Closing the gap opens another front in the class war

For those with memories going back a few decades there are awful ironies in the appointment of former National Party leader Don Brash to lead a taskforce to advise the government on how to close the productivity and income gap with Australia.

The announcement was made by ACT leader Rodney Hide last week because the taskforce was a component of the ACT/National coalition agreement negotiated after last years election.

The ironies comes because it was the economic policies supported by Brash and Hide which accelerated the widening of the gap in the first place. It’s like using weasels to guard kiwi eggs.

Thirty years ago our wage levels were on a par with Australia and our productivity, the value of wealth created per worker, was also similar.

Now the OECD says that while Australia’s population is five times ours, their gross domestic product (GDP) is 7.2 times higher. Put baldly this means their output per worker is about 30% higher than for New Zealand. Hence the income gap which has now become a chasm.

Both Don Brash and Rodney Hide are right to dismiss the idea that the gap has arisen because Australia has vast mineral resources which have driven their economic development. “Plenty of countries with lots of resources are not succeeding while others with none are doing phenomenally well,” Hide said.

So what are the drivers of the gap? In the 1960s our productivity was similar (in fact a bit higher) than Australia. However our economy stalled somewhat from the mid 1970s as our greater dependence on agricultural exports to Britain was felt when Britain entered the European Union and left its immature offspring out in the cold.

This economic stall was exacerbated by the shift in investment from production to speculation in the heady days after the 1984 Labour government and before the 1987 share market crash. To use a rugby metaphor those with capital to invest took their eyes off the ball. They invested in share market bubbles while our manufacturing sector went to the wall through the dropping of tariffs and subsidies.

What started as a small gap became wider but looking at the data the break opened rapidly from the early 1990s and the explanation is simple. The single most important factor was National’s 1991 Employment Contracts Act which tipped the employment balance even more heavily against unions and workers, drove down wages relative to the cost of living and reduced incomes for New Zealand families. In the 10 years which followed, New Zealand businesses did very well but not by investing in capital development and improving productivity. Instead they made good profits simply from the relative fall in wages. They had an easy ride on the backs of wage and salary earners. Under Labour from 1999 the free ride for business continued. As Labour’s Finance Minister Michael Cullen pointed out in 2006 that “in the last few years company profits have increased at twice the rate of workers’ wages”.

There was nothing from Labour to address the gap with Australia although productivity did improve such that it averaged 1.3% in the eight years to 2008. In Australia it averaged 2% over the same period.

These developments are described by economists as “weaker wage growth” in New Zealand from the 1990s and “capital deepening” in Australia (the increase in capital investment per worker) to explain the main drivers of the gap. It would be more accurate to describe it as a victory for business owners over workers and the failure of those same corporate interests to invest here in productive economic development.

Australia never had an Employment Contracts Act. The closest they got was their former Prime Minister John Howard’s so-called “work choice” proposals which Australian unions fought and largely defeated. Hence throughout the past 20 years Australian workers gained a better share of the profits of their work while businesses there invested more to improve productivity.

New Zealand workers and unions have not recovered from the assaults of the last 30 years. Increases in family income have come from people working longer hours in lower-paid jobs and two or more family members working to bring in enough for a family to survive.

None of this will feature in Don Brash’s analysis of the problem. Instead his taskforce will almost certainly propose tax cuts for businesses (we’ll be told it’s so they have more to invest in increasing productivity) and growing business opportunities by part-privatising our remaining state assets and contracting out more of our public services to the private sector.

Proposals like these will thrill business leaders but none will reduce the wage gap. In fact they will have the precise opposite effect and that’s what this exercise is about. It will be used as an excuse to launch another attack on working New Zealanders and our public services.


Income inequality is the culprit in rising crime

Wasn’t it a breath of fresh air?

Chief Justice Sian Elias’s comments that we need to look at alternatives to putting more people behind bars was the opening of a door in a windowless bunker. It was a sudden relief after so long in the stultifying, claustrophobic atmosphere of irrational fear mongering which is our penal policy.

Her mild-mannered comments speak truth to foolishness. For too long discussion on penal policy has been dominated by populist politicians and the likes of the Sensible Sentencing Trust whose well-funded campaigns have fuelled public anxiety and driven the clamour for longer, harsher sentences.

Our main political parties are still competing to be the toughest on crime. The skewing of public debate has been extreme. The latest budget contained major cuts to such things as community education while funding for prisons increased.

Justice Minister Simon Power isn’t interested in the Chief Justice’s comments. He petulantly complained she was out of order and said it was the government’s job to make prison policy and the judiciary’s job to implement it. Fair enough in a dictatorship but a public contribution from an expert senior judge should be welcomed in a democracy.

A similar predictable reaction came from Act MP and Sensible Sentencing Trust legal advisor David Garrett. He says we should take our lead from the US and build more prisons and fill them with more prisoners. Instead of pushing comic-book penal policy he and Simon Power could learn from reading English authors Richard Wilkinson and Kate Pickett who have written a stunning little book called The Spirit Level.

They use data from the World Bank and official United Nations sources to examine the prevalence of major social problems in developed countries namely: violent crime, low education achievement, obesity, teenage pregnancy, mental health problems, drug use, etc. The authors compared the levels of these problems across the globe and have found that they are not related to poverty but to income inequality.

They pull together the results from a wide range of international research by sociologists and psychologists and provide a clear and compelling analysis as to why countries such as New Zealand have become broken with debilitating social problems. The correlation between each social problem and the level of income inequality in each country is startling. Countries with higher income inequality, such as the USA and New Zealand, have much deeper social problems. New Zealand stands out in a way that makes a mockery of our history.

The book tells us what most of us know intuitively: The rise in social problems over the past 25 years is related to the dramatic increase in income inequality over the same period. The rich are getting richer while the poor languish in relative poverty and develop the negative social statistics with which we are familiar.

When it comes to violent crime such as murder, the link to income inequality is dramatic and inescapable. The US is high on both counts and New Zealand is racing to catch up.

Garrett points to what he says has been a drop in violent crime in the US after the country began heavier sentencing. However the drop he talks about from the peak in the early 1990s is related to the period when income inequality decreased somewhat during the Clinton years in the White House. During George Bush’s reign inequality and crime went back on the increase.

The US which has had more experience of prisons than any other country (it has four times the incarceration rates of other developed countries) has learnt the least. There is nothing to emulate here. The consensus amongst prison experts worldwide is that prison as a deterrent doesn’t work and we know prisons don’t produce the outcomes we want. It seems clear it is high conviction rates which have the greatest impact reducing crime rather than long prison sentences.

Surely the last thing we want to do is follow the US path whereby in 2004 there were 360 people in California serving life sentences for shoplifting.

Prominent and respected American criminologist John Irwin says prison is generally believed to have four “official” purposes – retribution for crime committed, deterrence, incapacitation of dangerous criminals and rehabilitation. However he says three other “unofficial” purposes have shaped America’s prison policy. These are what he calls class control – the need to protect honest middle-class citizens from the dangerous criminal underclass, scapegoating – diverting attention away from more serious social problems caused by growing inequalities in wealth and income and using the threat of criminal activity for political gain.

Irwin could easily have been writing about New Zealand.

It’s been pleasing to see the reaction to Sian Elias’s comments has not been as negative as one might have thought. There is a vein of commonsense that runs through New Zealand and it’s to be hoped the real cause of rising crime, high income inequality, will be openly debated. But for the moment just savour the sweet smell of oxygen before Garrett and Power do their best to slam the bunker door shut once more.


National Standards debate goes pear-shaped

The debate over national standards in education turned pear-shaped last week.

The media waded into the fray with editorials across the country attacking school principals and teachers for their opposition to the publication of so-called league tables which would rank primary schools according to how well their children perform in testing to the government’s national standards.

Valid criticisms of government policy were sidelined in a flurry of self-righteous editorialising.

The Southland Times made the silly suggestion “…the battle here is shaping up to be whether children’s performance data should be kept hidden from parents”. This is the classic case of setting up a straw man to knock it down.

Every parent has the right to good quality information, in plain English, which tells them how their child is doing in all subject areas and how that performance relates to other kids. The information is already available through several national assessment programmes to give to every parent good feedback in a clear, accessible way. There has however been justified criticism that reporting at some schools has been vague and unhelpful. Most schools though have improved their reporting to parents and caregivers in recent years with positive feedback from families and this is to be welcomed.

The Dompost excelled in ignorance with this claim:

“…research project after research project shows that it is teacher expectations and teaching methods that have a greater effect on children than the homes they were born into and the decile rating of the school they attend”

The factors they point to are critical once the student enters the school gate but the best indicator of educational success for a child is still their family circumstances. Numerous attempts have tried to show otherwise but have failed.

Auckland’s New Zealand Herald claimed the high ground for parents with its comments:

“League tables are a perfectly legitimate tool from the parents’ point of view. A good school for their child is one where high standards are maintained and if the pupils come with advantages, so much the better. If some schools have to work harder than others to bring most of their pupils to the desired standards, so be it. Parents want results.”

Of course parents want results but the implication is that schools are patch protecting and keeping information from parents. This is not the case. Opposition to league tables has a strong educational basis. Whenever such tables have been published for primary schools, and they have in parts of Australia and the UK, there has been no improvement in educational achievement of kids but plenty of negatives.

A school’s reputation depends on test results so teachers have narrowed their focus to “teaching to the tests”. This means less time spent on building good learning experiences for kids because how the school is perceived becomes more important than giving kids the best education. Kids are the losers in this victory of style over substance.

Our local experience in New Zealand with secondary school results gives plenty of grounds for concern. Newspapers have for many years published tables to titillate readers with misleading information on how well schools teach.

It was irresponsible reporting based on league tables which saw hagiographic articles written about schools such as Cambridge High School where media praise was lavished on the school for years over its 100% NCEA pass rates. Newspaper editors praised the “inspirational principal” and wondered aloud why all schools couldn’t get the same results. It all turned sour when the school’s manipulative practices were exposed much later.

Avondale College was Auckland’s highest profile example of bad educational practice. Under principal Phil Raffles the school grew an impressive reputation for educational success and basked in the warm glow of media adulation while in reality the learning opportunities for many kids were sacrificed to improve the schools’ placing in league tables.

Bright students from across Auckland were encouraged to enrol and dominated the top stream classes while kids from the local working class community dominated H-block (referred to by other kids as the handicap block) where they were prevented from sitting external exams to prevent them polluting the school’s academic results. The school rocketed in the league tables but educational opportunities for hundreds of local kids were stunted in the process.

At the other end of the spectrum schools in low income communities have been repeatedly slammed by newspapers for their poor results. Public accountability for schools is important but praise and criticism based on superficial misinformation provided lazily by the media is a disservice to schools and parents.

And now the same newspapers, which lionised Cambridge High School and Avondale College while pillorying struggling schools are claiming the right to do the same with our primary schools. They can’t wait to get stuck in.

The simple truth is that the media cannot be trusted with test results for primary schools. They have proven this in the past and last week’s editorials show they have learnt nothing in the meantime.


Private hospitals – cream only please….

Health Minister Tony Ryall’s announcement last week of policy changes under which District Health Boards will have wider scope to contract private hospitals to perform elective surgery was not surprising. It was signalled well before the last election and follows National’s pro-private bias.

Most commentators have seen it as merely tweaking the arrangements Labour had in place whereby it kept the door open to the private sector throughout its decade in government. They say Ryall is just nudging it open a bit more to increase the flow of funding to private hospitals.

Previously DHBs were free to contract the private sector to meet elective surgery targets or utilise funding left over at the end of the financial year. Ryall however wants boards to look for longer-term arrangements which he claims will be more cost-efficient. He says this will help the public sector to meet its targets – getting more operations for less dollars.

Ryall is careful to say this is not intended to undermine public health. He says private contracts should only be agreed by DHBs where “the long term viability of their (the DHB) resource and delivery is not undermined.”

Senior doctors have pointed to the policy leading to a loss of staff from the public sector to better paying jobs in private operating theatres. It’s easy to see their point. How often in the last few years have we heard public hospitals cancelling surgery because of staff shortages? In some cases patients have been brought in for operations two or three times only to be sent home through lack of available staff.

District Health Boards have been silent on the government proposals. They won’t risk getting offside with their new minister. Green Party MP Kevin Hague, who was Chair of the West Coast DHB until last year’s election campaign has the credentials to comment with authority and the freedom to speak publicly. He is heavily critical of Ryall’s proposal and has proposed an alternative which would be cheaper and more efficient.

Hague points to the extra capacity which already exists in the public sector and how this could be more easily utilised if DHBs were forced to enter more co-operative arrangements to provide elective surgery. Currently each of the 21 DHBs runs its own booking system for surgeons, anaesthetists and operating theatre staff. Waiting lists grow when there are shortages but when there is spare capacity this goes to waste when it could be used to operate on patients from other DHBs.

The astonishing thing is that neither the Minister nor Ministry of Health officials know the overall utilisation rate of our public health surgical services. Tony Ryall was asked for this information at a select committee a few weeks back and couldn’t provide the answers. This is surely basic information he should have had before he authorised new surgical operating theatres to be built – in time for the 2011 election – and before DHBs offer contracts to the private sector.

Kevin Hague says that if he had his way our surgeons, anaesthetists and theatre staff would not be employed by separate DHBs but would be employed by a new national body (New Zealand Surgical Services perhaps) with the responsibility to allocate resources to maximise the use of existing operating capacity for the benefit of patients.

Ryall has told boards he expects more regional co-operation but this is a far cry from directing the resources of the health system to be fully utilised for the benefit of the public. He prefers to allow DHBs to engage in “patch-protection” and let the private sector pick up for the inefficiency in allocation of our national public health resources.

Meanwhile the private sector will hound DHBs and the minister for lucrative contracts to provide elective surgery. They want to do just the high volume, short-stay “…ectomy”-type operations which involve a couple of days in hospital and a tidy profit provided by taxpayers. If there are complications they will bundle patients off to our public hospitals for treatment.

It’s true Ryall’s announcement won’t represent a dramatic change from the present but it will weaken public health provision, strengthen private provision and increase pressure on more people to take out private medical insurance. This in turn reduces pressure on the government to fully fund public health provision.

DHBs with the public sector as their first priority should resist the pressure from those who simply want the cream from the top of the health budget but in the meantime Tony Ryall has serious questions to answer about the under-utilisation of our public health services.