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Insights 11: 1 April 2016
Take a look at our 2015 Annual Report
Communities of Care - How Canada welcomes so many refugees
Read Dr Oliver Hartwich's NBR column on the great British sugar scam

Delivering a future of work
Dr Oliver Hartwich | Executive Director |
What is the difference between a letter and a pizza?

Well, we have become used to receiving the former only three times a week. However, we expect the latter to arrive within half an hour of ordering, piping hot and ideally with free delivery.

We also prefer receiving pizza deliveries because the bulk of our mail is just bills these days.

Oh, and there is another difference: Letters are still hand-delivered by posties, whereas Dominos has just announced an experiment with delivery robots in New Zealand.

What both pizzas and letters have in common, however, is that their delivery will require less labour in the future.

In fact, that is the reason why NZ Post just announced the loss of 500 jobs. It is the logical conclusion from falling mail volumes as communication has turned digital.

So it is only appropriate that Labour is thinking about the Future of Work. For the past year, the party has been conducting its inquiry into the changes happening in our labour market. Good on them.

It is welcome that political leaders are addressing the challenges of a future in which, according to Labour, “almost half of all jobs are going to disappear”.

We need to face up to a reality in which the creative destruction of the market place, combined with new technological possibilities, will make whole professions and industries obsolete.

Unfortunately, Labour’s response to NZ Post’s announcement shows that much more creative thinking is needed.

In a media release, opposition leader Andrew Little said that the “Government can’t just stand by and watch as NZ Post cuts 500 jobs without having a plan to help workers through the transition and into new roles”.

Though an understandable opposition reaction against the backdrop of concrete job losses, such government intervention on a case-by-case basis is not what is needed to future-proof the labour market.

The real challenge is to provide people with the right set of transferable skills that allows them to move to the jobs of the future.

Sure, this is not the answer to those just laid off at NZ Post. But it still remains the best that government can do in the long run.

There is no doubt there will be jobs in the future. But they will be different from our jobs today.

Someone still needs to design, service and repair those robots and drones that bring our pizzas.

Those obscene bankers
Dr Bryce Wilkinson | Senior Fellow |
Eminent UK economist and Financial Times columnist John Kay reportedly believes that the global financial system is broken and that there is a simple remedy.

It is broken because bankers have lost the plot. They have, he alleges, become detached from servicing real businesses and people: it is “an industry that mostly trades with itself, talks to itself, and judges itself” against its own unworthy standards.

This populist diagnosis does not quite ring true. An industry can’t make profits by trading with itself; in that world, one bank’s revenue is another bank’s cost. Moreover, in New Zealand at least banks are closely involved in lending to private enterprise and homeowners. In January 2016, lending to New Zealand residents outside the financial sector accounted for 77% of our registered banks’ total assets.

In the case of the US it is clear that profits were being declared in part by advancing depositors’ and investors’ money to people to buy homes they could not realistically afford. This process was aided and abetted by well-meaning government regulations, government agencies Fannie Mae and Freddie Mac, and irresponsibly-assigned high credit ratings to the repackaged loans.

Kay’s simple remedy appears to be “harsher penalties for the individuals, not the corporations, who handle other people’s money, subject to criminal and civil penalties”.

Of course any sound system of voluntary exchange must have effective penalties for fraudulent behaviour. Kay’s proposal for harsher penalties for such wrong-doing has some appeal in this context, although the bigger problem may be the failure of regulators to prosecute fraud adequately in the first place.

Furthermore, a sound system must embody caveat emptor (specifically those who chase higher returns must accept a higher risk of loss). Bankruptcy is an essential discipline under a ‘for-profit’ system. The ‘too-big-to-fail’ philosophy that took root in the 1990s amongst regulatory authorities virtually guarantees irresponsible risk-taking in banking. In New Zealand the $1.6 billion bail-out of depositors in South Canterbury Finance gave a perverse signal to risk-takers.

In short, diagnoses that bash bankers likely don’t get to the heart of the real problems. But Kay is surely right to be deeply concerned both about the weaknesses in the current global system and the need to avoid adding to the perverse incentives created by poor quality government regulation and offensive taxpayer bail-outs for risk takers.

Ban trees and do it now
Jason Krupp | Research Fellow |
We should laud, not vilify, the actions of a Wairarapa school that has taken the brave step to ban students (and presumably staff too) from climbing trees on school grounds.

Management have quite correctly noted that trees pose a health and safety risk to those playing in them, and have acted wisely to shut down any possibility of this risk eventuating on their watch. New Zealand would be well-served to not only follow their example, but to take further steps to eliminate these kinds of risks altogether.

Think about it for a moment. You don’t even have to be in a tree for it to harm you. A falling branch or a piece of fruit could have deadly consequences for those unfortunate enough to be under it at the time. Worse still, trees are everywhere. I mean literally everywhere. A quick survey of my yard revealed three of the deadly miscreants lurking in a corner that I had hardly noticed before this story made headlines.

And a tree doesn’t even have to be an actual tree to hurt you, as any victim of a paper cut can attest. Let us not forget splinters. I dare say WorkSafe would be doing the nation a favour if it tallied up the true economic costs of prying tiny slivers of wood out of thousands of hands and feet each year. I’m also willing to bet that hammer-thumb injuries would all but disappear when we stop trying to drive nails into boards and planks.

That is why we, as a nation, need to ban trees, and we need to ban them now.

Sure, alternatives exist. We could assess the health and safety law against the actual threat that trees on a school grounds pose, and then look at remedies that allow children to vent their tree clambering urges safely. But that sounds hard, rational and like it would take a healthy dose of common sense. That’s clearly just not worth the risk.

On The Record
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