Disgusting, barefaced, manipulation of the day: Labour on Kiwisaver
I was browsing the Herald to keep abreast of national events when I ran into this new set of policies from Labour.
I saw they wanted to gradually increase the retirement age, and I was thinking “this is good stuff”.
Then I saw that they have absolutely no moral fibre and have decided to package a tax-savings change for Kiwisaver members as money for nothing. The moment I read this:
Employee contributions remain at 2 per cent, “because we know families are finding it hard to make ends meet right now, let alone save”.
However, employer contributions would increase by 0.5 per cent a year from 3 per cent in 2014 to 7 per cent by 2022.
I stood up and started swearing loudly at my workmates. Calming myself to the point where I was only enraged, I explained to people at work what they already knew – it doesn’t matter who pays the contribution/tax in name, as over time wages will adjust so that the incidence of the tax is different.
This isn’t a complicated idea, I remember racing through it in test while I was in secondary school and thinking it was one of the easiest things we have to cover. However, it is only taught in economics – and as a result, politicians can just blatantly lie about the impact of policy without the public realising. And f**k, people in the party have studied enough to know this – they KNOW they are lying to the public, but they are happy to do it because they want to get elected.
Lets look at this case. If as Labour says things are really a struggle for households, labour supply is likely to be very inelastic. This would suggest that a significant amount of the “burden of tax” would in fact fall on them. In essence, they are just increasing the minimum amount you have to put into the scheme to get your “sweeteners” back … which you are being taxed to provide in the first place.
This sort of rubbish makes me feel ill – it is deception, it is lying, and its straight out immoral. This is why I dislike politicians.
Update: Via Kiwiblog I see that they did sneak in an admission that it will impact on wages – look this is fine, but when you make your main selling point that you are increasing employer and not employee contributions, you make it sound like they have a different impact. Which they don’t.
How about, instead of packaging your policy in a way to trick people you are just honest about it – and then you will see if people actually want it. Its this thing called democracy.
An omission to discuss the tax incidence of a move away from universal superannuation makes you sick?! Even when you know that households will probably compensate by reducing non-Kiwisaver saving for similar national saving in the long run?
If households were told:
Then I would say. Ok, if that’s what people vote for that is cool.
No, what makes me sick is that they are lying about what the policy is – in order to get people to vote for something. That is deception … that is politicians … that makes me a grumpy bear.
I’m not convinced that voters take politicians’ promises at face value. I imagine the public trustworthiness of politicians is somewhere down with lawyers, used-car salesmen, and financial analysts 😛
Far better to think of it as a beautiful use of framing to suggest that a straight swap is actually a freebie. On that note, I need to discuss framing with you because I just read a paper about the fact/value dichotomy, suggesting that facts are only fetishised because of the success of the positivists in framing the debate to devalue values.
Indeed. But of course, such barefaced lying leads to real sensible policies also being tarnished – a unintended negative.
That paper sounds interesting. Does it talk along the lines that there is no clear line between “fact” and “value” – that nothing is really true – and as a result, all analysis is subjective?
I’ve heard that before, and I think as long as the argument is transparent we can say there are “levels” of subjectivity – so something more akin to a “fact” can be seen as less subjective than an implied value.
In essence, we have to make value judgments about what are value judgments – and we can only really do this through some form of internal deduction inside our heads.
No, it’s not a crazy post-modernist/verging on nihilistic bloodbath. It says that you can’t disentangle the two because even determining what is a ‘fact’ requires a value judgment. Then, if the two are entangled, why can’t you reason about many things that we regard as values? If you can reason about many values then the positive/normative distinction is a false dichotomy that serves only to prevent reasoned discussion of certain subjects.
I’m not sure that is too different from what I said in the above comment – at least the way I read it with my subjective interpretation of the words 😉
Although I would note that since a “fact” requires a “value judgment” does not imply that we can treat all values equally (which you didn’t say, its just if we only had fact and value as binary things this is the argument we might be making) – it really comes back to the idea of clear levels of subjectivity.
I see the fact/value distinction as useful, not for preventing discourse per see, but for dividing up areas of study (allowing for specialisation) and for determining confidence due to what “level” of subjectivity is involved in reaching the result.
“I imagine the public trustworthiness of politicians is somewhere down with lawyers, used-car salesmen, and financial analysts.”
While this may be true, no one really distrusts EVERYTHING a politician tells them. People may only trust 20% of what politicians say, in which case which 20% do they choose? Most likely the 20% they like. And getting more money from your employer for nothing in return is well liked.
Politicians know this, which is why they trot out the comforting lies. I dont think the distrustworthyness of politicians is a mitigating factor.
They’re not even lying, they’re just declining to flesh out some of the implications of their policy. Being annoyed by a partisan group presenting only one side of things is ridiculous. I wasn’t suggesting that they lie but just that people are wary of politicians’ claims because they know that they’re partisan.
It’s hardly a secret that they want to present their ideas in the best possible light, is it? I guess that’s why we have all the other parties and their supporters around to point out the holes. There are also independent commentators, like Matt, willing to do the job. It’s almost as if you expect Labour to highlight the costs of their own policies!
Presenting one side assumes they presented one side – which they didn’t. They framed things so they were open for interpretation in the wrong way, that isn’t a side that is manipulation.
If a private sector person did that, politicians would call them immoral – I thought part of the reason we trusted the social contract with politicians was because they were above that. Calling such actions disgusting isn’t ridiculous – its required.
Politicians would call you anything that they thought helped them get elected. I’m pretty sure the social contract isn’t with the politicians, which is why we have elections every now and then to hold them to account.
I suppose we’ll have to agree to disagree about the morality of Labour’s actions. I don’t find them in the least objectionable: it’d be nice if politicians were fair and balanced but their incentives just aren’t set up that way. We’re just lucky that people like you are here to set the record straight. It seems likely to be a stable equilbrium 🙂
Good points as always – so we need to develop the right institutions right … like an independent body to cost and discuss trade-offs with party policies 😉
Back in the preswinging sixties the approach to company super was simpler. They’d say you put in 5%, the boss puts in 5% that makes 10% each year. Do that for 40 years and when you come up to retirement you’ll have a nest egg of 4 years’ salary to fund choices. The notion of double digit inflation was something only foreigners suffered. Putting away 4% won’t come to much, will it? And for most Nz citizens there is no access to savings vehicles which give a tax paid return better than inflation, so no wonder there is such apathy. Not saying it’s right. But it is understandable and will remain so unless we get a change from the top
Muldoon said, don’t worry about that – the government would pay. And that is where we are now.
The idea of setting up a Kiwisaver scheme that was opt out made sense. The subsidies, and the random “employer” “employee” contributions were just a pile of crap thrown on to make the whole scheme something politicians could sell to make it look like they are doing something special.
So I don’t disagree with having Kiwisaver there to frame something different – but parties using it as a lolly scramble device, one where they promise things that are misleading especially, is a pain in the ass.
Don’t you think thats a bit pedantic Matt? They didn’t lie or mislead. If someone interpreted the statement as meaning that their long term wages would not be impacted, they mislead themselves, because that is not at all what the statement says.
Moreover, you completely got it when you said that over time wages would adjust. Thats right. In the short term there will be some stickiness. So, “because we know families are finding it hard to make ends meet right now” it is being done this way, which will spare the poor workers the full impact in the short term.
Anyway, putting the statement to one side, how do you feel about the policy? To fund superannuation by compulsory taxation or by pre-funded compulsory savings and investment.
I do find the arguments put up that households will simply substitute away from other forms of savings that they do a little bit immature. I mean, true, some will, and thats fine, because many won’t and the overall impact will be an increase in saving by those who otherwise wouldn’t and are the ones that need to be saving for their retirement. Its not as if overall savings levels in Australia fell after they introduced compulsory superannuation savings.
“Don’t you think thats a bit pedantic Matt?”
No.
“If someone interpreted the statement as meaning that their long term wages would not be impacted, they mislead themselves, because that is not at all what the statement says.”
Umm, they announced that they were doing it this way to avoid pain to households – how do you expect non-economists to interpret this? Non-economists are smart, but they aren’t accustomed to the idea of tax incidence, and are likely to view this statement as suggesting that it will be employers paying for them … people often see prices as magical, you have to be trained to think of prices in terms of a market and trade – it isn’t in our set of natural views. In this context, I can understand where these types of views come from.
And Labour is manipulating it here for the sole interest of trying to get elected – I’m not exaggerating in the slightest when I say that the abuse of asymmetric information makes me feel sick, angry, and generally grumpy.
“Moreover, you completely got it when you said that over time wages would adjust.”
And the policy is phased in at 0.5% a year … well below inflation, and so well within the range of normal adjustment.
“So, “because we know families are finding it hard to make ends meet right now””
Because the policy is being phased in … so the implication is that the reason for doing it is because they will still be struggling at that point.
“To fund superannuation by compulsory taxation or by pre-funded compulsory savings and investment.”
At least compulsion through tax (national super) is transparent and is for a “minimum living standard” – they are just trying to take out tail risk. Trying to force people to set up their entire retirement savings is at best social planning – and at worst a pain in the ass.
“I do find the arguments put up that households will simply substitute away from other forms of savings that they do a little bit immature”
And empirically true. And policy relevant.
“Its not as if overall savings levels in Australia fell after they introduced compulsory superannuation savings.”
Why would they fall in the face of compulsion? No-one said aggregate saving would fall – just that it would likely be misallocated.
Have you noticed that the biggest proponents of it in New Zealand are fund managers and their ilk … there is a good reason for that.
Throw into the mix the role the media could play in reducing information asymmetry. Why did no one ask Phil, that if employees have to pay a higher contribution to kiwi saver, wont they just pay people less?
And when John Key said in the same article “In the end it’s just revision to the same old Labour: more borrowing, more spending, more taxation, more costs on business…” Why did no one ask John to clarify his statement in light of the fact that his government has increased borrowing and spending.
Agreed. It would be nice if the media pushed to actually discover information, rather than sensationalising everything.
There are people in the media that do great work, but they just don’t have the hours in the day to deal with all this misinformation 🙁
Having the employer rather than the employee pay does increase the effective minimum wage though, so there is a slight difference.
Good point. Although I was under the impression that the minimum wage was only binding for a small number of people.
Also if that was their entire justification for it, they could have just increased the minimum wage by more – rather than trying to sell it as a general policy for everyone.