I’ve heard or read a couple of strange stories in the last day or so about the nurses’ trade union making the case for a “pay equity” settlement for their members.
Of course, the very notion of “pay equity” settlements is bizarre, fit only for somewhere like the old Soviet Union. Some government officials decree that job x should be paid the same as job y, as if the price of a banana should be adminstratively and arbitrarily set equal to, say, the price of a kiwifruit because the two might have (say) similar nutritional value.
But what interested me were two lines being used by the nurses in support of the view that they were underpaid (neither line seemed to have much to do with the false equivalency of “pay equity”, but were rather intended to support the claim that nurses were – absolutely – underpaid).
The first, reported here, was this
“In Australia, nurses can be paid as much as $90,000 as a base rate with penal and on-call rates as well. The limit in New Zealand sits around $68,000.”
Last I looked, real GDP per hour worked in Australia (in comparable – PPP – terms) was 41 per cent higher than in New Zealand. That is the best aggregate measure of labour productivity. You’d expect wages and salaries for most jobs to be higher in Australia than they are in New Zealand. That appears to be so for nurses. A larger share of New Zealand’s population is in paid employment than is the case in Australia, so the difference in per capita income is a bit smaller, but still just over 30 per cent. In material terms, Australia is now a richer and more successful country than New Zealand is. Those gaps keep (slowly) getting wider.
Because of the somewhat-common labour market between the two countries that creates some specific problems for New Zealand. Plenty of people will look across the Tasman, weigh up the pros and cons of the heat, the snakes and spiders, and the challenges and opportunities of big cities, and move. Since our somewhat-common labour market applies across the board (not just, say, to public sector nurses), it isn’t a problem we can fix by simply agreeing to all pay ourselves more. Those sorts of outcomes have to be “earned” – not about individuals working harder, but about the economy as a whole finding better and remunerative opportunties, lifting earning possibilities for everyone. Do it enough, and one day that might even be a net flow of New Zealanders coming back from Australia (Ireland managed it, it can be done).
I’m sure the Nurses Organisation is better connected to people at the top of the government than I am, so I can only urge them to suggest to their friends and allies who currently hold office that economywide productivity might be elevated quite a long way up the list of government priorities (in the Labour Party “Our Plan for New Zealand” brochure dropped in my letter box the other day it featured not at all). Remind them, perhaps, that for decades New Zealand has been failing on this count, reducing successive governments to pretending to a success that just hasn’t been achieved. In consequence, wages are much lower than they really should be, and we’ve been more limited than anyone would have liked in dealing with all sort of other social problems.
(Of course, from a Nurses Organisation perspective the strategy I’m proposing would fail any sort of cost-benefit assessment: neither National nor Labour show any sign of being seriously interested in doing what it might take to generate much better productivity and incomes, and (by contrast) the nurses seem to have the government wrapped around their little finger on the pay-equity path to improving their own position. But I’m sure nurses are public-spirited people, and they have children too, not all of whom will choose to be nurses.)
The other strand of the nurses’ argument was a bit closer to home. A Wellington hospital nurse was quoted as saying
Only a quarter of the nurses she worked with lived within walking distance of their hospital. The result was that only a quarter of the nurses Ms Hopkinson worked with lived within walking distance of their hospital.
“We can’t afford to live in the communities we nurse in, we’re priced out of these neighbourhoods.” 12 years ago when she started, nurses lived in the central city, but that was no longer the case.
“They’re commuting from Featherston, from up the Kapiti Coast, Upper Hutt; they’re a long way away and they won’t be able to make it to us after an earthquake.”
Even in Wellington, it did seem a bit of a stretch to argue for a pay rise so that nurses could walk to the hospital when the 1 in 300 year earthquake hits. The present value of the cost of that possible post-quake complication will be pretty small indeed.
Now, as it happens I do live within walking distance of Wellington hospital. It is a pleasant middling suburb, and when I was younger I knew lots of nurses who lived in the neighbourhood, attended our church etc etc. It was close to their work and convenient. As I’ve noted previously, I bought my first (three bedroom, 30 year old) house in this same suburb 30 years ago – actually bought it from a teacher who was moving to Wanganui where housing was more affordable (it was near the peak of the then-boom). The Reserve Bank’s inflation calculator tells me I paid about $296000 in today’s money for that house.
Real wages and productivity have increased since then. Real GDP per hour worked has risen by a third, so roughly speaking spending $400000 on a house today would bear a similar relationship to incomes as $300000 then.
You cannot buy any house in Island Bay – still less a three bedroom house, 30 year old, decent-sized section, garage etc – for $400000. As it happens, earlier this week a real estate agent sent me a several page list of sales in the area in the last few months. The cheapest property sold was a unit with no land at all, and 60 square metres of house: that went for $400000. The next two cheapest ($507K and $570K) were also units and had 60 and 70 square metres respectively. The cheapest house that looks roughly comparable (size, age, but much smaller section) to that first house of mine went for $805000. The median price across those particular 37 properties was $960000.
It is insane. No wonder nurses can’t afford to buy anything decent reasonably close to Wellington Hospital (there are slightly cheaper suburbs, but they’ll all have had much the same escalation). It is not that nurses are underpaid. And it isn’t just the nurses. Anyone in a moderate-income job – especially if there is only one income, or one fulltime and one part-time income – will really struggle. And, much as I quite like Island Bay, it isn’t Fendalton or Remuera or St Heliers – yes, we have a beach too, but even with warming sea temperatures the sea is always more ‘refreshing’ than inviting.
It simply isn’t an issue about nurses, or nurses’ pay. It is a straightforward consequence of vicious choices that a series of central and local governments have made to mess up urban housing markets. Government has failed, very badly. And if it perhaps doesn’t impinge too terribly on the children of the wealthy, it greatly restricts the options of most everyone else looking to get into the housing market, nurses included. They are, to put it, colloquially, stuffed. And if that isn’t you or your children yet, it will be mine in a decade’s time. (Rents are not my primary focus, but in an age in which real interest rates are at record low, real rents should also be lower than ever.)
I’m sure the Nurses Organisation is better connected to people at the top of the government than I am, so I can only urge them to suggest to their friends and allies who currently hold office that fixing the urban land market might be elevated quite a long way up the list of government priorities (in the Labour Party “Our Plan for New Zealand” brochure dropped in my letter box the other day it featured not at all). Nice Mr Twyford appeared to understand the issue when he was in Opposition, but there has been as little action from him in government as there was from the class enemies of the Nurses Organisation, the previous government. Remind him, perhaps, of those fast-growing cities across swathes of middle America where good houses really are still affordable. There is no shortage of land in New Zealand, not even in Wellington (except to the extent the Nurses Organisation friends at the Wellington City Council make it artifically so. Do not just paper over the cracks, but fix the problem at source.
(Of course, from a Nurses Organisation perspective the strategy I’m proposing would fail any sort of cost-benefit assessment: serious land-use reform from either National or Labour still seems like a long shot (by contrast) the nurses seem to have the government wrapped around their little finger on the pay-equity path to improving their own position. But I’m sure nurses are public-spirited people, and they have children too, not all of whom will choose to be nurses. All of whom will eventually want houses.)
From any sensible policy perspective, so-called pay equity is just daft. From the perspective of any particular group of workers, perhaps it is the fastest path ahead – zero-sum game (well, worse) across the whole economy, but beneficial for those particular individuals. But, probably without really being aware of it, the Nurses Organisation put their finger on two really big symptoms of policy failure in New Zealand – productivity/earnings and housing – that affect almost everyone. While pursuing their own short-term self-interest, I would urge them to add their voice to the call for serious structural reform in these two areas. They need it. We all need it. Political parties, meanwhile, keep on failing to deliver.
37 thoughts on “Nurses, pay equity, and the real structural problems”
I was interested in the comparator groups argument on this morning’s national radio segment on this. My naive sense here is that if you have a group that go on to become nurses who on average got As at school, and a group who went on to be engineers who on average got Bs at school, it would be unjust for the nurses to be paid less after graduating (if the duties, hours, liabilities etc were the same – simplifying here). I can envisage an interesting research paper which explores the pre-specialisation “quality” of the students who go on to be nurses cf engineers, for example, which was a comparator group mentioned.
Universities know the school grades of their students – for example, if I log into my university portal for grades, I can see the mark I got in 6th Form Economics. So, it would be possible for a university that offered a Bachelor of Nursing and a Bachelor of Engineering to look at the relative pre-university academic performance of the two groups, and perhaps they might even have some overlapping university courses (e.g. first year stats.) Similarly, if you could get access to the data, the school grades of police recruits might be able to be compared.
Mostly unrelated, there is an interesting Freakonomics article/podcast “What can Uber teach us about the gender pay gap” which has some interesting examples of how pay gaps can appear in a gender-blind system due to varying preferences.
A person that gets lots of As for maths and science would unlikely end up in nursing. They usually have huge number of options available to them and if it is the health profession as their choice they end up as doctors. Usually nurses can’t get a decent grade in school and that leaves them fewer options unfortunately.
That may be the case in some of the lower grade nursing schools at polytechs but it certainly isnt at the Unverisity of Auckland. I graduated from there some years ago and was in the top 5% of all students doing the pre-med papers we had to complete. I chose it not because of a lack of options, rather out of interest. Your statement is based on ignorant assumptions.
The original comment was to suggest measuring this, rather than just relying on anecdotes… does that seem desirable?
If you choose to work in a lower paid position then that is a question of making the wrong choice. Otherwise carry forward your intellectual capacity and finish the appropriate qualifications and get paid accordingly. I have met a huge number of fully qualified accountants on $60k wages and they wonder why I am so lucky to be on a $200k wage. I tell them it is a question making your own choices rather than they having lucked out due to some fault of someone else. You are paid what you choose to be paid. Blaming others is just a cop out.
I actually started out studying production engineering in Australia. My dream was to run a factory when I was a kid as my dad was a factory manager. It did not take me long to realise, just 6 months in my studies, that the engineering degree was hard work and precision mathematics was a base requirement which I made a choice was not what i wanted to do.
I decided on a switch to commerce studying accountancy, law and marketing. It was even harder work because it was like learning a completely new language having spent most of my life in maths and science.
My first job was a low $12k a year as a accounting apprentice which then rose to $30k when i arrived in NZ. The only reason I got that job in NZ was due to my fiddling around with a $20k computer and self taught Lotus123(Microsoft Excel equivalent) and In the meantime I got better qualified and finished a Masters degree at the University of Auckland. By then my pay moved to $80k plus car, moved to various positions in various organisations and now on a $200k wage. Each move required a huge effort to relearn systems, processes. make new networks and climbed the corporate ladder.
Most wealthy baby boomers did not go to university. But these days it’s the case. Universities should have govt funding cut. Socialism for the rich capitalism for the poor. As advocated by wealthy green party voters in grey lynn. People should be free to not associate.
I’m not sure that pay rates between professions ought to be set based on relative IQ required to qualify for such a profession – which is (I think) what your argument is in respect of average grades received in secondary schooling. In many ways nursing and engineering are to my mind a good comparator group – both require a bachelors degree to work in the profession; both require a professional examination to be passed in order to become registered in the profession. The quality/competency/accuracy in fulfilling ones duties required by both professional groups is high, as mistakes made can be life-threatening and/or have the potential to cause human harm if done incompetently.
It probably takes longer (more years) to become a CPEng than an RN – and I think perhaps time to reach such a professional standard ought to be taken into consideration.
I’m not sure that pay equity is the answer to our low wage/low productivity economy, but I am sure it can’t be a bad thing. I believe every action taken toward lifting wage rates must help – as perhaps it is only higher wages that will drive innovation and efficiency – and hence higher productivity.
I agree with Michael that housing costs are outrageous here, but I think they will slowly but surely drop over the next decade – and if wages slowly but surely rise, we might start to be in a better place in terms of inequality.
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I think they call that communism.
What? Do you mean that pay equity is in operation in communist regimes (e.g., PRC)?
PRC has drifted to a capitalist system mostly, with some communism and we have drifted towards communism with lesser and lesser capitalism. But I did notice on my holiday in Shanghai and 5 provincial cities that they paid particular attention to health and safety on pitched roofs on their new houses. They had steel poles running along the entire length at the top of the pitched roofs that allow workers to attach their safety line which we have not adopted on the pitched roofs of our houses. At least they do appear to care more than we do.
Capitalism is not a political ideology, it is an economic system. Communism is a political ideology. You seem to be mixing up these basic concepts. The PRC is a one-party state, that party being the Communist Party of China. Hopefully that clear that up for you. So are you saying they don’t have pay equity in Communist China?
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Nope, they don’t appear to have pay equity. I setup a Beijing branch sales office in China in 2005 and men definitely demand a higher pay than the women do. So I hired women to run the office, a team of 5 women ran that office. It was much cheaper.
Don’t think I am mixing the 2 concepts. You can see the communist ideology in Jacinda Ardern and Grant Robertson in how they make their command and control decisions and the bullying tactics they employ in stealing the hard earned wealth of individuals. Trade mark is the propaganda machinery they have built by paying excessive sums to 125 so called independent working groups when you know they have already spelled out the agenda, which is, say what I want or the easy money flows stops. Bribing Sir Michael Cullen to say what Grant Robertson wants to hear is exactly what communists would do.
Clearly all of us do realise China has adopted Capitalism with Chinese businessmen competing successfully all around the world, initially by copying but now increasingly with innovation and creativity and you get that only through adopting market ideology and if there is no such thing as pay parity. You are successful if you earn it and therefore deserve to be wealthy.
Don’t forget the early communist years in China in the cultural revolution? Pay poverty, I guess you could also call it pay parity was enforced by the communists. It was a sin to be a landlord. Notice how the Labour party is painting landlords as evil people. Hardcore communists definitely.
To suggest NZ’s political leaders “command and control” and “bullying” tactics or ideological thought relates in any way to Xi Jinping tactics and thought is just laughable.
You seem to have some sort of romantic notion about China’s version of authoritarian capitalism being a exemplary model – but it has been built on subsidies for their exporters, worker exploitation, copyright infringement, environmental crisis, unbelievable currency/stock market manipulation/interference by the state and graft/corruption. It seems to me that the more its political leadership loses control of its economy, the greater it acts on controlling its people (whether in-country or abroad). That’s communism.
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I think you will find that Maori will generally say that so far the Treaty of Waitangi settlements to date represents only 2% of what has been stolen from them and their current predicament is due to the wealth stolen from them by the (British) Crown and they want their 98% back (from the NZ taxpayer, not too sure why Indians, chinese, polynesian settlers have to continue to meet a British Crown debt). Heard this comment on RNZ one morning when asked what this Professor of some Maori Studies department thought about the Maori CGT at 17.5% and other NZ people at 33%, with the reporter bumbling along scared to say the wrong thing.
So I guess a people will do what a people will need to do to get ahead, ie the British Empire and the stolen trillions from settled lands, the US war machinery kick start conflict around the world to feed its munitions industry which happens to be the largest in the entire world and Isrealis saying the Palestinian people never existed and there is no such people. They are just out of place arabs and should return home. Strange comment after a thousand years living there in Palestine.
Anyway, your Labour Party communist comrades just tossed out Marie Brady from making any select committee submissions.
Labour MPs on the justice select committee have voted against allowing China politics expert Anne-Marie Brady to make a submission on foreign interference in elections. National MPs supported Brady, a professor at Canterbury University, giving her view on the issue which is a focus of the committee’s inquiry into the 2017 general election and 2016 local elections.
That’s bizarre. If you want to set pay levels by school grades, why not go the whole way and just test people’s IQ and pay them a fixed amount according to their IQ?
“My naive sense here is that if you have a group that go on to become nurses who on average got As at school, and a group who went on to be engineers who on average got Bs at school, it would be unjust for the nurses to be paid less after graduating (if the duties, hours, liabilities etc were the same – simplifying here)”
The simplification you mention is the problem – there are so many variables that no one can properly model to say two jobs are equivalent. There is only one reliable method for evaluating and setting salary , and that this the market. The market will reflect all variables and the combined aspirations and needs of thousands of people, and will set the appropriate salary. Some occupations in NZ are paid very well compared to their educational status – thinking of tradespeople during the present un-ending construction boom. Any attempt to equalise the salaries based on perceived educational status, high school grades, skull size sounds like some horrible fusion between a socialist / caste or feudal system…
If there is a particular problem for nurses, is that they are in a market where the government is a sole or very dominant purchaser, and so can set a lower salary than if there were multiple purchasers. The answer isn’t to increase the salary but to restore market principles to the healthcare sector.
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“The answer isn’t to increase the salary but to restore market principles to the healthcare sector.”
Gosh, no. I’ve seen those “market principles” in action in the US for a number of my relatives (both those with and without private insurance) with absolutely awful individual patient and wider family outcomes. Socialized medicine is much, much more humane. Once you add a profit incentive to healthcare, morality goes out the window.
I must say, ACC has been an excellent first class service for my mum who is bedridden due to a cracked vertebra that was surgically replaced. Some of her other accidents was the hospital nurse dropping her, too lazy to ensure that she was properly assisted when trying to move her and a idiot physiotherapist that tried to get her to walk backwards thinking she was Michael Jackson.
Spot on productivity and the cost of housing. Problems stemming from crazy house prices flow through to many parts of the economy. over crowding, to health, children’s education, record household debt, family formation, poverty, you could go on and on. We have become so precious and clever with planning,rules, regulations, social engineering as to render basic housing unaffordable to a large percentage of the population. For a nation its a total disgrace. The responsibility of a Government is to create the environment for the market to deliver, they need to realise this sooner than later.
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Agree on the planning rules and regulations but would add to that building rules and regulations. Both nightmares – and the responsibility for making both bits of legislation/regulation nightmarish rests squarely with central government. I work in planning. The number of amendments to the RMA over time are ridiculous – each time adding to what matters planners have to ‘cover-off’ in plans. Take for example, this one;
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Hi Michael as you may remember I am registered nurse working in Christchurch. I do not feel qualified enough to comment on the strength or not of the nurses pay equity claim.
But with regard to your points about housing and productivity I feel I have some knowledge to impart.
Firstly there is a nursing shortage in my hospital despite a recent significant pay increase.
I believe high housing costs are a barrier of entry into the workplace for younger nurses who do not own their own homes. This is despite Christchurch’s housing costs being less unaffordable compared to elsewhere like Auckland.
I also believe that going forward due to Christchurch’s poor urban form and an over reliance on motor vehicles this will restrict the growth of the effective size of the labour market which will inhibit productivity growth.
I believe the route out of this ‘trap’ is to build higher density housing in ‘walkable communities’ around rapid transit.
I detail why and how this could be achieved here;
View at Medium.com
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My daughter is a nurse. At her graduation 4 years ago, I noticed that most of the other graduates there (maybe 200) looked older than her. I found out that many of them had got their degree after being dis-satisfied with their jobs out in the workforce. This was reinforced by the two who gave speeches.
So they hadn’t gone straight from school. And they had gone into the training, knowing the conditions and pay.
I trained in the US as a nurse – 4 year Bachelors degree. No one who trains as a nurse really understand the conditions (i.e., what it really is like to be a ward nurse) until they do it, day in day out for 40 hours (often more) per week. It’s exhausting – particularly if you are on rotational shift work – and that was when I was young! Give me an office job any day. Got here and instead became a pharmaceutical rep – better base pay than a nurse; a company vehicle; a commission/bonus scheme; and all my travel, meals and accommodation fully paid when on the road. Unfulfilling and boring however – which is the opposite of nursing.
I tell new accounting graduates. In accountancy if you can survive the routine, day in, day out exactly the same then you can get paid well. They pay you well to survive the routine and the boredom. You have to learn to love staring at numbers the entire day on a 15 inch screen. These days to make it exciting they give you two 17 inch screens. A day is usually a 10 hour day without breaks.
Your post motivated me to finish writing up my verbal submission to the select committee on the pay equity bill
Pay parity means no innovation, no creativity and no passion to achieve.
Apart from agreeing with your comments re housing unaffordability and its origins, may I raise with you and others the question of whether our ‘special relationship’ with Australia for labour market purposes is really in NZ’s interests?
My thought is that on the figures, many tens of thousands of youngish (20 to 35) each year leave NZ to work in Aus, perhaps most thinking a year or two of an exciting city and better pay experience would be good before coming home. But anecdotally all of us know so many who have stayed, and in my case far fewer who have returned: I don’t know if stats exist on this. Young ‘go-ahead’ people just qualified in trades, technical work, truck drivers, nurses as here etc, what I think of as the ‘engine room’ of an economy – not graduates – go for much bigger wages and real net benefits after costs (many actually less). I think they do so at relatively little cost to thinking themselves NZers, can easily return for family, and so many end up staying, pulled in by the money from a job keen to have them, city life, a personal relationship, etc.
So my thought is that in ‘institutional labour market terms’, NZ is on the losing end of the agreement that Kiwis may stay forever. If they had gone to England, as many also do, the usual ‘two year visa before you are 30’ is mostly accepted as enough – not just distance but the job market visa hurdles after two years being dissuading factors. If Australia had the same ‘two years before you are 30’ deal for Kiwis, could we not have so many more of those who left for adventure coming home and bringing us their upgraded talents and go-ahead attitude that led to them being brave enough to leave ‘home’ at, say, 21?
We have major ‘skill shortages’ in so many areas of the working economy beyond nurses, and as you have pointed out, have resorted to replacing losses of those born here with a fresh lot, which even if done fairly to them, is surely not efficient. Not withstanding the real economic imbalances you point out, it seems to me reasonable to posit that our labour market could be more productive if the giant sucking sound from Australia was turned down by some sort of administrative time limit on Kiwis in Aus – still better than the rest of the world, but limited.
I don’t think you can do much about the quasi-common labour market. It suits Australia in its present form, especially now when they take tax revenue from the NZ workers but offer no social security in return. And there is nothing NZ can do about it, save stopping people from leaving…
There are three OECD countries which have the highest rates of foreign domiciled citizens and those are NZ, Portugal and Ireland. In each case the neighbouring big country speaks a common language (Portugal not directly I realise) , has a reasonably similar culture and recognises qualifications etc. There is nothing any of these countries can do it about it seems – even Ireland has attained a decent economy but people still leave for the UK, at least whenever there is a downturn.
The lesson is – don’t worry about it. Just get the basics right so there is a decent reason to go home if you wish to. New Zealand has not achieved this, for all the reasons this blog illustrates nicely. I live in Germany now with a young family and would dearly like to come back to NZ, but realistically this would be a huge cut in living standards, not due to incomes but because of living costs, namely housing.
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Largely agree with you, altho note that most of the Irish diaspora developed decades ago when Ireland was underperforming.
I largely agree with Damoyo’s comments. We, of course, can’t control what the Australians do, and they have been moving to make it harder for NZers to securely move to Australia long-term (I’d certainly counsel my kids against doing so, esp if they themselves one day have kids).
Also worth thinking about the difference between the interests of NZers and the interests of “New Zealand”. For individual NZers the exit valve of Australia has been great, but that becomes less clear when one tries to think of an entity called “New Zealand’ (not that govt but the society more broadly). Perhaps the easy exit option has meant there has been less pressure on govts to actually fix the domestic problems. Perhaps the exchange of populations has itself degraded social cohesion and a shared interest in a common destiny. Libertarians would deny any of this has any meaning – individuals are all – but I’m not a libertarian.
I just got off the plane from Las Vegas yesterday. I stayed there with a nice young couple who live in a townhouse about 10 years old. He’s an iPhone repairman and she’s a stay at home mom. He makes enough money to rent their nice, 10 year old, 140sqm 4 bed 2.5 bath townhouse with garage. I viewed an open home of an identical property going for US$275,000. They’re a short 3 drive from plenty of public amenities and only about 15 minutes from the city center. Driving around I saw a lot of new properties from single family homes to apartment buildings all prices at commensurate levels. Those properties were built en masse, in large developments each about half a square km block at a time. Similar young kiwi couples in their early 20s can only dream of this relatively idyllic lifestyle in cities of anywhere near similar size!
These were the kind of communities that made headlines 10 years ago for plummeting property prices in the subprime mortgage crisis. Now, they’re affordable, new, well-built homes for young families and in spite of the relatively low prices, developers are still hard at work building block after block of new market-rate affordable housing.
A cruel irony of New Zealand is things here cost more, but you still earn less. I thought the example in Las Vegas put to shame supposedly progressive polities like Los Angeles, San Francisco, and New Zealand, all of whose governments virtue signal in favour of “affordable housing” but cannot deal with market realities.
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if pay rates are set by grades that’s socialism and creating social caste systems. if a high school drop out becomes a millionaire and along the way has barriers and social prejudice against them. the millionaire drop out should pay the low tax rate due to poor grades. Honestly universities are anti blue collar workers and the poor. That’s why blue collar workers are switching right. because the left favours the cognitive elite.
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