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Insights 20: 2 June 2017
Unusual business in Switzerland in today's NBR
Roger Partridge on the Employment Relations Amendment Bill - Newstalk ZB
The Overseas Catch: The state of recreational fisheries management abroad

Waiting for affordable housing
Dr Eric Crampton | Chief Economist |
If the Government wants its announced increase to the Accommodation Supplement to do any good, it had better have some policies ready to help increase housing supply. Otherwise, landlords are likely to be the main beneficiaries. At least in Auckland.

Figuring out who really pays a tax, or benefits from a subsidy, is always trickier than just looking to see who writes or receives the cheque. It depends instead on the specifics of the market.

In places where it is easy to build new housing, accommodation supplements encourage more construction. Demand for rental accommodation goes up with the income boost, and more housing developments get underway. But in places where it is difficult or impossible to build, tenants simply have more money with which to bid against each other for scarce rental units.

Economists generally expect that the costs of a tax, or the benefits of a subsidy, are split between buyers and sellers, with the greater part of the effect felt by the side of the market that is less responsive to price changes. When regulation makes housing supply relatively inflexible, that means landlords receive most of the benefits from subsidies to tenants.

The theory held up well when tested against American housing market data. There, federal vouchers subsidise rents for lower income tenants. A study by Eriksen and Ross found that the voucher programme, on average, had no effect on what landlords charge in rent. But that masked huge differences across cities. In cities where new building was easy, the programme resulted in lower rents – and in tenants’ shifting up to higher quality accommodation. But where city planners made it hard to build, landlords instead hiked rents.

Citing advice from the Ministry of Social Development, Prime Minister English suggested his Government’s increase in the Accommodation Supplement will not affect rents. But he should be careful if MSD based its advice on the effects of the last large change to the Accommodation Supplement, in 2005.

Auckland’s sharp decrease in housing affordability since 2005 points to a city that has a harder time building to meet demand – and one where the Accommodation Supplement will have different effects.

The Initiative has a few ideas about how to let New Zealand’s cities grow. The government needs to act on it if the Accommodation Supplement is to do the job it is meant to be doing, rather than mostly lining landlords’ pockets.

Schools and social mobility
Briar Lipson | Research Fellow |
When the Programme for International Students Assessment (PISA) started testing 15-year-olds in 2000, New Zealand students ranked second in reading and third in maths. Ever since, our scores have perpetually declined. Set starkly against this, pass rates for NCEA level 2, the national qualification typically completed by 16 and 17 year olds, have risen relentlessly.

So what is the story?

PISA assesses how well 15-year-old students have acquired knowledge and skills deemed essential for participation in society. By comparison, NCEA measures students of all abilities in all learning areas, allocating credits and grades for skills and knowledge. Depending on who you are, PISA and NCEA assess markedly different things.

Should we be worried about these differences? The answer to this is ‘yes’, if you care about social mobility.

Between 2002 and 2004, NCEA replaced the traditional trio of School Certificate, University Entrance and Bursary. With its equal emphasis on academic and vocational programmes, NCEA puts course choices from nuclear physics to nail technology into the hands of teachers, parents and students. Then in 2007 the new New Zealand Curriculum was introduced. A high-level document, it leaves much of the selection of curriculum content to its teachers.

Together, these changes mean that school boards and teachers choose what courses are taught, and what content is included.

This system works to the advantage of schools and students with aspirational, knowledgeable families; they encourage and support their children to take on challenging courses. But in school communities with less ambition and understanding, students’ fate is in the hands of their teachers. On top of this, league tables rank schools on their NCEA pass rates. This inevitably puts pressure on even the most virtuous of teachers, to encourage certain students into ‘safe’ courses. Such courses may neither challenge nor stretch these students.

Taken together, NCEA, the New Zealand Curriculum and our crude school accountability framework are a recipe for disaster. It is hard to imagine a system more likely to accentuate the gap between our ‘haves’ and our ‘have nots’.

Usefully, PISA also tells us something about the relative size of that gap. In their measure of the difference in performance between the top and bottom ten percent of a country’s students, New Zealand ranked 69th out of all the 71 countries who took part. Could there be a more damning indictment?

Could it be that it’s time for a change?

Kentucky Fried Tragedy
Dr Rachel Hodder | Research Fellow |
It may not have caught your attention but New Zealand is in the grips of a tragic health disaster.

Is this a particularly deadly new strain of the flu? An Ebola outbreak? Flesh-eating bacteria?

No, this is a legal business sponsoring a sporting event. KFC have agreed to sponsor the Rugby League World Cup. A deal which a public health expert has described as a “tragedy for public health”.

You see, according to this expert, when something “inherently bad” is advertised alongside something “inherently good” the halo effect causes people to think the bad thing is actually a terrific thing.

Presumably this expert is referring to KFC as inherently bad and rugby league as inherently good. But surely that is a matter of opinion?

Sure, KFC is by no means a crucial part of a balanced diet. But what public health experts do not seem to realise is that people choose what to eat based on factors other than nutritional value alone. And I would argue with my dying breath that their Wicked Wings are indeed terrific, no matter what public health experts say.

And is rugby league really ‘inherently good’? As someone who is not a league fan, I struggle to see what is good about it at all. But to each their own.

Even still, I’m not sure why spending a couple of hours watching sport in front of the telly is something for public health experts to celebrate. And even the act of playing sport is not without its hazards. The 15,000 annual injuries from rugby league, costing ACC $16 million, could also be described as tragic, if we wanted to be melodramatic.

In any case, it is hard to believe that a bit of advertising is going to trick people into believing that Kentucky Fried Chicken is good for your health. The name alone does not exactly create imagery of health food.

The experts of course understand the more sinister corporate motive for sports sponsorship. They are apparently trying to give children a “life-long addiction to their food”.

But if that is the way it works then the solution to the obesity epidemic is simple. Take the current funding for public health research and use it to sponsor the next World Cup. A bit of sponsored advertising about healthy eating will easily trick children into a life-long addiction to spinach and brussel sprouts.
On The Record
All Things Considered
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  • In China ride-sharing apps face a new challenge from an old rival.
  • Is the West being killed by comfort?
  • Why were so many Manhattan Project scientists from Hungary?
  • It seems you can get a university degree in almost anything these days.
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