It's time we the people of Hawke's Bay and especially our leaders woke up to the true state of our local economy. The latest employment statistics are shocking but are probably an indication of our future direction unless we acknowledge the issues and develop strategies to deal with them.
The unemployment numbers are hardly surprising given fruit picking and other seasonal work has yet to yet to eventuate. Possibly the situation could even be worse if it were not for the thousands emigrating elsewhere in search of better opportunities. Alternatively its also possible the lack of population growth is a contributing cause of the malaise.
One statistic that stands out is Maori and Pacifica people are about 3 times more likely to be jobless. Since Maori comprise 24% of the total Hastings population and Pacifica a further 5%, there is clearly a relationship between our overall second highest unemployment ranking and ethnicity. The figures for Napier are only slightly lower.
The proportion of Maori in our community will continue to rise because already 35% of those in the 0–15 year age group are Maori. These young people will soon be looking for jobs, and the percentage of these groups will continue to increase significantly within just a few decades.
We also have a problem with our brightest and most talented young people departing for higher education and opportunities often to never return, or only to do so as a retirement option.
These are the demographic realities. Unless we change our thinking unemployment will become an ever more serious problem.
We need people to be better skilled, we need more jobs, and we need those jobs to be more lucrative. Whilst our farms, orchards and forestry are the backbone of our economy we cannot rely on primary industries to provide these improvements in the future. Pastoral farming is not a great creator of employment because increased production is the result of greater efficiency not more manpower. Nor will horticulture deliver because as we already know their jobs require limited skills and offer irregular and relatively poorly paid work that is subject to seasonality, weather and other disruptions. For many this is not the stuff of careers.
To move forward we need to do a number of things. Firstly attitudes to education must change. Those who have yet to join the work force need to develop the skills that an employer can use to meet the needs of their customers. In particular they need to be able to communicate orally and in writing, in english. There are too many who cannot construct a simple sentence without excessive expletives and meaningless expressions such as “like”, and “yknow what I mean”.Second they must have skills in basic arithmetic so they can add, subtract and have some appreciation of basic logic. They also need to be reliable.
Next we need to improve our educational offering. Whilst the EIT provides tertiary courses the numbers attending are a fraction of those at Otago University, a city with a smaller urban population than Napier and Hastings combined. We must provide study options that encourage more of our brightest to stay, and more from other parts of the country to come here to study. Suggesting we will never get a university because we don't already have one is not just defeatist, it condemns us to second ranking in perpetuity.
Population growth is a major driver of economic growth. We are close to shrinking and if we do not face reality and stop pretending how great the place is, we will enter an endless downward spiral. Recently we ceased being the 5th largest urban area in the country and soon we are likely to slip to 7th behind both Tauranga and Dunedin. We must find out exactly why people are leaving and not returning, why they are not flocking here, then develop strategies to reverse the situation.
We need more manufacturing and distribution jobs and not just those connected to the core primary output. We need to grow our visitor industry because it creates jobs and does not require a huge investment, and can be made to happen quickly. People claim to like coming here so why have the numbers dropped so significantly.
Then we need serious leadership from our leaders. I recently commented on the Mayor of Napier's statement that we don't want better air services because it will just allow locals to spend their money elsewhere. This is symptomatic of the elitist attitude of too many of those who control our destiny. We need to do everything we can to make Hawke's Bay a better place to stay, to shift to, and to visit. True, some very high profile business people have shifted here in recent times but where are the jobs? They might like living here but clearly they do not like Hawke's Bay as a place to do business.
It is also time we stopped building monuments that pamper leaders vanity and concentrate instead on providing the infrastructure and other things that will actually make a difference.
We need to get our act together. The recent departure of the heads of the Hastings Business Association, and the Chamber of Commerce after scarcely a few weeks in the job suggests not only that we are seriously dysfunctional, but essential initiatives are being delayed. We have an Airport Board determined to sit tight and prevent more able people taking over, whilst building an industrial park instead of concentrating on the core business of ensuring we have competitive links with the rest of the world. We also need leaders who ensure we get a better deal from Government rather than a better deal for themselves.
Wake up Hawke's Bay before we discover we have morphed into a gigantic retirement village where the dominant occupation is looking after the elderly.
Friday, November 23, 2012
Monday, October 29, 2012
Realism needed by Napier Mayor
The suggestion we might have flights to Oz (HBT17/10/12) is premature knowing the background of those involved, though Hawke's Bay's struggling economy could certainly do with the lift in spirit and trade it would provide.
Official accommodation figures for August reveal a whopping 27.8% reduction in motel guest nights this year compared to last. One motel has been liquidated, many others are struggling. Retailers are hurting as is the conference trade. Opera House Chairman John Buck has commented that excessive air fares had made Hawke's Bay unattractive.
Passenger numbers through our airport have have been static compared to four years ago. In comparison during the same period Queenstown airport has experienced a 46% increase in travellers.
Only the thousands of cruise ship passengers visiting us is preventing a meltdown, but we need to be realistic. The ships look fantastic, deliver essential spending but are not a replacement for our traditional visitors. The reduction in bed nights for August alone was 16 000, about the same number as cruise passengers for an average month during the six month season.
Cruising is likely a major cause of self drive and coach touring dropping off but is more seasonal, and probably less valuable. Nor can we control whether they continue to come here since the reason they do is for scheduling convenience rather than anything else.
I consider the Mayor of Napier to be the single biggest impediment to more destinations plus better and cheaper air services. Surely the state of our economy is a wake up call to the Mayor. We are the bottom ranked economy in the latest ASB regional comparison, the only area in the country with a one star ranking. High unemployment might even be worse if so many people were not leaving to live elsewhere.
Art Deco is great and brings in a lot of people but it seems nothing else matters to Mrs Arnott and it's an excessively narrow focus.
This will probably astonish many people but she recently stated she did not favour better air services for Hawke's Bay people because it would allow them to spend their money elsewhere. At least a couple dozen others heard it as well. This confirms my long held suspicion she opposes better air services and always has.
In 2004 I wrote to her detailing the grossly inaccurate and seriously misleading content in a council report on trans-Tasman air services. She responded by stating “the media do not know everything”, apparently referring to my working in the media, but completely ignoring the sound and indisputable information I provided.
Incredibly in June 2006 she then effectively gave the discredited report credibility by writing “One report on the airport has been considered by Napier and Hastings which concluded that Hawke's Bay did not have the infrastructure in place to attract and sustain international flights. All existing trans-Tasman airlines have confirmed this.
In 2007when the privately funded $40 000 BERL report was released and calculated there were already sufficient passengers to support direct services to Australia, plus a potential $43 million improvement to regional GDP she simply commented “it was in the public domain”.
Recently (28/07/12 HBT) she was reported as claiming “ to have canvassed every alternative international carrier in terms of flights and none of them have been interested in flying to Hawke's Bay”
Frankly I don't believe it and challenge her to provide proof by way of correspondence, proposals, reports, or minutes, plus appropriate responses rejecting them, to support her claims. Some chance encounter at a flash Air New Zealand sponsored lunch counts for nothing in my view.
For eight years since I first became involved Hawke's Bay people have been forced to pay the outrageous airfares inflicted by a monopoly supplier. It seems those who don't live here have decided to travel elsewhere and unless we restore our competitiveness with other visitor destinations, we will continue to go backwards. We have so much to offer and its a great pity she has not supported the airport with the same enthusiasm as the museum and McLean Park grandstand projects.
Mrs Arnott believes the Local Government reforms will force amalgamation because Hastings has more voters. It seems the only way to progress the airport issue and get all of Hawke's Bay moving again is to remove Mrs Arnott's influence, and it seems the easiest way of doing this is amalgamation.
Official accommodation figures for August reveal a whopping 27.8% reduction in motel guest nights this year compared to last. One motel has been liquidated, many others are struggling. Retailers are hurting as is the conference trade. Opera House Chairman John Buck has commented that excessive air fares had made Hawke's Bay unattractive.
Passenger numbers through our airport have have been static compared to four years ago. In comparison during the same period Queenstown airport has experienced a 46% increase in travellers.
Only the thousands of cruise ship passengers visiting us is preventing a meltdown, but we need to be realistic. The ships look fantastic, deliver essential spending but are not a replacement for our traditional visitors. The reduction in bed nights for August alone was 16 000, about the same number as cruise passengers for an average month during the six month season.
Cruising is likely a major cause of self drive and coach touring dropping off but is more seasonal, and probably less valuable. Nor can we control whether they continue to come here since the reason they do is for scheduling convenience rather than anything else.
I consider the Mayor of Napier to be the single biggest impediment to more destinations plus better and cheaper air services. Surely the state of our economy is a wake up call to the Mayor. We are the bottom ranked economy in the latest ASB regional comparison, the only area in the country with a one star ranking. High unemployment might even be worse if so many people were not leaving to live elsewhere.
Art Deco is great and brings in a lot of people but it seems nothing else matters to Mrs Arnott and it's an excessively narrow focus.
This will probably astonish many people but she recently stated she did not favour better air services for Hawke's Bay people because it would allow them to spend their money elsewhere. At least a couple dozen others heard it as well. This confirms my long held suspicion she opposes better air services and always has.
In 2004 I wrote to her detailing the grossly inaccurate and seriously misleading content in a council report on trans-Tasman air services. She responded by stating “the media do not know everything”, apparently referring to my working in the media, but completely ignoring the sound and indisputable information I provided.
Incredibly in June 2006 she then effectively gave the discredited report credibility by writing “One report on the airport has been considered by Napier and Hastings which concluded that Hawke's Bay did not have the infrastructure in place to attract and sustain international flights. All existing trans-Tasman airlines have confirmed this.
In 2007when the privately funded $40 000 BERL report was released and calculated there were already sufficient passengers to support direct services to Australia, plus a potential $43 million improvement to regional GDP she simply commented “it was in the public domain”.
Recently (28/07/12 HBT) she was reported as claiming “ to have canvassed every alternative international carrier in terms of flights and none of them have been interested in flying to Hawke's Bay”
Frankly I don't believe it and challenge her to provide proof by way of correspondence, proposals, reports, or minutes, plus appropriate responses rejecting them, to support her claims. Some chance encounter at a flash Air New Zealand sponsored lunch counts for nothing in my view.
For eight years since I first became involved Hawke's Bay people have been forced to pay the outrageous airfares inflicted by a monopoly supplier. It seems those who don't live here have decided to travel elsewhere and unless we restore our competitiveness with other visitor destinations, we will continue to go backwards. We have so much to offer and its a great pity she has not supported the airport with the same enthusiasm as the museum and McLean Park grandstand projects.
Mrs Arnott believes the Local Government reforms will force amalgamation because Hastings has more voters. It seems the only way to progress the airport issue and get all of Hawke's Bay moving again is to remove Mrs Arnott's influence, and it seems the easiest way of doing this is amalgamation.
Tuesday, October 9, 2012
Closing the Gisborne Railway
This weeks KiwiRail decision to mothball the railway line between Napier and Gisborne, was not unexpected but is disappointing. Money is being raised to fund an investigation into the decision but the reality is this line has been troublesome for many years, has probably never been profitable , and therefore would require support from either ratepayers or taxpayers.
Perhaps we might better understand the situation if we look at the history and the many problems experienced . I have some knowledge of the issues as a result of providing media coverage of many of the issues over the past 25 years.
Although development started in 1910 more or less towards the end of the great railway construction period work in earnest did not get underway until the 1920's . The job was not finished until1942 having been seriously disrupted by the great depression and a major flood in 1938 when 21 construction workers died. It was the last major line to be built in this country.
In the 1980's the closure of Wattie's Gisborne's processing plant and the meat freezing works probably reduced freight volumes quite severely.
In 1987 Cyclone Bola scoured out the south bank just south of Gisborne resulting in a significant length of track left dangling in mid air. Effectively the terminus ended up 15 Km or more south of the city until the bridge was extended at a cost of manymillions. I can still remember the official opening by then then Minister of railways Richard Prebble.
Of course while this was happening more shippers must have discovered road was both a cost effective and convenient alternative.
In yet another incident about 10 years ago a large railway crane collapsed the bridge over the Nuhaka river, again putting the line was out of commission for several months and requiring millions more on repairs.
The most recent has been a huge washout that's estimated to cost at least $4 million to repair. Significant track and bridge work will also be required in the future. That's why KiwiRail seemed to have decided to call it a day.
Whether the line will ever be recommissioned is far from clear. While rail does have an important place in the economy, and in some countries is even making a comeback, these conditions may not ever exist for this particular line. Rail suits commodities such as coal, iron ore and bulk liquids, especially where terminal facilities can be provided to minimise handling costs. Controversially if fracking could possibly create an oil industry the rail may be needed again.
Rail also has an advantage on longer distances where fuel and other efficiencies can be realised. The ability to electrify rail systems is also an issue as fossil fuels become more expensive and the environmental impact of their use more significant.
Whilst 200Km seems a long way when driving its probably well short of ideal for rail. Undoubtedly however the greatest difficulty is the lack of meaningful traffic volumes. The long touted wall of wood seems never to arrive and its possible if it ever does that it will be shipped overseas direct from Gisborne's port.
Unlike roads that can be used for freight, buses, and private vehicles, rail has only one use and that is trains.
Trucks are also getting larger, more powerful, and more efficient. More importantly road transport is point to point, eliminating the multiple handling that is inevitable with rail, and often involves travelling shorter distance overall. For many it is simply more convenient.
There have been some attempts to boost usage. In the early 1990's Wattie's used rail to ship tomatoes from Poverty Bay to their factory in Hastings for processing. Using rail might seem logical but it wasn't attractive. Before starting the journey loads had to be shipped in the opposite direction just to get to the rail head. There was also extra handling as the loads were transferred from trucks to rail wagons. Also it needed an awful lot of tomatoes to make up a train load, so a lot of produce sat in the sun. And at times the factory ground to a stop awaiting the train, then when it did arrive was swamped by hundreds of tonnes of tomatoes waiting processing.
It didn't stop Wattie's growing tomatoes in Gisborrne, but they found trickling loads direct from field to factory by individuals truck a better option.
Whilst Gisborne is very isolated and therefore dependent on transport links improving road transport has had a major impact on the railway. It may have even forced the overnight Gisborne to Napier ferry service to cease operating.
In reality rail was probably only viable when the 40 mile limitation on road transport was in force.
Whilst the road between Napier and Gisborne is narrow, has many hill sections and is also subject to slips and disruptions but these are significantly less serious than those experienced by the rail line and it can be improved. The recently opened Matahorua gorge bi pass has already eliminated a very slow and slip prone section, saving trucks perhaps 10 minutes. An extra $4 million has been allocated to building additional passing lanes.
Whilst good transport links are vital for any modern community this does not necessarily mean rail. Nelson at the top of the South Island is every bit as isolated as Gisborne, yet seems to do well despite not having rail links.
Also judging by the huge number of trucks operating travelling between Hawke's Bay and either Taupo or Palmerston North and points south, its clear that significant volumes of freight are still sent by road even when an functioning railway is available.
Perhaps we might better understand the situation if we look at the history and the many problems experienced . I have some knowledge of the issues as a result of providing media coverage of many of the issues over the past 25 years.
Although development started in 1910 more or less towards the end of the great railway construction period work in earnest did not get underway until the 1920's . The job was not finished until1942 having been seriously disrupted by the great depression and a major flood in 1938 when 21 construction workers died. It was the last major line to be built in this country.
In the 1980's the closure of Wattie's Gisborne's processing plant and the meat freezing works probably reduced freight volumes quite severely.
In 1987 Cyclone Bola scoured out the south bank just south of Gisborne resulting in a significant length of track left dangling in mid air. Effectively the terminus ended up 15 Km or more south of the city until the bridge was extended at a cost of manymillions. I can still remember the official opening by then then Minister of railways Richard Prebble.
Of course while this was happening more shippers must have discovered road was both a cost effective and convenient alternative.
In yet another incident about 10 years ago a large railway crane collapsed the bridge over the Nuhaka river, again putting the line was out of commission for several months and requiring millions more on repairs.
The most recent has been a huge washout that's estimated to cost at least $4 million to repair. Significant track and bridge work will also be required in the future. That's why KiwiRail seemed to have decided to call it a day.
Whether the line will ever be recommissioned is far from clear. While rail does have an important place in the economy, and in some countries is even making a comeback, these conditions may not ever exist for this particular line. Rail suits commodities such as coal, iron ore and bulk liquids, especially where terminal facilities can be provided to minimise handling costs. Controversially if fracking could possibly create an oil industry the rail may be needed again.
Rail also has an advantage on longer distances where fuel and other efficiencies can be realised. The ability to electrify rail systems is also an issue as fossil fuels become more expensive and the environmental impact of their use more significant.
Whilst 200Km seems a long way when driving its probably well short of ideal for rail. Undoubtedly however the greatest difficulty is the lack of meaningful traffic volumes. The long touted wall of wood seems never to arrive and its possible if it ever does that it will be shipped overseas direct from Gisborne's port.
Unlike roads that can be used for freight, buses, and private vehicles, rail has only one use and that is trains.
Trucks are also getting larger, more powerful, and more efficient. More importantly road transport is point to point, eliminating the multiple handling that is inevitable with rail, and often involves travelling shorter distance overall. For many it is simply more convenient.
There have been some attempts to boost usage. In the early 1990's Wattie's used rail to ship tomatoes from Poverty Bay to their factory in Hastings for processing. Using rail might seem logical but it wasn't attractive. Before starting the journey loads had to be shipped in the opposite direction just to get to the rail head. There was also extra handling as the loads were transferred from trucks to rail wagons. Also it needed an awful lot of tomatoes to make up a train load, so a lot of produce sat in the sun. And at times the factory ground to a stop awaiting the train, then when it did arrive was swamped by hundreds of tonnes of tomatoes waiting processing.
It didn't stop Wattie's growing tomatoes in Gisborrne, but they found trickling loads direct from field to factory by individuals truck a better option.
Whilst Gisborne is very isolated and therefore dependent on transport links improving road transport has had a major impact on the railway. It may have even forced the overnight Gisborne to Napier ferry service to cease operating.
In reality rail was probably only viable when the 40 mile limitation on road transport was in force.
Whilst the road between Napier and Gisborne is narrow, has many hill sections and is also subject to slips and disruptions but these are significantly less serious than those experienced by the rail line and it can be improved. The recently opened Matahorua gorge bi pass has already eliminated a very slow and slip prone section, saving trucks perhaps 10 minutes. An extra $4 million has been allocated to building additional passing lanes.
Whilst good transport links are vital for any modern community this does not necessarily mean rail. Nelson at the top of the South Island is every bit as isolated as Gisborne, yet seems to do well despite not having rail links.
Also judging by the huge number of trucks operating travelling between Hawke's Bay and either Taupo or Palmerston North and points south, its clear that significant volumes of freight are still sent by road even when an functioning railway is available.
Saturday, September 29, 2012
What do we do with the rates surplus?
The Hastings District Council has revealed a surplus of over $2million for the year ended June 2012. Pleasing but it was mostly the result of the very unfavorable economic times we are living through.
The surplus arose from two situations. The first was a decline in interest rates of about 1% on borrowings of some $60 million. The second was that borrowings were almost $20 million below budget because many anticipated capital works have not been necessary. At a budgeted interest rate of 7% this alone equates to a saving of some $1.4 million.
When the rate was struck interest rates were expected to be much higher and therefore included in the amounts ratepayers were required to pay. So effectively the rates surplus was the result of ratepayers being charged more than the actual cost of the interest charges to the council.
Never the less having a surplus is very much better than having a deficit. But what should be done with that surplus? Some costs are up and some down and when they are up this is passed onto ratepayers. For instance following the Christchurch earthquakes insurance charges rocketed, and of course council has passed those on for the current year.
Even after a number of these unforeseen needs were identified there was still a sizable surplus and management proposed using some of it to reduce debt. I an some other councillors preferred allocating a portion to off setting an expected rates rise of around 4% next year thereby halving next years likely increase.
Normally I have an aversion to debt, so why did I not support the proposed debt reduction?
Well in the first instance I think it would just make it easier for council to increase borrowings in the future. For instance the Hastings District Council is proposing to gift $1 million to the Napier City council funded by increased borrowing to support the museum extensions. Another example is the recent decision to proceed with a major debt funded upgrade of Civic square, that somewhat scruffy area between the Art Gallery and the Library. Not cheap at $8 million and likely to double with interest charges.
For the record I voted against both items.
The main reason I preferred the rebate option is Council reasons funding major projects with debt spreads the full cost over the generations who are expected to benefit. Its a bit like depreciation which spreads costs over the life of an asset. Just as depreciation allowances are fixed irrespective of profits or cash flow so should inter-generational financing. That is if we truly believe future generations should be contributing we should stick to that ideology not tinker with it on a whim or a surplus.
The surplus arose from two situations. The first was a decline in interest rates of about 1% on borrowings of some $60 million. The second was that borrowings were almost $20 million below budget because many anticipated capital works have not been necessary. At a budgeted interest rate of 7% this alone equates to a saving of some $1.4 million.
When the rate was struck interest rates were expected to be much higher and therefore included in the amounts ratepayers were required to pay. So effectively the rates surplus was the result of ratepayers being charged more than the actual cost of the interest charges to the council.
Never the less having a surplus is very much better than having a deficit. But what should be done with that surplus? Some costs are up and some down and when they are up this is passed onto ratepayers. For instance following the Christchurch earthquakes insurance charges rocketed, and of course council has passed those on for the current year.
Even after a number of these unforeseen needs were identified there was still a sizable surplus and management proposed using some of it to reduce debt. I an some other councillors preferred allocating a portion to off setting an expected rates rise of around 4% next year thereby halving next years likely increase.
Normally I have an aversion to debt, so why did I not support the proposed debt reduction?
Well in the first instance I think it would just make it easier for council to increase borrowings in the future. For instance the Hastings District Council is proposing to gift $1 million to the Napier City council funded by increased borrowing to support the museum extensions. Another example is the recent decision to proceed with a major debt funded upgrade of Civic square, that somewhat scruffy area between the Art Gallery and the Library. Not cheap at $8 million and likely to double with interest charges.
For the record I voted against both items.
The main reason I preferred the rebate option is Council reasons funding major projects with debt spreads the full cost over the generations who are expected to benefit. Its a bit like depreciation which spreads costs over the life of an asset. Just as depreciation allowances are fixed irrespective of profits or cash flow so should inter-generational financing. That is if we truly believe future generations should be contributing we should stick to that ideology not tinker with it on a whim or a surplus.
Tuesday, May 8, 2012
Stopping the gravy train
Recent hefty salary increases for mayors begs the question of whether the Remuneration Authority takes into account the ability of ratepayers to pay, or the level of income adjustment received by the wider community.
For Hastings in just two years the Mayor moved from $106 100 to $117 700 or 11%. while the 10% for Napier was from $100 200 to $110 300. The latest official figures reveal salaries and wages for the entire country averaged just 2% in the past year and about 4.5% for two years confirming the impression the rich are gaining faster than the rest. Recent tax adjustments have further tipped the balance in favour of the already well paid.
A significant reason for this disparity is the use of surveys to ascertain salary and wage movements. Each survey reveals significant increases for those already well paid executives, directors and others, thereby justifying further increases which are then in turn picked up by subsequent surveys, to become the justification for yet another round of upward movements.
The system is a salary escalator feeding on itself to continue rewarding the already well rewarded individuals. Those at the bottom including superannuates receive only small increases because the surveys show only minor changes, a pattern repeated for many years. In the latest round councillors in both Hastings and Napier received a nil increase. While the survey system was once equitable because all incomes were moving upwards at about the same rate this is no longer the case.
The problem is not isolated to New Zealand. The US census bureau reports the average income for American families has dropped for three consecutive years, yet compensation for executives has risen by 15% in 2011 helped by rising share prices because options and stock are a significant part of many packages. For 2010 the increase was a massive 28%.
The Gini coefficient developed by Italian statistician Corrado Gini reveals inequality has been growing in most countries since 1990.
No individual can be blamed but those who could make a difference such as Mayors, local government chiefs, company CEO's and directors, MP's plus many other highly paid members of this club are understandably disinclined to do so.
To improve equity two things must happen. Increases must be significantly less than the full surveyed movements, and at the same time new indices are needed to take into account the performance of those in charge. For instance in local government one factor might be rates. For every point rates are below or above inflation, salaries would be adjusted by the same amount in the opposite direction. Other measures could be economic growth, unemployment, visitor numbers, debt, community income levels, and so on.
Such a change would disrupt what is currently a very comfortable gravy train and as a result provide some equity to the many on lower incomes who are now meeting the bulk of the cost of excessive salaries.
For Hastings in just two years the Mayor moved from $106 100 to $117 700 or 11%. while the 10% for Napier was from $100 200 to $110 300. The latest official figures reveal salaries and wages for the entire country averaged just 2% in the past year and about 4.5% for two years confirming the impression the rich are gaining faster than the rest. Recent tax adjustments have further tipped the balance in favour of the already well paid.
A significant reason for this disparity is the use of surveys to ascertain salary and wage movements. Each survey reveals significant increases for those already well paid executives, directors and others, thereby justifying further increases which are then in turn picked up by subsequent surveys, to become the justification for yet another round of upward movements.
The system is a salary escalator feeding on itself to continue rewarding the already well rewarded individuals. Those at the bottom including superannuates receive only small increases because the surveys show only minor changes, a pattern repeated for many years. In the latest round councillors in both Hastings and Napier received a nil increase. While the survey system was once equitable because all incomes were moving upwards at about the same rate this is no longer the case.
The problem is not isolated to New Zealand. The US census bureau reports the average income for American families has dropped for three consecutive years, yet compensation for executives has risen by 15% in 2011 helped by rising share prices because options and stock are a significant part of many packages. For 2010 the increase was a massive 28%.
The Gini coefficient developed by Italian statistician Corrado Gini reveals inequality has been growing in most countries since 1990.
No individual can be blamed but those who could make a difference such as Mayors, local government chiefs, company CEO's and directors, MP's plus many other highly paid members of this club are understandably disinclined to do so.
To improve equity two things must happen. Increases must be significantly less than the full surveyed movements, and at the same time new indices are needed to take into account the performance of those in charge. For instance in local government one factor might be rates. For every point rates are below or above inflation, salaries would be adjusted by the same amount in the opposite direction. Other measures could be economic growth, unemployment, visitor numbers, debt, community income levels, and so on.
Such a change would disrupt what is currently a very comfortable gravy train and as a result provide some equity to the many on lower incomes who are now meeting the bulk of the cost of excessive salaries.
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