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Lower Productivity Will Increase Poverty, Not Eliminate It

Posted on 27 Jul 2009

Calls by Maori leadership expecting to eliminate poverty by increasing handouts are short-sighted and will create the opposite results to what they are actually seeking, ACT New Zealand Maori Issues Spokesman Peter Tashkoff said today.

“It is surprising that Maori leadership still think that increased transfers from the productive sector is the way to fix poverty in New Zealand, when Labour tried the same approach and got us nowhere,” Mr Tashkoff said.

“Unless we address our poor productivity then wages will not be able to increase. In the past decade New Zealand’s multifactor productivity growth rate plummeted to 0.6 percent – down from 2.1 percent in the 1990s, and 1.6 percent between 1985–1990. This is the predictable outcome of increased spending. What it once cost to run our country for two years – when Labour first came to office – now sadly only covers one.

“This massive increase in spending has in part been driven by our willingness to engage in expensive welfare programs. Since the introduction of Working for Families in 2004 - the ratio of workers to beneficiaries has steadily dropped to a point where it now takes the efforts of almost three working New Zealanders to support two beneficiaries.

“Far from giving people a hand up, welfare keeps beneficiaries down and the idea that people are entitled to handouts destroys their incentives to work.

“If productivity growth is not present, wage growth is unsustainable. Trying to fix low wages by transferring even more money from the productive sector will only suppress productivity growth further and deeper embed a low wage economy.

“Instead of calling for more of the same failed policies of the present, the focus should be toward policies that will actually increase productivity growth and put in place the high wage economy that we all want to see. Addressing the issue at source is the only way that we will ever see an elimination of poverty in New Zealand, everything else is wishful thinking,” said Mr Tashkoff

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