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Insights 45: 29 November 2019
Submission - Designing a Fair Pay Agreements System Discussion Paper.
Eric Crampton on why gender diversity in the boardroom won't always please investors.
Research Note - Ignorance is not bliss: Why knowledge matters.

MBIE seats the unions at the steering wheel
Roger Partridge | Chairman |
When the government presses ahead with incomprehensible proposals, you have to ask “Why?”

A classic example is the Ministry of Business, Innovation and Employment’s Discussion Paper, Designing a Fair Pay Agreements System. Submissions in response to the Discussion Paper were due earlier this week.

Instead of answering MBIE’s 98 “How to?” questions, the Initiative’s submission focuses on a missing 99th question: “Why we should not implement a system of fair pay agreements (FPAs)?”

In our July report, Work in Progress: Why Fair Pay Agreements would be bad for labour, we demonstrated that since compulsory unionism and the former industrial awards were abolished in 1991, New Zealand’s labour market record has been strong. Unemployment sits at 4.2% – compared with the OECD’s average of 5.2%. New Zealand has one of the highest labour market participation rates of any developed nation. And since 1991, we have enjoyed the third-highest rate of jobs growth in the OECD.

We also found that the case put forward last year by the Fair Pay Agreement Working Group did not stack up. Contrary to the claims of the working group:
  • The workers’ share of GDP has not fallen overall since the 1991 reforms; it has risen.
  • Market income inequality has fallen since the early 1990s.
  • Wage growth has not lagged productivity growth overall since 1991.
  • Wages have not fallen as a result of a race-to-the-bottom in any industry. Wages in every wage decile have risen.
Despite the evidence presented in Work in Progress, the MBIE Discussion Paper repeats every one of the working group’s discredited claims. And it adds a few more misleading claims of its own, including suggesting the OECD believes compulsory collective bargaining is likely to be good for productivity growth, which it does not.

Our July report also found that FPAs will be bad for just about everyone. FPAs bring significant risk of:
  • Slower productivity growth from locking in inefficient practices and reducing labour market flexibility;
  • Job losses where firms are unable to recoup costs of higher wages brought about by FPAs; and
  • Harm to consumers from firms who are able to increase prices to recoup higher wage costs.
These adverse consequences are likely to fall disproportionately on the low-skilled and on New Zealand’s least well-off.

The only winners from FPAs will be the unions. FPAs will thrust unions into the box seat in negotiating FPAs on behalf of all workers in any industry or occupation.

And there you have your “Why?”

A right to sustainable litigation
Dr Oliver Hartwich | Executive Director |
On Monday, Lawyers for Climate Action (LfCA) launched in the New Zealand Parliament. It was the silk-wearing equivalent of protesting school children. It also showed the same enthusiasm for handing government more power.

To be clear, protecting the environment is a laudable goal. But while a certain degree of naïveté may be endearing in young people, it is embarrassing for a profession that likes to call itself “learned”.

There was nothing learned in the LfCA’s call for a new ‘Right to a Sustainable Environment’ in the Bill of Rights Act. Its members should go back to Law School and take some jurisprudence classes.

The phrasing of their new proposed right goes like this: “Everyone has the right to a sustainable environment that is protected for the benefit of present and future generations.”

From a legal theory perspective, there is so much wrong with this, it is hard to know where to begin.

A good start would be to point out that bills of right typically protect citizens from the state. Historically, such lists of rights defended individuals from the coercive powers of the sovereign or government more generally. Lawyers call these protections ‘negative rights’.

In contrast, the right to a sustainable environment is a ‘positive’ right. A positive right makes it the government’s duty to provide something to its citizens. These are much harder to define. It is easy to compel government not imprison you without trial (negative right). But what does it mean, for example, to have a right to education? Is that kindergarten, high school or a doctorate?

Similarly, what is a ‘sustainable’ environment? It is in the eyes of the beholder. You will get different answers from Greta Thunberg or an oil magnate.

Bills of right are usually clear who is the bearer of a right. Superficially, the proposal grants a right to “everyone”. Yet, on closer inspection the right holders are the beneficiaries from environmental protections. These include people, some of whom might not have been born yet. This is muddled thinking which aims to give legal rights to people who cannot logically hold or exercise rights.

What is worst, this new right will supersede existing rights. The right to enjoy one’s property could easily be voided by the right to a protected environment. None of this would be predictable, making it a rule of law nightmare.

What the LfCA propose is thus a right to limitless billable hours for future generations of lawyers.

Once the lawyers are back from their jurisprudence classes, perhaps they should think about how one could also, and more effectively, protect the environment. Property rights, anyone?

One-up Australia
Luke Redward | Research Intern |
This week, opposition leader Simon Bridges announced he would introduce an elite anti-gang task force if elected.

Loosely modelled on Australia’s Strike Force Raptor, such a policy may be appropriate on the other side of the ditch. But this is New Zealand, and we can take stronger stuff than our Aussie cousins.
The Australians try to make life miserable for members of gangs. That includes harsh traffic ticket crack downs to enforcing liquor licenses on gang premises. That’s a good start but I won’t sleep better at night knowing that the Raptors are merely ensuring prudent payment of parking tickets. That’s nowhere near enough for me – or indeed New Zealand.
Okay, the Aussies have also targeted those lawyers still brave enough to represent gang members in court. They follow both the lawyer and their partners around, parking outside their homes and following them to work, ensuring no nefarious legalese is at play. Who would trust the criminal justice system in any case?
If Bridges’ goal is the eradication of gangs, we need to be much tougher than those Aussie sissies.
So how about drones for a start? Yes, Strike Force Raptor should have access to the latest technology New Zealand has to offer. I admit it, our latest technology usually means second-hand from America, but at least its new to us!
Why don’t we follow gang members around with drones? Better yet, why not sellotape tasers onto these drones to ensure prompt crime-fighting responsiveness with minimal life risk?
Why don’t we implant shocking chips into every gang member? That way, police can disable any gang member at the push of a button. Alternatively, why not develop it to detect adrenaline and shock the target automatically?
Better still, we need to be putting these chips into the gang member’s grandmothers! That way, we can ensure that if the gang member gets shocked, so too does grandma. What better way to deter violent gang action?
More comprehensive measures like this will make it clear that gangs are no longer tolerated in New Zealand, and no amount of well-meaning social development nonsense will stop the ever-growing threat they pose to the middle-class New Zealander.
Or maybe New Zealand needs to establish a giant penal colony somewhere else. Pity Australia is already taken.

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