How Long Until Wages Catch Up To The Housebuying Power Of 1992?

The long-term strategy for building economic wealth appears to be holding house prices steady while waiting for wages to catch up. This article does the maths to answer one question: how long until the average wage has the same housebuying power of the average wage in 1992?

In 1992, the average New Zealand house price was $105,000. The average wage at that time was almost $15 per hour. This means that most Kiwis found themselves able to buy a house after 7,000 hours of labour.

By 2021, the average New Zealand house price has climbed to some $750,000, while the average wage languishes at around $34 an hour. This means that most Kiwis today are looking at putting in 22,000 hours of labour before they can get to the position of homeownership.

Economists predict that the average New Zealand house price will increase by double-digit percentages in 2021. 5% increases are expected for the two years after that, up until March 2024, which is as far ahead as anyone responsible will try to predict.

Let’s make two assumptions: firstly, that these forecasts are broadly correct; secondly, that house prices stop increasing after March 2024, allowing wages to catch up.

This suggests that house prices will top out at a national average of about $910,000 ($750,000 x 1.10 x 1.05 x 1.05). This assumes that they increase by around 10% in the year to March 2022, and then 5% for the two years after that, before remaining stable thereafter. The reality is, of course, anyone’s guess, but let’s say for simplicity’s sake that house prices reach $910,000 by March 2024 and then stay there in perpetuity.

To buy a $910,000 house with 7,000 hours of labour, a worker would have to be getting paid $130 per hour. Assuming that all other things (labour share, taxes, rents, non-rent living costs) are equal, $130/hr is what the average wage would have to be for the average worker to have the same housebuying power as the average worker in 1992.

As mentioned above, the average wage in New Zealand is around $34 right now. This means that it has to increase 3.82 times for the average worker to have the same housebuying power that the average worker had in 1992 – without house prices increasing beyond March 2024.

Wage growth over the past 28 years in New Zealand, from just under $15 an hour in 1992 to around $34 an hour at the end of 2020, has run at about 3% per annum.

If we assume future wage increases of 3% per annum, and no further house price increases beyond March 2024, then we will have to wait around 48 years for the average wage to catch up to the housebuying power that the average wage had in 1992.

In reality, it’s unlikely that house prices will remain exactly the same for the next 48 years. When the Boomers start dying off en masse, beginning in about 15 years, the demand for housing will rapidly fall all across the Western World. At that point, house prices could go in any direction depending on how much immigration takes place.

Of course, if house prices continue to increase beyond March 2024, then wages will simply never catch up. The West will become more and more verticalised until we effectively regress into a feudal-style economy where 99% of people are renters for life.

What can be said with confidence, however, is that it will take around half a century, at current rates, for wages to catch up to the point where the average worker has the same housebuying power they had in 1992. And that is even if one assumes that house prices don’t continue to increase.

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If you enjoyed reading this article, you can get a compilation of the Best VJMP Essays and Articles of 2019 from Amazon for Kindle or Amazon for CreateSpace (for international readers), or TradeMe (for Kiwis). A compilation of the Best VJMP Essays and Articles of 2018 and the Best VJMP Essays and Articles of 2017 are also available.

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Clown World Chronicles: Business In Clown World

A common proverb states that the business of America is business. Indeed, America has long been the place where fortunes were made. But now that the West has degenerated into Clown World, business works in a different way. Fortunes are still made – but at a cost.

Clown World commerce is not what we’re used to. The story we’re all told at school is that productivity is a function of capital and labour, which work happily together to create needed goods and services. The supply of needed goods and services ameliorates human suffering and therefore earns profits and is a moral good.

The reality is much more complicated.

Although most of this book blames varieties of Marxism, atheism and materialism for Clown World’s woes, a large amount of the blame must be placed on capitalism. The political demands made by Marxists may be obvious, but the demands made by capitalists are no less pressing. These demands have had the effect of making Western society more of a twisted circus.

Capitalism is to blame for the fact that the growth of low and middle-income wages has decoupled from productivity. Although productivity has increased several times over recent decades, wage growth has lagged a long way behind. This has occurred because capital has exploited its strengthening negotiating position to offer workers worse deals. This change is shown graphically on the website WTF Happened in 1971.

The major consequence of this decoupling is that most of the increase in wealth accrues to an ever-smaller section of the population. Some studies suggest that the top 1% of the American population has looted as much as 85% of the growth in wealth since the Global Financial Crisis. In Clown World business, the system does not work for the good of the population, but only for the people at the top.

Capitalism is also to blame for the mass importation of cheap labour, as well as the sentiment that bringing in cheap labour is necessary because the locals are unwilling to do those jobs. Major industrial interests lobby government representatives to open borders and to lift restrictions on the movement of cheap labour. They also instruct their propaganda organs to manufacture public approval for such measures.

The Clown World workplace operates on a model closer to that of West Indian sugar plantations: if you won’t work for nothing, we’ll find someone who will. Any demand for a fair wage is portrayed as a refusal to work. The Clown World media plays a crucial role, supporting the capitalists by running stories about how fruit and vegetables will rot in the fields if immigration restrictions are not relaxed.

Things are so badly tilted towards capital now that it has become extremely difficult to buy a home without using inherited money. In New Zealand, house prices have increased 7 times since 1992, but wages have only increased 2.25 times. It’s a similar grim story in other Western countries. In the United States things are so bad that it was possible for the Wall Street Journal to headline an article with “Millions of Young People Shut Out of the Housing Market.”

Clown World business is about maximising short-term profit at the expense of all other considerations.

Because labour is usually one of the largest costs of any business, Clown World has seen extreme measures taken to cut labour costs. The most popular of those has been to ship manufacturing and services overseas to cheap labour zones that don’t have expensive regulation relating to worker protection.

The result of this drive for cheap labour is a lower quality of goods and services. We might have more of everything, but that everything is worse. By today, it’s all but impossible to speak to a customer service representative who has English as a native language. The result is confusion and frustration.

The drive to cut costs doesn’t stop at being cheap. It can extend to living entirely off someone else’s credit.

In Clown World business, it’s possible to live off investor money as it keeps rolling in, rather than make a profit. It’s not actually necessary to turn a profit and live off that, as a traditional business would. Investor money will keep coming into a business as long as that business retains a positive reputation. This means public relations.

As recently as 2015, media giant YouTube had never turned a profit, and it’s not clear that they turn one now. Twitter still doesn’t turn a profit. It’s not necessary to ever turn a profit as long as investor money keeps coming in to finance operations. And this money will keep rolling in as long as the company has good public relations. In Clown World business, success is mostly a matter of politics.

That politics trumps profit in Clown World can be seen from the bizarre alliances that corporate titans make with various political movements. Before the body of George Floyd had cooled to room temperature, major corporations had hit the media with campaigns showing their support for Black Lives Matter. Even McDonald’s ran an advertisement hailing the memory of Floyd.

These alliances help secure government funding, which is often even better than investor funding because it can come in the form of grants. The Government is a major source of funding for Clown World business, whether in the form of business development grants or tax breaks. Elon Musk got $4,900,000,000 of it! If you can convince an important person that your business is likely to provide jobs in the future, chances are good that person will cut you some public cash.

A business model where people are paid low wages, and hence can’t buy the goods and services of other businesses, isn’t sustainable for long. Sooner or later the impoverished masses start counting every last dollar, and when they do the consumerist economy shudders to a halt. Clown World business is when all long-term considerations are abandoned in favour of the next quarterly report.

There are many questions around Clown World business in the post-coronavirus future. If consumption falls sharply, how will people stay employed? If they can’t stay employed, must we introduce a universal basic income? And if 50% of women under 30 supplement their income with OnlyFans payments, where does that leave young men?

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This article is an excerpt from Clown World Chronicles, a book about the insanity of life in the post-Industrial West. This is being compiled by Vince McLeod for an expected release in the middle of 2020.

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If you enjoyed reading this essay, you can get a compilation of the Best VJMP Essays and Articles of 2019 from Amazon for Kindle or Amazon for CreateSpace (for international readers), or TradeMe (for Kiwis). A compilation of the Best VJMP Essays and Articles of 2018 and the Best VJMP Essays and Articles of 2017 are also available.

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Low Unemployment Is Meaningless If The Jobs Don’t Pay

Politicians like to brag about the low levels of unemployment they claim to have achieved. A low level of unemployment is presented as evidence that the economy is being managed well, and therefore that the stewards don’t need to be changed. But as this essay will demonstrate, low unemployment is meaningless if the jobs don’t lift people out of poverty.

Western politicians have been terrified of unemployment ever since World War II. Adolf Hitler frequently made reference in his rally speeches to the climbing German unemployment rate, citing it as evidence of the failure of the then-existing political Establishment. It’s taken as true by all that an unemployed man is far more likely to cause trouble.

The postwar paradigm has been characterised by a concerted effort to keep unemployment low. This worked out very well in the decades after the war, because back then a job guaranteed a certain standard of living. A full-time worker could expect to own a house and support a wife and three children. This great wealth, fairly distributed, kept revolutionary sentiments to a minimum.

Since the advent of neoliberalism in the early 1980s, the Western worker has solidly lost ground. Wages are no longer coupled with productivity (see graph at top of page), and so the buying power of the average wage has steadily declined. The average wage in New Zealand now has less than 40% of the house-buying power that it had a generation ago.

The problem is that Western politicians have continued with the assumption that so long as they keep unemployment low, all will be swell. This is a fine assumption when the average worker can afford a house and to raise three children in it. When they can’t, this assumption just leads to the face of the average worker getting pushed further and further into the shit.

If a person works full-time, but can’t meet a dignified standard of living with the proceeds from their wage, then that person is effectively a slave. Whether you’re a slave or free is not a question of how big your television is, it’s a question of how much coercion you live under. If your wage is so poor that you can’t live on it, then you’re effectively dependent on other people’s largesse. Less dependent than a beggar, but dependent all the same.

The lesson that Western politicians need to learn is that unemployment itself is not a good thing. Unemployment only has value insofar as it is conducive to ending the people’s suffering. If a working person can’t alleviate any of their suffering because their wage is so poor, then they are just as liable to become discontented as an unemployed person.

After all, the unemployment rate on slave plantations is extremely low. No-one on a slave plantation is sitting idle, or on the dole. So if unemployment alone is a factor important enough to gloat about, then it could be argued that the slave plantation model is a highly effective way to organise an economy. The absurdity of this is obvious.

It’s meaningless, then, for a politician to gloat about the low unemployment levels of their economy, as if that alone were evidence that they were running the country well. What matters is that the people are not suffering – if a large proportion of employed workers are not able to live decent lives, then the country is not run well.

The starkest problem for the Western worker is that they no longer have any negotiating power. This is the result of a combination of factors, the foremost being union-busting laws, ever-increasing technological sophistication (requiring ever-higher educations to understand) and the mass immigration of cheap labour. The capital holders have all the power, and they have used this to drive wages to the floor.

There probably isn’t any way to solve this problem within the current economic paradigm. The decoupling of wages from productivity has granted to capital holders a degree of coercion over their workers that they have not enjoyed since slavery: stories like this are now common. The only solution that seems likely is to institute a universal basic income, because this would allow workers to turn down abusive or exploitative employers.

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If you enjoyed reading this essay, you can get a compilation of the Best VJMP Essays and Articles of 2019 from Amazon for Kindle or Amazon for CreateSpace (for international readers), or TradeMe (for Kiwis). A compilation of the Best VJMP Essays and Articles of 2018 and the Best VJMP Essays and Articles of 2017 are also available.

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Clown World Chronicles: What is ‘Neoliberalism’?

In the financial sections of the world’s news websites, the reader often finds reference to “neoliberalism” or even “the prevailing neoliberal paradigm.” This is something so all-pervading that its necessity is taken for granted. It’s very important to understand neoliberalism, because the neoliberal mindset is the one in which things get done. This chapter explains.

In short, neoliberalism is the prevailing economic paradigm of Clown World.

The ‘neo-‘ prefix denotes that this is not the first time we have lived under this economic paradigm, and the ‘liberal’ root means that this economic paradigm is characterised by a lack of regulation of business activities. The liberty in question isn’t your liberty from coercion by capital; it’s the liberty of capital to coerce you.

As anyone who has played a game of Monopoly will be aware, the problem with economic liberalism is that it ends up with massive inequality. Absent a system of wealth redistribution, the ability of landowners to charge rent means that they eventually end up with all the money. Their ever-increasing ownership of capital leads to ever-increasing rents until the masses are as impoverished as any medieval peasant.

In the real world, economic liberalism led to the Great Crash of 1929, and from there to the Great Depression. This always happens under liberalism, because once all the money ends up in a few hands then no-one but them have any spending power. One no-one has any spending power, the economy slows down, workers get laid off, and recession begins.

The original liberalism was ended by American President Franklin D. Roosevelt, who brought in the “New Deal“. This was a drastic reorganisation of the economic system, intended to reverse all the advantages accrued by what Theodore Roosevelt had earlier called “the representatives of predatory wealth.” Decried as both Fascism and Communism by FDR’s opponents, the New Deal ended the Great Depression in America.

The Great Depression ended much more violently in Europe. The anger and paranoia brought about by the terrible economic conditions saw many people cast about for a scapegoat. This desire to find someone to blame for the desperate problems made it possible for an opportunist like Adolf Hitler to come to power, and the consequences of that are known to all.

After World War II, Western politicians became extremely cautious about allowing a return of the economic conditions that they believed were the ultimate cause for the bloodshed. Absent extreme and desperate poverty, they reasoned, the people would have no cause to give their power to a supremacist who wanted to conquer their neighbour.

As a result, those politicians allowed the workers to get a fair deal. Instead of all the economic power being held by a few people who ruled the others like kings, it was widely distributed across the population. This egalitarian economic arrangement continued for almost 40 years. This time period encompassed some great decades – the 50s, 60s and 70s allowed for freedom and creative expression to flourish all over the West.

It was too good to last.

Neoliberalism arose in the early 1980s, after the ruling class realised that it had been 40 years since the end of World War II, and the hard-won lessons about solidarity had been forgotten. Ronald Reagan and Margaret Thatcher, no less opportunistically than Hitler himself, came to power promising a shake-up of the existing economic paradigm. Their recipe for greatness was low taxes, low welfare and free markets.

The influence of America and Britain is such that practically the entire Western World is now neoliberal. Arse-licking dogs like David Lange forced neoliberalism on an unsuspecting New Zealand public after 1984, laying the economic foundations for the Clown World era. The demented Ruth Richardson piled on the pain by slashing the Family Support allowance. Helen Clark opened the immigration floodgates and John Key kept them open.

This obsession with money, at the expense of society itself, led us to here. Neoliberalism is to consume, mindlessly and without end. All higher culture and all spiritual traditions are to be destroyed because they prevent people from consuming. The borders must be thrown open because every new immigrant – regardless of what crimes they commit – is a new consumer.

By 2020, neoliberalism has, much like the original liberalism, led to the concentration of wealth in extremely few hands. Although society has become shittier in a great many ways, this increasing shitness has brought with it vast profit potential, and those profiting greatly are putting enormous energy into perpetuating the system. This combination of increasing diversity and increasing inequality is one of the major causes of Clown World phenomena.

All over the West, economic desperation is now standard for the youth. A study showed that the average wage in New Zealand has less than 40% of the house-buying power that it had 26 years ago. The youth suicide rate is skyrocketing, and the individual despair felt by these unfortunates is starting to become a generational malaise.

Much like the original liberalism, neoliberalism has set the scene for totalitarian extremists to come to power in the West. Although Donald Trump isn’t the one, a new Hitler could easily take advantage of the worsening economic conditions to channel the people’s desperation into another paroxysm of violence. The Weimar Republic was the original Clown World, and our current iteration of it could end in a similar fashion.

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This article is an excerpt from Clown World Chronicles, a book about the insanity of life in the post-Industrial West. This is being compiled by Vince McLeod for an expected release in the middle of 2020.

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