Productivity

A pretty average editorial

Given the Southland Times broke the Israeli non-spy story after the Christchurch earthquake, that turned out to be just freaked out students wanting to get home fast , you can say it is one of the less high-brow among our nose-diving fourth estate.  There wasn’t much mention of the damage this accusative did to our ‘100% Pure Brand’ in Israel, or among Israeli Americans.

Now we all know that Fairfax, like the Horrid, only employs ’decent journalists, trained and skilled’.  Well today’s “A pretty average editorial” shows some true ‘genius’. There’s unintended irony for you.

“A pretty average editorial” gets the Campbell Jive violins out right at the start:

“The average New Zealand business with a turnover greater than $700,000 a year spends 21 per cent of it on wages. The dairy industry, just 7 per cent.”

You can see where this is heading.  Those nasty dairy farmers need to employ a lot more people so they can have shit productivity as, I don’t know , a provincial newspaper based in Southland:  Read more »

Has the worm turned?

Is the political worm turning at the Herald?

In politics, as in all spheres of life, timing is everything. Take the report into manufacturing released yesterday by the Labour, Greens, New Zealand First and Mana parties. When their inquiry began last October, times were uncommonly tough in the sector. Just last Friday, however, the latest BNZ-Business NZ performance of manufacturing index indicated that it was expanding at its fastest rate since 2003, and at one of the world’s highest rates. Equally, a tumbling exchange rate has eased many of the sector’s woes. In that context, the report’s talk of the killing of manufacturing seemed lame at best.

 

It smacked of a strategic retreat, a once over lightly, get it out of the way kind of report, that in a weeks time after the recess will be barely mentioned.  Read more »

Hide on solving poverty

Rodney Hide has written a much better columns for the NBR than the silly one in the Herald about trains. He begins with the prescription for ending poverty:

Ending poverty is easy: abolish income tax, remove all controls on foreign investment, eliminate welfare, get rid of the minimum wage and make employing someone simple contract law, i.e. no employment legislation, no Employment Court and no personal grievances.

The country would boom and there would be jobs for Africa.

Productivity would go through the roof.

Wages would skyrocket.

The majority of Parliamentarians know that’s true.

But they don’t do anything positive to assist the poor or to reverse New Zealand’s relative economic decline. Aaah, they explain, politics.

I could never figure out what that meant.  I was missing something. And I spent a great deal of time finding out what it was.

It’s this: there’s no cause-and-effect thinking in politics.

Deducing policy consequences requires a chain of reasoning that political reporters and most voters can’t be bothered with.  It’s requires thought and it’s hard.  I forgive the voters.  Their vote won’t make a difference to the world.  So why waste time thinking about policy impacts?

 

An extension of the Big Mac Index

ᔥ Conversable Economist

Orley Ashenfelter extends the Big Mac index to look at Wages…or as he calls it McWages…the wage rates of people in the same jobs across the globe. His conclusions are interesting, particularly the skewing effect of a minimum wage law:

Here is an illustrative figure. The horizontal axis shows the “McWage ratio”: that is, the U.S. McWage is equal to 1.00, and the McWages in all other countries are expressed in proportion. The vertical axis is “Hourly Output Ratio.” This is measuring output per hour worked in the economy, again with the U.S. level set equal to 1.00, and the output per hour worked in all other countries expressed in proportion. The straight line at a 45-degree angle plots the points in which a country with, say, a McWage at 20% of the U.S. level also has output per hour worked at 20% of the U.S. level, a country with a McWage at 50% of the U.S. level also has output per hour worked at 50% of the U.S. level, and so on.

The key lesson of the figure is that the differences in McWages across countries line up with the overall productivity differences across countries. The main exceptions, in the upper right-hand part of the diagram, are countries where the McWage is above U.S. levels but output-per-hour for the economy as a whole is below U.S. levels: New Zealand, Japan, Italy, Germany. These are countries with minimum wage laws that push up the McWage.

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