Wednesday 3 August 2011

Why I still can't take the Greens seriously

I love the Greens on civil liberties, or at least relative to most other parties and with a big caveat on their nannying proclivities with respect to tobacco and fatty foods. And they're good on copyright.

But their economic policy prescriptions...egads.

Here's their proposal for ending child poverty.

First, take a program that's meant to provide a wage subsidy to poor workers with children - Working for Families - and extend it to folks who aren't in work. Working for Families is defensible in theory, even if its current application has winds up having rather too high effective marginal tax rates, especially on second earners. But why wreck it by extending it to beneficiaries rather than simply increasing payments under existing social welfare programmes for those not in work? I can see the political reason for it: entrenching it as part of the now untouchable middle-class welfare. Extending WFF to those out of work would make it infeasible to run what I'd view as a much better policy move: strengthening the wage subsidy and eliminating the minimum wage.

Second, better study support for sole parents and beneficiaries. I'm not particularly opposed, but I'd thought that current student loan programmes that provided for living costs already filled much of the hole here.

Third, raising the minimum wage to $15/hr from $13. They say this is worth $60 per week for those working full time on the minimum wage; they're effectively assuming no or negligible disemployment effects of the minimum wage. Labour demand curves are presumably vertical from $13 to $15 per hour. Why not more than $15 per hour? Maybe the curve slopes beyond that point. If you want to help the working poor who have children, do it by making Working for Families more generous. The burden is then borne progressively through the overall tax system rather than falling on disemployed low wage workers and on those consuming the products and services of minimum wage workers; the benefits are also better targeted as they'd hit those workers with children.

Finally, minimum performance standards for rental properties. So landlords would be forced to insulate and heat their homes to standards North Americans would find liveable. It would be surprising if landlords didn't pass along at least some of the cost increase to their tenants: unless the supply of rental housing is perfectly inelastic, some of the cost increase will be passed along. And if demand for rental housing is less elastic than supply, the renters bear the bigger part of the burden. In the alternative, benefit levels could be increased such that tenants could choose to spend the extra money on a slightly better house or on warmer clothes for the kids. Unless we think poor people make worse choices than we could make for them, and the Greens I'd thought eschewed that kind of paternalism, forcing the poor to receive benefits in housing quality rather than in cash isn't likely to be efficient.

Rauparaha at TVHE says pretty much the same thing.

Choice among points on an equity-efficiency frontier; we can argue about that over beer. Policies that keep us inside the frontier just seem silly.

5 comments:

  1. "Working for Families is defensible in theory, even if its current application has winds up having rather too high effective marginal tax rates, especially on second earners. But why wreck it by extending it to beneficiaries rather than simply increasing payments under existing social welfare programmes for those not in work?"

    But why increase payments for those not in work? OECD-published research found that for every 1 percent child poverty was decreased by govt redistribution (social assistance) 1 percent more workless households resulted. This effect is partly produced by higher welfare payments correlating to more unmarried births.

    The Greens are proposing short term fix with the cost of long term harm.

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  2. @Lindsay: I took the goal as given - get more money to poor people today. I'd still sooner that be done primarily through wage subsidies than through minimum wages, and that straight cash go to folks unable to work rather than in-kind transfers or rather than extending the wage subsidy scheme to things that aren't wages.

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  3. >raising the minimum wage to $15/hr from $13.

    A question -- would a minimum wage of NZ$15/hr give NZ the highest minimum wage/per capita GDP ratio in the developed world? Even at $13, it's still much higher than any US state (the highest is Washington State, US$8.67 = NZ$10), despite the large per capita GDP difference. Australia has a higher min. wage, but the delta is smaller than the (now huge) difference in per capita GDP.

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  4. Economics aside (yeah, I know this is an economics blog) I also have concerns over the Green's approach to science and R&D, particularly as it relates to GM/GE research. I get the impression that there is an undercurrent of distrust for science within the Green Party. I find it slightly hypocritical that they should on the one hand vote against legislation requiring safety testing of new psychoactives, and at the same time wish to ban or heavily restrict GE research because of largely unsupported safety fears. If its ok for new drugs to be allowed onto the NZ market with minimal control why can't scientists perform research which may lead to valuable discoveries?

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  5. We can't afford short term gain, we are in the sh1t financially.

    The US has rightly brought to the fore the unfunded liabilities they have, but they aren't dealing to, we in NZ are no better.

    No, like a household who have overspent on the credit cards we need to lessen out outgoings.

    So the Greens like Labour are a threat to our future economically.

    All they see as the solution as spend more and tax those who already pay 97% of the tax anyway.
    Mike Mckee
    Seatoun

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