Why can’t we have full employment in New Zealand?


Somewhere in the last 30 years politicians and economists decided real full employment was “inefficient” and damaging to the economy. So they redefined full employment as the natural or equilibrium rate of unemployment, the lowest level of unemployment at which inflation remains stable. (Also known as the “non-accelerating inflation rate of unemployment” (NAIRU).) Economists start to get antsy when unemployment drops to around 4-5% as they are worried about inflationary wage demands. Now I’m sure you can see the issues here.

Firstly, increasing wages for the masses is regarded as bad. A large pool of unemployed people keeps downward pressure on low paid workers who are aware (and reminded) they are easily replaceable. This usually does not apply to upper management, directors and advisors who are involved with running businesses. They get rewarded for keeping costs, including wages, low. Politicians from all the major parties may talk about upskilling and higher wages…

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