Thursday, 27 April 2017

If you debate immigration and Winston doesn’t comment, did you have a debate about immigration at all?

The New Zealand Herald released an analysis and visualisation of immigration data from Statistics New Zealand this week. Most of the recent debate about immigration between National and Labour has centred on work visas, and whether too many migrant workers were coming into the country to take jobs away from hard working kiwis. Contrary to the belief of many, it turned out that “Chinese and Indian chefs” were not representative of the majority of work visas. The article reported that “despite China and India being among the biggest source countries for permanent residents, they are not among the top five for direct migrant workers.” The top five ended up being the United Kingdom, Germany, Australia, South Africa, and the United States, and so racists who claim that Asians are coming and stealing all the jobs might be, well, wrong.

Harkanwal Singh and Lincoln Tan put a lot of work into this piece. They both clearly explained the data in the article and presented the data through interactive visualisations to communicate clearly with different audiences. They interviewed diversity expert Paul Spoonley from Massey University to provide additional context to the data. They interviewed an immigrant health worker to humanise the data and show the tangible effects of recent policy changes. They did a good enough job that the editor decided to make it the front page headline.

Then Winston Peters heard about it. You can imagine him making his best impression of White Island, with hot smoke coming out his nose and ears, furious that the media was reporting that immigrant workers might not be all Asian. Obviously, this was unacceptable, and a press release had to be written and published! His criticism came in two parts:

“Asian immigrant reporters”
Harkanwal Singh is from India and has been here for 9 years. He has probably single-handedly made the largest impact on data journalism in New Zealand, ever. He’s the data editor at the Herald and runs the Insights section, and supports the broader statistics and data visualisation communities. (Disclaimer: I know Harkanwal and have done some work with him before). Lincoln Tan is from Singapore and has been here for more than 20 years. He’s been a journalist for the Herald for over 10 of those years and written hundreds of articles, leading to a Canon Media Award in 2016 for Best General Reporting.

So sure, Winston is right in his press release that Harkanwal and Lincoln are “Asian immigrant reporters”. Even though he doesn’t say anything explicit beyond this, it’s obvious that he is attacking their credibility by implying that they have some bias or vested interest when they report that the “top five source nations for migrant workers [are] not Asian”. He makes it a bit clearer later in a phone call with Newshub saying “you have two immigrants themselves as reporters for the Herald writing what is clearly misleading information [and] headlining it on the front page”.

What Winston is doing here is actually undermining immigrants so that they can’t discuss or argue about the issues that affect them. He’s trying to disqualify the immigrants from the debate, and that’s not going to be good for our democracy if smart and well-intentioned people who try to provide facts and analysis are marginalised for their ethnicity or migrant status. This is further confirmed when he says in the Newshub call “they’re like the New Zealand Initiative, who are majorly immigrants themselves, and they are heavy into being pro mass immigration” in reference to their immigration report released in late January this year.

The fact that these two particular migrant reporters have contributed massively to New Zealand journalism doesn’t matter to Winston. The fact that they have been in New Zealand for a long time and are productive members of society doesn’t matter to Winston. The fact that they are reporting on verifiable data that come from a government agency doesn’t matter to Winston. They’re migrants, and that’s sufficient to call the reporting “propaganda”. That’s just lazy racism, and we have to expect better if we want the immigration debate to go anywhere.

“Completely wrong and based on flawed analysis”
The primary substantive complaint from Winston is that the Herald article is based on Statistics New Zealand data for Permanent and Long Term (PLT) arrivals and departures. It turns out that this data is derived from “arrival cards” at (air)ports, rather than the actual number of visas granted. Apparently, the Ministry of Business, Innovation, and Employment (MBIE) has this data, so the Herald article is therefore “rubbish” according to Winston.

As much as it pains me to admit, Winston does have a point here that is tarnished by his personal attack on the journalists. The MBIE data may be a better indicator of where migrants are coming from than the Statistics NZ data since it’s based on the actual visa numbers. To call the Herald analysis “defective” is harsh though; the analysis is accurate and still informative based on the official Statistics NZ data available. It’s also unfair when we consider that politicians regularly quote the Statistics NZ data when braying on about “record immigration”. In fact, Winston has used the same source himself for net migration statistics. He used that Statistics NZ data on the same day he criticised the Herald for “creating confusion and spreading misinformation” for not using the MBIE data.

Just as an aside, Winston’s arguments seem suspiciously similar to the ones made by Michael Reddell (published on his blog and in the NBR). In that article, Reddell closes with a plea for MBIE to “markedly improve” access to this data, saying that “good timely data just aren’t made easily available”. This data is only published once a year, while Statistics New Zealand publishes data monthly. It certainly helps explain why no one else has been using this data.

This particular Herald article was based on PLT data, and maybe more articles can be written based on better data. That’s not necessarily a bad thing; the Herald article still represents an improvement in analysis and data visualisation for the immigration debate beyond what we had before. The immigration debate is hungry for better data beyond anecdotes, for better analysis beyond preconceived assumptions, for better discussion beyond “record net migration”. Politics only exists when we cannot agree on what the correct answer is, when we are in the face of uncertainty and imperfect information, when the decision maker has to make a judgement call. Perhaps if we can find it, better data can be used to inform policy too.

Tuesday, 13 December 2016

Hateful Language

Last Monday, Gareth Morgan decided to release his new tax policy that would introduce a tax on "productive assets". This short post isn’t about the details of that policy and whether it would work or not. It’s about the rhetoric used in the discussion of that policy.

It started with the Paul Henry interview on Thursday. Morgan called Henry a “tax loophole cowboy” and Henry responded by calling Morgan a “wowery socialist”. At one point Morgan dismissed Henry with a casual “Don’t tell the economist what a reverse mortgage is mate,” and Henry accused Morgan of wanting a “socialist state”.

Then Jamie Whyte got into the mix to criticise Morgan with “Perhaps Victoria University did not cover the difference between consumption and income when Morgan was studying for his PhD.” Later, Gareth Morgan responded with “He's a moron like all libertarians” and also “Whyte is an economics ignoramus, as is Henry.” He later said that Whyte was an “Economic illiterate as is most of Far Right.”

To other people who have disagreed with his proposal, Morgan has said things like “Try Econ 101 b4 u blab” and “do your homework dickhead.” It’s only funny in the context that Morgan also said “abuse is lowest form of intellect. Try counselling.”

This is the stuff of Stuff comment threads. Name calling and abusive rhetoric gets in the way of having proper policy discussion. Morgan’s straight-talking vibe is something that probably makes him an attractive candidate for some, but it also makes him a divisive candidate who seems to refuse engagement and just dismisses opponents instead. It doesn’t help people have a meaningful discussion about his policy, and it certainly doesn’t help make the policy any better.

I wish we could elect politicians purely on their policies, but how they act and behave is just as important. They have to be role models for our society, and the more that they act like petulant children, the more our country sees that this behaviour is okay and emulates it. That's not how I want our society to turn out. We can do better.

Monday, 17 October 2016

Civics, Citizenship, and Political Literacy

New Zealand is generally considered to have a healthy democracy. In comparison to many other countries, our democracy is relatively stable, trust is pretty good (we’re ranked 2nd for corruption perceptions in the OECD), and our government is reasonably accessible for most people. I’ve left a lot of qualifiers in there of course, because there has been a growing feeling that perhaps not everything is as rosy as it should be. We’ve always known that the youngest voters (18-24) are least likely to be enrolled to vote (around 65%), but actually, over the last three national elections, enrolment rates in every age group have dropped, most significantly in the 30-34 age bracket. With 78% overall turnout at the 2014 election, it’s a far cry from the 90%+ turnouts of the 1980s. While New Zealand scores close to the OECD average in assessments of civics understanding at the Year 9 level, we have the largest inequality of civics knowledge – some students know a lot, but others know very, very little.

Voter turnout is often taken as a proxy for active participation in our democracy. If people do not vote, then the likelihood of them participating in our democracy in other ways is likely to be low. 27% of non-voters at the 2014 election fell into the “lack of interest” category, with reasons such as “can’t be bothered with politics or politicians”, “can’t be bothered voting”, and “makes no difference who the government is”. These issues have been highlighted recently by low voter turnout in local elections, with barely 40% of eligible voters casting a ballot. There has been a loud sentiment that it is ridiculous to ask people to pick 6 strangers out of 8 unknown candidates, with many voters selecting candidates based only on the candidate statements provided in the pamphlet, how aesthetically pleasing they look in their candidate photos, or in the case of a family friend, “the names I could pronounce” (“Soarbit? Too hard, no vote.”) What is the point of a democracy if the decisions are uninformed, unjustified, and uninspired?

With this backdrop, the New Zealand Political Science Association recently held a workshop on Civics, Citizenship, and Political Literacy at Parliament, hosted by a cross-party working group of MPs. I’ve tried to very quickly summarise and group the points made by the various speakers, although I may have injected some of my bias when taking notes (sorry) or paraphrased what people said (sorry again).

Political literacy, the ability to understand the political debates and decisions critically and make informed choices to take action where necessary, is not something that we can measure directly. Angus MacFarlane from the University of Canterbury said that “we presume that if people are politically literate, they understand party differences and facts about our political system”, but in reality, that’s not enough. While voting is important, practising active citizenship goes further to include debate, advocacy, and protest. David Wilson, the Clerk of the House, said that public input into the select committee process leads to improved legislation, and better laws are something that we probably want. Bryce Edwards of the University of Otago said that “civics education isn’t just Parliament and it’s not just voting, it’s about civil society and true participation.”

What about the role of schools in improving civics understanding? The Electoral Commission said that “enrolment and voting is a habit that needs to be formed when young.” The Education Service of Parliamentary Services said that rather than throwing facts at students, we should be drawing ideas out of them. The New Zealand Council for Educational Research said that too many people still think that education is “learning about stuff” (i.e. facts-based) and that areas like civics need to be more focused on skills. Bronwyn Wood from Victoria University said that when students grow up in undemocratic environments, in schools where they are disempowered and do not experience transparency or accountability from the power structures around them, what hope do we have for them having hope that the system will work for them in the real world? Josiah Tualamali’i of the Pacific Youth Leadership and Transformation Council said that “schools don’t trust us to make decisions”, and NCEA doesn’t give students a visible opportunity to make democratic decisions.

The volatility around democratic participation will only worsen as New Zealand’s demography and equality continue to change. Bronwyn Hayward from the University of Canterbury said that there are strong ethnic and socio-economic differences in civic participation, with varying expectations and abilities to participate. The Clerk of the House said “people may not know that they have a right to have a say”, and that we need new ways to reach out to marginalised groups. Shilanka Smith of Fusion Virtuoso posited the question: how do our existing ways of citizenship disempower new members of our society? Education in the classroom is one thing, but adults have to lead by example to show how to be an active and inclusive citizen. Josiah also brought up the growing number of people who experience a cultural deficit, perhaps most significantly the increasing proportion of young people considered “2nd generation” New Zealanders, trapped by the diaspora between their ethnic heritage and their new cultural home, yet largely unrepresented in government or politics. Maria Bargh of Victoria University said that we need better education of civics, which despite what many schools seem to think, is not just about the Treaty. Improving political and moral literacy through history teaching can lead to better race relations, and we need better incentives and funding to teach NZ/Māori history and politics.

What should we target when trying to improve civics understanding amongst our population? Iati Iati of the University of Otago phrased the challenge in a different way – how can we find ways to show people what they have to lose if they do not participate? Many people in marginalised groups, including Māori and Pacific Islanders, tend to believe that there is nothing that they can do about government and that they are not affected by acronyms like the GCSB or the TPPA. Everyone needs to understand that they have “skin in the game” so that they are motivated to act in their interests. Wendy McGuiness discussed the critical role that grandparents and parents play in fostering an understanding of civics and politics; parents used to be a primary source of news/information for their kids, but nowadays as social media has increasingly become the leading news source a massive disparity has formed between people of different education levels and socioeconomic backgrounds. Katie Bruce of JustSpeak said that we can’t learn to be active citizens by just sitting and listening. Students don’t necessarily need to “learn” citizenship, but need to be given opportunities to live and experience it! By starting with the issues that young people care about, the political literacy and civics understanding will follow. The Ministry of Education also argued that civics education is not just the facts, but actually doing it. Teacher confidence is key because it can be risky to discuss controversial topics (no teacher wants a visit from a conservative religious parent demanding to know why Timmy had to discuss LGBT rights in the classroom). There needs to be some improvement of that capacity to provide informative yet safe education on the difficult issues that we ultimately face in the real world.

Patrick Barrett of the University of Waikato said that “there is perhaps a sense that there is some discrepancy between our democratic aspirations and the reality.” It seems that we have long known that there is a civics understanding problem, as evidenced by many, many, many articles and many studies, yet not enough has been done about it. As we head towards the 2017 national elections, there is a chance for us to leverage that context to better engage with students and superannuants and everyone in between. Perhaps there are two main plans that can be actioned. Firstly, the top-down academic route, where universities and other public sector organisations can help support teaching capacity by providing professional development opportunities and support local curriculum development. Secondly, the bottom-up charity route, with grassroots organisations running workshops in schools and communities to improve accessibility to civics education resources and opportunities. 

As a representative of UN Youth, I argued that making students come to us does not make civics education accessible – it is just another barrier that makes it easy to pass off civics as an extra-curricular activity or something only for the “smart” or “outspoken” kids. Particularly for the marginalised and disenfranchised segments of society, there is no impetus, no motivation to actively seek civics understanding because there is no perceived value. We need to go out to the schools and communities and make it as easy as possible for students to access civics education, a sentiment echoed by many speakers during the workshop. Bryce Edwards’ quip that “maybe we need to hire a bus next year and drive it around New Zealand” may not be as silly as it sounds.

Monday, 26 September 2016

The Right to Know

This post originally appeared on The Co-Op, a blog of young(ish) writers of varying ideological and political perspectives.
On Thursday I went along to a panel discussion for Gavin Ellis’ new book, Complacent Nation, also with Toby Manhire and Mihirangi Forbes. The book is about the role of media, journalism, and politics in eroding our ability to seek information about what our government is doing. Part of the book and the talk centred on the concept of “the right to know”. Ellis argues that every citizen has the right to know the important information that we need in order to function as a citizen of our society, yet increasingly our media is saturated with celebrity gossip and trivia.

It often feels like everyone is decrying the decline of journalism, with the rise of clickbait and low-quality news. In fact, a very recent analysis found that almost half of the New Zealand Herald’s online articles were syndicated, most commonly from the Associated Press (which is probably okay) and the Daily Mail (maybe less so). Part of this is blamed on what Ellis calls “technology” - analytics-driven newsrooms that craft articles and change headlines based on what is or isn’t producing clicks. With clicks and impressions of advertisements responsible for the majority of digital revenue for news agencies, it stands to reason that managers are seeking efficiency – getting the most clicks for the least amount of work. I don’t blame this on technology, just economics. Maybe the technology is enabling the economics to be applied faster, almost in real-time, but it’s still the underlying economics that are causing the shift from “real” news to “junk” news.

When it comes to economic theory, the managers can easily argue that the shift is market-driven. Clickbait only exists because it is so effective at attracting the attention of readers/viewers, and “junk” news is only disseminated because it is consumed so vociferously. This is the other side of the right to know – what we want to know, that frustrates intellectuals because we can only consume so much information and our insatiable appetite for “junk” news gets in the way of “important” news. When the public is more interested in the Real Housewives of Auckland than the water contamination scandal in Havelock North, it can be argued that the public checks and balances of the democratic system may be compromised.

Everyone needs someone to blame; journalists blame their editors and managers, managers blame their capitalistic overlords, ivory tower academics blame the government, the government blames the apathetic public, Grammarly gets grumpy at me for using too many run-on sentences, and the public writes angry tweets at the journalists, and we’re left with a chicken and egg situation. The right to know as envisioned by Gavin Ellis only works when the public knows what it is that they’re supposed to know in order to keep democracy accountable. But what the public knows is so strongly driven by the information that they’re fed, that it’s difficult to know where the problem comes from. Do the choices made in media reporting cause poor civics understanding, or does poor civics understanding drive the media into making those choices? As is often the case, it’s probably both.

For those that believe that something needs to be done about the New Zealand journalism and reporting, one good proposal comes from the Coalition for Better Broadcasting. Their ten point plan essentially boils down to levying commercial broadcasters and internet service providers to fund public service broadcasting and media. A 1% levy would raise about $60 million a year to go towards investigative journalism, documentaries, political debates, arts and science programmes, and regional news and current affairs, without the commercial pressures that promote reality TV. They argue that producing poor quality media is like polluting a river, and that maybe we should move to a “polluter-pays” model. It’s hard to argue against (unless you happen to be a commercial broadcaster or ISP).

Of course, there have been other shifts that have contributed to our current journalism landscape too. A significant portion of the talk centred on the Official Information Act, and how it has both opened up the public sector to scrutiny but also been used to obfuscate efforts to get information. The “no surprises” rule between public agencies and ministers has meant that the ministers are almost always informed when OIAs come in, and political considerations become a factor in when and how to release information (or not). Mihirangi Forbes also talked at length the difficulties of working in small New Zealand, where the two degrees of separation (especially in the Maori community) that works so well for the telecommunication company’s marketing campaign means that it’s difficult to conduct crucial but relationship-destroying investigative journalism without burning a lot of leads.

The pace of technological change will continue to impact many industries - it remains to be seen which industries will be willing to change fast enough and which will try to cling onto the old ways for too long. It’s not just the journalists that have to make this decision; it comes down to the editors and commercial managers who will have to make those decisions. An engineer in Kodak’s research and development group was the first group to create a digital camera – it was the managers who refused to sell it because they feared it would cannibalise sales of traditional film. We’re seeing competing interests between the public’s right to know, the journalists’ desire to report, and the capitalistic pressures of their bosses, morphing the journalism industry into something that perhaps cannot fit anyone’s ideals. Toby Manhire’s quip that there is a burgeoning industry for future of journalism panels hits a little too close to the truth.

Sunday, 18 September 2016

Universal Basic Income and Time

This post originally appeared on The Co-Op, a blog of young(ish) writers of varying ideological and political perspectives.
Technology is going to change the way we work. In the research group that I work in, we have two Baxter robots. These humanoid robots are designed to effectively replace human workers in low-skill manual tasks, particularly in industrial environments. They’ve already been put in some factories in the US, particularly in small businesses. Earlier this year, researchers at Columbia University showed how a Baxter robot combined with machine learning could iron clothes. I published a paper earlier this year where Baxter could play chess against a human. Every day more applications are being revealed. These robots cost about US$25,000, which sounds like a lot until you consider that it’s roughly one year’s salary for a low-skilled worker. The robot doesn’t need to rest, it doesn’t get sick, it doesn’t need holiday pay, and generally achieves a lower error rate than a bored human doing repetitive tasks all day.

Automation, industrial or otherwise, is treated like the bane of the low-skilled worker. For researchers, simple tasks are the easiest place to start, and the technology already exists to make hundreds of types of jobs redundant – the main barrier is that it’s currently economically unviable to implement. The fear is that introducing this technology will cause mass unemployment and widening inequality. The traditional economic response to this is usually “well people can just upskill”, which is fine as a principle but not practical for many people. Upskilling requires education, education costs time and money, and not everyone has access to the necessary resources or support to “just upskill”. Even when everyone does upskill, there may not be enough jobs for all the upskilled people – just ask the legal industry.

The Universal Basic Income (UBI) seems like an attractive option to help alleviate the pressures on all people as their jobs become more uncertain and insecure. If we can provide every person in the country with a base level of income from the government sufficient for some minimum standard of living, then work is no longer a necessity for survival, but something that we do because we want to. We become more incentivised to find fulfilling work, not just work with sufficient income. Individuals become willing to take larger risks such as starting up small businesses or moving into unpaid education or volunteer work because the UBI safety net can catch them if they fail. Social welfare becomes a lot simpler, and the government doesn’t need to somewhat arbitrarily decide who is deserving of a benefit and who isn’t. I don’t necessarily agree that the UBI is the correct or only answer, but I accept that the UBI is one potential solution to address technological unemployment. However, if we are going to debate the merits of having a UBI we need to consider an important point.

My main concern with a UBI as a solution to technological unemployment is the nature of time. People losing their jobs due to advancements in technology happens gradually and in small pockets of society. In the past, this has been slow enough that humans have generally been able to adapt. When I say slow, I mean over the course of years or decades. Artisan weavers were replaced by mechanised looms, and while some people were hurt by losing their jobs, there was no broader societal upset. More recently, retail cashiers have been replaced by self-service checkouts, but this isn’t necessarily seen as a direct cause of rising unemployment. Most of these changes have been small in scale because technology doesn’t change jobs on a large scale overnight – the human element ensures that technology is introduced slowly and cautiously. Business owners are conservative, and don’t like risking the future of their businesses on some technological fad that might be outdated within six months. Technological unemployment is a continuous process, not discrete.

In most proposals for UBIs, the policy change would have to be instantaneous. One day, everyone is paying a certain level of tax and getting nothing (or a benefit), the next day new legislation kicks in and suddenly everyone is paying a different level of tax and getting a $11,000 a year. This implies that we have to identify some threshold where we say “okay, enough people have lost their jobs to technology, the UBI is needed now.” In the meantime, all the people below that threshold who have already lost their jobs will suffer. Perhaps we’ve already started to see this, with rising homelessness, rising inequality, and rising job volatility. When we apply utilitarian macroeconomics and tax policies, individuals fall through the cracks all too easily. We either have to wait for the problem to worsen and for some tipping point to happen, or bring in the policy too early and encounter unnecessary costs.

So perhaps, if we are going to have a UBI, what we need is unfortunately complicated – a gradual, slow increase of the UBI to match the gradual, slow changes to the labour market. Any policy implementation has to be discrete, putting it at odds with the continuous nature of technological unemployment, but at least making many small steps might be better than making one big step. So rather than jumping straight to $200 a week per person (and bankrupting the government), maybe we need to start at $200 a month or every two months. It’s not enough to live on, but it’s enough to start sending signals to society that the way we think about work and labour is going to change. Make it opt-in too so that people have to actively participate and understand what’s happening in order to benefit. We’d still have to initially keep some forms of social welfare benefits like jobseeker support (unemployment benefit) to help people transition between jobs (perhaps the amounts paid out for benefits can decrease as the UBI level increases). But over time, as technology makes our society more wealthy and prosperous, the UBI can increase sustainably to a level that supports all people in our country. It may feel like small drops in a bucket, but maybe that’s exactly what we need rather than pouring a jug of water into the bucket and watching it overflow.

Some would argue that this is difficult to do because it increases compliance costs, it becomes harder to educate people how this scheme works, and it become susceptible to over-reactions to short-term fluctuations rather than long-term trends. For some reason, when it comes to tax policy or social welfare policy we wait for ages and ages for changes to happen because we don’t want to confuse people by changing it too often. What I’m advocating for is a number of small changes more frequently, rather than one big change and then waiting a long time to revisit it. We already do this with the Official Cash Rate – we recognise that it’s important that for the Reserve Bank to react to the changing macroeconomic environment eight times a year rather than just once a year. Why shouldn’t we also be reacting to the changing labour market in the same way?

Of course, any movement towards a UBI requires a substantial change in how the government raises revenue too, whether that includes a true capital-gains tax on all assets, changing the tax brackets to increase the contributions of the super-rich, and/or creating incentives for multinationals to keep their money in New Zealand and pay tax rather than taking the profits overseas. The government’s expenditures would have to change too, with a hard look at superannuation, tariffs and subsidies, and social welfare more broadly too. But each of these policy changes should stand on its own merits independently, as well as together when considered in context. We can talk about whether a UBI makes sense and how to best implement it first, so that it can become a key plank of a model for how government can support society in uncertain times.

Friday, 26 August 2016

Drivers of the Housing Crisis

This post originally appeared on The Co-Op, a blog of young(ish) writers of varying ideological and political perspectives.
The Problem
Humans seek security and safety in shelter, supporting social, psychological, and economic benefits. Those without shelter are left exposed to weather, illness, and exploitation. Humans find value in shelter, and therefore markets exist to buy and sell the homes that provide that shelter.

In a free market economy, the forces of supply and demand dominate. According to Statistics New Zealand data, the number of dwellings in Auckland has increased by 30% in the last 20 years. The Auckland population has increased by 43% in the same time period. The Ministry of Business, Innovation, and Employment estimates that there is now a cumulative shortage of at least 25,000 dwellings in Auckland. Others estimate this to be larger, with the Productivity Commission estimating a shortage of 60,000 homes by 2020. Simply put, there aren’t enough new houses for new people to live in.

As a result, land prices have more than quadrupled over the last 25 years, and house prices (after inflation) have trebled in the same time period. The average house price is set to exceed $1 million in the next 12 months; this has already occurred in North and East Auckland and in some city fringe areas. The property-price-to-median-income ratio in Auckland has reached nine; the rule of thumb is that this ratio should not exceed three (although there are few big cities where this is true).

This exposes Auckland to two key risks:
1. long-term societal imbalance as the gap between homeowners and renters increases due to growing property wealth from capital gains
2. potential sudden burst of the housing bubble with collapsing property prices, impacting the wider economy, and disproportionately affecting the less wealthy

Owning housing has become inaccessible for a large proportion of the population, forcing them to rent while transferring wealth to existing homeowners. This disproportionately affects young people, with economist Shamubeel Eaqub coining the term “Generation Rent”. The high cost of housing keeps families in a cycle of poverty, with housing costs leaving insufficient funds for other basic needs, or in some cases insufficient funds for housing leaving families homeless. Widening inequality and increasing poverty is a key predictor of falling happiness within a society.

The Drivers
Stable pricing is predicated on a balance between supply and demand. Political parties, independent analysts, and media pundits all have differing opinions on whether the cause of the Auckland housing crisis is on the supply-side or the demand-side; in reality, it is likely attributable to both. Here are twelve drivers from both sides – some are from the Auckland Council Chief Economist, some are from the Productivity Commission, and some are from my own analysis.
1. High net migration into Auckland, reflecting New Zealand’s current economic strength relative to Australia and Europe, as well as a booming education sector targeting international students. In 2015, net migration into Auckland was at least 30,000. Note that net migration is both more people coming into Auckland, and fewer people leaving. This is most apparent to/from Australia; a few years ago New Zealand was (net) losing 40,000 people a year to Australia, last year we (net) gained 1,600. More stats available at TransportBlog.
2. Historically low interest rates, both worldwide and in New Zealand, reflecting efforts by central banks to stimulate their economies to avoid the long-term impacts of the Global Financial Crisis. In 2008 the OCR was at 8.25%; now it is at 2%. With low interest rates, people are more incentivised to borrow (and spend). More stats available from the Reserve Bank of New Zealand.
3. Increasing willingness by banks to fund household lending, based on international lending standards viewing mortgages as “safe lending” that are less risky than corporate lending. Household debt is now at over 160% of nominal disposable annual income. It’s set to keep going up as interest rates keep falling. More analysis available from the Reserve Bank of New Zealand.
4. A demographic shift towards smaller households, with smaller family units and an aging population. In 2013, almost half (48%) of all households in Auckland had only one or two people. More stats from Auckland Council.
5. Council constraints on the supply and usage of land in Auckland, leading to artificially low housing density that is inconsistent with density patterns in other large cities internationally. Auckland has a pretty uniform population density of 32 people per hectare beyond 2km out of the city centre; in New York it’s 100 people per hectare at 2km, in Barcelona it’s over 300 – it takes over 20km for population densities there to match Auckland levels. More stats from New York University/NZ Treasury.
6. Vocal opposition to intensification by existing ratepayers (synonymous with homeowners), expressing concerns about compromising standards of living and reducing property values. Councils and governments are (arguably) democratic and dominated by older and wealthier segments of the population. It is largely in their capitalistic self-interests for house prices to rise, increasing their personal wealth. The Productivity Commission has identified this as a “democratic deficit” due to the disproportionate influence of homeowners in local council elections and consultations. More on this from Bernard Hickey (and everyone else talking about NIMBYs).
7. Onerous and uncertain resource management requirements and building consent processes, disincentivising new developments and increasing compliance costs. It can be very risky for new developers, because they can invest millions of dollars into large-scale development, only to be blocked after a few years by rejected consents.
8. Skills and labour shortages in the construction industry, stemming from unattractive low wages and punitive liability rules. New Zealand has maintained a net deficit of construction workers for the last 30 years. More analysis from Statistics New Zealand.
9. Speculative investment, with foreign and domestic investors accounting for 43% of purchases, driven by tax-free treatment of capital gains attracting investors towards New Zealand housing. The exact proportion of foreign vs. domestic (and who counts as foreign and who counts as domestic) is controversial and uncertain. More stats from CoreLogic/Auckland Council (section 3.2.7).
10. Auckland Council’s extremely high debt levels, currently at 275% of revenues (annual borrowing costs are roughly 12% of revenues), negatively impacting the Council’s ability to build the necessary electricity, water, and roading infrastructure to support new dwellings. More stats from Auckland Council.
11. The Productivity Commission estimates that the average floor size of new dwellings has increased by more than 50% since 1989, requiring more land in order to house the same number of people. More stats from Productivity Commission (section 3.3).
12. The “leaky homes” crisis of the late 90s leading to negative perceptions towards the construction industry and causing ongoing costs to affected families and local councils. This has also made policy-makers conservative, erring on the side of caution and stringency when it comes to RMA and related reform.
A major challenge is the inelasticity of housing supply – it takes both a long time and a lot of money to build housing and related infrastructure. This limits the responsiveness of housing supply to comparatively fast changes in housing demand, creating the opportunity for imbalances to snowball into crises. This also creates the potential for overcorrection, due to the slow response of policy outcomes.

The Conclusion
Any policy that only addresses one of these drivers will not resolve the housing crisis. A combination of policies from both central and local government is required in order to rebalance supply and demand, or at least reduce the size of the currently widening gap. Perhaps this has already been happening – there have been a number of actions taken in the last few years, and it will take many more years for the effects of those actions to be seen in the housing market. We can only wait for the market to respond.

Sunday, 26 June 2016

Brexit and the Hammerhead Sharks

This post originally appeared on The Co-Op, a blog of young(ish) writers of varying ideological and political perspectives.

On Saturday I attended a BWB Conversations event with the author of Being Chinese: A New Zealander’s Story” Helene Wong and film-maker Roseanne Liang. Amongst discussion about what it means to be a Chinese-New Zealander, assimilation and integration of immigrants, and speaking out against microaggressions, there was one narrative that struck a chord with me. When asked about how we can build better connections between minority groups and with the majority Pakeha, Helene said that the key was for people to interact with each other and work together. Just talking to each other can be enough to humanise each other, to overcome an innate human distrust of the different, to see that we are all humans first and white or black or brown or yellow or red second.

In the wake of Brexit, this is very relevant and important. An ugly xenophobic racist streak has reared its head in recent months in the UK and US, and while it has always existed in the undercurrent, that dangerous mentality has captured enough people to achieve material change. Many commentators have said that the Remain campaign failed to strike an emotional chord with the populace, that experts were successfully characterised as elitist by the Leave campaign, that the Leave campaign were able to build a better narrative that went beyond rationality and spoke to the electorate.

Perhaps there is something to be said about how the Remain campaign actually communicated with people. Did they rely on mass media advertising and debates trying to be efficient, reaching many people at once, or did they actually go into the communities and talk in person, reaching only a few people or only one person at once? I understand that talking to small groups of people is expensive, in that political campaigning costs time and money and both of these are only available in limited quantities. But there is something about a one-hour debate on television that becomes inaccessible for the disadvantaged and disenfranchised.

There are lessons to be learnt from Brexit as the sentiment expressed by the Leave voters sweeps across the rest of Europe, across the United States, and even down in little old New Zealand. We’re going to see increasing interest from immigrants and refugees because we are damn lucky to be living in a pretty great country. How we deal with that speaks about who we are as a country, whether we are a country that welcomes people with open arms and gives everyone a fair go, or a country that prejudges people who look and sound different to the rest of us and puts policies in place to keep them out. We have seen from our politicians, from all sides of the spectrum, that our country may be heading down the second path.

There is a common tendency for social progressives to just shut out those who don’t agree. Everyone has a story of how they tried to call someone out on being racist or sexist or homophobic or otherwise offensive and had it backfire miserably. We learn from these experiences and argue that there are some people whose opinions cannot be changed and in the interests of our own mental welfare we should not bother to engage with them. Never read the comments is a common mantra, but that only allows the ill-informed, the misguided, and the offensive to continue perpetuating their views. We cannot keep shouting from our ivory towers, hope that the media amplify those voices, and then hope for that to equate to real change. The message has to be taken to the people, not projected at the people. It is not enough to just call them uneducated, uncultured, or impoverished and to just ignore them.

That means we have to get out of our echo chambers and go to where these other people are. We have to comment on the Herald’s posts on Facebook and the Stuff comment threads, we have to physically visit community groups and iwi, and we have to argue with our racist uncles at family dinners. That’s where “the other people” are, the ones who vote and happen to be in the majority. We have to go out of our way to say “that’s not okay” and seek to educate people. It’s not easy. It takes a lot of effort and pain, but it’s what we have to do to move away from the path we are on. It’s not something that we can just leave to the political parties or academic experts or business leaders. It’s not enough to just hope that those views will phase out over time; we need to give that change a nudge.

Helene Wong said two things in particular that resonated strongly with me. The first was a metaphor: that in our society now Pakeha are the sky and the minorities are the clouds. There are many clouds, of different shapes and sizes, but they only exist against the aerial landscape of the majority. We should strive to live in a society where we are all clouds, Pakeha included, co-operating and co-existing amongst a common sky. The second thing she said was that we have to be brave. I believe we have to speak up, and cannot just be apathetic, because apathy is what leads to the strengthening of existing power structures until they can no longer be fixed.

Kaua e mate wheke mate ururoa. Do not give up; no matter how hard the struggle is, keep fighting.