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Monday Message Board

April 12th, 2010

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

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  1. April 16th, 2010 at 19:24 | #1

    @conrad

    As a NSW HS teacher, I am aware. I also aware that we do have a problem with the bottom two deciles of achievement/socio-economic status. It is improving, but there’s still a lot of room to do better.

  2. April 16th, 2010 at 19:33 | #2

    James :
    @P.M.Lawrence
    I find it a bit hard to believe that you are criticising a satirical cartoon for straw-manning. In any case, you mustn’t have read it very carefully, because the cartoon explicitly says that the minimum wage has no clear effect on employment, and so does the data – notably David Card’s study which I mentioned earlier.
    Chris Warren’s point about the number of equations are not “a nonsense” but a generalisation of Sraffa’s economic model, which shows that a set of prices can be found that clear markets and enable economic reproduction for any division of wages and profits. Wages and profits cannot therefore be said to be determined by the market – they determine the market. The split between them is governed by relative power in class struggle as expressed through employer/employee conflict, union/antiunion activity, government policy, etcetera.
    In Sraffa’s model the profit/wage share is an independent variable – this is a logical consequence of the mathematics, but I’m a bit hesitant to say that this logical consequence is also a policy consequence, since this depends on the degree to which reality matches our mathematical approximations of it – as the GFC has shown that’s a pretty dicey thing to assume.

    For your first paragraph, I did note the points in that cartoon, and they are wrong in the ways I outlined. The cartoon explicitly states: “My theory about the minimum wage. Isn’t it shiny and elegant? It proves that the minimum wage hurts poor workers by raising unemployment!” When the cartoon acknowledges the discrepancies, it is to highlight that that theory does not fit the facts. But, as I pointed out, even the theory in an undergraduate textbook was more sophisticated than that and covered different cases with different outcomes. The cartoonist is probably right to mock those who offer such a simplistic theory – but it is wrong to take that cartoon and then use it in support of knocking down any theoretical description.

    On the other paragraphs, I think you are doing what has been called “furious agreement”. That is, I was pointing out that we can indeed have different numeraires and so on, with free and under-determined variables around, and that that is what is happening (under-determined by the internal logic, that is; of course outside bargaining power comes along too). So you can’t use the idea of stuff not being determined as a reductio ad absurdum to “prove” that you have to constrain wages to get all the variables determined; it is quite possible for them not to be all determined (internally, endogenously), so it is quite possible for wages not to have that sort of constraint after all.

  3. April 16th, 2010 at 19:56 | #3

    Alice :
    @P.M.Lawrence
    I dont know PM – I work for a company that seems to employ a lot of local northern beaches people in a service that runs 24/7 but its usually below the payroll tax threshold. There are lots of employers like that. Im not so sure its much of an incentive. Frankly I dont agree at all with payroll tax given that Im loathe to give the desperately incompetent NSW state labor a single solitary cent.
    They have privatised veryting under the sun that used to bring them income because they are too laxy and bungling to administer things and like heroin addicts they want a short quick high from a sale, but they have almost privatised their revenue sources in entirety and are still looking for sales.
    What do you do with such an incompetent lot of morons?. Not give them payroll tax at all? Im all for it.

    I was talking about a negative payroll tax, by analogy with negative income tax, not the payroll tax that is around at the moment. That is, just as a negative income tax takes money from individual people on higher incomes but actually pays out to those on low or no (other) income, so also a negative payroll tax would credit employers a base amount for each employee (say, A$10,000 p.a. for each full time employee and pro rata for part-timers), which would reduce their tax bills (say, their GST) and put a premium on hiring people for that much rather than creating a disincentive like a mandated minimum wage (regardless of whether other things actually override the disincentive, it’s still there). Others like 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 researched this area as well as me, so it isn’t half-baked. It works out like TerjeP’s suggestion about subsidies at comment number 50, but with some details that help it work (like, not needing to get and then churn funds for it).

  4. Alice
    April 16th, 2010 at 20:52 | #4

    @P.M.Lawrence
    Well – PM – maybe that would be an incentive for thosen who a coterie of employees who lie below the payroll tax threshold…perhaps a redistribution of payroll tax from employers who have a lot of employees to those building businesses with not many employees is sort of what you had in mind? I think maybe this is a good idea…if payroll tax isnt going to the coffers of the inept State Govt (and yes…Im all for Federal takeover at NSW level in entirety)…is this the sort of thing you had in mind? It would act as incentive to put more on …however it could also act as an incentive just to save it as profit. Im not so sure a negative payroll tax in our hands would see more employed (it could just be retained to increase profits rather than hire new people – wages so often depend on time and are already under the microscope of cost cutting – Im wondering if the assumptions re redirection of additional profits would automatically be redirected to additional hirings – ie the psychology of lowering wage costs is already there – can it really be mitigated against by tax changes?).

  5. Alice
    April 16th, 2010 at 20:53 | #5

    should read “those with a coterie of employees”

  6. Alice
    April 16th, 2010 at 21:00 | #6

    @TerjeP (say tay-a)
    Terje – Im not worried about him either – he said to me “Mum – if I go to tafe and get a certificate no-one will pay me. If I work here I can get that certificate and I get paid (bad pay but if I went tob Tafe Id get no pay…and Im getting experience and next year I can go to uni).

    Terje – it was enough logic for me to throw $50 extra his way a week for living expenses.Its his 18th birthday present….as well part of a damn Iphone contract. That better not kill me or it will be confiscated by me (who doesnt have one and wants one).

  7. paul walter
    April 16th, 2010 at 21:07 | #7

    No doubt about it, mums are a young fellas best friend.
    gee, when I think of the times my poor late mum bailed me out as to the accidents of youth, I certainly wouldn’t be here otherwise, I suspect.
    ouchh!

  8. Alice
    April 16th, 2010 at 21:21 | #8

    @paul walter
    Me too Paul..though I must admit my parents could afford no bailouts and neither could my partner’s…we were both on our own support mechanisms from age 16 him and 18 me!
    My partner bought and sold cars out of his garage to help his sole parent Mum…from age 16 (lived on legacy support in an age where Mums didnt work and his dad died tragically young – not much to get by on apart from his grocery stealing and the occasional bike or car he sold – true).
    Mine…public servants and a few kids…just getting by with the mortgage ..not much for extras and kids over 18 got billed promptly!! I moved out and paid my own way…but rents were cheaper back then. I can afford a bit more of a bailout but I have my limits and they arent that high.

  9. paul walter
    April 16th, 2010 at 22:48 | #9

    Alice, that’s right. In my case, came the time, mum stood back and I had to stand on my own two feet; accountable.
    “tough love”, I suppose.
    But for that , I have the priceless gift of ownership of both my own accomplishments and failures.

  10. April 17th, 2010 at 10:39 | #10

    @Alice

    “[M]aybe that would be an incentive for thosen who a coterie of employees who lie below the payroll tax threshold” doesn’t come into it, because you are referring back to current payroll tax and how that operates. But I pointed out that this is not that, this is a set of tax breaks connected to all employees, regardless – there isn’t any separation off according to how current payroll tax operates. For more detail on what I have in mind I gave a link (and other links to other people’s related work). It wouldn’t just operate as an incentive to hire while the the employers kept the gains; they would have to offer at least that much in wages because people could offer to work for anybody in name only, just to let the employer put them down on the tax returns (which isn’t ripping off the tax, because outgoings on unemployment benefits drop to match). Everybody would have an actual value even for zero productivity, but it would make more sense to do more than that and get paid more than that. Only, no employer would have enough bargaining power to offer less than the tax break and find any takers (they might offer less in cash, say with work for the disabled, with the rest going on benefits, facilities, etc.).

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