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Marc My Words: You can’t pick an empty pocket

Marc My Words is published on Marc Alexander's website www.marc-alexander-mp.org


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You can’t pick an empty pocket

The Child Poverty Action Group published a report last November urging the Government to “stop discriminating on the basis of a family's income source”. In other words, treat beneficiaries no differently from low and middle income earners.

It might seem impertinent to ask why can't we discriminate on the basis of a family's income? There is a fundamental difference between money earned for work done and a handout provided through the hard work of another. Those who give up a portion of their earnings to subsidise others are deprived of a proportion of the reward for their work. The result is deprivation of their own family.

With respect to welfare benefits it may well be that there are some groups for whom we do want to discriminate favourably. Superannuitants, for example, are beneficiaries in one sense because the income paid to them is derived from other peoples’earnings; this is not strictly a benefit but a legitimate entitlement. Why? Because the portion taken in taxes will eventually be returned to future wage and salary earners in their turn. It is a justifiable mark of a compassionate society that the infirm, the unfortunate, the disabled and those unable to contribute to their own welfare should be looked after.

But what about those who choose circumstances that rule out their participation in the economy? Like - motherhood may be a wonderful thing but can it be assumed that hard working families trying to better themselves should subsidise someone else's personal decisions, at their expense?

Anti-poverty campaigners always make the same mistake: they assume that we can continue to disconnect the relationship between work and reward through higher progressive taxes, - redistribute earnings to those with less - pretend no one is looking - and we'll solve all these problems!

Rubbish! Rubbish! Rubbish!

The solution being touted is no solution at all. In fact the result is mostly self-defeating because economic punishment directed on our most successful drives them away - they soon realise that the anticipated rewards are not forthcoming. They are 'stolen' to plug up an ideological economic hole created by the approach to welfare. It explains why a quarter of our most highly skilled tertiary educated people have left the country; 464,465 Kiwis whose expertise is being enjoyed by other economies. Our brain drain is ten times worse than that of our trans Tasman neighbours!

By discriminating against of wage and salary earners, the very 'point' of work and its consequential wealth creation is lost. If it makes no difference whether family income is sourced from work or from a benefit, then how does this reinforce the work ethic? With amusements and distractions aplenty, boredom surely can’t be the raison d'etre! There are a number of basic things about civil society and until such time as we redefine ourselves we remain dependent on a healthy and robust economy. We need incentives to keep more from our own efforts if we want to encourage greater wealth creation. It shouldn't be the prerogative of Government to debate and decide who deserves to get either more of their own or other peoples’money.

Last year’s Working for Families initiative has exacerbated the problem: currently we have of low unemployment, high economic activity and growth; record commodity prices; tourism has exploded as our biggest export earner. We are also experiencing higher wages and salaries (although not throughout all sectors), pushed along by a dramatic skills shortage. Nevertheless, against the prevailing economic wisdom, the measures introduced in the last budget have increased rather than decreased the numbers of those who have become partial dependents on the state! The impact has been to further diminish the relationship between 'what you do' with 'what you earn'.

The effect of marginal tax rates dramatically narrows the gap between what two families earning vastly different incomes, take home. This blurs the traditional ethic of working for what we have and diminishes our aspirations to achieve.

Working for Families may have a laudable goal (is it really to support families?) but the means used to achieve it, undermines its purpose. A similar regime was introduced in Australia with disastrous results. In just two years 1.3 million Aussie families owed more than A$1 billion which the government then had to write off!

Governments have never been good at engineering the distribution of wealth. We already have a mechanism called the 'market' which has been responsible for the creation of the abundance that greedy politicians are now haggling over. The Working for Family initiative is actually a misnomer because no family will benefit through its own effort at all but through the generosity imposed on others by the Government’s magnanimous creation of dependency.

It gives no comfort to those whose drive, creativity and diligence will see them opt to move to other countries where they will be better rewarded. As for the rest of us? Those who remain will be all the more poorer for their departure.


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