this sector at the current levels.

So what happened? Clearly in the intervening months the facts of the matter didn’t change, the need for this type of middle class welfare continues to be suspect, the economic benefit is still low to nil and the government certainly hasn’t become any wealthier in fact with the current state of the world it is probably looking at being poorer.

Clearly the vested interest lobby groups (ok that is clearly emotive and redundant language all lobby groups have a vested interest by definition) have done their work and succeeded in applying sufficient political pressure in an election year so that the relevant politicians have caved in.

Is this what we pay these people for? To take the path of least resistance. Isn’t caving in to a lobby group a form of Might is Right. You see given that the decision had been made and was logical people who agreed with the decision would not have felt the need to make their feelings known, therefore this argument becomes completely one sided as the politicians only hear the lobby group side.

And so what any way, if I lobbied for free ice cream on Fridays no matter how many people I could round up to support the proposal it still wouldn’t be a good idea. Any sensible leader at any level would be able to say no to such a request as it is fairly obvious that this is unlikely to produce any real benefit, other than the obvious short term ones of enjoying the ice cream. If the Ice Cream manufacturers came out in favour of the idea on the basis that this would increase employment in their sector and lead to a robust industry that would be the envy of the world. Would that help the argument? Again clearly not as we could see fairly readily that we were just providing a government subsidy in the form of a transfer from tax payers to ice cream manufacturers. And finally just because it would make the politicians popular (everyone likes “free” stuff after all) that wouldn’t make it good as again we could all see that it was really a bribe type of an idea from a political angle.

But this is exactly what has happened with the exception of the ice cream idea doesn’t have a “vulnerable group” to support. As an aside I am a bit over hearing about vulnerable groups, probably because I am never in one, which in one way is a good thing for me but as far as I can tell most people are. We have children no matter how rich and spoilt are always referred to as vulnerable if you cut government spending directed at them. Then there are the old (any one over 65 despite vast evidence to the contrary that most of these folk are anything but “old”) The sick, the disabled, youth, the unemployed, solo mums, working mums, women in general, low paid workers, any ethnic group etc If you want to be a successful lobby group you need to have some “vulnerable” people to support which is relatively easy because with a bit of PR effort anyone can become one.

And at the end of the day so what, leaders should lead for the good of the total community they were elected to represent, not cave into people demanding free ice creams.

Welfare

In common with a lot of other countries NZ spends a significant chunk of government money on direct hand outs to some of its citizens. I refer of course to Welfare payments in the broadest sense from Unemployment benefits to Superannuation Payments. Most Superannuation recipients don’t see this as welfare as if you ask them most will tell you they “earned it” through paying their taxes while they were working, but for the purpose of this I will ignore those issues for now and the wisdom of other benefits that people worry about, for example “dole bludgers” and “professional DPB recipients”.

What I do know for an undisputable fact is it costs a lot, specifically $22.9 bn or 31% of total government expenditure with the next two biggest being health at $14.4 bn and education at $12.3 bn making it not too far off the size of those two combined.

What do we get for this huge spend, well by and large we get people trapped in poverty and dependency because despite the large sums spent as a general rule living on a benefit is hardly the life of luxury.

And it is a lot of people specifically this many

Benefit Numbers
Unemployment 60,000
Sickness 60,000
Invalids 85,000
Domestic Purposes Benefit 113,000

Then there are approx 500,000 people over the age of 65 who are entitled to and therefore the majority of whom will be drawing superannuation. It is much harder to generalise about their economic circumstances as for quite a number the superannuation they receive is a top up for other savings etc that they may have. The value of paying people who don’t need it is a much debated topic and refers us back to the “earned it” argument again.

So what’s your point I hear you ask, well for one thing 22.9bn divided by 600,000 people is about $40,000 a person and that is a long way from what they actually get which I would suggest is much closer to about $15,000 but that’s not my point either. My point is being on a benefit is generally a bad idea and has all sorts of negative outcomes. I don’t propose to back that statement up I am just going to ask you to believe me on this one but a small amount of research on your own will undoubtedly confirm this fact.

So here is what I think is the most elegant solution a single universal benefit for every working age person in the country. Yup everyone, working, not working, rich or poor, sick or healthy, with or without children.

So first off we eliminate the majority of benefit fraud as other than pretending you are two people there are no other wrinkles in the system.

No more admin costs, well very minor ones to add people to the list at age 18 and delete them when dead but a relatively small task compared to the current system.

But the key idea is it provides a strong incentive to get work as nothing gets taken off you, every dollar you earn is yours to keep, whereas at the moment you end up with a benefit reduction when you work, giving you a low effective earning rate. This will provide the right signals and incentives to get people out of that benefit trap.

How do you pay for this I hear you ask. Well assume that we pay everyone $15k per annum then at about 3 million people to pay it will cost $45 bn. First of all we can use the money we are all ready paying the $22.9 bn which is half and then we need to increase taxes, yep sorry that is the only place money comes from, but hey if you are working then you will be happy to pay $15k more in tax as effectively nothing will change for you anything less than that would be a bonus and I think the cost would be lower but don’t have the data to work it out.

Get out and promote this idea with you local politician etc, it is contained within the working parties ideas and is the best of their proposals in my opinion.