Home > Economics - General > IR reform and inequality

IR reform and inequality

November 2nd, 2005

It looks as if the IR legislation will be passed through the Parliament while we are all changing the channel to get away from the barrage of ads supporting it, so I suppose I’d better comment now, before taking the time to wade through the 600 pages of simplification the government is giving us. I’m mainly concerned with the likely impact on inequality

Taking the central elements of the legislation separately, it’s possible to make a case in regard to any one of them that the effect on inequality will be modest, or even favourable. It can be pointed out, for example, that many minimum wage earners are in high-income households, so a lower minimum wage won’t be so bad. And making it easier to sack people ought to promote more hiring as well as more firing, which should be good for those who are now unemployed.

These arguments are plausible, but not clear-cut. On the other hand, when we look at the macro evidence, we get very clear evidence pointing the other way. Wherever reforms like this have been introduced, notably the UK and NZ, inequality has increased drastically on almost all dimensions (capital vs labour, variance in wages, wage premiums of all kind, unequal allocation of work). In the US, where these institutions have been entrenched for a long time, inequality is higher than in any other developed country and getting rapidly worse.

It may not be clear which piece of the reform package is doing the work, but the aggregate outcome can be predicted with safety.

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  1. Roberto
    November 2nd, 2005 at 21:17 | #1

    Have I missed something, but usually/typically the Goverment commissions Treasury (or external consultants through Treasury) to conduct modelling to test effects and outcomes.

    I know there was a lot of activity on this front during ANTS/GST. However, the Government must have undertaken some even limited modelling, and why hasn’t that been released, even if it supports the Gov’t's contention – at least then it could be scrutinised and tested!

  2. Jill Rush
    November 2nd, 2005 at 21:39 | #2

    Greg Combet reduced the new SerfChoices to a very understandable level on the 7.30 Report today. His graphic representation of the lowering of wages was compelling.

    His analysis of the effects of the legislation was clear and logical. We have a revolutionary change with “simplification” which looks like a picnic for lawyers. 600 pages plus another 500 of explanation is hardly simple. It is impossible for the average punter to understand what it means and the short time for the Senate to review it means that even the professional legislators will not understand the full ramifications of the legislation until interpretation begins.

    It looks like legalised theft especially when the country is going to import workers from overseas to weaken the position of working people. It is not democracy to remove rights in such a manner.

  3. Roberto
    November 2nd, 2005 at 22:04 | #3

    All Combet did was deliberately cloud the issue. A sensible political tactic, but not very helpful.

    Given that the EM and Draft bill (aprox 1200 pages in length) were tabled only today – and the Opposition (quiet rightly deplored the lack of time to scrutinise) – how did Combet get such an indepth understanding – is he a speed reader?

    I guess it could have been much worse with Sharon Burrows ranting on and on and on

  4. Terje Petersen
    November 2nd, 2005 at 22:12 | #4

    Which version of inequality are we talking about? Inequality of income, inequality of wealth, inequality of opportunity, inequality of contribution?

    And why is an increase in inequality necessarily a bad thing? If Bill Gates gave all his wealth to Australias poorest family then there would be an increase in Australian inequality. Whilst if Sydney was hit by a nuclear bomb there would be an decrease in Australian inequality. Yet surely the former would be far more preferable than the later.

    QUOTE: …especially when the country is going to import workers from overseas to weaken the position of working people. It is not democracy to remove rights in such a manner.

    RESPONSE: Like I have said several times it is our fetish for the welfare state that makes tough border protection laws necessary. Tampa and the like were popular due in part to this popular fear of foreign labour.

    QUOTE: It looks like legalised theft …

    RESPONSE: What like taxation?

  5. Ernestine Gross
    November 2nd, 2005 at 23:22 | #5

    John,

    First of all I’d like to thank you for running this blog.

    Almost 10 years ago I wrote a paper drawing a parallel between the gold exchange standard and work place agreements. The disaster of the gold exchange standard, known as ‘beggar-thy-neighbour policy’, can be understood quite readily in terms of the problem of ‘non-binding agreements’ as in the ‘Prisoners’ dilemma’ game in non-cooperative game theory. The history of the gold exchange standard is so well known that I won’t repeat it here. The point I was making is that while ‘national governments’ are no longer trying to gain a ‘competitive advantage’ by means of ‘competitive devaluations’ the work place agreements provide a mechanism for ‘competitive cost cutting’.

    Greg Combet made a related point on the 7:30 Report tonight regarding wages in China and India. The point is related in the sense that Combet did not take it to the next step. In order to remain ‘cost competitive’ the currently low wage counties have an incentive to cut their wages. The process converges to 0, assuming it is being left to run unchecked. I do understand that minimum wages (‘safety net’) is supposed to act like a minimum wealth constraint.

    The ‘promise’ that the minimum (money) wage will not be lowered does not change the argument.

    It seems to me the proposed IR legislation allows for speeding up the process.

    Incidentally, if I try to understand what has been happening during the past 10 to 20 years within the context of theoretical models of non-dictatorial resource allocation systems then the governments (not only Australia) have reliable information that workers have altruistic preferences.

  6. November 2nd, 2005 at 23:34 | #6

    Combet was quite correct in saying – as I said when the PM’s thing was first released in May – that the central and key thing was the abolition of the no disadvantage tests for AWAs – thus all this guff about legislated minima is just that – they can be unilaterally done away with by making an AWA.

    And Stephen Smith points to the specific wording where duress cannot be inferred if it’s made a condition of (continuing) employment that an employee sign an AWA.

    Put those two things together and what do you get? The aim of the legislation – increasing the profit share of GDP at the expense of wages. That will lead to increased inequality.

    It’s not so hard to understand, 1252 pages of legislation and explanatory memoranda notwithstanding.

  7. Dogz
    November 3rd, 2005 at 01:51 | #7

    I might be more inclined to listen to those who rail against inequality if they put their money where there mouth is. There’s little credibility lamenting the plight of those at the bottom when you’re a union leader/academic/ABC employee/public servant/labour party MP happily stashing $100,000 – $300,000 per year.

  8. Alan
    November 3rd, 2005 at 05:45 | #8

    Well, doh, what did you expect John? If altering IR law wasn’t going to result in a transfer of wealth from the many to the few, why would the Coalition bother?

    The wonderful convergence of God’s will, as interpreted by the Fair Pay Commission, and the interests of business owners, as interpreted by Kevin Andrew, is further evidence that the workings of market forces are the workings of an Intelligent Designer.

  9. neophyte
    November 3rd, 2005 at 06:02 | #9

    Dogz,

    Get real!! How many public servants/ABC employees do you really know who are able to “stash” $100,000 to $300,000 pa. I presume that you are implying that they earn far more that this so that that they can “stash” the rest. I would strongly suggest that most such employees would earn less than $50,000 and spend most of that in paying off mortgages, buying food etc so they’d have very little to “stash”. As one of the above, I have very little left over each fortnight yet still manage to support a Foster child overseas as my contribution to the plight of those at the bottom.

    Generalisation sucks.

  10. Andrew
    November 3rd, 2005 at 06:41 | #10

    Dogz

    And yet I bet you’re happy to believe the Business Council of Australia running support ads for lower taxation and IR changes . Not to mention demanding the govt spend money on infrastructure (which we pay for) so they can make more profits (which they will keep more of).

    As you say, it’s a strains the credulity a bit to believe people who want lowered tax on amounts earned over $125K(!) pa (while demanding the govt spend more on supporting their businesses) reallydo care what poor people end up with.

  11. Ros
    November 3rd, 2005 at 07:15 | #11

    In “Relative Advantages: Casual Employment and Casualisation in Australia and New Zealand� the authors Iain Campbell and Peter Brosnan have a look at and put forward, as they say, some tentative arguments as to why casual employment is less significant in New Zealand and not growing across the economy as a whole.

    They offer the following
    “But also crucial is compression from the top. Permanent workers in New Zealand have fewer benefits than permanent workers in Australia, and their situation was markedly worsened as a result of the radical program of labour market deregulation in the 1990s. As a result of this narrowing of the shortfall in rights and benefits, employers have less incentive to replace permanent workers with casual workers�

    Points they make
    Award regulation has been crucial in shaping the practice of casual employment. The overall effect was to establish a sharp divide in the employment structure (and the workforce).

    Casual clauses signalled a type of “officially sanctioned’ gap in the regulatory system.

    The conferring of casual status on a worker gives the employer a psychological advantage.

    The final point particularly interest me as I have been employed as a casual for all of my paid working life since early adulthood. The psychological advantage (they consider that of lesser importance as a factor of difference between Australia and New Zealand) is not just one that motivates employers. It is also a matter of importance to employees. Certainly where the bulk of the workforce is permanent they view casuals as disposable also, and not one of them.

    Two points I would make, it may be that inequality has increased drastically on almost all dimensions, but this article by Iain Campbell and Peter Brosnan suggests an aspect of employment where this will not be the outcome. It may be that the changes, while essentially not applying to casuals will change their status, by changing the “work rights� of permanents, and therefore resulting in more individuals being employed as permanents. It could serve therefore to drive a more equitable distribution of “work rights�

    Secondly the changes have to change the dynamics in the workforce. There will be less of the them and us available to permanent workers (and maybe less of them to go first and more of then to get the promotion or pay increase), the “casuals� will become more than co-workers, they will become competitors, possibly. Because of the restricted nature of the changes (Professor Stewart, also on 7.30 Report) it will take time to have an impact, but it will be interesting to see.

    Though there are a number of workers in Australia who seek this type of employment there are also large numbers who want to join the permanents and their extra rights and returns, Considering that August 2004 casual employment rate in Australia was 27.7% it is also of interest whether that part of the workforce sees the same picture of doom and gloom as the strong union and permanent workforce does. If they perceive that there may be an improvement in their “work rights� because the employers view the employment relationship differently they may be right on side with the changes, These workers might conclude that it is the award structure that has put them in their vicarious employment position, and that a levelling of the playing field means that they are no longer as a matter of course at the bottom of everybody’s lineup.

  12. Patrick
    November 3rd, 2005 at 07:18 | #12

    Three cheers for inequality!!!! I can’t believe you are so worried about economic inequality. What merit do you see in equality?

  13. Katz
    November 3rd, 2005 at 07:35 | #13

    Terje further up brushes against the perceptual problems that arise when “inequality” is mentioned.

    In the short term at least, inequality of outcome will arise from this legislation because some groups and interests will be able to protect/promote their economic interests. Employers, skilled workers, skilled service providers, workers whose jobs do no face competition from importers (e.g., the construction industry) are likely to benefit. either relatively or absolutely.

    Of more relevance is inequality of process. This IR legislation gives employers the whip hand. Employees will suffer a severe depletion in their ability to organise themselves to agitate for collective outcomes.

    But, in the not so short term, and the not so long term, this legislation is likely to reawaken the moribund union movement. Howard, the pint-sized Thor, will go to his Walhalla, Costello’s/Abbott’s Gotterdammerung can’t be far off.

  14. Tony Healy
    November 3rd, 2005 at 08:58 | #14

    Bill Shorten points out the legislation allows employers to cancel negotiations after three months, and just apply the five basic conditions. Effectively, employers will be rewarded for not negotiating with their staff, which makes a mockery of the claims that this is about people and management negotiating as equals.

    The Bill also gives the Minister power to strip from federal awards or agreements any condition he chooses, without consulting Parliament.

    Read more.

  15. Tony Healy
    November 3rd, 2005 at 09:01 | #15

    Ros, even if more people are hired as permanents under these reforms, it won’t mean anything, because the value of a permanent role has been diminished to close to that of a casual role. Which was the whole point.

  16. Dogz
    November 3rd, 2005 at 09:12 | #16

    neophyte,

    I would strongly suggest that most such employees would earn less than $50,000 and spend most of that in paying off mortgages, buying food etc…

    Generalisation sucks.

    Your generalizations (eg the first one above) or just anyone’s? Mutually contradictory statements aside, by “stash” I meant “pay”. I am talking about the leaders at the ABC/Unions/Academia/Public Service/Labour Party – not the rank-and-file. IE, the ones most vocal in their criticism of “inequality”. If any of them are earning less than $100,000 I’ll eat my hat.

    JQ is on $250,000 (academic), I bet Kerry OBrien/Maxine Mckew/the usual ABC suspects are in that ballpark if not more. (According to the Latham diaries McKew avoided running for parliament for Labor for the very noble reason that she couldn’t stand the thought of living amongst those at the bottom of the equality ladder). I’d be really surprised if Sharon Burrows or Greg Combet earn less than $100K.

    You see, it seems inequality within the current system is ok for those people, because they benefit from the inequality.

    Andrew – the BCA are not bleating about inequality. And as far as I am aware they are funding their own ads. And they are not running a scare/disinformation campaign like the ACTU. So yeah, seems fine to me (if a little boring – but then I don’t have much time to watch TV so I have never really understood what all the complaints are about in the first place. If you don’t like the ads don’t watch tv – go do something healthy like kick the footy with your kids or start a business and create some wealth).

    And why should unionists have automatic right of entry to my workplace? I founded this company, invested my own money, own the damn thing, took all the risk and make all the tough decisions, including who to hire and fire. If an employee has an issue my door is always open. If I can’t make them happy then they’re better off at another company – not hanging around and pissing in the well the rest of us drink from. Why would I let some pissant unionist in here to stir up trouble?

    If you think it’s ok to give someone who’s stated purpose is causing industrial unrest carte-blanche access to your workplace, then you should have no problem if I break into your house this Friday night, drink your beer and watch footy on your TV with my smelly stocking feet up on the coffee table. I’ll invite some of my mates over while I’m at it.

  17. stephen
    November 3rd, 2005 at 09:14 | #17

    Patrick asks what’s wrong with inequality. good question – one of the “meaning of life” ones. the answer is that inequality closely correlates with unhappiness. if we assume that being happy is better than being unhappy (and that has to be an a priori assumption, I don’t think it can be demonstrated logically), then more equality is better than less. the evidence suggests that the thing that most matters in relation to incomes is not the total level, but how individuals perceive their relative level (relative to neighbours, work colleagues etc.). social cohesion is helped by equality – which is, incidentally, why progressive income taxes were introduced in the first place, it was not an altruistic impulse on the part of people with money to part with it. equality is a slippery concept, but if we also relate it to fairness, there is a strong economic argument for fairness: it reduces transactions costs, a high trust society operates far better than a low trust society. there’s in short a wealth of reasons why equality is better for society as a whole, and improves overall levels of happiness.

  18. Katz
    November 3rd, 2005 at 09:27 | #18

    Let me guess, Dogz. You manufacture Princess Di commemorative tea-towels.

    Three cheers to you for holding the line against this predicted upsurge in dangerous Bellamyism.

    I admire your passion for 19th-century values and employment practices. But I regretfully predict that, even if you avoid “trooble at Mill”, Howard’s attempt to return to the era of the Masters and Servants Act will end in some blood, much sweat, and many, many tears.

  19. Roberto
    November 3rd, 2005 at 09:31 | #19

    The easiest way to solve the whole IR debate, is to survey/poll the staff at employer groups at ACCI and AIG etc.

    My gut feel is that the staff at these and other similar bodies wouldn’t be as enamoured with the claims that their bosses like the whinging Ridout and sourpuss Hendy espouse.

    If the staff are against it, then that suggests ‘we have a problem’.

  20. Tony Healy
    November 3rd, 2005 at 09:47 | #20

    Dogz, the provision that used to let unions inspect workplaces weren’t designed for honourable people like yourself. They were designed for greedy pricks that cram 20 migrant women into a house to sew garments at $2 per hour, and where the doors are locked and the windows barred to prevent theft, trapping the workers if there’s a fire.

    Occasionally we read about tragedies like this overseas. The reason they don’t occur in Australia is that unions police and enforce Australian standards.

    There are many, many examples of dangers on construction sites and in factories that are prevented by unions. Or were. Past tense.

  21. Dogz
    November 3rd, 2005 at 09:50 | #21

    Katz, if running an efficient business – including keeping your employees happy – is 19th century then I guess I am a 19th century man and proud of it.

  22. November 3rd, 2005 at 09:52 | #22

    “the evidence suggests that the thing that most matters in relation to incomes is not the total level, but how individuals perceive their relative level (relative to neighbours, work colleagues etc.). social cohesion is helped by equality”

    So why doesn’t this apply to other aspects of life as well? Why isn’t the government required to increase equality in partners? I don’t give a stuff how much more money Tom Cruise earns than me, but the fact that he’s banging Katie Holmes and the last chick I shagged wasn’t anywhere near that standard really gets my goat.

    There oughta be a law that dictates hot sheilas have to share it around more – you know, in the interests of social cohesion.

    Inequality is unavoidable and greater inequality usually means a higher rate of economic growth. Somebody is always going to the poorest, but the fact is that it is absolute poverty that should be eradicated – and in Australia it already has.

  23. Dogz
    November 3rd, 2005 at 09:56 | #23

    The reason they don’t occur in Australia is that unions police and enforce Australian standards.

    If that was all unions did I wouldn’t have an issue with them. But they do an awful lot more than that. They need members and they need workplace control to survive, and they’ve never much cared if they drive businesses to the wall in order to maintain both.

    I would have thought that policing and enforcing Australian standards was a job for the government (the body that sets the standards), not private organizations with a much broader agenda.

  24. Katz
    November 3rd, 2005 at 10:09 | #24

    “if running an efficient business – including keeping your employees happy – is 19th century then I guess I am a 19th century man and proud of it.”

    But clearly, Dogz, the history of Industrial Relations in the 19th century ended very badly, even for kindly masters such as your good self.

    That’s because your dear old paternalists went to the wall or were forced to adapt to the severe discipline of competition.

    Workers didn’t take kindly to governments’ teaming up with the masters and not the servants. These workers even demonstrated they were willing to break the law and to go to gaol in defence of what they called “workers’ rights”. Caused no end of trouble.

    Of course, the arrival of manhood suffrage and the decision of governments to set up collective bargaining systems were closely related to each other.

    Here’s the generalisation: the earlier the achievement of manhood suffrage, the earlier the adoption of collective bargaining procedures. Coincidence or not?

  25. Dogz
    November 3rd, 2005 at 10:22 | #25

    Katz, your views represent precisely what is wrong with unions/Labor today: you’re still fighting the 19th century battles.

    Maybe treating your workers like sh*t was competitive practice in the 19th century, but in many industries today it is not. It is certainly not competitive practice in my industry (which, incidentally, is slightly higher up the foodchain than commemorative Princess Di paraphernalia). And for those industries in which such practice may still be competitive, we have Australian standards as Tony Healy points out.

    Hence why the 19th/20th century “one size fits all” IR policy that we’re presently saddled with is no longer appropriate. Rather the point of the current reforms methinks.

  26. November 3rd, 2005 at 10:42 | #26
  27. Katz
    November 3rd, 2005 at 10:44 | #27

    “Katz, your views represent precisely what is wrong with unions/Labor today: you’re still fighting the 19th century battles.”

    My comments about the past have nothing to do with my hopes for the future. I’m modest enough to recognise that the past doesn’t exist to reify my hopes, fantasies and dreams.

    But to the substance of the matter: if those views about employer/employee relations were so anachronistic, then why bother to crush them with such powerful legal penalties? This just doesn’t seem logical to me.

    If you will allow me a piquant parallel, consider the following: Every right-thinking social-darwinist in the last decades of the nineteenth century assumed that Aborigines were destined for extinction. Thy believed that automatic and natural processes would achieve this interesting anthropological phenomenon. Yet, these very same social-darwinists supported the denial of a wide range of political rights and social amenities to Aborigines. One can only imagine that this was done to speed what was asserted to be a “natural” process.

    In the same way, Howard’s IR fanatics just don’t believe in “natural” processes. They intend to turn up with a sword and a firebrand.

    History shows that the Aborigines stubbornly refused to become extinct.

    And unions? Well let’s just wait and see.

  28. gordon
    November 3rd, 2005 at 11:10 | #28

    I’m glad to see Prof. Quiggin raising the profile of inequality as the fundamental evil outcome of the Govt’s. IR proposals.

    Abolition of Australia’s remarkably progressive and successful IR system is of course done at the behest of foreign investors who don’t understand it and don’t like what they don’t understand. Besides, it has Unions in it, so it must be bad.

    Consistently throughout his chequered political career, the Rodent has recovered from seemingly irrecoverable defeats by moving further to the Right. Over time, this strategy has brought him completely under the control of the foreigners who largely furnish the support for the far Right in this country. The Rodent has a lot of debts to pay, and payment can no longer be deferred. It is a matter of academic interest whether he himself understands what has happened, but those who have to live with the consequences will not care much about that.

  29. davey
    November 3rd, 2005 at 11:14 | #29

    Dogz wrote:

    I would have thought that policing and enforcing Australian standards was a job for the government (the body that sets the standards), not private organizations with a much broader agenda.

    But aren’t you (according to yesterday’s comments) the government’s employer? So that means you should set the standards – as a business owner! Wow, but isn’t that a private body? And as for agendas, you’ve painted the union movement with a pretty broad tarbrush already. I can’t pretend to know the breadth of your own agenda. But we’ll all be safe if you set the rules. I feel better now.

    Also, Yobbo, your continuted references to Katie Holmes and “hot sheilas” are offensive – no matter what your ironic point may be. Get over yourself.

  30. Dogz
    November 3rd, 2005 at 11:17 | #30

    Oh yeah, gordon, and the CIA is spying on me from the office across the road.

    You forgot to take your Trilafon this morning.

  31. Dogz
    November 3rd, 2005 at 11:21 | #31

    But aren’t you (according to yesterday’s comments) the government’s employer? So that means you should set the standards – as a business owner!

    No, I am a voter, and via that I get to indirectly set the standards. And I expect the govt to enforce the standards themselves – not to outsource enforcement to the unions. I get to vote on that too (albeit indirectly again).

  32. Roberto
    November 3rd, 2005 at 11:51 | #32

    Gordon – so are you saying that the Ilumminati and the Bilderbergers are behind WorkChoices?

    Yes or No?

  33. November 3rd, 2005 at 12:11 | #33

    Er, I only referred to Katie Holmes once, not “continutedly” and I don’t actually understand why you think I’d care what you find offensive.

  34. Dogz
    November 3rd, 2005 at 12:18 | #34

    If it helps, I’ve not yet found a “hot sheila” offensive – at least not before the morning after.

  35. Katz
    November 3rd, 2005 at 12:41 | #35

    The various critques of Gordon’s conspiracy theories above are on the mark.

    The Rodent doesn’t need the advice or help of any shady right-wing international conspiracy to promote his IR dream.

    In fact his IR Dream has the same effect on the Rodent as Katie Holmes has on Yobbo and Dogz.

    IR is Rodent Viagra.

  36. Katz
    November 3rd, 2005 at 12:44 | #36

    Whoops! I bet I know which word tripped the Moderation Police.

    Katz Says: Your comment is awaiting moderation.

    November 3rd, 2005 at 12:41 pm
    The various critques of Gordon’s conspiracy theories above are on the mark.

    The Rodent doesn’t need the advice or help of any shady right-wing international conspiracy to promote his IR dream.

    In fact his IR Dream has the same effect on the Rodent as Katie Holmes has on Yobbo and Dogz.

    IR is Rodent [tumescence facilitating medicine beginning with the the 22nd letter of the alphabet].

  37. dannyhill
    November 3rd, 2005 at 12:54 | #37

    I see a Tele front page story on how the new unfair dismissal laws have created jobs. I see a photo of smiling boss and smiling worker with their arms around each others shoulders. I see a story about their profound gratitude to Mr Howard. I can’t see the date but I’d say within a week of the laws taking effect. Any advance?

  38. davey
    November 3rd, 2005 at 13:48 | #38

    My mistake, but once was enough. Curious as to why you cared enough to respond. Defensive? Oh yes, and a petty shot at spelling – how surprising, Yobbo.

  39. snuh
    November 3rd, 2005 at 13:55 | #39

    There’s little credibility lamenting the plight of those at the bottom when you’re a union leader/academic/ABC employee/public servant/labour party MP happily stashing $100,000 – $300,000 per year.

    yes, when it comes to credibly “lamenting the plight of those at the bottom”, always turn to the prime minister, other liberal MPs, the business council of australia, and the directors and managers of its constituent corporations.

  40. Terje
    November 3rd, 2005 at 13:58 | #40

    QUOTE: The point I was making is that while ‘national governments’ are no longer trying to gain a ‘competitive advantage’ by means of ‘competitive devaluations’

    RESPONSE: So why is there so much US interest in the monetary policy of China. The US accusses China of deliberately undervaluing its currency to gain a trade advantage. Personally I would accuse the USA of trying to get the Yuan overvalued to gain a trade advantage. Either way the notion of competitive devaluations have not gone away even though floating currencies are disruptive to commerce and server nobody except those focused on short term political cycles (or those focused on making profit from currency speculation).

    QUOTE: In order to remain ‘cost competitive’ the currently low wage counties have an incentive to cut their wages. The process converges to 0, assuming it is being left to run unchecked.

    RESPONSE: This assumes that the world has a massive oversupply of labour relative to consumers or capital. China and India joining the world markets does change the ratios however wages will not converge to zero. In fact the quicker that India and China can build capital (ie Infastructure) the faster their wages will grow and the quicker the supply shock will pass for the rest of the world. Any attempt to slow down the natural dynamics of this process is to the disadvantage of the worlds poorest people.

  41. davey
    November 3rd, 2005 at 14:09 | #41

    Does a Liberal Party MP lamenting the plight of those at the top while happily stashing $100,000 – $300,000 per year have any credibility?

  42. Patrick
    November 3rd, 2005 at 15:08 | #42

    Stephen says inequality is closely correllated with unhappiness; I say bollocks.

    I think a) that is rubbish and b) it misses the point.

    Not a lot to develop on with a, except that the saying that the grass is always greener etc has a bit of vintage: I think some, perhaps a majority of, people are always going to perceive themselves as less well off than another and resent it/feel inferior/feel hard done by/want to kill the other, whatever. I don’t think the degree of inequality is actually that material.

    As for b, you have to start with the observation that in fact, people are more equal now, than just about ever before. What does a poor person not have these days? I’m being serious. They have considerably more than rudimentary health care, DVD players and TVs and educations, they vote, they live in houses. Obviously there are poorer people who don’t have all this or any of it, and obviously there are too many people who have all this and yet don’t have enough to eat healthily every day. But that doesn’t change the fact that they are better off than ever before.

    Secondly, and relatedly, on b, inequality correllates strongly with what else? Growth!! Lots of it!! Which feeds into my first point on b.

    Inequality is generally caused by economic growth which is to the benefit of everyone: its not about the meaning of life, it is about common sense.

  43. November 3rd, 2005 at 15:17 | #43

    A lot of whacky stuff here, but let me upset the Howardian claque by reminding them that, according to the law of diminishing marginal utility, every dollar you take off a rich citizen and give to a poor citizen improves Australia’s social wellbeing.

  44. Dogz
    November 3rd, 2005 at 15:33 | #44

    according to the law of diminishing marginal utility, every dollar you take off a rich citizen and give to a poor citizen improves Australia’s social wellbeing

    Not quite. Poor people are more likely to smoke. Take a dollar from a non-smoking rich person and give it to a poor smoker and all you do is further shorten the poor smoker’s life expectancy.

    Besides, I prefer the law of natural justice, which says that if you take something of mine, I have the right to blow your head off.

  45. davey
    November 3rd, 2005 at 15:46 | #45

    And if you take someone’s life, the criminal justice system has the right to put you away, so that you can write your pathetic memoirs, entitled: “Dogz Gone: Some Smoking Commie Stole My Dollar, and All I Got Was This Tiny Cell”. Kind of catchy, don’t you think?

  46. Dogz
    November 3rd, 2005 at 15:52 | #46

    good point – I won’t blow your head off. Steal from me and I’ll seduce your wife instead. Legal and just as satisfying.

  47. davey
    November 3rd, 2005 at 15:59 | #47

    Ha ha, so old-fashioned. Anyway, it’s not legal for dogs to procreate with people.

  48. Andrew
    November 3rd, 2005 at 16:10 | #48

    Stephen says -

    “equality is a slippery concept, but if we also relate it to fairness, there is a strong economic argument for fairness: it reduces transactions costs, a high trust society operates far better than a low trust society. there’s in short a wealth of reasons why equality is better for society as a whole, and improves overall levels of happiness”

    There is a big difference between equality and fairness. I’m very happy to live in a ‘fair’ society with everyone given an equal chance to succeed…. but that doesn’t mean that the results for everyone will be equal.

    In an example that all unionists hate – what if I’m a very productive factory worker who produces 2 widgets per hour compare to the bloke next to me who only produces 1. I think it would be ‘fair’ if I got paid more than him – we are not of equal value.

    Since we are in the middle of the Spring Carnival – let’s use horse-racing as an example – In a handicap race, each horse is given a different weight depending on age and ability. That’s hardly fair (why penalise a horse for having ability) – but it should produce a relatively equal outcome.

  49. wilful
    November 3rd, 2005 at 16:16 | #49

    perfectly legal for dogs. They don’t go to jail.

    But re happiness and equality. Patrick can say rubbish as much as he likes, but there is a statistically significant correlation. Have a read.

  50. Andrew
    November 3rd, 2005 at 16:38 | #50

    I’m fully prepared to accept that equality and happiness are linked – but that’s closely related to the saying ‘ignorance is bliss’…..

    Who’s happier – the PNG tribesman who has the biggest hut in the village with no mod cons whatsoever – or the Australian surburban worker living in the worst house on the street with only ‘basic’ mod cons like a TV, DVD player, and holden commodore….

    I suspect the PNG tribesman who’s got more than everyone else in his village is probably happier – but would you trade places with him?

    I hold no chop with argument that says we should all be made equal – that sounds like a recipe for mediocrity….. let’s pander to the lowest common denominator rather than creating a society with incentives to succeed.

  51. Hal9000
    November 3rd, 2005 at 16:42 | #51

    “Inequality is generally caused by economic growth which is to the benefit of everyone”

    Patrick pines for the economic paradise that was tsarist Russia or the antebellum Carolinas. Sadly, it seems those at the bottom of those growth engines didn’t like it very much. Not much happiness there. Nor, indeed, much growth compared with egalitarian, backward Australia, where comparative wealth seems to have made us, er, happier and healthier. Can’t have that.

  52. UQ Student
    November 3rd, 2005 at 17:48 | #52

    “In an example that all unionists hate – what if I’m a very productive factory worker who produces 2 widgets per hour compare to the bloke next to me who only produces 1. I think it would be ‘fair’ if I got paid more than him – we are not of equal value.”

    I love “widgets”. They really make economics an easy subject to master. But I what I can’t figure is… out of the 3 widgets cited in your example, how many were produced by the factory owner? 3 because he owns the factory? Or zero because he didn’t do the work?

  53. Dogz
    November 3rd, 2005 at 18:33 | #53

    A: 3

    The factory owner started the factory. Invested the capital. Took the risk.

    If you don’t like the idea of the owner making a couple of bucks off your labour, go start your own factory. You’ll be trading low-risk/low-reward (worst-case scenario: you have to find another job if your boss goes broke) for high-risk/high-reward (worst-case scenario: you go broke, and spend the next 20 years paying off your creditors or rebuilding your equity).

    It’s a free country; you have the choice.

  54. snuh
    November 3rd, 2005 at 18:44 | #54

    If you don’t like the idea of the owner making a couple of bucks off your labour, go start your own factory…It’s a free country; you have the choice.

    and if i don’t have any capital? and, say, i don’t have any collateral or anyone who would be able to guarantee a loan? do i still have a choice? is it still a free country?
    it is interesting that, on your analysis, the question “is australia a free country?” seems strictly related to the ease with which the person asking can access to capital. perhaps you might ponder how the formulation “i am poor and without advantagous connections, therefore i am not free” implicates your world view.

  55. Dogz
    November 3rd, 2005 at 18:59 | #55

    snuh, I started a company on next to no capital. I worked for quite a while for someone else, saved money, and then branched out on my own. It was a huge risk. Took a long time to get established (any business does), but it is paying off now.

    Sure, it’s easier if you start with capital, eg inheritance. But to borrow from Yobbo, that’s no more interesting that saying life’s easier if you’re attractive.

    My story is far from unique – most successful companies start that way. There are plenty of non-capital-intensive businesses you can begin with. But it’s extremely hard work and extremely high risk. Most people can’t stomach one or the other or both, and that’s fine. If I lost everything now I probably wouldn’t do it again – I used up my energy on this one. But don’t pretend you can’t do it: you can.

  56. lurch
    November 3rd, 2005 at 19:17 | #56

    Dogz are you a distant relation of the great Bounderby?

  57. Dogz
    November 3rd, 2005 at 19:30 | #57

    More 19th century references. I’m starting to see a pattern here. Dickens is the primary source for IR reform on the left.

    I prefer Aussie over English tradition, and the 20th/21st century over the 19th; to wit: avagoyamug.

  58. SJ
    November 3rd, 2005 at 19:35 | #58

    Which scenario is more plausible:

    a) Rich founder of successful business spends days at a time typing anonymous comments into a blog, or

    b) The typing gets constantly interrupted by the sounds of his mum banging on the door and telling him, for example, to get out of his pyjamas and come and eat his dinner?

  59. snuh
    November 3rd, 2005 at 19:42 | #59

    I started a company on next to no capital. I worked for quite a while for someone else, saved money, and then branched out on my own.

    so you had capital. interesting.

    i presume you were in a situation in which saving was relatively easy, i.e., you were without dependants to support. am i wrong? if i’m not, then i repeat my original criticism.

  60. Dogz
    November 3rd, 2005 at 19:45 | #60

    b) is certainly more plausible, but a) is the truth (although I am not “rich”).

    unfortunately I find this strangely addictive – sad isn’t it.

  61. Dogz
    November 3rd, 2005 at 19:51 | #61

    actually, snuh, no. I had/have dependents. FTB is a wonderful thing. And childcare subsidies. And free healthcare. And good govt schools. You still have to cut back a lot but Australia has a pretty strong social safety net, especially for families.

    But this is all getting a bit personal – my anonymity is at risk if we keep going down this road, plus it’s all rather off-topic.

  62. Jill Rush
    November 3rd, 2005 at 20:16 | #62

    The legislation is all about giving greater value and power to those who have capital. The creation of inequality.

    The reason that unions won rights in the workplace was because employers as a group behaved in a greedy and selfish manner in the nineteenth century. Workers under great duress fought to have a fair share of the value that they created. Worker’s are not so keen to have to fight to retain rights and some protections from capricious employers, especially as bullying is already so prevalent in the work force.

    One doesn’t need much imagination to envisage how women are treated in Dogz workplace for example – his attitude to women is quite clear. The view of a happy workplace can often look quite different from another’s perspective. However workers would not disabuse him of his perception if they value their jobs because they need to pay bills and feed their families.

    The alternative is to turn to crime – a time honoured Australian tradition from the days of the First Fleet.

    AWAs will be e boon for lawyers – acting for the big end of town whilst making most people powerless as they will not understand more than the law is stacked against them – Even if they are in the right they will not have access to huge sums of money to fight injustice, in the few instances where it might be provable. This inequality will lead to a breakdown of the harmony in society. Inequality does matter.

    No wonder the terror laws have been introduced at the same time – the unionists can be made to “disappear” if they cause trouble.

  63. Terje Petersen
    November 3rd, 2005 at 20:26 | #63

    My company these days has an annual turnover measured in the millions. It started with seed capital of $200. Plus there was the cost of registering the company (ie the government didn’t help). I had some stationary for writing contracts and I could print invoices on an old PC. I had money in the bank to pay for rent and food for three months. These days we have company credit cards to fascilitate some types of transactions but we have never borrowed any significant amount. I say we because there are a dozen employees and there are now two other joint owners.

    Before being in business I had only ever worked full time for 3.5 years. And I had never earned an above average wage.

    I find the suggestion that companies are started by people with loads of capital quite laughable. Some companies are started with lots of cash up front but most build up from next to nothing.

    To start a business the most important things (and the ones most often missing) are asperation and faith. Both are products of the mind.

    My father left school at 12 and became a carpenter. When he got to Australia he had enough money for a few weeks lodging and he spoke no english. Today he is a self funded retiree. He never ran a company but much of his life he was self employed.

    The notion that you need lots of capital to get ahead in life is simply untrue. A good attitude, a little bit of thrift and hard work goes a long, long way.

  64. SJ
    November 3rd, 2005 at 20:34 | #64

    One doesn’t need much imagination to envisage how women are treated in Dogz workplace for example – his attitude to women is quite clear.

    Indeed.

    Occupation: Financial Controler
    Interests: Chick with tits

  65. Dogz
    November 3rd, 2005 at 20:44 | #65

    One doesn’t need much imagination to envisage how women are treated in Dogz workplace for example – his attitude to women is quite clear.

    ?

    Because I expressed sexual desire towards a celebrity figure anonymously on a blog? Well shoot, condemn me along with half the population. Lighten up.

  66. Dogz
    November 3rd, 2005 at 20:48 | #66

    Interesting you say that SJ. My financial controller is a “chick with tits”. They don’t come without them (barring cancer trouble).

  67. SJ
    November 3rd, 2005 at 20:52 | #67

    I don’t think you quite understand. Click on the link in my earlier post.

  68. SJ
    November 3rd, 2005 at 20:58 | #68

    Sorry, it was I who misunderstood.

    I’m after some honest opinions, I have got the double thumbs up from the finance department (wife)…

  69. Dogz
    November 3rd, 2005 at 20:59 | #69

    heh – didn’t see it was a link. I thought you were spoofing a job ad. That’s one of the more interesting “double entendres” I’ve seen in a web conversation.

    Anyway, not me I’m afraid.

  70. SJ
    November 3rd, 2005 at 21:10 | #70

    Yeah, right.

  71. Dogz
    November 3rd, 2005 at 21:26 | #71

    well, can’t think of an obvious way to prove it to you, but there’s no reason for me to lie. I’ve used this handle on 3 blogs and that’s it (see if you can find ‘em :) . Anyway – this topic was meant to be about IR reform – and this thread is not.

  72. SJ
    November 3rd, 2005 at 21:41 | #72

    there’s no reason for me to lie.

    There are all sorts of reasons for people to lie, and the claim from an anonymous poster with an obvious agenda to push that he “has no reason to lie” doesn’t carry much weight.

    I’ve used this handle on 3 blogs and that’s it (see if you can find ‘em)

    The google search of Australian sites using the keywords “+dogz -deck” yeilds only two pages of results, and only one poster, i.e., you.

    (The “-deck” in the google search is required because there was a film called Deck Dogz released this year.

  73. SJ
    November 3rd, 2005 at 21:47 | #73

    (broken link to Deck Dogz above.)

  74. November 3rd, 2005 at 22:33 | #74

    Dogzbody, you missed the point.

    Terje – sure pal, “next to nothing” and “aspiration and faith” – luxury, pure luxury, we had less than nothing and couldn’t even say aspiration and faith after we climbed out of our brown paper bag and licked the road for breakfast.

  75. Andrew Reynolds
    November 3rd, 2005 at 23:44 | #75

    cs, SJ – quit playing the man and not the ball.

    cs, There are plenty of examples of people starting businesses on minimal seed capital – just as well, or we would still be run by the same families that controlled the world in the Middle Ages – or even before. Perhaps the ancient Roman families are still around (are they the Illuminati?).

    Even those climbing out of the paper bags and licking the road clean wi’ tounge eventually were drinking Chateau de Chasellay (is that spelt correctly?). Some people are prepared to take the risks that come with business, some are not. If you do not want to, that is your choice. Deal with the success of others other than through envy.

  76. UQ Student
    November 3rd, 2005 at 23:50 | #76

    Congradulations Dogz, for the truly inspiring “up-by-the-bootstraps” story that I’m sure would be even more inspiring if you filled us in on the details which you are witholding because you don’t want to put your anonymity at risk. Although I think that if your story was as common as you say it is then there’d be little chance of that.

    So the widget factory owner started the factory. Invested the capital. Took the risk. Therefore, the owner produced all 3 of the widgets produced by the 2 workers in one hour.

    There is a flaw in your logic. The example involved two workers, one made 2 widgets an hour, one made 1 widget an hour – and you say that of the 3 widgets made, none of them were actually produced by the workers, because the 3 widgets were all produced by the factory owner.

    Your equation is missing 3 widgets somewhere. What exactly did the workers produce then? Does the fact that they do not own part of the factory mean they are not responsible for the produce?

    I guess if the two workers both went on strike, the factory owner has nothing to worry about – the widgets will still be produced. and if the workers were replaced, the new workers would still be producing nothing (0/3 widgets), so it would be fair for the owner to pay them nothing.

    Maybe its true that the factory owner started the factory by taking an enormous personal risk with a small amount of personal capital, and then succeeded due to hard work and good decisions (of course, luck or connections never have anything to do with it). Or maybe just acquired it with their family’s pre-existing capital from the people that started the factory, or maybe it was acquired in a government privatization. Maybe it’s a small company that started with one person, the owner, doing most of the work, or maybe its one of the big companies where ownership has little to do with management, is acquired by a personal stock-broker, and does not require a physical presence on site. Maybe its one of the latter that set up shop and put one of the former out of business. If it is one of the former, it is true that the owner will be taking a risk by starting the factory – although aren’t the creditors also taking a risk if the owner declares bankruptcy? We don’t have debtors prisons any more. If it is one of the limited-liability latter, the risk is not all that great, the owners can sell their capital before it goes under, and it will be the workers out of a job. Perhaps not so bad, depending on the age and skill level of the worker in question, the size of their mortgage, their health, the prevailing economic circumstances and what’s going on in their life at the time. It could be a disaster. You cannot generalize.

    As for risk – since 100% of businesses cannot succeed (despite the fact that it is the solution you offer to 100% of people for any and all of their workplace problems), there is indeed a risk for the owner. Say a factory costs $x to start up. The risk for somebody who only owns $x or less, risking all they own on the investment, is very high. The risk for somebody who already owns $10x in starting the same factory is not as great at all. So the risk you talk about is greater or lesser depending on the capital you already own. For the worker going out and starting their own factory, the risk is vastly greater than for the person who already owns a factory, however they acquired it. I know you like to invoke the worst case scenario because it is the one most sympathetic to owners, but not all the risks of ownership are created equal. The more assets you have to fall back on, the smaller your risk. Its not a level playing field where anybody can just go out and take the same level of risk for the same level of returns. Then there’s that other type of risk – physical risk, to which ownership and management are rarely subject but which does claim a number of victims from the class that according to you produces 0/3 widgets. part of the thrust of IR reform is ridding bosses of the responsibility of workplace compensation in the event of physical workplace accidents.

    It’s a free country; you have the choice, and the more capital you have, the more choice.

  77. jquiggin
    November 4th, 2005 at 06:31 | #77

    I can’t follow the exchange above between SJ and dogz, but please knock it off and stick to civilised discussion.

    SJ, it appears yours was the first entry in this subthread, so can I particularly request you not to make any further personal criticisms of dogz.

  78. Dogz
    November 4th, 2005 at 07:32 | #78

    UQ Student,

    I think that if your story was as common as you say…

    My story is not uncommon _conditioned_ on having started a successful business. It is certainly uncommon across the whole community, but that’s because most people don’t have the stomach for it – which is fine. As I said, I am not sure I would have the stomach for it again.

    Your equation is missing 3 widgets somewhere

    By your logic if my local Mitsubishi plant turns out 1 car per hour using 4,000 workers then none of them built the car. The point is they all _contributed_ to the building of the car, as did the factory owner. The factory didn’t just materialize from thin air.

    The more assets you have to fall back on, the smaller your risk. Its not a level playing field where anybody can just go out and take the same level of risk for the same level of returns.

    Of course not. I said that too in my original comment. But as I also said, and as others have pointed out, there’s plenty of low-capital businesses you can start with and work up from there. Although now I think about it, by the law of diminishing marginal utility (invoked here previously by cs), the marginal risk/marginal reward may actually be pretty constant regardless of your original asset base.

    Using the fact that other people have easier access to capital than you to justify not starting a business is like using the fact that Tom Cruise is better looking than you to justify not trying to hit on that girl you’re interested in.

  79. Patrick
    November 4th, 2005 at 08:00 | #79

    Wow. I never understand this overwhelming faith in personal experience., and even less this easy degeneration from argument to nonsense.

    Speaking of which, HAL9000 seems to have misunderstood me about as thoroughly as possible, which is why the statement he quotes is so compatible with his attack on my position.

    Some people on this thread don’t realise that the whole point of the limited liability company (and anglo capitalism) is that labour and capital are divorced. If you have no capital but skilled labour, you can found a company, in which those who have capital can invest, limiting their risk to the extent of their investment.

    That said, many businesses have been founded on very little capital and a lot of hard work – the company is there a way of turning labour into capital, but that is not uniquely anglophonic.

  80. November 4th, 2005 at 08:14 | #80
  81. Dogz
    November 4th, 2005 at 08:43 | #81

    That said, many businesses have been founded on very little capital and a lot of hard work – the company is there a way of turning labour into capital, but that is not uniquely anglophonic.

    And that’s the crux of it. If you capitalize your labour by building a company while paying yourself very little, you risk losing it all. There’s little that’s more stressfull than facing closing up shop two years into a venture into which you’ve sunk everything and from which you’ve drawn barely enough salary to survive.

    By working for someone else you don’t get to capitalize your labour (except through what you can save from your wages), but you don’t risk not being paid for it either: work a day, get paid for a day’s work.

  82. November 4th, 2005 at 09:44 | #82

    I had/have dependents. FTB is a wonderful thing. And childcare subsidies. And free healthcare. And good govt schools. You still have to cut back a lot but Australia has a pretty strong social safety net, especially for families.

    But this is all getting a bit personal – my anonymity is at risk if we keep going down this road, plus it’s all rather off-topic.

    Yes, I can imagine how the sudden realisation that you might not be where you are without the help of the social democratic features still remaining in our society (as opposed to your success been wholly due to your own individualistic fabulousness) might be a bit embarassing. Peter Saunders of the CIS is coming around to smack you for letting the side down.

  83. Dogz
    November 4th, 2005 at 09:53 | #83

    Where did I claim my success was entirely my own? If you read another recent IR thread on this blog you’ll see I came out against Yobbo in support of public healthcare. I am also in favour of good public education, from which I personally have benefited greatly. Don’t stereotype.

    That’s the problem with this IR debate: the left side of politics appears to be fighting a caricature they have erected to justify their own choices in life, not one that accurately reflects the realities of modern society.

  84. Dogz
    November 4th, 2005 at 09:56 | #84

    Where did I claim my success was entirely my own? If you read another recent IR thread on this blog you’ll see I came out in support of public healthcare. I am also in favour of good public education, from which I personally have benefited greatly. Don’t stereotype.

    That’s the problem with this IR debate: the left side of politics appears to be fighting a caricature they have erected to justify their own choices in life, not one that accurately reflects the realities of modern society.

  85. November 4th, 2005 at 10:08 | #85

    The right continually caricature the left here – to claim it’s something particular to the left is simply selective vision. Good on you for admitting that the social wage has value, though.

  86. UQ Student
    November 4th, 2005 at 10:26 | #86

    “By your logic if my local Mitsubishi plant turns out 1 car per hour using 4,000 workers then none of them built the car. The point is they all contributed to the building of the car, as did the factory owner. The factory didn’t just materialize from thin air.”

    As by your own logic none of them built the car, the factory owner produced the car by his ownsome because he “took the risk” (although the noble family of Mitsubishi always had the Japanese government to ameliorate the risk). Therefore the factory owner can pay them what he wants, and if they organize collectively for higher pay and better conditions he has an absolute right to fire them and bring in cheapo scabs (although in Mitsubishi’s case such acts would be carried out by management rather than ownership, which doesn’t need to bother about the actual running of the factory, just whether or not to sell the shares or buy more of them).

    Yeah, I know, a Mitsubishi car factory is not the same as a widget factory. But then, I’m not talking about the real world, I’m talking about the widget example! I know that in most factories there is a division of labor which makes the whole example of one worker producing 2 widgets while another produces 1 unrealistic. Widgets are usually made on a production chain involving many laborers with different specialities.

    “there’s plenty of low-capital businesses you can start with and work up from there.”

    Your suggestion that the worker go out and “start their own factory” does not imply a low-capital business.

  87. Dogz
    November 4th, 2005 at 10:43 | #87

    Your suggestion that the worker go out and “start their own factory� does not imply a low-capital business.

    My suggestion is a metaphor for “go start your own business”. It goes back to the original point: if you don’t like people making money off your labour, you can always do something about it. When society supports capital generation by almost anyone, deciding whether to work for a wage from someone else or to work for yourself is not so much a question of “us vs. them” or “labour vs. capital”. It’s much more a question of risk vs. reward.

  88. Dogz
    November 4th, 2005 at 10:47 | #88

    Your suggestion that the worker go out and “start their own factory� does not imply a low-capital business.

    My suggestion is a metaphor for “go start your own business�. It goes back to the original point: if you don’t like people making money off your labour, you can always do something about it. When society supports capital generation by almost anyone, deciding whether to work for a wage from someone else or to work for yourself is not so much a question of “us vs. them� or “labour vs. capital�. It’s much more a question of risk vs. reward.

    Wages are a very low risk way to make money – I never really appreciated how low-risk until I started my own business.

  89. Roberto
    November 4th, 2005 at 10:51 | #89

    UQ Student Says: November 4th, 2005 at 10:26 am
    “Therefore the factory owner can pay them what he wants, and if they organize collectively for higher pay and better conditions he has an absolute right to fire them and bring in cheapo scabs”

    In an employment market which sits at 95% employment, are you seriously suggesting that employers will busily set themselves the task of sacking staff? Who will they replace their staff with? Even the ‘surplus pool of labour’ concept doesn’t apply.

    Ps: what does ‘cheapo scabs’ mean. A very insulting and derogatory remark. I guess it’s to be expected of a University Student.

  90. November 4th, 2005 at 11:05 | #90

    When that creature who purports to represent the electorate of Mackeller in the House of Reps asked Treasurer Costello the Dorothy Dixer the other day the about economic benefits of the IR reforms the nice Mr Costello quoted from some IMF report which urged Australia to legislate for more flexibility and all that rubbish. I haven’t seen anyone take up two points relevant to that.

    1, The IMF has driven numereoous countries into poverty – read Nobel Prizewinner Joseph Stiglitz’s “Globalization and its Discontents” – and is no authority on anything except how to generate greater inequality; for more examples consider the privatization of water in South America.

    2, Costello did not quote from the latest World Bank Development Report for 2006 (launched 18 September) which emphasises the great losses from inequity. It states, inter alia, “Two broad labor market approaches are relevant for equity. First, interventions in the labor market should ensure effective application of the core labor standards across the whole market, implying no … discrimination. Workers should be free to assemble and form associations, and their unions should be free to have an active role in bargaining. Second, in all areas the policy mix needs to be assessed in ways that balance protection (for all workers) with allowances for the restructuring so central to dynamic growth and employment creation.�

    Isn’t it wonderful that after all this time – since May of this year – several economists can describe the legislation as a dog’s breakfast!!

    Last, how does that Peter Hendy get away with describing this legislation as
    Australia being “about to abandon the horse and buggy era and enter the 21st century”? In fact how does he get away with anything he says?

    Des Griffin

  91. Katz
    November 4th, 2005 at 11:16 | #91

    1. Another sneaky wrinkle in the proposed IR legislation is a prohibition against “patterned agreements”. Any employee who attempts to have one of these registered is liable to a fine.

    What is a “patterned agreement”? Any collective agreement which is similar to an agreement struck in another workplace.

    In other words, any attempt made by a union to standardise employment conditions is ipso facto illegal.

    However, what if workers and employers in different workplaces spontaneously and unknowingly arrive at similar agreements, are these still “patterned agreements”?

    2. Yesterday Greg Combet assured an audience that it is likely that unionists will go to gaol in an attempt to break this IR legislation. Someone laughed.

    This impending confrontation will be no laughing matter, except insofar as it represents an unnecessary provocation of more or less the same magnitude of stupidity as the attempt to introduce Conscription during the 1960s

    Arrogance, complacency, carelessness: the hallmarks of a government that has ceased to recognise the difference between skill and luck.

  92. Roberto
    November 4th, 2005 at 11:16 | #92

    FRANCIS FUKUYAMA in an article “A Year of Living Dangerously” found at http://www.opinionjournal.com/editorial/feature.html?id=110007491 said about Muslim Immigrant integration into Western Europe:

    “..Integration is further inhibited by the fact that rigid European labor laws have made low-skill jobs hard to find for recent immigrants or their children. A significant proportion of immigrants are on welfare, meaning that they do not have the dignity of contributing through their labor to the surrounding society. They and their children understand themselves as outsiders.�

  93. Dogz
    November 4th, 2005 at 11:24 | #93

    Katz, whatever else you could accuse this government of, complacency is not one of them. They’re risking a lot with this IR legislation.

  94. Katz
    November 4th, 2005 at 12:06 | #94

    But Dogz, they haven’t taken the time or the effort to measure exactly how much they are risking. Therefore the charge of complaceny stands.

  95. Patrick
    November 4th, 2005 at 12:21 | #95

    Great, unionists going to jail: that sounds just peachy – will they all get to sit next to Craig Johnston?

    I actually think unions were and could be relevant useful pieces of the economy and society. They aren’t now and haven’t been for years, here or in the US. A welfare system based on labour market rigidities is a f**ken rotten idea – Europe basically proves the point.

    The welfare system should focus on ‘relaunching’, training and have clear cut-offs. But making it harder to sack people is a patently absurd way of improving employment. Once again, France is a great case in point: the new PM, euro-conservative (ie almost the exact opposite of american-conservative) came in just after the referendum debacle. His big thing was ’100 days to tackle employment’. Not the numbers, not that quick,, but at least the attitude. What did he do? He introduced new two year easy-hire-easier-fire contracts; a small revolution for a country where normally you need a permit to hire people on defined-duration contracts as opposed to ‘contrat de durée indeterminée‘ (unlimited length contracts).

    What a strange way of tackling unemployment!

    But there, it is too late. No-one manufactures anything in France now, and for a reason. When we replaced our hydraulic arm on the rear door of our car, we were lucky. Our year’s model had been made in Czeck Republica, at 22€. The previous year’s had been made in France, at 59€!

    The key, as I said above in this thread, is to let the economy grow. Then the jobs will appear like magic, and, real magic, the government will have the money to help out those that need it without raising taxes.

  96. Katz
    November 4th, 2005 at 12:44 | #96

    “No-one manufactures anything in France now, and for a reason.”

    Patrick, you might be interested in this site:

    http://www.answers.com/topic/economy-of-france

    There you’ll find that in the most recent year (2004) France had a trade surplus of US$5b, and that the country’s main exports are manufactured products.

    Or are we referring to ANOTHER France?

    I know you imagine that you are arguing a bigger, more universal, and more important point. But do yourself a favour and build your arguments on solid, correct facts.

  97. Patrick
    November 4th, 2005 at 12:47 | #97

    Oh, and UQ student, if you don’t know what a word means don’t use it. ‘Ameliorate’ is a very awkward fit there.

  98. Ernestine Gross
    November 4th, 2005 at 13:14 | #98

    I am not sure whether a reply to a response to my post is meaningful after the numerous personal discussions (if discussion is the right word). However, the response to my post appears to be sincere, so I’ll comment.

    Terje Peterson : “RESPONSE: This assumes that the world has a massive oversupply of labour relative to consumers or capital. China and India joining the world markets does change the ratios however wages will not converge to zero. In fact the quicker that India and China can build capital (ie Infastructure) the faster their wages will grow and the quicker the supply shock will pass for the rest of the world. Any attempt to slow down the natural dynamics of this process is to the disadvantage of the world’s poorest people.�

    Reply: No. I am talking about a dynamic process of a system that is more complex than a 3 factor model.

    Yes, poverty in all countries is a real issue. But, No to your ‘natural dynamic’. The dynamics of an economy system depends on the institutional environment. Institutional environments are made by humans (eg industrial relations reform, which is the subject of this post).

    Without evidence to the contrary, I would not consider it to be ‘fair’ to make it the responsibility of the relatively poor people (as measured by income distribution data) in the relatively rich countries (as measured by GDP per capita) to look after the relatively poor people in the relatively poor countries.

  99. stoptherubbish
    November 4th, 2005 at 13:20 | #99

    Dogz,
    How are we to pay to top up the low pay of minimum wage workers? As I understand the arguments of neo liberals, we should not require employers to pay a living wage, because poverty is best addressed thorugh transfer payments (welfare) and the tax system. Whilst the tax rates of people moving from welfaret to work are outrageous, even if they were fixed up, (and why isn’t the government moving to do this instead of wittering about the top marginal rates) could someone explain to me why employers should not have to pay each employee enough to live on? If employers are able to refuse to pay sufficeint for an individual employee to reproduce him/herself, in the absence of any wlefare, then employers are effectively seeking a subsidy for the rest of the polity. Fair enough. But if they require the rest of us to subsidise them and their and their undertakings, what in the name of mutual obligation, are they actually going to do to earn this subsidy, other than reap an even larger surplus than they otherwise would?

  100. Dogz
    November 4th, 2005 at 14:01 | #100

    stoptherubbish,

    It’s a good question. By my reckoning, a family of 5 with one wage earner and three children pays no net tax until they start earning around $50,000 (accounting for FTB, childcare subsidies, etc – it may be a little more or less). If you add in the cost of other public services such as heathcare, schooling, roads, etc, you’d have to be getting up towards more like $75,000 before someone starts making a net contribution to the government coffers, maybe even higher.

    So, taking the “empoyer should pay the true cost of an employee” theory to its logical conclusion, shouldn’t every employer pay a minimum of $75,000 per year for an employee?

    Most people would assume not, because that would mean most jobs wouldn’t get done, and as a society we want those jobs done. I can’t see that the principle is any different for those on minimum wages: we shouldn’t only set the minimum wage at a level based on what we think employers “should” pay, we should choose the level based on all of society’s goals, including reducing unemployment.

    BTW, all other things being equal, competition will ensure those employing people on a lower minimum wage don’t reap any greater profits. In fact the correlation can be reversed: Colesworth (which pays double the minimum wage of the US) has much fatter profit margins than walmart.

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