The lie about productivity and wages

The Productivity Commission has a new report out which looks at changes in the labour income share, or LIS, from 1978 to 2010.

The labour income share is described in the report’s summary as:

The labour income share (LIS) measures the split of national income between workers who supply labour and the owners of capital.

To a non-economist like me, that’s pretty much “how much the workers are getting out of their work and how much is going to the boss.”

The media release is pretty cheery about our labour income share:

“Even though the LIS has fallen overall in the measured sector of the New Zealand economy, the evidence is that the real wages firms pay their workers increase more rapidly when productivity growth is strong”, says Paul Conway, Director of Economics and Research.

“Over time, growth in real wages paid by firms in the measured sector was strongest during New Zealand’s period of high productivity growth from the mid-1980s to 2000 and much weaker when productivity growth was lower. Higher real-wage increases are also more likely in high-productivity-growth industries.

It sounds great, superficially. When productivity growth is high, we get the “strongest” wage increases. It makes perfect sense: obviously employers – being pure rational economic actors – pay people commensurate to their productivity. If you work harder, you get paid more.

But take another look at that first clause:

Even though the LIS has fallen overall in the measured sector of the New Zealand economy

And look at this, from the summary linked to above:

The LIS has recently been the focus of considerable international concern that growth in real wages has fallen behind growth in labour productivity. When this occurs, the LIS falls as the share of national income going to labour decreases and capital receives a bigger slice.

That is to say: even though workers are more “productive”, their income hasn’t increased in proportion to their productivity.

They’re working harder, but not getting paid more in return for it.

But the Productivity Commission urges you not to jump to any hasty conclusions:

While this work is mainly about the split of the income “pie” across labour and capital, it is also important to keep in mind the growth of the pie as a whole. For example, if productivity growth is fast enough, real wages could still be rising at a reasonable pace even when the LIS is falling. To the extent that income has an important bearing on wellbeing, this may be preferable to an economy in which the LIS is constant because real wages and productivity are both stagnating.

Ah, yes. Grow the pie. Ignore the fact your slice of it is shrinking in comparison to the bosses’.

There’s a bizarre implied threat there. Hey, workers, don’t get too antsy about the fact you’re not being fairly recompensed for producing more work, because you could be living in a dystopia where you get a fairer share but the owners are making less money!

So, what are the reasons for the globally-observed fall in LIS?

This fall in the LIS has been attributed to a number of influences, including new technology, globalisation and reductions in worker bargaining power.

New technology isn’t the problem – of course when you put Ellen Ripley in a power loader she shifts more stuff for the same effort – but “globalisation” and “reductions in worker bargaining power” are pretty telling. That means: we’re making more money exploiting labour in the developed world. That means: we smashed the unions so you have to settle for what your employer deigns to offer.

The Productivity Commission opines that this report “underline[s] the need for New Zealand to have a resilient and flexible economy which can adjust to new technology and help workers adapt to new jobs. The emphasis needs to be on adapting to change, rather than resisting it.”

But who else talks about making the economy more “flexible”? The National government, while pushing through law changes which undermine worker bargaining power.

I’m going to go with the PSA, which takes a different view:

Report confirms workers need a pay rise.

Repost: Employment law: it’s toasted

In an early episode of Mad Men, when the company’s going for the Lucky Strike account, sleazebag antihero Don Draper asks the client exactly how cigarettes are made. They talk through the process, mentioning the tobacco is toasted – and Don says, “there’s your line. It’s toasted.”

But, the Lucky Strike guys protest, all cigarette tobacco is toasted. There’s nothing special about the way Lucky Strike toasts its tobacco.

“Doesn’t matter,” Don says. “You’re the only people talking about it.”

Watching Mad Men explains a truly depressing amount about the success of John Key’s government.

Take their employment law changes: right now, they’re legislating away the right to a tea break, replacing the current mandatory minimum rest periods (two 10-minute breaks and one half-hour break for an 8-hour shift) with non-mandatory, “if your employer thinks it’s unreasonable they can take it away” rest periods. And the examples that keep getting cited are of teachers (those unreliable moochers) “just” walking out of a classroom when break time rolls around, or air traffic controllers “just” downing tools and letting all the planes crash.

The fact is, minimum breaks aren’t currently set to a compulsory schedule. The law does not say, “if you start at 8am then you must stop work at 10am for 10 minutes”. They’re a minimum level because some employers absolutely would make you work a twelve hour shift non-stop if they could (and probably pay you $2 an hour for it too.)

But you never hear about it. And because people are generally well-natured and assume their political leaders are well-natured too (and that their media is well-informed and analytical and will provide any necessary context) it just gets taken for granted that there must be a problem with our current break system. Because, well, the Minister says of course he supports regular rest breaks! National wouldn’t take them away unless there was a problem, right? It’s just giving people flexibility, and they obviously need flexibility, you can’t just have air traffic controllers wandering off and letting all the planes crash.

It was the same story around 90-day fire-at-will trials. Under the old law, employers could put new workers on probationary periods – longer probationary periods than the 90-day trials, even! The difference was, those probationary periods had to be genuine trials. Workers had to be given feedback on their performance, and still had basic work rights – unlike the 90-day trials.

But you never heard about it. And because people are generally well-natured, etc, it just got taken for granted that we needed the 90-day trial period. Because, well, they wouldn’t do it if it already existed, right? It’s just fair to allow employers to give someone a go, right? Why are you complaining about job creation?

It’s lying by omission, capitalising on people’s goodwill and faith that our government isn’t really an out-of-control pack of cynical profiteers, who rule for the rich and powerful and put no stock in ideas about wellbeing, community or anything besides the money they can get their hands on right now.

Watch for it.

(For a side-by-side comparison of the tea break rules, check Helen Kelly’s Twitter.)

Added: I’d already written this article when Mike Hosking’s diatribe about “just work hard and your boss will never exploit you” came out. Suffice it to say, I think if you’ve never worked in a role where your rest breaks were strictly scheduled, and you didn’t have to worry about how much you earned in your first job, you are a very, very privileged person.

Repost: Life isn’t fair. But it should be.

(Originally posted at On The Left.)

I was not an angelic child.

My mother has retconned her memory of my early years since I became an adult, and my grandmother delicately phrases it as “you were a little troubled”. The truth is I was a terror. When I thought something wasn’t fair, you heard about it. And when I was told “well life isn’t fair, Stephanie” it only made things worse. And louder.

These days, I blog.

It may be that Mum and Grandma only have themselves to blame. They raised me with far too strong a sense of justice, which revolted at any suggestion of accepting unfairness as an immutable fact.

Well before I could put it as eloquently as I hope I’m doing now, I knew it wasn’t good enough to say “that’s just the way things are” or “life isn’t fair”. If something was wrong, it was wrong, and importantly, it didn’t have to stay that way.

All the issues which resonate with me today – like workers’ rights, reproductive justice, poverty – are issues of justice and fairness. Because it isn’t just that workers be expected to exchange their labour for inadequate wages, and it isn’t just that people, predominantly women, are denied the right to choose whether they have children or not and under what circumstances, and it isn’t just that children go to school with empty lunchboxes while the CEO of ANZ gets paid $11,000 per day.

Those things simply are not fair. And I didn’t – and I don’t – care if life isn’t fair.

The structure of our society, the relationships we have with other people, and universal experiences we all go through – none of these things are set in stone, however long we’ve lived with them or how ingrained they are in our psyches.

So that was where I started, with a strong sense of justice and a belief that things can and should change.

That only got worse once I figured out the next step: those unfair structures aren’t accidental. The fact that they reinforce the power of the powerful and keep the oppressed oppressed certainly isn’t.

We live in a world designed so the powerful can maintain their power. And this is unjust.

This is the major reason why I’ve always been confused by the inherent conflict some people on the left see between “class politics” and “identity politics” (the second reason is because I think there’s a good case to be made that class itself is an “identity”, especially in the 21st century.) In the frame of justice, in the context of power structures conspiring to keep the majority down so the minority prosper in extravagance, we are all the same in the eyes of the powers that be. The only difference is that some of us are denied the fruits of our labour, and some of us are denied bodily autonomy (and get even less of the fruits of our labour), and many, many of us are kept hungry and desperate and alienated – far too preoccupied with the necessities of life to give a damn about deeper questions of political philosophy.

(There’s also the issue of intersectionality, i.e. the way the different oppressions and power structures of our society combine/multiply/reinforce themselves against many people.)

At the core, the oppressed are united in their oppression. It just takes different forms (and some of those forms are much worse than others.)

Of course reality is much more complex. The sad reality is that many people who are staunch activists on one axis of oppression can be pretty terrible on another (misogynist leftwing men, my god, you’re a problem.) And as someone who’s relatively privileged myself – Pākehā, cis, hetero, upper-middle-class, university-educated, currently able-bodied – it’s very easy for me to say “we’re all in this together”. So I’m not saying that. A lot of people have very good reasons not to throw their lot in with activists like me.

What I am saying is this: I’m on the Left because I do believe in justice. I know we can fight for it. I know life will always have its ups and downs. But by god, it should be fair.