Midwives and pay equity: actually, it *is* sexism.

In the news over the weekend: midwives are taking a pay equity case.

Midwives drop bombshell with court action over pay discrimination

College chief executive Karen Guilliland said discrimination against midwives had actually worsened. “This claim has been almost 20 years in the making. The legal action will have global ramifications.”

Self-employed midwives typically look after about 50 expectant mums a year and are paid about $100,000 annually by the ministry, but earn an average of $53,000 before tax because of various expenses they have to cover as a business, and their wages do not increase to match their experience.

That’s a low salary. The starting rate for graduates coming out with shiny new business degrees is around $42,000. That’s for people who have little to no experience, and who are working standard business hours.

The College of Midwives has developed this set of comparisons (source – pdf 450kb).

Comparative incomes

Comparative incomes

It’s not just that midwives aren’t paid well. Their pay rates haven’t risen significantly for years and years. Since 2007, their pay has gone up about 2.5%. In that time, inflation has been around 17.5%.

Here’s a comparison with pay increases for other health professionals over that time.

Pay increases for midwives

Pay increases for midwives

No matter which way you cut, slice and dice it, midwives are underpaid.

Why does this happen? Well, I’m guessing that it’s like so many other female dominated professions: midwives are underpaid because they are women. It’s a classic pay equity case. The evidence is even reasonably clear. Back when medical doctors commonly provided maternity and delivery care, the pay rates weren’t too bad. But in 1993, midwives started to be paid the same as medical doctors for maternity and delivery care. More midwives entered the profession, medical doctors left, and pay rates stagnated (data available here: pdf 450kb). To me, that says that as men left the profession, it was possible to pay less and less and less, because women are paid less. That’s all there is to it.

Anyone who disputes the claim that women are paid less might want to take a look at some of Professor Marilyn Waring’s work. I especially recommend Counting for Nothing.

But what has our Prime Minister got to say about it?

Apparently it’s not sexism. It’s just that:

One of the arguments is, well at least the case that people put up, is is it because they are women that the pay is slightly less or is it because that’s what the job pays. It depends on which perspective you take,” Mr Key said.

So… women are paid less because that’s what they’re paid.

Expanding on that a little, he also said:

And it depends on which perspective that you take – so some professions which are dominated by men will have higher pay, and the argument is, is it because that’s what’s demanded of that particular job?

I’m finding it a little hard to work out exactly what he means,* but what I think he’s getting at is that jobs dominated by men are paid more because the job demands more.

But that’s exactly the point of the pay equity exercise. Midwives’ jobs are tough and demanding, but somehow, the job is not as well paid as other tough and demanding jobs that are typically done by men. Hence the need for a pay equity case.

And if that’s not sexism, I don’t know what is. I understand that Mr Key can’t admit that on air, but it would be good if he could at least demonstrate that he understands the nature of the claim that midwives are making.

On the positive side, he’s waiting for the court process to come up with an answer. So are we all.

Further reading:
New Zealand College of Midwives media release and supporting information
What do midwives get paid? at OHbaby

*NB: it’s challenging to come up with perfectly formed sentences live on air.

Posted in Economics, Employment | Tagged , , | 9 Comments

I hope IRD is looking at this

State houses at Arapuni. Source: Wikimedia Commons

State houses at Arapuni. Source: Wikimedia Commons

Reported in the New Zealand Herald this morning, a house which has changed hands changed hands four times in three months, and made money every time.

Sold four times in three months – price jumps $84,000

We don’t know how much money was involved on the last transaction. But here’s the transaction history.

First sale: Mrs SW sells her home for $475,000. She bought it in 2012, for $291,500. The gain on sale is $184,500.

Second sale: Mr XZ sells the house for $522,500, two days after he bought it. The gain on sale is $47,500.

Third sale: A trust sells the house for $559,000, four days after buying it. The gain on sale is $36,500.

Fourth sale: The property is sold again, for an undisclosed amount.

So are any of these transactions subject to tax? As a general rule, capital gains are not taxable in New Zealand, except that if something is bought with the intention of resale, then any gains are taxable.

The first sale is clearly not subject to tax. Mrs SW bought the house and lived in it for three years. So in as much as we can judge her intentions from her actions, it seems very clear that she didn’t buy the house with the intention of resale, so it isn’t caught by our current tax rules. Even if we had a full capital gains tax in New Zealand, instead of our current half-pie measures, it’s highly likely that family homes would be excluded from the tax. This is a standard feature of capitals gains taxes worldwide: family homes don’t get caught, or if they are caught, then they also get some very big discounts. So Mrs SW gets a tax free capital gains. NB: before anyone thinks that’s unreasonable, remember that she still has to live somewhere, and chances are she’ll be buying another house. She may come out ahead, but she may not.

But what about the second sale? Mr XZ has said that he bought the house for his in-laws, but they changed their minds. They didn’t like the area anymore because it had too many state houses in it.

Perhaps that is the case. He would need to provide evidence of that, because on surface, his actions indicate that he bought the house with the intention of resale. That’s the usual inference to be drawn when something is bought and sold so quickly.

So on the face of it, I think that second transaction is taxable. If Mr XZ has no oother income at all (unlikely, but let’s run with that), then using the standard tax scales, he will pay 10.5% tax on the first $14,000 profit, and 17.5% tax on the second $33,500, or a total of $7,332.50.

The third transaction will come under much the same scrutiny. Buying something, then selling it four days later? Again that’s a very, very prompt sale, and it looks very much as though the property was bought with the intention of resale.

The tax rate for trusts is 33%. The effective rate can vary, depending on how much income is distributed from the trust and to whom, but we don’t know anything about what has happened within that trust. So I’m going to run with 33%, which makes the tax on the second transaction something like $12,045.

So I think there’s something like $20,000 or so of tax to be collected from these transactions. Possibly. Depending on whether or not IRD can prove intent, or the vendors can prove that they just happened to have to sell the properties. One thing is for sure: it will certainly be worth investigating, especially now that it has been splashed all over the NZ Herald.

Posted in Taxation | Tagged , , | Leave a comment

Another tax increase, but it won’t be happening any time soon

Enrolment for taxation

Enrolment for taxation

Goods and Services Tax is a tax on consumption in New Zealand. It ought to be imposed on all goods and services as they cross the border, but in practice, it’s not, because often the cost of collecting the tax is higher than the amount of tax that would be collected. So government sets a collection threshold, of $60. If customs duties and GST amount to more than $60, then they’ll charge you, but if it’s less, then you get away scot free.

The government is looking at changing that threshold. And in effect, that means a tax increase. For example, say that the threshold is decreased to $10 of GST and customs duties. Currently if you import books to the value of say, $200, you pay no GST or customs duties at the border. Under the reduced threshold, you would be required to pay over $30 GST before you got your books ($200 x 15% = $30). Your tax has gone from nothing, to $30.

That’s quite a tax increase. And you have to wonder why it has suddenly become a priority for our government. After all, the problem has been known about for years, and retailers have been complaining about it for years, saying that it’s unfair that they have to charge GST, but overseas suppliers don’t, creating yet more barriers to running a successful retail business in New Zealand.

It’s the money. In their discussion document released today, GST: Cross-border services, intangibles and goods, the government estimates that it’s losing about $140million a year in GST on imported goods. And that figure is set to grow by about 10% a year. That’s a lot of government revenue, especially when that long promised surplus is looking more and more like a mirage.

The thing is, it’s not going to happen any time soon. It’s expensive collecting duties and GST at the border, and Customs’ systems are not set up to deal with lots of low value goods. So here’s what government is going to do: it’s going to do some more consultation.

Changes to the de minimis threshold
3.22 …Customs has been asked to look at options for simplifying and changing the level of the threshold, with a report to Ministers later in the year. This is anticipated to be followed by public consultation.

Well, that’s certainly being on the cusp of something special. Next year. Maybe. Or the year after. Or sometime, we hope. Possibly.

The thing is, I agree that we ought to be doing something about this loophole in our GST law. When we charge 15% GST on every cheap paperback bought in a store in the country, but we don’t charge GST on books imported from overseas, unless they cost $400 or more, then there’s an inherent unfairness in the system. And we need to do something to address it. But it would be good to see some concrete plans for action, instead of yet more consultation.

In the meantime, if you’re planning to get the latest must-have nerd-joy toy from thinkgeek.com for a friend for Christmas, then you should be fine. It looks like there won’t be any extra GST at the border for quite some time yet.

Posted in NZ Politics, Taxation | Tagged , | 1 Comment

The price of milk

John Key says that New Zealanders are paying perfectly reasonable prices for milk. Sub text: so everyone, especially the opposition, should stop complaining because hey, it’s all okay here and we’re on the verge of something special or whatever.

In Countdown supermarkets this morning, housebrand milk was available for $3.99 for two litres, or $1.995/litre.

Countdown milk

Countdown milk

In Sainsbury’s in the UK this morning, housebrand milk was available for £1.50 for two litres, or £0.75/litre.  At present, that’s about $NZ 1.62 per litre.

Sainsbury's milk

Sainsbury’s milk

In Coles in Australia this morning, housebrand milk was available for $AUD 2.00 for two litres, or $AUD 1 for a litre, which at present is about $NZ 1.07/litre.

Coles milk

Coles milk

Yes, there are all sorts of pricing wars going on, and in Australia some supermarkets are using milk as a loss leader to draw people in. The point remains: in a country which is a prolific producer of dairy products, it is more expensive to buy milk than in is in other comparable countries.

Posted in Economics, NZ Politics | Tagged | 3 Comments

NB: costs are not the only factor in rents

State houses at Arapuni.  Source: Wikimedia Commons

State houses at Arapuni. Source: Wikimedia Commons

A child died, and a coroner has argued that her death was due at least in part to living in a cold, damp home. Shamefully, her home was a state house.

The rental property stock in New Zealand, including state houses, is very, very poor. Many houses are cold damp nasty holes, and it’s no surprise that people living in them are vulnerable to life threatening illnesses.

The Labour party has proposed a “Warrant of Fitness” for rental properties, and they have resubmitted a bill to the ballot to achieve this.

But, Bill English says a warrant of fitness for all homes would drive up rent and push housing stock out of the market.

Really? Drive rents up? English seems to think that the only factor determining rents is landlords’ underlying costs. But that’s a mistake. We know that landlords don’t really mind making losses on rental properties, and that they quite happily wear extra expenses. After all, many of them are quite happy to leverage up their properties as far as possible, and pay large amounts of interest. The evidence shows us that landlords just pay up on expenses. Obviously, there is a relationship between expenses and rents, but it can’t be all that’s going on.

So what else drives rents?

Umm… (and really, this ought to be staggeringly obvious to Mr English and the (alleged) top-knotch business people in his party), it’s the MARKET.

If a landlord sets too high a price on her or his property, then the renters will go elsewhere. End of story.

And even if expenses do go higher than the amount that can be earned in rent, the all that will happen is that the MARKET will operate to drive some over-geared landlords out of the MARKET, which in the longer term might help to calm house prices down.

If renters can’t go elsewhere, because there isn’t sufficient supply of houses so they must simply pay the price asked by landlords, then there won’t be a problem with the rents being high enough to cover expenses either. And if that results in some families living in substandard homes, then perhaps the government might like to acknowledge that there has been a MARKET FAILURE, and they need to act.

Alternatively, we could take this as an instance of the MARKET performing perfectly, but not achieving the social aims that we think are important.

Either way, if we think that living in warm, dry homes is a social goal that we should be aiming for, then the case for government action is clear, and there’s nothing stopping it, except for Mr English’s on-going protection of landlords.

Posted in Economics, NZ Politics | Tagged , | Leave a comment

Tweeting the budget: what people are interested in

When the Budget was released yesterday, I quickly pulled together two tables of information, one about where government was getting money from, and the other about where government was spending money.

The breakdown of revenue was available directly from the government’s own budget fact sheet. This table simply puts the information in a plainer form.

Projected government revenue for the year ending 30 June 2016

Projected government revenue for the year ending 30 June 2016

The breakdown of expenditure is a little more difficult to put together. Government only releases the total expenditure on welfare in its fact sheet. To get the values for individual benefits, you have to go to the detailed information in Vote Social Development, released under “The Estimates of Appropriations”.

Projected government expenditure for the year ending 30 June 2016

Projected government expenditure for the year ending 30 June 2016

What I find interesting is the number of times that each tweet was retweeted.

The tweet on where government was spending its money – retweeted 20 times.

But the tweet on where government was getting its money from? Only one person retweeted that.

So very few people are all that interested in where government revenue comes from, and yet it accounts for half the Budget. Tax alone accounts for 46% of the Budget.

My inner tax nerd is very sad.

Posted in Economics, NZ Politics, Taxation | Tagged , , | 1 Comment

Budget advisory: where government gets its money and where it spends it

For the purposes of making commenting on the 2015 Budget a little easier, here’s some information about where government gets its money from, and where it spends it. This is taken from the 2014 Budget figures.

Most of government’s money comes from tax. This is the breakdown of government revenue from the 2014 Budget.


Government spends most of its income on welfare, health and education. The single biggest item of government expenditure is New Zealand superannuation.


Details on government revenue and government expenditure were sourced from the 2014 Budget page on the NZ Treasury website. The revenue and expenditure figures above exclude income and expenditure by SOEs.

Posted in Economics, NZ Politics, Taxation | Tagged , | Leave a comment