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Monday Message Board

July 27th, 2009

Its time once again for Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language.

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  1. July 27th, 2009 at 18:39 | #1

    Since no-one’s said anything here today – I felt I may as well post a link to my latest article – on minimum wages – maybe to kickstart some debate…



    BTW – what happened to the old format for this blog?

    kind regards,


  2. SeanG
    July 27th, 2009 at 19:29 | #2


    This is an interesting article on Iceland and how it is rebounding (from a really really low point that is) due to the devalued Krona.

  3. Michael of Summer Hill
    July 27th, 2009 at 21:16 | #3

    John, on the weekend the illywackers were at it again this time with the help of the former PM preselecting another Richard Cranium in WA to stand for the Liberals at the next federal election who thinks global warming is a massive fraud which the public has been duped into believing. NUTS.

  4. July 27th, 2009 at 21:38 | #4

    Kevin Carson has just done a guest post at the P2P Foundation blog drawing on some of JQ’s work.

  5. Ikonoclast
    July 27th, 2009 at 21:40 | #5

    I am always amused (in a sardonic way) by the implied argument, on the economic right, that wage increases are inflationary but profit increases are not. This issue gets back to the ratio of profits to wages which has been shifting in favour of profits for about 20 years. Apparently, twenty years of the scales tilting in favour of capital are not enough. We must have more.

    The other source of sardonic amusement is that in boom times, wage rises are inflationary (so must be resisted) and in bust times, wage rises are unaffordable, and so must be resisted. See, it’s an argument for all seasons.

    This last minimum wage decision is a disgrace. To me it looks like a privileged and bitter individual delivering an adverse decision as he is forced to depart his sinecure. There is nothing so contempible as those who trample the poor and the weak with nary a parting care. That the Rudd Govt has let it stand is a further disgrace. But then what can you expect? Rudd sold out to the corporates long ago.

  6. July 27th, 2009 at 22:34 | #6

    Ikonoclast : This issue gets back to the ratio of profits to wages which has been shifting in favour of profits for about 20 years. Apparently, twenty years of the scales tilting in favour of capital are not enough. We must have more.

    From memory Ikonoclast the profit share of national income is at its highest ever (ie since records were kept) and the wages share its lowest since 1968. The last 26 years – from 1983 and the Accord layign the groundwork for hoard – accelerated the shift. The problem from capitalism’s point of view is that while gross profits have gone to capital the rate of profit is falling or at least stagnating at low levels. So the push will be on to destroy the value of capital (already occurring), for the strong to eat up the weak (already occurring) and to drive down living standards (already occurring.)

    I think Marx might be right here.

  7. July 27th, 2009 at 22:35 | #7

    Oops. In the post above hoard=Howard.

  8. TerjeP (say tay-a)
    July 27th, 2009 at 23:53 | #8

    Last week Ross Gittins in his infinite wisdom stole my idea for health care reform. Here is my original version of Medicare HECS:-


    And here is the Ross Gittens version of Medicare HECS:-


    It would be nice if he had given me credit but mostly I’m just happy that he has taken the idea to a larger audience.

  9. July 28th, 2009 at 01:34 | #9

    “”"Temperature Data Wants To Be Free

    The UK’s Met Office Hadley Centre and University of East Anglia have been refusing access to the data used for their global climate averages and scientific studies. A copy of the data has leaked, and attempts continue to accomplish the release of the data by whoever maintains it. Excuses have included confidentiality agreements which cannot be verified because no records were kept, mention of the source has been removed from the Met Office web site, and IPCC records were destroyed.



  10. Donald Oats
    July 28th, 2009 at 09:37 | #10

    Re #9: Before you go analysing the leaked data to death, how do you know that the data really is the data, and not a forgery like some recent emails that have got Liberal opposition leaders into trouble?

    Leaked “raw” data from an anonymous source is more trustworthy than the final, statistically processed, official results? Give me a break. How do you know what the leaker’s agenda is?

  11. Michael of Summer Hill
    July 28th, 2009 at 09:40 | #11

    John, I have never seen such parasites as the neo-conservative illywackers within the Liberal Party. Ever since Turnbull gained the leadership the parasites have continuosly been disloyal and never gave him a chance. Today the polls show Turnbull on 16%, but that is not a true reflection of what the man is capable of. But for the former PM and others sceptical parasites within the pockets of the nuclear power camp Turnbull would have fared better. And I thought there were only schmucks within the NSW Liberal Party.

  12. Ikonoclast
    July 28th, 2009 at 10:08 | #12

    John, re your comment number 6. If I had done my research properly you could not have taken my 20 year “pawn” en passant. ;)

    I suspected my 20 years claim was an understatment of the case. Your post shows what an understatement it was. I agree, Marx was right, in general, about the forces and results of late stage capitalism. One thing we can add with our knowledge today, is that endless growth capitalism exists in intrinsic contradiction and conflict with the limits to growth in a finite world.

    Although, it must be remebered that Marx did predict that capitalism would burn up every other value. If we stretch that statement into the natural world we can see the environment and non-renewable resources as the last value being burnt up.

    What we needed to do was moderate and control capitalism with the forces and insights of democracy, science and a broad based scientific/humanist education for all citizens. We failed to do that and allowed the market, blind greed and unrestrained appetite for status, possessions and material satiation be the guiding force of our society. We allowed faith in our own systems to triumph over reason and empirical analysis. For those mistakes we have now entered “The Age of Consequences.”

    Frankly, I have reached the point where I reckon humanity deserves what’s coming. A salutary lesson is required.

  13. Fran Barlow
    July 28th, 2009 at 10:34 | #13

    On the topic of the ETS

    Polls suggest, apparently, that whereas last year 60% favoured immediate action on climate change mitigation, now a majority in Australia (45-41) favour delayinG until COP15 has been resolved. This could easily be misinterpreted as increased support for the coalition position of deny and delay. Given that the Greens are (quite rightly and on the right rationale) opposing the current ETS, I think this would be unfortunate. I too believe that no scheme is preferable to locking in a scheme that invites discredit and won’t work.

    I believe that a good scheme would involve the following basic elements:

    An emissions target by 2020 of at least 25% or the OECD/EU COP15 target, whichever was the higher
    Agriculture, Forestry & Transport all covered by ETS
    Scientific Authentication of all emissions offset schemes that take account of nature of biome, and composing biota in seasonal and lifecycle terms
    All permits to be auctioned — fines for failure to have sufficient permits to cover trading of at least 10% of any shortfall, plus interest at double the prevailing business loan rate
    Funds raised under ETS to be fully hypothecated to climate adaptation, restitution, R&D into near zero-emissions (NZEI) supporting loans for commercial NZEI or retrofit or establishment of new indigenous vegetation, compliance etc.


  14. Ikonoclast
    July 28th, 2009 at 10:41 | #14

    The progress on Climate Change mitigation will be deny, delay, dither, disaster. Disaster is locked in. We have an upcoming endless rolling global depression, disastrous climate change, disastrous reource depletion and massive wars over dwindling resources all locked into our future. Chances of escaping this are about 0.01%. By 2100, a reasonable estimate is that the earth’s human population will be in the range of 0 persons to 1 billion persons.

  15. melaleuca
    July 28th, 2009 at 10:42 | #15

    Ikonoclast, most economists would agree that if you increase the minimum wage you will increase unemployment. Why do you want to make people unemployed? Why not abolish the minimum wage altogether?

  16. Fran Barlow
    July 28th, 2009 at 10:54 | #16


    Several reasons Mel.

    1. There is scant evidence that falls in real wages cvan indefinitely sustain businesses the viability of the business model for which has decisively declined. In the end, at best, it allows the enterprise to close down in ways that foreclose losses to creditors and the owners.

    2. Lowering wages undermines other businesses in the area that have a viable business model

    3. Increases in real wages drive technological innovation which then drives changes in the kinds of work being done and the total working time rather than the total numbers of those employed

    4. It’s not obviously better for people to be employed for next to nothing because their marginal costs associated with work remain the same. At a given threshhold, the marginal value of work falls to zero.

  17. July 28th, 2009 at 11:27 | #17

    1. I would agee – but I see this as an argument in favour of abolishing the minimum wage. Drops in real wages (and even more – drops in nominal wages) will drive employees away. Nothing will stop a bad business model faster than that.
    2. No – it increases the available pool of employees. Those employees leave the declining business and go to the good one. Net gains all round. Resources (of all sorts) go to higher value use.
    3. This is, in effect, an agreement with the proposition that raising minimum wages hurts employment.
    4. See 3 – but I would disagree that having people employed is not obviously better. The effects of long term unemployment on the individual are well known, particularly in mental health terms. I would say it is obviously better to have them employed than unemployed.

  18. Hermit
    July 28th, 2009 at 11:52 | #18

    @Fran Barlow
    I think a lot hinges on how natural events pan out in the next year or so. Despite La Nina and a solar minimum we still had the Victorian bushfires. If next summer is a stinker with record coal production to fire up the aircons then ETS may be back in vogue.

    Of course Mother Nature could be playing a trick on us and saving the worst til later. When 90% of companies and individuals are on welfare there won’t be enough private or public capital for the low carbon switch. In hindsight the incremental approach of the ETS will seem wise.

    I agree that offsets need very tough auditing. For example if a forest burns down the offset is disallowed retrospectively. Ditto ‘clean development’ that doesn’t change anything. If not tough auditing then limit offsets to 10% of the required carbon cuts so the peddlers have a limited market.

  19. Jim Birch
    July 28th, 2009 at 11:54 | #19

    TergeP, as I see it the main problem with people seeking health value is: Can they? People don’t seek value in other areas of life very reliably so why would they do so in the complex technical area of medicine. (Read, eg, Dan Ariely’s Predictably Irrational, if you seriously doubt this.)

    If doctors who spent a decade in studying and apprenticeship – plus ongoing education and possibly specialization – are often found to be almost clueless about the cost/benefits of diagnostic aids and treatments, how can you expect the untutored person suffering a bunch of symptoms to do better. Outcomes are appraised statistically in medicine for good reasons but the end-user-knows_best system you’re apparently putting faith in will come down to things like fashion and the “sexiness” of the surgeon. Medicine is a rough science – individual treatment instances have highly varied outcomes – so determining best treatments is a job for experts. It’s pretty well established that untrained people (among others) don’t have much of a grip on statistics and making people pay their own medical way isn’t going to change that.

    I’m happy with a copayment system and would encourage (almost) anyone to take an active interest in their own health. But the reality check is when the doctor says you need test XYZ costing $105, or operation ABC costing $6,527: who is qualified to argue? You’d want guidelines for these things established and maintained by experts, who might just have a chance of navigating the matrix of treatments, cost, reliability, efficacy, frequency and severity of adverse events, and so on, wouldn’t you?

  20. Chris Warren
    July 28th, 2009 at 12:06 | #20

    Andrew R

    I have never heard of “low wages driving employees away thereby stopping a bad business model faster than anything else”.

    Has this been investigated anywhere?

    Theoretically this can happen with next to zero unemployment, but are you implying that it can occur with 3, 4, 5 per cent unemployment?

    To what extent is this relevant to todays circumstances.

  21. July 28th, 2009 at 12:59 | #21


    No, Melaleuca, most economists would not agree that if you increase the minimum wage you will increase unemployment, because there is a lot more to it than that (or see here).

    Over and above that, you can also implement minimum wages in other ways than by mandating them. I researched the area for a submission to the Henry Tax Review, and it turns out that some economists, e.g. Professor Kim Swales of the University of Strathclyde and his colleagues, and Nobel winner Professor Edmund S. Phelps, McVickar Professor of Political Economy at Columbia University, have found another approach to implementing a minimum wage that actually increases both employment and GDP (see here and here).

  22. melaleuca
    July 28th, 2009 at 13:10 | #22

    Fran says:

    “2. Lowering wages undermines other businesses in the area that have a viable business model ”

    You should speak to people who operate small businesses. If a business is to be successful it needs to pay good staff a premium. If a business undercuts its competitors wages the good staff will leave and work for the competition and that business will ultimately suffer.

    I would prefer to have a very low minimum wage and then have government mandate a minimum “social wage” to be provided via government payments.

    Incidentally, my partner happily works for below the min wage in the rag trade. So do thousands of other mostly ethnic women. It seems crazy to me that this type of employment is criminalized by the state. Why should people be treated as criminals simply because they want to work?

  23. Fran Barlow
    July 28th, 2009 at 13:14 | #23

    @Andrew Reynolds

    No.3 doesn’t agree with the proposition “that raising minimum wages hurts employment”. It can change the pattern of employment. Also employment in specific businesses does not depend in practice on whether someone can employ someone at below the minimum wage. Plainly, if minimum wages were set a lot higher than they are now then there might well be some job losses in places competing with businesses that were not subject to that requirement where labour costs were the dominant difference in the cost of the good or service. There are lot of ifs in there.

  24. TerjeP (say tay-a)
    July 28th, 2009 at 13:37 | #24

    Jim – even if we retained existing medicare price schedules and guidelines and prevented gap payments using the Medicare HECS fascility we would in my view still get benefits from making costs more explicit to end users and in expecting them to repay those costs according to their means. People may not be entirely rational in their action but most are far from being entirely irrational. And we certainly shouldn’t wish for a system that disadvantages rational people and which discourages rational decision making when it comes to precious medical resources.

    Personally I think most people get more rational if the environment rewards it. It is not as if medical professionals never over service people in todays system. However most patients currently have little financial incentive to cry foul when it happens or to even ask the question.

  25. Fran Barlow
    July 28th, 2009 at 13:58 | #25

    @TerjeP (say tay-a)

    I wonder TerjeP if there would be some value in getting properly qualified health service providers to “bid” to supply certain items (with a service specification) to the government and then allowing people looking for specific services to then “accept” offers on the government’s behalf. A putative client could specify what they were after and any conditions (locality, cost, time of day etc) and then a list of matches and near matches could come up from a web-style interface. The client could then choose a service provider directly from the site.

    Each client would be given a budget for refunds at 85%, 65% or less with unused funds transferrable to others for service only or capable of being rolled over year on year. That would give everyone an incentive to save on health care costs. Services deemed “essential” (vaccinations, dental checks etc) would be given out free of charge. Those assessed as having chronic medical conditions could be given an extra allowance or perhaps taken out of the system entirely. Health care providers could be rated by their clients on quality of service just as people on ebay are rated by people who have purchased.

    It doesn’t sound that hard.

  26. Socrates
    July 28th, 2009 at 14:52 | #26

    Social justice anyone? I found this quite a sad story at BBC:

    The British MoD is appealing the compensation amounts awarded to disabled army veterans. The amounts awarded were not large. One, who was shot in the leg in Iraq, received £46,000, while the other, injured in training, got £28,750.

    This is at a time when bank executives have notoriously received publically funded pensions of over £1 million per annum without any government appeal. This seems inconsistent at best, a symbol of a broken society at worst. After the drawn out saga to get equal rights for Ghurka veterans, it suggests a pattern of behaviour that does not show the MOD or the British government in a good light.

  27. Ikonoclast
    July 28th, 2009 at 15:05 | #27

    Melaleuca at #15 says, “Ikonoclast, most economists would agree that if you increase the minimum wage you will increase unemployment. ”

    Yes, Mel and most economists agreed before the Global Financial Crisis that the “great moderation” (the end of economic volatility) had occurred and we would never have another major economic crisis.

    The plain fact is that most modern economists follow neoclassical economics theories. Neoclassical economics is a fallacious doctrine and have been proved so by recent events. Therefore most economists are wrong about most things.

    Neoclassical economics has theoretical holes you could sail the Queen Mary through. In addition, Neoclassical economics fails, nay has failed miserably, to describe the behaviour of the real empirical system.

    To say, “if you increase the minimum wage you will increase unemployment” is to parrot the nonsense of these failed mainstream economists with their dead theories.
    The statement, on its own, is simplistic and lacking in context. Context involves questions like this. What is a living wage (the reproductive cost of labour?)? Of what good is it to allow less than a living wage if governments must then make up the shortfall in welfare (or allow people to starve or turn to crime) and to make up this shortfall by higher taxes falling on businesses and other workers? Is this sort of a bureaucratic tax and disburse churn more or less efficient for the entire society than legislating a minimum livable wage in the first place?

    Is the minimum wage level the only or even an important factor in unemployment? What about increasing automation? What about the role that could be played by provision of better (and much needed) human services? Could aged care do with more workers currently? (We all know the answer to that one.) What about the role of current debt-deleveraging and the tightness of finance? Is that playing a role? (You bet it is.) in increasing unemplyment? If you pay workers a pittance then they will have little to spend on products other than bare essentials? Will this slow the rest of the economy and produce unemplyment there?

    Sorry, simple slogans don’t cut it. Especailly when they come from the failed majority of the corporate capitalist brain-washed economics fraternity.

  28. melaleuca
    July 28th, 2009 at 15:33 | #28

    Ikonoclast, if you are correct then the minimum wage should be increased to at least $5,000 per week.

    Your point about the GFC is also rubbish for obvious reasons. No neoclassical economist worth his salt says economics is able to make accurate predictions about future events any more than meteorologists can tell me what the weather will be like on in Jakarta on November 10 20011.

    Economists can however analyse past data for cause and effect.

  29. Fran Barlow
    July 28th, 2009 at 16:02 | #29

    @melaleuca 328

    You do yourself a disservice adducing strawmen — in this case — a composition fallacy

    No part of favouring a minimum wage entails proposing a wage that would change the composition of costs of a good or service in ways that would cuase it to exceed decision points for the take up of the said good or service.

  30. Pedro
    July 28th, 2009 at 16:06 | #30

    LOL Mel, make it $50k a week, we’ll all be rich. What is it about the current recession. I even saw Krugman the other week argue that a payroll tax increase could be good for employment.

  31. Pedro
    July 28th, 2009 at 16:08 | #31

    “No part of favouring a minimum wage entails proposing a wage that would change the composition of costs of a good or service in ways that would cuase it to exceed decision points for the take up of the said good or service.”

    Fran, if you are saying that arguing for a minimum wage is not the same as arguing that a higher minimum wage is necessarily good then of course that is true. But Mel’s point still highlights the difficulty arguing that a minimum wage does not have negative employment effects.

  32. Fran Barlow
    July 28th, 2009 at 16:26 | #32

    @Pedro #31

    As the term “minimum wage” implies “the least one can fairly offer”, Mel’s observation was simply frivolous rather than making a point about the relationship between wages and employment. If a minimum wage falls under the general wage level of an industry then requiring that nobody offer less than that makes no difference at all to competition between businesses.

  33. Michael of Summer Hill
    July 28th, 2009 at 16:32 | #33

    John, it seems like Rudd knows he is going to get hammered at this week’s National Labor Conference and is trying to appease (or buy his way out) the unions. But having said that, any Federal Government initiative promoting Australian goods must be given the thumbs up.

  34. melaleuca
    July 28th, 2009 at 17:19 | #34

    PrQ, could you please comment on whether the decision to freeze the minimum wage was the right one? Come on, don’t be shy :)

  35. melaleuca
    July 28th, 2009 at 17:29 | #35

    Fran, you miss the point. What we should care about is the social wage of our poorest citizens, not the minimum wage. Have you not heard of flexicurity? http://en.wikipedia.org/wiki/Flexicurity

    It is downright stupid to risk the jobs of unskilled people and sometimes only marginally employable people by having high minimum wages such as we have in Oz (compared with like OECD countries).

    Having said all that I would like to see a “lowish” min wage retained in a flexicurity setup otherwise employers would be tempted to pass labour costs onto the taxpayer and also because I think if the minimum wage is too low it may indirectly contribute towards a culture of greater wage differentials as per America.

  36. philip travers
    July 28th, 2009 at 18:03 | #36

    Before the last election, our member of Parliament now,had an advertisement running about the cost of accommodation in Grafton N.S.W. Where someone on an average wage would only end up with a one room bedroom flat.In Dorrigo a Settee is around $520.00 a month.All this talk that has issued from Fed. Rudd cannot avoid its nonsenses ,so as far as minimum wages are concerned,which is very silly as a concept when underemployment is the major problem in Australia, when that is easily aligned with rentals.It is pointless even thinking about owning land under a certain income,unless the whole notion of the free market undergoes a great and swift change.I think however something worse than unaffordable housing and low wages is ahead economically speaking.The whole settings of Government,to my mind are completely wrong.If I was in government,I would first suggest,and if it didn’t happen force it by Law more creative solutions to housing and land and services ownership…including converting large truck bodies to all weather housing..something large truck trays can already appear to be,by their really flexible coverings today.Noise and safety etc. could be designed in.If land was somehow unaffordable new purchasers should be able to commit themselves to local voluntary work..and this accessed in how it could make the economy more productive and competitive.Banks will just have to live with it.Went to a site last night that had dump trucks converted to swimming pools, and these dumpsters,as they are called proves that,they can be converted to holding large amounts of water.It will be of no surprise to those who put up with my opinion,that,I see that idea can be converted to any back loading potential of both trucks and rail matters including coal trucks.There maybe also a possibility of transhipment of sea based species through sea containers alive and doing well.Just the normal reinvention of applying a bit of technological know how.I haven’t said there are no problems in moving large volumes of water this way…I am aware of that,and potential road damage…being stupid about ideas isn’t the reason I am suggesting someone have a look at this.YouTube Urban Eye for the video of the Dumpster swimming pools! A article online SMH yesterday about three species and colouring of as inspiration on possibility.I know when in the Melbourne Library years ago now, I came across a photo of lobsters growing in the heat and water of a small coal fired power station.I suggested lobsters,and possibly crays,if my memory serves me could be exported to the U.S.A. and solar heating could do the job.It happened.No pay or than you came my way.Let’s say,I have extremely mixed feelings about regular occurences like that.

  37. philip travers
    July 28th, 2009 at 18:06 | #37

    No pay or thank you,in second last sentence.

  38. Salient Green
    July 28th, 2009 at 18:51 | #38

    Hermit #18, re forest offsets burning down and being disallowed. You would have to take into account the percentage of below ground biomass and how long it would take to release it’s carbon now that it’s dead or if it’s alive and supporting a smaller tree. You would also have to take into account what is done with the remaining logs. If they are left in the forest, carbon is sequestered for a long time.

    To be fair, you would have to establish what percentage of the forest’s cabon was released into the atmosphere immediately, and then establish how long it would take the dead bits to release their carbon. Sounds like a good little science project for some clever person.

  39. TerjeP (say tay-a)
    July 28th, 2009 at 18:51 | #39

    The legislated minimum wage should be set regionally not centrally. Preferably at zero but certainly at a rate more suited to the relevant economic region. It is dumb not to lower the minimum wage in regions with double digit unemployment.

  40. Fran Barlow
    July 28th, 2009 at 19:02 | #40

    What would be the point of legislating the minimum wage at zero? Would this be better than 6d per week? How much?

    Sorites rules …

  41. Michael of Summer Hill
    July 28th, 2009 at 19:31 | #41

    TerjeP (say tay-a), if P=0 then you are an extremist advocating slavery.

  42. Fran Barlow
    July 28th, 2009 at 19:54 | #42


    It is downright stupid to risk the jobs of unskilled people and sometimes only marginally employable people by having high minimum wages such as we have in Oz (compared with like OECD countries).

    Assumes facts not in evidence; assumes model that is not established;

    And yes a “no minimum wage” provision would encourage a race to the point where the welfare net prevented further deterioration. Really, if you want to avoid distortion, you’ve got to remove welfare so that people will be desperate enough to accept any conditions. On the same logic, why not shred OH&S? These are much more costly than minimum wages and even an unsafe job is better than none, right?

    Subsidising wages would probably be contrary to WTO provisions and be a net transfer from people below average wages –who pay most tax to people on above average wages. Indeed, in a market where there was a case for it, it might simply force wages lower still leading to no net benefit.

  43. Ikonoclast
    July 28th, 2009 at 20:21 | #43

    I once knew a bloke whose favourite saying was;

    For every complex problem there is a simple solution and it is always wrong.”

    This fits the no-minimum-wage fetish to a “T”. Mel and TerjeP seem to make the simplistic assumption that removing the minimum wage will reduce unemployment. Well, it might but only in one sense. It could reduce unemployment in the same way that defining one hour of work a week as “employed” reduces unemployment. That is it becomes a statistical game where you redefine the meanings of employed and unemployed to get the answer you want.

    A person employed at below subsistence wages (or the reproductive cost of labour) is not gainfully employed with respect to the whole of soceity. Yes, he or she might be gainfully employed from the employer’s point of view, However, the person is not gainfully employed from their own point of view nor gainfully employed from a whole of society point of view. The rest of society must subsidise wages with welfare or bear the costs as someone turns (in part at least) to crime to subsist.

    I suspect that TerjeP’s position is that whilst there is no mandated minimum wage in his system, the actual minumum wage will find its own level above zero and presumably at a subsistence level for workers with at least some saleable skills. The problem as always is that the world is complex, messy and subject to “frictional” drags.

    The very existence of welfare will distort the economic system’s ability to find a level for a minimum wage. I will admit the distorting effect of welfare as quickly as any libertarian. However, remove welfare entirely and you get even worse socio-economic effects. History teaches us these effects are squalor, starvation, crime and epidemics. The latter two eventually impact on all classes not just the underclass.

    Thus to deal with market failure, frictional adjustment and technologically induced unemployment (high levels of automation) we need a welfare safety net as the least of several evils. The necessary existence of welfare on these grounds distorts the system’s ability to find a “market perfect” minimum wage as do frictional and other factors in their own right. We therefore feel constrained by both generel humanitarian reasons and enlightened self interest to provide a “minimal reasonable living standard” to all citizens.

    As welfare settings and minimum wage settings interfere with each other in the strict market sense and as welfare has proven historically “necessary” as outlined above, then the only logical thing to do it take it out of the market’s hands and legislate both welfare and minimum wages. Of course, this does not in any sense ague for a carte blanche to set minimum wages absurdly high. However, you might as well set them at a “reasonable living” level as the “gains” below that level are all to employers and none to the worker or society in general. Indeed some of the gains of absurdly low minimum wages to employers may also turn out to be illusory as economic activity is damped by workers having little cash to spend bare necessities.

  44. Ikonoclast
    July 28th, 2009 at 20:35 | #44

    I might add that a having a welfare floor without a wage floor will lead to problems too. Both floors are necessary for a logical, economically viable and humane system. Having a welfare floor without a wage floor leads to the welfare system operating (even more strongly than it does already) as a defacto wage subsidy system. I won’t go into this at length now as my posts usually get too long.

  45. Alice
    July 28th, 2009 at 20:49 | #45

    social safety net = automatic stabilisers = fiscal idea of keeping the economy moving not stalled in some high unemployment equilibrium of low growth and low output ( a divided unhappy society and one that isnt moving anywhere)
    = keeping people with enough money in their pockets to keep looking for work not laying idle spebnding every day looking to satisfy their immediate wants for food and shelter and burdening the rest of society.
    Is everyone mad? Social saftey net needed as is progressive taxes (the rich who have managed to evade this and reduce theor tax obligations increasingly in the past thirty years with their trickle down BS).

    The saftey net has huge holes in it and the weight will drag us all down as it is dragging us down now.

    The market sense of people working for market wages is rubbish. Start applying it where it is needed – the market remunerations of the wealthy are not market remunerations – they are closed shop deals that leave shareholders out of the process entirely. Nothing competitive about that. Why should wages be competitive when exec and managerial remunerations are not.

    Fine if the execs want their closed shop remuneration deals but raise taxes on them and mainatin the safety net or watch good workers and reasonable families get angrier by the day when they cant get decent jobs with decent conditions on decent wages.

    You can only screw people down so far (and yes some in here would advocate slavery…thats the penultimate of the flexible competitive wages argument).

    Turn it around and lookm at the competitiveness of exec salaries…there is none.

  46. Alice
    July 28th, 2009 at 21:08 | #46

    @Andrew Reynolds

    and Andy (my favourite boxing partner) says

    “Those employees ….(read the newly sacked – my addition)….leave the declining business and go to the good one”.

    Andy WRONG. For a start Labour is the only proudction input NOT ALLOWED to be flexible. Only capital is allowed to travel from country to country in the name of globalisation and unfettered markets “freely.”

    But Labour is not allowed to be flexible – we have “immigration rules”. Its the mots regulated input into production and people DONT leave their families, their friends, their home town – they will not simply leave a declining busines and go to an improving business or industry… some may, many wont – they just joing the long term unemployed.

    Flexibility of labour to move? Not much. You want to de-regulate markets irresponsibly and to the nth degree Andy? Then de-regulate labour – its the biggest cost – let labour move from country to country as they see fit in search of work.

    Why hasnt that de-regulation happened Andy??? Huh ?? Who is resisting that?

    Capital – it wants capital perfectly free and de-regulated and labour constrained and cheap..

    My god, the hypocrisy of the de-reg argument knows know bounds.

  47. Alice
    July 28th, 2009 at 21:15 | #47

    It seems some would prefer to go back to the free narkets of Dickensian England where crime and murders were rife in cities and regulation minimal and the only control was a police force who had to wear leather collars to prevent having their throats slit on the job to be robbed.

  48. melaleuca
    July 28th, 2009 at 21:57 | #48

    Ikonoclast says:

    “This fits the no-minimum-wage fetish to a “T”. Mel and TerjeP seem to make the simplistic assumption that removing the minimum wage ….”

    Learn to read, old swan. I said we SHOULD have a minimum wage and gave two reasons why at #35 above.

    As to what is humane, you need to explain why people who work for below the minimum wage should be treated like criminals. How in hell is that humane?

  49. July 28th, 2009 at 22:06 | #49

    Could not agree with you more. Labour should be deregulated. Next? Looks like you are wrong on my opinion again. Used to that yet?

    N.B. The immigration laws (and the White Australia Policy) were brought in as the ALP Platform and were a condition for Watson’s support of the (conservative) Protectionist Party. The ALP, and the Left generally, has been utterly consistent in its support for immigration controls as a way of protecting its power base – the unionised workers.

  50. Ikonoclast
    July 29th, 2009 at 08:57 | #50

    Mel, in post #15 you said , “Why not abolish the minimum wage altogether?” In context and in tone, it was clearly a rhetorical question. However, by post #35 you were re-writing your own history and shifting your position.

    Are people who work below minimum wages criminalised in this country? I am not aware of it but then I am not a legal expert. I am aware that there are laws against employers paying below minimum wages. There are laws against illegal migrants working and other immigrant categories working without the correct work visas. This is not the same thing as bona fide citizens being criminalised for accepting, wittingly or unwittingly, wages below the minimum.

    Or perhaps your “treated like criminals” was figurative rather than literal. People are prevented from working at below minimum wages by indirect rather than direct means. Preventing employers from paying below minimum wages indirectly prevents (and protects) people from working for below minumum wages.

    This gets back to a “general good” versus “individual freedoms” argument. There are many cases where our individual freedoms are limited for the general good. Indeed individual freedom can be limited for the individual’s long term good as we do for children. The sweatshops of contemporary India or the cotton mills of England circa 1850 (for example) with no minimum wages and child labour show where the race to the bottom that is the laissez-faire system takes us. The “Low/No Minimum Wage” is a plank of the laissez-faire system.

  51. Ikonoclast
    July 29th, 2009 at 09:22 | #51

    I would wager that every respondent to this blog believes in regulation to some level, accepts it and indeed wants it in various aspects of economic, civil and social life. To take the argument to the extreme. Zero regulation is anarchy. Total regulation is totalitarianism.

    We should get the above clear at the outset of any argument on regulation. I strongly susepct that Andrew Reynolds would not be in favour of total abolition of labour regulations and total abolition of immigration controls. That would very quickly affect the amenity of your life and the sanctity of your private property A.R.

    Hmmm, let’s take it a bit further. As well as totally deregulating labour, how about totally deregulating the rules and laws relating to the protection of private property and even its existence as a valid concept. Are you in favour of these things Andrew R? LOL. I thought not.

    Private property laws protect private property. Given that we are material beings and cannot live without material support a reasonable level of freedom depends on having some materials at our command and disposal. Labour laws protect the capacity to labour. Labour laws give the possessor of the capacity to labour some protection against abuse of that personal capacity by others just as laws proscribing assault give us some protection against personal assault. All these laws have been found to be necessary and good in the historical-empirical melting pot of common law.

    The argument is not about regulation itself but the correct settings for regulation. “De-regulation” is an unfortunate term. Does the person proposing it want no regulation or less regulation than currently? And if less regulation, how much less?

  52. Donald Oats
    July 29th, 2009 at 10:40 | #52

    When Howard was in power I used to dream of the Dickensian times – “Ah, the good ‘ol days” – but then I’d awake to the nightmare of WORKCHOICES, and that language would have me reaching for my copy of “Nineteen Eighty Four”.

    There isn’t much I’d fight for, but the minimum wage and conditions is one thing I would. As Ikonoclast points out, without a minimum wage and conditions the race to the bottom can go very low indeed.

  53. Alice
    July 29th, 2009 at 11:16 | #53

    Ah Don,

    John Howards “Workchoices”…so much choice for employers it made me sick. The worst I heard was when Darryll Lea was rostering its counter sales people on one hour rosters in the city (it put me off their chocolates and thats saying something). Another I heard was the son of a friend, suddenly taken off his full time week and put on rotating 3 to 4 hour casual contracts working for the same shoe chain with two differenty stores at Macquarie centre. They could cover their two stores, after hours (no overtime), Sats and Suns this way and not even include so much as a tea break for the young man.

    Bah to John Howard…curse him. Workchoices was the ultimate humilation of many Australian youth and Id like to send John Howard to the workhouses of Dickensian England (and even that would be too good a punishment for the little blighter).

  54. July 29th, 2009 at 11:29 | #54


    Ikonoclast wrote “I would wager that every respondent to this blog believes in regulation to some level, accepts it and indeed wants it in various aspects of economic, civil and social life. To take the argument to the extreme”.

    You would lose; I for one do not. See Kevin Carson’s mutualist blog for a view I find persuasive, certainly at the philosophical level although I am unsure of some practicalities.

    “Zero regulation is anarchy”.

    This is a common confusion of anarchy with anarchism.

    “As well as totally deregulating labour, how about totally deregulating the rules and laws relating to the protection of private property and even its existence as a valid concept. Are you in favour of these things Andrew R? LOL. I thought not.”

    But getting rid of those laws and regulations has nothing to do with getting rid of the concept, but rather to do with handing over the concept to a more philosophically sound and consistent form of implementation – a private one.

    “Private property laws protect private property”.

    Except to the extent that they undercut the concept, from being a contradiction in terms (and see above). They amount to asserting that none but the state may violate property. And, of course, incidental benefits can neither offset other harm nor constitute justification and legitimacy.

    “All these laws have been found to be necessary and good in the historical-empirical melting pot of common law”.

    No, actually – since we have ample historical record of just how they have worked to procure harm, e.g. in the Enclosure of the Commons (in England) and the Highland Clearances (in Scotland). People are welcome to explore the outworkings of Terra Nullius nearer at hand, though they are likely to come to one or another of two different wrong and simplistic conclusions, that Aborigines did or did not own land in Australia before the Europeans came (my own view is that some few in some areas did own land, that of those few most owned it communally, but that the rest generally only owned communal and/or individual hunting rights etc. and that proper and fair dealing would have involved not negotiating any purported purchase but negotiating quit rents on those rights).

  55. Ikonoclast
    July 29th, 2009 at 17:04 | #55

    I stick to my statement that zero regulation, zero law equals anarchy. I did not mention anarchism nor did I equate anarchy to anarchism. I meant a state of disorder. Though I would also accept from the Meriam Webster, definition 2. : “a state of lawlessness or political disorder due to the absence of governmental authority”

    Definition (c) “a utopian society of individuals who enjoy complete freedom without government” is for those who believe in fairies. In the absence of legitimised power, illegitimate power would soon arise. I prefer an ever imperfect democracy to warlordism thank you.

    P.M.L. says, “But getting rid of those laws and regulations has nothing to do with getting rid of the concept, but rather to do with handing over the concept to a more philosophically sound and consistent form of implementation – a private one.”

    I could argue that the connection between practice and theory is closer than that. That the concrete existence of laws and regulations (and their causes and effects) informs abstract moral philosphy just as abstract moral philosophy can inform, modify and progress the practice of law. Further, to remove all concepts and practices to a private form of implementation seems a rare and hopeless combination of solipsism, isolationism and asocialism. The private implies the social and vice versa.

    I laugh, quite frankly, to think what would eventuate if we each privately, multifareously and consistently implemented our private notions of property. Actually, this is exactly what we all try to do to some extent in our own little ways but laws and regulations limit this endeavour in each of us or else society per se could not exist.

    I grant your examples of the enclosure laws and the doctrine of terra nullius. Both are examples of the iniquitous and manipulative operation of laws to suit sectional interests. I equally grant that many other examples could be advanced. However, democracy and law have progressed from the enclosure laws and carte blance application of terra nullius, I hope.

    OMG, I am showing signs of optimism. I must be ill. Readers of some of my more gloomy prognostications will know that optimism is not my default setting.

  56. melaleuca
    July 29th, 2009 at 17:16 | #56

    Ikonoclast says:

    “However, by post #35 you were re-writing your own history and shifting your position.”

    Umm no, you apparently lack basic comprehension skills. In #15 I asked a question because I wanted to hear your views. I didn’t state my position until later.

    “This gets back to a “general good” versus “individual freedoms” argument. There are many cases where our individual freedoms are limited for the general good.”

    The effect of this is racially discriminatory. Huge numbers of immigrants with very poor English skills have very little chance of getting a minimum wage job. Most therefore work in the “black economy” for below min wages. For those of you who live in Melbourne you may want to consider why you can get a good $10 meal and a $10 haircut in Victoria St, Richmond, even though these businesses pay very high inner city rents. The reason is because most of the staff are Vietnamese with poor English skills who work cash-in-hand for low wages.

  57. Ikonoclast
    July 29th, 2009 at 18:57 | #57

    The “black economy” is a public, social and moral hazard at so many levels. The picture you paint argues for a much stronger policing of minimum wage laws, tax laws and immigration laws. The shonky unregulated migrant agency business has much to answer for and should be shut down lock stock and barrel by legislation.

    There is no reason that immigration policy cannot be enforced by one govt agency while another govt agency acts as an Immigrant Advisary. Throw in a well funded Immigration Ombudsman as well but for heaven’s sake keep private enterprise out of social policy. Private enterprise always subverts social policy.

  58. Fran Barlow
    July 30th, 2009 at 14:31 | #58


    I just heard a clip from you on newsradio regarding contingency “success” fees and lobbying.

    Your proposal for a hiatus between ministerial duty and being a lobbyist ought to be taken up. Two years doesn’t sound excessive.

  59. Pedro
    July 30th, 2009 at 15:22 | #59

    How is the general good advanced by pricing people out of employment? Let me tell you the story about the disabled woman who had to be fired from the cleaning job she loved (yep, it’s true) because the govt would not let her be paid by the clean instead of by the hour. Did you notice an improvement in the general good in about May 2006 when that happened?

    The race to the bottom is nonsense. Clearly any job has to pay at least the dole to attract people from the dole. But if the race to the bottom were true, how is that anyone is paid more than the minimum wage?

  60. Fran Barlow
    August 1st, 2009 at 13:34 | #60

    I wonder what people here think about the connection between the state and elite sport.

    This is an issue that has troubled me for quite some time. Try as I might, I can think of no good reason for public funds to be given (directly or otherwise in the form of tax deductions, allowances for sponsoship in company tax returns etc) to elite sport.

    Now let me say I fall far short of being a sports fan. I will put my hand up to an enduring interest in cricket as narrative, but that’s it. I don’t believe my personal interest ought to attract puiblic funds either.

    The issue comes up pretty much everytime there’s some controversy surrounding elite sport — drug taking, Beijing Olympics and human rights, and the latest — the World Swimsuit Competition in Italy. Apparently the best male swimmer in the world, one Michael Phelps, was bound by a sponsorhip arrangement to work with inferior equipment and therefore get beaten by some chap nobody but the connoisseurs had ever heard of.

    Now frankly, I don’t much care. At best, elite sport is entertainment, in just the way the latest Harry Potter is entertainment. ‘Is it worth watching?’ is the beginning and the end of its justification for me. I couldn’t care how they get there. They could swim in outfits that made them look like mer people and be bloated to the gills with steroids for all I cared. But why is the state involved?

    We’ve separated church and state — why not elite sport and state?

  61. Alice
    August 5th, 2009 at 22:28 | #61

    Fran – no one is beating Phelps right now at Fina…seriously his swimming is hypnotic to watch – completely amazing – (and I do so love good swimming). Have you seen what makes this Phelps so special (apart from the fact that he swims like an angel…).
    He is the tallest, but he has an unusually long strong back. He is long from his shoulders to his swimming leggings – long, really long and strong.
    Never seen anything like that. The most uniquely designed swimmer’s body on the planet. This boy was born to swim. They will be hard pressed to find someone to beat him.
    Whoever beat him wont last long – must have been a fly by night.
    Phelps is a swimming god Fran. There is nothing better…. than watching Phelps in the pool – a machine.

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