Retrograde, Reactionary and Ignorant

The State of Labour

The Labour Party in New Zealand is in disarray--ideologically.  It has repeatedly shown that it is bereft of ideas, policies, and principles that engage with the real world.  This is what happens when a political party gets captured by minority interest groups: in this case, homosexuals, unions, and 60's-style feminists. 

Any policies or ideas, when announced, end up being strange or extreme.  Under such conditions politics becomes a very hard slog indeed.

The latest debacle is Labour's "wage policy".  It has been written by unions, reflecting a wishlist that harks back to the days of a controlled socialist economy.
  Its understanding of economics, markets, production, and growth appears to be non-existent.  It gets pretty bad when the left-sympathising NZ Herald feels compelled to slam dunk the policy and consign it and the Labour Party to the dog-house.

It will not be easy to take the Labour Party seriously at this election if it comes up with any more policy like the one announced on Tuesday. To lift the level of wages in this country it proposes industry-wide wage orders. When a union finds that some employers in an industry are paying less than others the union will be able to apply to a Workplace Commission for a minimum wage order. . . .

Then comes a paragraph detailing just how retrograde and how reactionary (and thoughtless and ignorant) Labour's wage policy is.

Any caucus member who imagines there is anything novel in industry agreements cannot have been around in the 1980s or earlier. National awards, as they were called, were one of the pillars of a protected, highly regulated, cost-plus economy. The modern world of competitive trade is quite different. To impose standard costs and working conditions on all competitors in an industry is not the way to help the economy generate higher incomes.

The editorial goes on to tell us that the policy appears to have been ameliorated  by "older, wiser" heads.  But this merely serves to underscore how the Party is now being driven and run by extremist groups.  After the election, which Labour will surely lose, the older heads will be rolled.  In place we will be left with a "gaggle of gays, feminists and unionists".  At this rate, Labour will become perpetually unelectable.

Older heads in the Labour caucus have tried to temper the policy, as is evident in the detail. When a union applies to the commission for an industry standard "agreement" any employer at risk of inclusion in the commission's definition of the industry would have the opportunity to make a case for exclusion.

All employers caught in the net would then have the chance to negotiate an industry standard agreement with designated unions. If no agreement could be reached, the commission would write a standard agreement for the industry that could cover pay rates, holiday entitlements, overtime and union rights.

There is nothing voluntary about an agreement made under that sort of duress. It's the 1970s' compulsory arbitration by another name. Labour argues for going back to the future because wage growth has lagged productivity increases, it says, since 1991, the year a National Government allowed employment to be an individual contract. It believes wages in Australia are higher because that country has preserved more collective bargaining.

Wages are higher in Australia for several reasons, such as mining and population growth, neither of which Labour appears to be endorsing. Inflexible working arrangements are probably not among the country's advantages.

The Herald then gives the Labour Party a lesson in Economics 101: labour and wages operate in a market--a market disciplined by the same forces of supply and demand that any other market must face.  There is nothing sacrosanct about labour--socialist fetishes aside.  Wages can only increase in the short term when demand for labour is stronger that its supply.  They can only increase sustainably or permanently when labour is more productive (producing more value per hour) than its competitor firms--whether in New Zealand or overseas.

A strong economy needs to let employers prosper wherever they can and compete for the employees they need. Wages grow when employers need more people with valuable skills. A policy for productivity encourages more investment in productive activities, and better education to equip workers with adaptive skills. It does not put industries back in a straitjacket for unions' sake. The country has been there.

Quite.  Those who will not learn from history are condemned to repeat it.  Let's hope they never get the chance to condemn the rest of us along with themselves.  The Labour Party deserves to be consigned to electoral oblivion.

Before we perform the last rites, however, we should consider how our current MMP system has brought this situation about.  Labour, as a political party, has been weakened by New Zealand's system of proportional representation.  In a future post we will endeavour to argue that the current electoral system tempts all political parties (over time) to electoral irrelevance--that is, to elitist, out-of-touch political parties, subject to capture by minorities and extremist pressure groups.