Speech to Nelson Chamber of Commerce
19 April 2012
Nelson Chamber of Commerce
I'd like to begin with a question.
Are you familiar with the expression 'shadow yacht'?
I wasn't until I saw it described in a magazine article not long after the global financial crisis began.
A shadow yacht is a trailer yacht for your mega-yacht — a floating garage that tags along with your main yacht to carry your collection of helicopters, cars, motorcycles, jet skis and motorboats.
The point of the article was that examples of indulgence like this might not survive the meltdown.
It described a typical home for the super wealthy in Connecticut: eight bedrooms, a gym, theatre, wine cellar, staff quarters, game rooms, a Turkish bath, and a special room in the basement for grooming dogs.
And 26 toilets.
The year that article was written, one per cent of Americans owned 47 per cent of the wealth in that country.
We might not have the vast wealth of America, but if you look around, you'd have to say New Zealand is beginning to be re-made in that image.
Some people may see that as a triumph of prosperity.
I see it as a sign of failure.
A small number prosper, the vast majority don’t.
I don’t want New Zealand to keep heading in this direction.
I want us to become prosperous together and give everyone a fair share.
New Zealand has such enormous potential as a nation - that we really can be a place where anyone can grow up hopeful, with the future they dream of within their grasp.
Last month I gave the first of a series of speeches I'll be making about New Zealand's future.
I said I intend to lead a government that creates a new New Zealand.
I'll be setting out how we get there, step by step.
I have talked about the need to lift our educational achievement and the importance of science and innovation in creating more exports.
Today I want to talk to the New Zealanders who are doing the work but not reaping the rewards.
Here in New Zealand we have been working harder than almost anyone in the developed world.
But it's not paying off.
We are trying to succeed by squeezing more out of people, by paying lower wages than other countries and working longer hours than them.
When people tell me they’re actually working harder for less, I believe them.
Hundreds of thousands of honest individuals get out of bed each day and go to work, and they cannot get ahead.
Take the rest home cleaners who earn eleven cents an hour above the minimum wage doing a really important job - looking after our parents in the years in need.
They’re playing by the rules, doing their bit.
And yet how do they raise a family on eleven cents more than the minimum wage?
Take the skilled contractor or the owner of a small business who risks everything to raise the capital they need to buy equipment or a van, take on staff or subbies.
I want them to know someone is on their side, and to feel hopeful that our economy is working for them just as hard as they are working.
Or take a family I know about where one parent works in nursing and the other in IT. They can manage the mortgage and the groceries, but they are having to choose between a school trip or soccer camp.
They’re not expecting a super yacht, but they do expect to be able to offer their kids opportunities.
When we’re working harder than workers in other countries but earning less, it’s time to change.
Let’s take a look at some figures.
The average wage in 1989, in today’s dollars, was $21.49.
By 2011, it had reached $24.43.
But if wages grew as much as productivity for the twenty-two years up to 2011, then the hourly rate would have been $31.85.
That’s an extra seven dollars an hour, or $297 a week that the average worker earned but didn’t get paid.
How many people would be wanting to go to Australia as they are now in record numbers if we paid that?
Surely lifting everyone up must be the point of economic growth, or why do we bother?
That’s why we need to create a new economy - a clean, green and clever economy.
It’s now making a virtue of our low wage rates, calling it “New Zealand envy”.
It’s as if they want to make New Zealand a truck stop on the way to Mexico.
But there is another path that successful businesses in the twenty-first century are taking.
When I visit some of the smartest new businesses as I go around New Zealand I see them working cooperatively to get ahead.
Almost invariably I see management and workers intelligently demonstrating good faith on all sides and a recognition that everyone's in there doing their best. Everyone deserves to share in the rewards.
Tiwai point could have been an obsolete aluminium smelter decades ago, but it didn't work out that way.
That’s because management and workers at NZ Aluminium came together and looked at what they had to do to keep the operation running.
Through their ingenuity they began
producing the highest quality aluminium in the world. They
identified their niche, they got the business, they scored
and today everyone shares in the success.
They are well paid for working well and it’s an important business in a regional area.
Higher wages are a feature, not a bug in a new economy.
The message I want to give the thousands of New Zealanders who go to work every day, look after their kids and do the right thing, is this:
Labour will deliver for you.
Under Labour you will be our priority. We want the country to work for you.
Imagine if we could create a New Zealand where everyone could earn enough to provide a good living for their family.
That’s not the case now.
One emerging idea I’m interested in is the Living Wage.
It’s the amount a person needs to earn to provide for themselves and a family.
It’s started to catch on London since 2004 when the London mayor set up a unit that works out the Living Wage level each year.
Over time, as finances allowed, Council gradually began to pay the Living Wage level.
Now some businesses that contract with the Council have agreed to pay it too, whether they hire direct employees, contractors, or temporary staff.
The results have been encouraging.
More than four out of five employers believe the Living Wage enhanced the quality of the work of their staff.
Absenteeism fell by a quarter.
Two-thirds of employers said recruitment and retention improved.
The attraction of the Living Wage is that it’s a voluntary pathway, not enforced by law, to incomes above just the minimum wage.
A lot of businesses have found it’s a good way to show they’re actually good employers.
Even some of the giant global banks in London are signing up - like HSBC and Goldman Sachs.
Accountancy firm KPMG said that after they adopted the living wage, staff turnover dropped dramatically.
The idea now has cross-party support in the UK.
What the Living Wage recognises is that our workforce is changing.
We have to be prepared to look at new ideas.
In contrast, the government believes that by going cheaper and keeping the minimum wage low we will do better.
But last month we had the highest number of people leaving for Australia for better wages.
Our workforce has been hollowing out.
You see a small number of high paying jobs at the top.
A growing number of low-paying jobs at the bottom.
And in the middle - where there used to be good pay for doing good work - those jobs are vanishing.
Many of the jobs aren’t even permanent.
Many of them are being contracted out and casualised.
There’s no room for a living wage in a race to the bottom.
So as the number of low paid jobs has grown, the government has stepped in to top them up, with payments like Working For Families.
What we really need is for more people to be better paid, and for the growth in our economy to filter through to everyone’s incomes.
We need to imagine an economy where we say: Dammit, we can have a country where everyone has enough to live on.
We know the answer to this: Raise our productivity by being smarter.
We can’t cut our way to prosperity.
Zero budgets are what you get when you fail.
If we don’t have enough - and it’s clear today that we don’t - then we have to be thrifty. But we also have to figure out what we need to do to get ahead.
A few dozen new businesses that earn well in the international markets aren’t enough, we need hundreds of them.
You know well in this Chamber the difference that’s being made to your economy by high-value added companies that are exporting products built on your region’s natural advantages.
This government is not doing what's necessary to make that happen around New Zealand.
They need to be putting real firepower behind R and D. They're not.
They need to be giving the education system the resources it needs to be world class. They're not.
They need to be getting New Zealanders as excited about innovation as they once were about property speculation. They're not.
And they need, most urgently of all, to be looking at the ticking time bomb amongst our young people.
Since 2008 the number of young people out of work has soared.
They account for 43 per cent of our total unemployment - a higher share than in any other OECD country.
The number of 15 to 24 year olds who are not in work, school or training is enough to fill Eden Park - 20,000 more than there were 3 years ago.
This is a disaster for New Zealand.
Make no mistake - we will end up paying very dearly when we have to pick up the pieces down the road.
Every young person we lose is a productive member of the community lost.
Young people not in employment, education or training cost us about a billion dollars a year.
So why wouldn’t we invest in them before they become a burden? It makes simple business sense.
There are not enough jobs or training opportunities.
If they all turned up at tomorrow asking for a job - there wouldn’t be one for all of them.
But that’s not the whole story.
Some of them have little interest in getting one.
Some of them are drifting out of school with hardly any qualifications or skills and setting themselves up for only the most low-skill, low-paid job.
Their future from there doesn’t get much better, and yet one in five students has left school by the age of sixteen.
Stuart Middleton, one of our leading educationalists, says we need to start with those kids leaving secondary school with no qualifications.
We need to reach right down into those schools and get to the kids before they become a problem.
The way it works today is that if you have a classroom of thirty kids and one or two who are bored and disruptive, you just want them out of the school.
Those are the ones we have to get hold of and make sure they go into further education or apprenticeships, so that they don’t fall through the cracks and end up on the dole.
In Southland they set up a scheme to track young people after they leave school.
They keep in contact with them and work to get them into training, or jobs. School leavers aren’t just left to disappear.
As many as 10,000 young people are being ‘tracked’.
The mayor of Clutha says the program is “doing a brilliant job at the top of the cliff.”
A similar program is running in Otorohanga with excellent results.
Businesses have relocated to the area because of the support offered to employers and the resource of young, trained workers.
The proportion of youth responsible for resolved crime dropped from nearly half to less than a fifth.
Regions are showing leadership on these schemes.
The biggest problem is that only half the country has a youth transition scheme - and instead of supporting them, the government is cutting the scheme.
We need a comprehensive scheme for the whole country, so that none of our kids fall through the cracks.
Ultimately, it is self-funding. Instead of a billion dollar drain on our country, these kids will be contributing to it.
In a new clean, clever economy our kids will need many skills.
So today I am confirming it is a Labour priority to get every young person under twenty into skills training, education or employment.
And the centre-piece has to be apprenticeships.
Instead of paying young people to go on the dole, we should use it to subsidise businesses to take on apprentices.
For an employer, especially in a small business, taking on a new trainee apprentice can mean cost and risk.
The government has to help them reduce the risk, and provide an opportunity.
Look, we’re already paying the money. It’s better to pay it for working rather than sitting on the dole.
Let's give those kids a chance.
Let's get the country working.
And let's get the country paid properly for doing that work.
We don't have
to accept the rule that you survive by paying lower
or pushing people harder for the same pay, or moving jobs overseas.
How you get the economy growing again is you unhook your economy from the practices that get crushed by international competition, and move it into the high value niche areas where you can make a good living.
That's how you get an economy where, as we grow, the real estate agent, the local chemist, the courier driver, hairdresser, the bank worker and the teacher sees their income growing in return for their contribution.
People I meet, all around the country say the same sort of thing to me:
“I work hard, I’m pay my bills, I’m doing my best at raising my kids and playing my part in the community but who’s going to stand up and back me?'"
The answer is: Labour is going to back you.
When was the last time you heard the government talk about apprentices?
When was the last time you heard them ask if everyone is earning enough to live on?
When was the last time you heard this government say that their economic plans are for you?
The Government’s plan has more missing than it has in it.
It consists of selling off some bits of New Zealand, our assets, our productive farm land, doing deals for more pokie machines, looking after their cronies.
What we need are big changes. We need a clean, green, clever country where the world wants to live.
Above all we need to grow a new economy so that we all share in the benefits.
That’s the new New Zealand I want to create.
If you like the idea of a New Zealand where most people are struggling to get ahead and a happy few are wondering which of the 26 toilets they might use tomorrow, then we don't need to change a thing.
But if you think we can do better, let's get going.