Are Policy Analysts Causing Inflation?

As with most Anglo-Saxon cultures, New Zealanders have a strong anti-intellectual streak and an ambivalent relationship with the State. It's therefore unsurprising that little respect should be accorded to the role of the public servant, and in some circles 'bureaucrat' is practically a swear word.

The country's most successful comedy show, Gliding On, was based on lampooning the (lack of) activities in a Wellington government office. To this day, in a very different political and economic environment, it's still an a priori truth that the 'pdf pushers' in Wellington are overpaid, unproductive drain on the taxpayer that contribute nothing to society's well being.

But it would seem a bridge too far to blame public servants for causing inflation and raising mortgage rates, right? Not according to Stuff columnist Bernard Hickey , who appears to claim just that. Hickey aspires to be "provocative and unconventional [and] question the consensus". Here, however, he is satisfied with peddling an exaggerated version of conventional wisdom.

His column is a classic case of bait-and-switch. He has a larger, ideological claim to make (government spending is contributing to inflation and should be reigned in) but spends most of the time appealing to kneejerk contempt for bureaucrats by making cheap points about advisors and policy analysts – whose salaries in reality form only a tiny proportion of total government spending

The core part of his post is simply listing the jobs for analysts and advisors, which by definition can't be adding any value (question: if they were, how would we know?) He is shocked to find 29 jobs listed in the Dominion Post for such roles. Are these to replace people who have left, or are they new jobs? We don't know, because his assumption is simply that 29 must be 29 too many.

He then skips to a Trade Me search of government jobs and find that – horror – 22 are offering salaries more than $80,000. Twenty-two out of how many? If we run his search again across all salary bands, it turns out that this is 22 out of 152 government jobs – about 15 percent. And 84 (approximately 60 percent) are in the $0—50,000 category. I would hazard a guess that this is actually quite similar to the NZ labour force as a whole.

The only piece of hard data that supports his larger argument is that public sector wages have grown faster (20.6 percent over seven years) than in the private sector (15.6 percent)
But -- having focussed the attention on analysts and advisors -- he conveniently ignores the fact that the 'public sector' includes all government-funded occupations, including doctors, nurses, teachers, police, social workers et al. Investigation will almost certainly show that these have absorbed the great majority of extra expenditure.

Of course, Hickey will probably still want to argue that spending has grown too much and too fast. But he then has to acknowledge that these are things people have actually (repeatedly) voted for.

His second graph does show a steady increase in the core public service (bureaucrats). One could argue that ANY organisation that expands its operations will see a proportionate expansion in administrative functions, and areas like research and analysis (which in the private sector is often considered to add value). But even if we assume that all 40,000 bureaucrats are fundamentally useless and unproductive, their totality still constitutes less than 2 percent of the NZ labor force (around 2.1 million). This 2 percent is causing inflation? Come on...

The post includes a set of colourful graphs presumably intended to add intellectual rigour. But this is the most dishonest part of all. Increases in public spending and bureaucrat numbers since 2000 are compared to a long steady decline in NZ's relative economic standing against the OECD, US, and Australia. The problem is that this graph starts in 1970, and the big decline is 1970-90 – i.e. in NO way caused by current policies. In fact, if you actually look at the bit of the graph that is post-2000, the lines are more or less flat – indicating that in recent times NZ has held its own, especially against the OECD average and the US. Not bad, especially with all those bureaucrats weighing us down...

In a future post, I'll discuss what the motives might be for the type of claim peddled by HIckey. Meanwhile, the popular view of public servants as unproductive parasites is, well, pretty unfalsifiable. But let's be clear -- the suggestion that they're somehow responsible for New Zealand's macroeconomic difficulties is nonsense.