Please, Labour, stop trying to link everything to the Housing Crisis

Image

This morning, David Cunliffe’s Facebook account posted the above graphic with the following caption:

Part of fixing the housing crisis is increasing peoples’ incomes. That’s why I’ll raise the minimum wage within 100 days of taking office – then I’ll raise it again in 2015.

Now, I’m not going to get into the pros and cons of lifting the minimum wage. Instead, the question that came to mind for me was, “What has the minimum wage got to do with the supposed housing crisis?” At the risk of sounding elitist, are people currently earning minimum wage really likely to be even close to getting into the Auckland, Christchurch or Wellington housing markets? Raising the minimum wage will help pay weekly bills, not get people a 20% house deposit.

I know Labour’s seized on the idea of a housing crisis as an election year issue, but trying to tie everything to the housing crisis will only end up undermining their message.

Advertisements

3 comments

  1. I agree to an extent, in that Labour seem confused, but Wages & Rents (economic rent earned from unimproved value of land) are linked, which is in turn linked to housing affordability. Labour have just got Ricardo’s Law of Rents wrong. Wages increase only when Rents decrease, they will try argue their CGT is consistent, but unless they can bring down the price of land (where most economic rent comes from) then their min wage hikes & CGT are ineffective. Noting, that I have a Georgist bias, so I’d like to see productive incomes untaxed and land/resources taxed instead.

    1. Hi Ellipsister,

      Interesting point about Ricardo’s Law of Rents. It’s been a while since my economics papers at Uni, so I had to do some background reading to understand where you were coming from. Thanks for the forced impromptu study session!

      As to broader tax questions, from a general philosophical perspective I’d agree with the concept that taxes should be based on land and resources, rather than productive incomes. However, just in terms of minor adjustments to our existing tax system, I’d be rolling out a full Capital Gains Tax that includes family homes, so that all income is taxed, regardless of source. It fundamentally annoys me how our tax system is skewed towards investment in non-productive assets like residential real estate.

      JN

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s