Some of our more impatient bosses have moved fast to take advantage of the additional power given to them by WorkChoices, and it’s encouraging to see lots of signs that workers are fighting back. Along with marches and job actions, music has always been part of such protests, and the ASU is putting on a Rock for Your RIghts at Work event at the Zoo in Ann St., Brisbane on 6 April
(via Mark Bahnisch
John Quiggin 
Dogz,
Hope the younger generation will not be disappointed. The predecessor of State Super (NSW) used to write down astronomical amounts of projected super payouts for some dates in the future. Except for the early baby boomers, these huge numbers disappeared because ‘the rules of the game were changed’.
Financial markets, as we know them, do not allow complete insurance.
As for IR laws, there are two aspects which I believe haven’t been exposed on this thread.
a) For whose benefit have these new IR laws been created? Allegedly these laws constitute an “extremely complicated legal environment” [Chris Gardner, http://www.freehills.com.au/people.asp%5D
b) How can people work ‘professionlly’ in an organisation while facing the risk of being dismissed if they object on ‘professional grounds’ to management’s “wants”. I believe this is an important issue of general interest (eg food technology, health, education, finance, accounting, engineering, construction, …. cleaning properly so that people don’t get sick).
Any suggestions?
Alpaca,
I agree. However it is normal for governments to either ban things or make they compulsory. They seem incapable of the middle road. The compulsory nature of unfair dismissal laws was wrong, and prohibiting a private alternative is also wrong.
However if you want security you can alway sacrifice some pay and get income insurance.
Regards,
Terje.
Dogz,
We may be in furious agreement here.
No goalpost-shifter I!
I do not wish to dispute in any material way your “three ages” generalisation.
To show how agreeable I can be I’ll even forego disputing your assertion about the degree of difference between now and 50 years ago.
Thus, the sole disagreement I wish to address is your implication that WorkChoices and related IR changes will not impede future development of Australia as an “ownership society”.
Let us assume that Howard’s changes remain on the books. (A very brave assumption in my opinion).
I believe the long-term result will be a reduction in the proportion of Australians who will qualify financially to become members of the ownership society.
In other words, Howard’s IR changes will tend to reduce the scope of the ownership society and increase the size of the working poor underclass.
Now this may not be such a bad thing for folks who want their lawns mown cheaply or who hanker after a live-in maid. But there are social and cultural consequences for a society that prides itself on its egalitarianism.
And only time will tell whether and to what extent large numbers of Australians will accept with quiet resignation their rebranding as a gaggle of Step’n’fetchits.
EG, I agree that financial markets do not hold complete insurance. But neither does anything else. Our retirement is probably safe for another 50 years, largely because trade between the 1st world and developing nations allows both to grow much more rapidly than either side would grow organically on their own. When the planet is all first world + Africa things will be different – but that is a way off yet.
Katz, my lawns are already mown cheaply, by a guy who runs a franchise with his two sons. They’re friendly, diligent, efficient, and cost-effective. And almost certainly none of them are union members, or care a damn about wrongful dismissal or anything else.
No live-in maid yet Dogz?
You only think your getting your lawn cut cheaply. The informal sector in the workforce is only just beginning to form, so don’t sign any long term contracts on your edging your nature strip and polishing your garden gnomes.
Kevin Andrews seems quite flustered about employers actually using the powers he gave them so early in the frog-boiling process.
But in the abattoir he has enjoyed a small victory of PR over black letter law.
Well done Kev!
“avaroo, I think you’re pushing it a bit. Forcing doesn’t mean compelling by legislation unless it’s qualified to convey that meaning. ”
Here’s what you said:
“avaroo, on the subject of this legislation forcing fair paying employers into a race to the bottom�
Clearly you WERE saying the legislation would force employers to lower wages. If you are now recognizing that this legislation does not in fact, force anyone to reduce anyone’s wages, fine.
“But what do you think of this problem? If market conditions force employers to reduce pay generally as a result of this legislation, do you think that’s good?”
I don’t think this legislation will force anyone to lower anyone’s wages. And so far, you’ve been unable to show how it would.
“In other words, very roughly speaking, investment returns are now almost as important as income for most Australians. ”
Thats excellent! There’s nothing quite like owning a piece of the pie to encourage people to put in their best effort.
No sign of wages going down here. Only change since Monday week ago is those who eschewed industriousness as a method of keeping their job, instead relying upon legislation, are now much more receptive to instruction and somewhat compliant with the philosophy which underpins their job: “Do some work”.
Yes, the legislation will force employers to lower wages, in the same way the establishment of a new Coles supermarket will force local shopkeepers to close.
Specific compulsion in the legislation is irrelevant, unnecessary, and was not mentioned by me.
Quick straw poll reveals that 100% of adjoining business owners will not be keeping a timesheet nor a record of their hours worked.
“[In other words, very roughly speaking, investment returns are now almost as important as income for most Australians.”
Thats excellent! There’s nothing quite like owning a piece of the pie to encourage people to put in their best effort. ”
Now, now, Avaroo, you seem to be advocating an extreme form of socialism, namely equal wealth distribution, to encourage people to put in their best effort. Isn’t that a bit utopian?
“Yes, the legislation will force employers to lower wages”
I’m happy to agree with you if you’ll point out the specific parts within the legislation that demand that anyone lower anyone’s wages.
“Specific compulsion in the legislation is irrelevant, unnecessary, and was not mentioned by me. ”
It certainly was mentioned by you: “avaroo, on the subject of this legislation forcing fair paying employers into a race to the bottom�
Enough of the semantic hair splitting! I don’t agree with Tony Healy – if his argument holds true then all award workers would only earn the award, whereas in fact most employers pay market which is currently well above award – but his use of the word “force” seems appropriate, viz (from answers.com):
force: to compel through pressure or necessity: I forced myself to practice daily. He was forced to take a second job.
Note: “pressure or necessity”. “Pressure” seems to cover Tony’s use.
Fine, explain how the legislation would “pressure” anyone to lower anyone else’s wages.
“force: to compel through pressure or necessity: I forced myself to practice daily. He was forced to take a second job.”
Actually, the word “compel” is the key word here, not pressure. How would the legislation compel anyone to do anything?
Actually, “force” is the operative word. It is used in this fashion a lot, eg:
But the rapid spread of Linux could force Microsoft’s hand, said analysts…
I don’t see the distinction between that use and Tony’s:
The introduction of WorkChoices could force employers’ hands…
But you know, I didn’t want to get sucked into the semantic hair-split, so that’s all I’m going to say on the subject.
“Actually, “forceâ€? is the operative word. ”
It is the word that Tony used. But it isn’t accurate. At least in this particular case. Force leaves no room for anything but doing what one has been forced to do. Neither does compel, if one is compelled, or forced, one has no choice in the matter.
This particular legislation will not force or compel anyone to reduce anyone else’s wages. Economic conditions might of course, but WorkChoices will not.
Let’s inject a little nuance here.
Some employers will be forced to lower wages.
Some employers will choose to lower wages.
Some employers will be forced to maintain or increase wages.
Some employers will choose to increase wages.
The proportions of these responses over time will depend largely on conditions beyond the power of employers and employees.
And these responses will usually despite not because of Howard’s IR changes. Here are some of the more important determinants:
1. Level of economic activity.
2. Nature of the particular sector in the economy, exposure to foreign competition.
3. Restrictions imposed on the supply and training of categories of employee.
So it is likely that, if Howard’s IR changes remain the law and if they are actually enforced then wages and conditions will likely deteriorate at the margins.
Of more concern than wages and conditions outcomes are Howard’s limitations upon freedom of association, denial of freedom of choice about who may be workers’ advocates, and prohibitions imposed upon the contents of employment agreements.
These aspects are contradictory to any reasonable definition of a free society.
But the good thing is that these infractions of common notions of justice will cause the demise of the legislation, the demise of the Coalition, or both.
Nonsence, Katz. If an employer is forced to lower wages the employees should and perhaps will leave. Ditto if they choose to do so. If they cannot leave (I presume there is no slavery in Oz) it means that there is no other decent job for them to go to – not likely, particularly in an open economy.
The reason for this is – ta da – the level of economic activity, which is at least in part due to the increased levels of freedom in the economy.
Yes, there are elements of the package that do infringe on freedom and I, like others who believe in the freedom of the individual will consistently try to get rid of them.
To be fair, though, you should have a look at the reasons for those. A good example is the denial of freedom imposed by overmighty Unions imposing a closed shop on employees and acting in restraint of trade in many other ways.
I see no mention of those in your comment. Please try to be a bit more balanced.
“Nonsence, Katz. If an employer is forced to lower wages the employees should and perhaps will leave.”
Still immune to nuance AR?
This will happen sometimes. But at the margins, taking into account general economic conditions, a dimunition in union power will result in a decrease in wages and conditions.
Dearie me, AR, you can’t have it both ways: complaints about “overmighty” unions and a denial of their ability to influence wages and conditions favourably for their members.
Note again the return of old bugaboo of moral argument masquerading as actual analysis. If I wanted a sermon I’d go to church.
On the union issue, it seems like the fairest thing would be for anyone who wants to use a union to bargain for him or herself, ought to be able to, but the unions should not be able to demand that anyone do so, even in companies where unions exist. Wouldn’t that be fair to all?
Katz,
Overmighty unions can and do increase wages for their members. Problem is, of course, that in doing so they skew the market, reducing overall wages – particularly for the unemployed, whose numbers tend to increase in direct proportion to the amount of market distortion introduced by the overmighty unions.
Thus endeth the lesson.
.
avaroo,
I agree with you entirely. In Australia though, and particularly in the construction industry, there exists the closed shops, where you can only work if you are a union member. This is not (any longer) legal, but they still exist. The legislation is aimed at (incorrectly in my view) defeating this.
AR,
Monopolies are said to be “bad” for market capitalism, but that does stop capitalists trying to beat each other to death in the market.
Unions are identical in this regard to capitalists. They both strive to monopolise supply of a factor of production.
Only God has a panoptic view of the beautiful harmonies of equilibriated competition.
Amen.
I (and a lot of other free-market economists) don’t think that monopolies are bad for market capitalism. In fitting with my current surroundings, monopoly is the ying to competitions yang… 🙂
In response to Tony’s question about whether I’m comfortable with other elements of the current regime — the simple answer is that I don’t believe in any government involvement in the IR market. Please don’t confuse me with somebody who simply supports whatever Howard does.
I agree with this position also. The only monopolies that I automatically oppose on principle are monopolies that are enforced by law or violence (except in self-defence against violent opponents).
I think that competition regulators are in general a menace. They do more harm than good.
I also think that the criminalisation of cartels is counter productive. Cartels (including trade unions) should be legal.
Andrew, John Humphreys, Terje, PML (?),
There is a relatively easy solution to your problem. You each buy a block of land, suitable for agriculture, stock it with whatever animals you wish to breed for human consumption, and whatever other ‘endowments’ you wish to take along as your initial ones. You can then be monopolist and monopsonist on your respective blocks of land. If you have adjacent blocks, you can play international free trade and you can test your theories of money and inflation, using private money (say potatoes or sheets of paper with numbers on it). Even triangluar trade (geometric interpretation) is possible. You can measure your productivity and pay yourself accordingly, using private money. The ATO is not interested in income, measured in say potatoes – after some time they may not even know of you any more. And the Dutch won’t object to you preferring The Netherlands being called Holland.
You may then be totally free by having total control.
Not sure so, whether anybody would record the data for ‘long-run’ cost curves and market outcomes. The data on the ‘exchange values’, assuming free international trade will occur, of political theory for engineerig skills would be interesting to have.
However, you can’t have ‘transfer pricing’, ‘corporate structures’, ‘multinational production’, and 24 hour international financial markets and feed yourself.
Just a thought. Who knows, maybe the number of adjacent blocks, bought for the same purpose, would increase over time.
Ernestine,
I am not sure which problem you think there is an easy solution to but let me presume you mean the problem of excessive government. You seem to be implying that there is some scope to escape the reach of the state. There is not.
If you buy a block of land (as I have) you still need to pay rates. If you trade with actual goods instead of money (eg barter) the tax office still insists on its share.
Anybody who owns anything is forced by the government to have liabitities denominated in the government issued fiat currency. You can’t escape the system so if you don’t like the system you must fight to reform it or chose from one of the alternate systems of oppression around the world.
What you propose in terms of allowing people to creating their own private economy to escape the clutches of government is essentially how the wild west of America got settled. People moved west to avoid the government and the government moved west to tax the people. When I visited Bryce Canyon in the USA last year I read about the original Mormon community that settled and inhabited the area. They did fine until the government turned up and destroyed the community by demanding back taxes (over more than a decade) and sending them all bankrupt. No more home grown potatoes for government loathing christians.
What you propose sounds somewhat like Panarchy, however I doubt that you are an advocate.
http://en.wikipedia.org/wiki/Panarchy
Regards,
Terje.
EG, I cannot add much explicitly to Terje’s comments, except to point out that buying yourself out, starting from here, itself represents a barrier to exit so to speak – and you can rest assured that unless there is something in it for the powers that be, they will raise the barriers to exit. A historical case is the sort of de facto deals worked out with escaped slaves and serfs – maroons and cossacks – whereby the price of their limited, precarious and de facto freedom was to kick the ladder away after them so nobody else could follow them.
Over and above that, many of these areas have been covered at this blog and its linked sites – there was even a post about that particular buying oneself out approach a few weeks ago.
Oh, and the problem with the damned Dutch wouldn’t be cured by opting out; they are seeking to infiltrate people’s minds and stop us being captains of our souls, albeit only in respect of a minor issue (it’s the principle that makes me indignant).
I suppose I should add to the earlier debate that distortions caused by unions do not increase unemployment and/or decrease wages proportionately; the effects are mixed because there are other distortions around and there is a tendency for them partly to offset each other. In general, if you have N similar sized but uncorrelated distortions around, you can reasonably expect the marginal harm from another to be proportional to 1/sqrt(N) – so it’s not proportional. And some distortions were deliberately put in to offset others, so removing only them increases harm proportionally.
Terje,
The problem to which I have provided a solution is that portrayed in the advocacy statements by you, Andrew Reynolds, John Humphreys, (Yobbo) and PML I don’t advocate your views.
I am saying instead of you trying to persuade others to change in a way which benefits you, why don’t you just do what you claim is good for others. It is possible.
Surely, you can solve remaining little problems such as council rates. Council rates (or land taxes) in country areas in Australia are very low. You can buy yourself out of the need for local currency by pre-paying the rates for the rest of your life and buy lollies or whatever you like with any remaining small change that is left after you have ‘realised the purchasing power of your money’. (You need to look up Friedman’s permanent income hypothesis to see why, unless you want to deduce it directly from the Arrow-Debreu model).
I’ll make a prediction. You won’t find any need for v. Hayek. You can test some of Ricardo’s writings on ‘international trade’. Most of Adam Smith is redundant because that which you can apply in the world you advocate is in Ricardo. You can practice Mill’s philosophy, you won’t find a need for Keynes and von Mises is totally useless if you intend to bring your family along. I’ve listed all the books which Andrew Reynolds advised I should read to get a basic education in Economics and Politics. I’ve used only Arrow-Debreu to get a solution. One difference between Arrow-Debreu and the list of books recommended by Andrew Reynolds is that only Arrow-Debreu do not advocate anything to anybody. This distinguishes analytical economics for ‘crusaders and persuaders’ who, by the nature of their activity, do not ascribe ‘equal rights’ to freedom to others. Another difference is that Arrow-Debreu check whether what the model which others advocate is internally logically consistent. So it provides a wonderful tool, as one contributor said, to take the Mickey out of ideologues.
You said you are not an economist, so I don’t believe I am offending you by spelling things out the way I did.
EG – you can’t prepay your way out of governments welching on any deal later, even supposing they were willing to make one in the first place. That’s sovereign risk for you. As for your other points:-
– working within the system doesn’t work (I’ve tried in my small way, and look what happened to the Democrats when they tried – capture); and
– I haven’t wanted to impose my views on others (incidentally, one can always make an apparently inconsistent value system consistent by embedding it within a larger framework that provides the necessary fudge factors).
BTW, It’s not clear which of your points apply to whom on your list.
PML,
I wasn’t aware of your first post when I posted to Terje. Apologies.
The transition problem, which you, IMO, rightly keep on stressing, is sadly often ignored in ‘management’, be it private or public.
The point you make about ‘error cancellation’ is related to one encountered in the incomplete market literature. Adding one market may make ‘everybody worse off’, except if the result is to ‘completely span the choice space’.
The risk, which you call sovereign risk, is no different from the risk of ‘loss of property’ due to an act of nature or private expropriation (breach of contract). It is no different from HIH defaulting.
Prepayments involve a giro account, an estimate of future payments and instructions to the council to send bills to the bank and an instruction to the bank to pay it. Similarly, an accountant can be prepaid to lodge an income tax return on your behalf, every year, showing total income equal to zero, which corresponds to the outcome of the solution I described. Both, the bank and the accounting firm are private organisations. To the best of my knowledge, the main difficulties with banks and accounting firms during the past 20 years arose from governments having been talked into the idea that banking and accounting can be ‘deregulated’ to ‘remove market distortions’.
You may say that this cannot be done due to remaining uncertainties. You may be right. But, if you are right then advocates, who base their recommendation for student loans on Friedman’s permanent income hypothesis, are wrong.
No, you are not imposing your views on others and I did not say you do.
“one can always make an apparently inconsistent value system consistent by embedding it within a larger framework that provides the necessary fudge factors”
Not sure what you have in mind.
EG – oops, I read the wrong numbers off my models for harm done by market imperfections. When they are uncorrelated, N similarly sized ones move 1/sqrt(N) away from the optimum in the state space, but the harm actually is of order N. What happens in fixing them, though, is where something counter-intuitive comes up. There is rent seeking in prioritising which imperfections to remove (or even notice). Going from 10 imperfections with 10 units of sub-optimality to 5 will generally lead to greater correlation and as much as 25 units of sub-optimality – a deterioration of 15. This is because highly correlated imperfections have order N squared units of harm.
The risk I have described as sovereign risk – of the rules being changed on you – is fundamentally different from risks of firms failing or of natural disaster, since the latter are fixed. However governments react. If everyone tried to opt out, they would represent a significant diminution of the tax base and the government would act to claw it back.
There is also the issue that you can’t net off debts you owe against debts owed to you. The mechanics of the process you describe would not release you from the government’s reach, they would just diversify your portfolio. It’s a power issue, not an economic issue.
As for widening a system to put in fudge factors, consider a “free” system which nevertheless contains both haves and have nots. There is a disparity from the starting state/boundary conditions, not from the internal mechanics of the system which are symmetrical. Then the law in its impartial majesty forbids rich and poor alike to steal bread or sleep under bridges.
PML,
“If everyone tried to opt out, they would represent a significant diminution of the tax base and the government would act to claw it back.”
My proposed solution was not meant for everybody (ie not as an alternative social arrangement) but merely for the very very small minority who seems to share your beliefs.
Ah, EG, that’s predicated on the assumption that such an experiment would fail. If so, of course no problem – but if it succeeded, then it would grow until it faced the constraints I described, aborting it. The point is that in the presence of these outside constraints any such approach could not possibly succeed; you were coming at it as a means of humouring the experimenters, not of conducting the experiment properly.
And who wants to invest any effort in the experiment if success means that the experiment gets aborted. You would suffer all the agony and get none of the benefits.
No, Terje, success would mean that you would experience what you preach is good for others. So you would get the benefits for your suffering and agony.
Ernestine,
Anybody that forms a break away society is going to suffer hardship. This is probably as it should be. However if that alternate society is allowed to function in peace and its core principles allows it to prosper then the hardship may be “worth it”. Of course why would anybody endure the hardship if they knew in advance that at the first sign of prosperity emerging in their new society then the original society would reimpose itself.
For instance lets say you live in Ghana and think that life would be better in Norway. You know that it will be difficult for the first 5-10 years because you don’t speak the language and you look different. However you decide that changing societies will be better for your life in the long term. You may decide to immigrate. However what if you knew (or reasonably suspected) that if you started to build a successful life for yourself in Norway then you could be extradited back to Ghana for deserting your nation and doing well out of it. You might then decide not to bother. I think this is not so different to how libertarians view your contrived experiment.
I am reminded of the story I heard about the Mormons in America in the wild west days who moved west to build a new community based on Christian values and to avoid the impositions of government. The specific example I am thinking about relates to Mormons that settled near Bryce Canon. They abandoned the benefits of society and moved into the wilderness to build a new society. They knew there would be hardships but figured that the burden was worth it. However several years later the government also moved west. It turned up and demanded back taxes from the settlers and sent most of them broke.
Essentially you are arguing that we live under some system that effectively allows for panarchy, when clearly we do not.
http://en.wikipedia.org/wiki/Panarchy
Regards,
Terje.
Terje,
I don’t argue for panarchy or any other ..archy. Please see earlier posts on this thread.
Terje, that’s a slight misreading of what happened in Utah with the Mormons. They actually moved west because they began to be persecuted for their religious beliefs, primarily polygamy. Numerous petitions for statehood by the Utah territory, including the Mormons, who were the majority population, were turned down by the federal government because of the polygamy issue.
http://www.encyclopedia.com/html/U/Utah.asp
See. Alternate society got snuffed by original dominant society.
Mormons are still quite alive and well in Utah. Many more of them today then there were back in 1857. I wouldn’t think they could be described as having been snuffed in any true sense of the word.
Avaroo, you left out some very serious parts of Mormon history. For a start, being persecuted “for” their beliefs wasn’t the whole story; they were also persecuted for their assets, and of course if they had been on course to falling over on their own they wouldn’t have been persecuted.
Even when the Mormons tried to play it straight and work within the system, like the members of James Strang‘s splinter group on Beaver Island in Michigan, all that happened was that ordinary Americans threw aside their pretence of legitimacy and resorted to violence and exile (as they had with the Loyalists before them).
On top of that, there was an intention to destroy them utterly; it was feared that they would become militarily strong enough to resist or even fight back effectively, so the Governor of Missouri actually signed an “Extermination Order” against them.
As well, that description of Mormons seeking statehood leaves out the part where they resisted the arrival of US forces. They actually preferred independence to being part of the USA, and only preferred statehood status over being a subject territory.
To this day, some splinter Mormons practise variants of their old ways in a set apart way, conducting their lives on a small scale in such a manner as to draw on US social security resources rather than contribute to the USA.
It seems pretty clear that the US pretence that government rests on the consent of the governed has always rested on manufactured consent, manufactured by either intimidation, exile of dissidents, or internal exclusion until they get on message. But this is a general criticism, not peculiar to the USA – and it describes where we came in, considering opportunities of opting out to be meaningless from being overly hedged about.
Although, EG, I don’t see why trying to set an example of an alternative lifestyle would be described as trying to impose a lifestyle on others.
PML,
You write, “Although, EG, I don’t see why trying to set an example of an alternative lifestyle would be described as trying to impose a lifestyle on others.”
I have nothing to do with your conversation with Terje and Avaroo and I am not interested in the topic either.
“As well, that description of Mormons seeking statehood leaves out the part where they resisted the arrival of US forces. They actually preferred independence to being part of the USA, and only preferred statehood status over being a subject territory.”
If they preferred independence, they wouldn’t have repeatedly petitioned or statehood.
“To this day, some splinter Mormons practise variants of their old ways in a set apart way, conducting their lives on a small scale in such a manner as to draw on US social security resources rather than contribute to the USA.”
Certainly mormons have no copyright on this idea. Plenty of non-mormons do exactly the same thing, draw on US resources rather than contribute to them.
“On top of that, there was an intention to destroy them utterly”
I that were true, they would have been utterly destroyed as they were never in a military position to do anything other than be destroyed.
“it was feared that they would become militarily strong enough to resist or even fight back effectively, so the Governor of Missouri actually signed an “Extermination Orderâ€? against them.”
for their religious beliefs, not their military might.