67 thoughts on “Monday Message Board

  1. Most middle class incomes illustrate Australia’s income inequality.

    In the case of academics, using the ADFA academic agreement at:


    it is clear that as at December 2008, all academic rates – lecturer, senior lecturer and above, were over $75,000 and much higher than average ordinary earnings (ABS 6302.0) at $64,269 pa.

    Academic lecturers rates are also higher than most Commonwealth public servant rates which in Dec 2008, paid $75,000 and over only to their Executive levels (see

    Click to access DEEWRPayScales.pdf

    While our tax scales my reintroduce wage justice, when you look at trades and general rates you can see just how divided Australia really is.

  2. Who can point me to some nice resources on applied/computable general equilibrium modeling and DSGE?

  3. @Chris Warren

    but this doesn’t take into account the actual conditions of academic staff – how many hours they work and how many academics are underemployed and forced to work at casual rates for less hours than they actually work. For example, my last academic job I worked between 70-80 hours a week on average. Most academics i’ve known work about 60hrs.

  4. gregh

    The same argument applies to executive level officers in the public service. For at least 10 years they have been suffering incredible cuts through an enforced “efficiency dividend” and staff cuts. They do not have easy access to flextime as do other staff and work whatever hours they need to do to get the job done.

    But there is also a principle – it is not ethical, or compliant with OHS, to compensate long punishing working hours through pay. This is the wrong response and in the 1990’s along with other factors, caused massive stress compensation claims.. IN some departments the compensation is achieved through extra leave called (“TOIL” leave). So expecting more pay, based on long hours, is not the best argument.

  5. chris warren

    I wasn’t particularly thinking of income but more conditions of employment – that is, an acadmic not working those hours for that pay would find themselves not working in the future – ie contract not renewed.

  6. Update, Update, Update, Victorian Premier John Brumby announcement to shut down one of the nation’s oldest coal-fired power stations must be viewed as a step in the wright direction. And whether you are Labor or Green, the consensus seems to be shifting towards Brumby’s view that the time to act is ‘now before the costs escalate into the future’. Gillard must now show her true green credentials if she is going to win the election by agreeing to share the burden and cost of ramping down one of the nation’s oldest coal-fired power stations. No more ifs or buts for crunch time has come for Gillard.

  7. Chris, correct me if I’m wrong, but I have the impression that the “Executives” to whom you refer are middle-ranking officers in what used to be called the Third Division, and that there is a whole stratum in the Senior Executive Service whose salaries are substantially higher than those of any of the standard academic grades.

  8. No Fran Barlow, it has been reported that closing down two of Hazelwood’s eight power units will reduce ghg emissions by some 4 million tonnes a year, equivalent to about 3% of Victoria’s annual emissions and 0.7% of annual national emissions. It is a start.

  9. @Michael of Summer Hill

    A tiny start, and one to be funded out of Federal funds which might or might not be available. I still haven’t seen the modelling on costs, so I don’t know what they assume about compensation for closing shy of 2031 — a Bracks mistake, as I recall. It was supposed to be shut down in 1992 and then again in 2005.

  10. Fran Barlow, a recent Environment Victoria report found shutting down Hazelwood completely by 2012 would cost $320 million a year and cut Victoria’s green- house emissions by 12 per cent.

  11. Overall, Hazelwood accounts for about 9% of electricity emissions Australia wide so shutting it down completely and not replacing it or its output would save about 9% (or 4%+ of total emissions in Australia).

    However, replacing it with gas (while a step forward) would be much smaller than this. Straight CCGT might cut electricity emissions overall by to about 40-50% of 9%. Using wind or some other intermittent technology would require some OCGT so the cuts would be noit much greater (and perhaps not as much) but the cost much higher.

  12. @gregh
    The notion that the better paid might work hard for their money and many have spent many extra years on very low-pay studying for educational and other qualifications essential to do their jobs, and take career and business risks that might see them lose their savings and home are not a factor in left-wing rhetoric about equality.

    The possibility that inequality could be in everyone’s interest including the worse-off groups in society, such as suggested by John Rawls, because of the incentive effects to work harder, to save and to invest in human capital, and the capacity to use differences in wages to discover differences in talents and labour productivity and induce the reassignment of people with different talents and human capital to where they are most productive are also lost to left-wing rhetoric about equality.

  13. Most of the leftwing discussions I’ve seen (most recently Cohen) take Rawls as a starting point (though they may disagree with him), which rather undermines your claim.

  14. Thanks John,

    The books you might be thinking of are RESCUING JUSTICE AND EQUALITY, by G.A. Cohen, 2008, and If You’re an Egalitarian, How Come You’re So Rich? 2001.

    Rawls’ practical influence on day to day politics is not well-documented and could be much less in Australia than elsewhere such as in the USA. What would his battle cry be?

    Analytical Marxists such a Cohen may be even less well known. I know more of the writings of Jon Elster since Geoff Brennan assigned Ulysses and the Sirens and Making Sense of Marx for a class I took.

    Middle class radicals may like Rawls because he professes egalitarianism with a distinctive twist. Faced with lessened incentives to work, save and invest, strict equality would hurt the poor.

    Behind the veil of ignorance, you might choose that it is better to be poor in a rich society than equally poor in a poor society. It is mistaken to insist on equality if an unequal distribution of income and wealth could actually improve the lot of everyone including the worse-off in society.

    So long as inequality benefits the least well-off class in society, Rawls’ difference principle interposes no barrier to any amount of inequality as long as it is to everyone’s benefit.

    Many middle class radicals had what they wanted: their consciences eased by a commitment to the worst-off, but they would have to surrender only a small part of their wealth.

    When the disincentive effects of higher marginal taxes are broached, at least a few on the Left succumb to chanting ‘supply-side economics, supply-side economics,’ rather than musing about implications of the difference principle. Do you know of any Australian discussions of Rawls and high marginal tax rates in this or other contexts?

    I prefer Tullock’s explanation for income redistribution: the desire of the recipient to receive the money.

  15. Jim Rose #13 & 15:

    ‘the POSSIBILIY that inequality could be in everyone’s interest… It is mistaken to insist on equality IF an unequal distribution of income and wealth could actually improve the lot of everyone… SO LONG AS as inequality benefits the least well-off …

    Lots of conditionals and hypotheticals here. So what is the truth of the matter? I was under the impression that at national comparison level more equality is generally associated with better social outcomes.

    How much inequality is needed to provide the incentives you want? More or less than we have at present? And is the incentive effective in leading to a desired outcome? Promoting the incentive to work has little utility if there is no work to be had (eg for the long term unemployed).

    Agree about disincentive effects of high marginal tax rates, but attacking this problem does not require embracing a general ideology that inequality is good.

  16. I must say that the (admittedly space saving brevity required) argument presented here is not very convincing. Firstly one would have to show that inequality was the optimum way to achive the outcome and on the face of it that seems unlikely. Also I don’t believe that ‘work’ (as I think you are constituting it) is a good in and of itself, yet that seems to be part of what you are arguing for. I’m struggling to get a feel for Rawl’s idea as you present it Jim Rose – can you give me a simple concrete example?

  17. Gregh at #17,

    Rawls was interested in the implications of different institutions of his conception of justice as fairness. He followed his principle of justice as the first virtue of social institutions wherever it took him.

    For example, Rawls lent qualified support to the idea of a flat-rate consumption tax (see A Theory of Justice (Cambridge, MA: Harvard University Press, 1971), 278-79). He said “a proportional expenditure tax may be part of the best scheme” and adding that such a tax “can contain all the usual exemptions”.

    The reason why Rawls lent qualified support to the idea of a flat-rate consumption tax was these tax what people take out of the common store of goods rather than what he or she contributed. He also supported negative income taxes and other forms of social insurance. Rawls preferred a proportional expenditure tax over an income tax of any kind (see A Theory of Justice, p. 246 – see googe books)

    Of course, if I advocated a flat-rate consumption tax and a negative income tax as Rawls has done, and which I have on this blog, along with uniform regulation of all industries, for my troubles I would be denounced as a libertarian and a Friedmanite, which I was.

    Rawls was a profound thinker and open to different interpretations. It is hard to disagree with his ideas of equal liberty, equal opportunity, and such inequalities that are to everyone’s advantage.

    Rawls does not reject progressive taxation altogether as they may be necessary to preserve the justice of the basic structure with respect to the first principle of justice and fair equality of opportunity and forestall accumulations of property and power likely to undermine social institutions.

    Rawls seems to argue that you moderate inequality because this will make the worse-off better off, rather than because you do not like inequality. Redistribution that is not done to help the worse-off just treats some people as sources of money for others.

  18. jack horner, the truth is found in the Golden Rule’s corollary – ‘do not treat people in a way you would not wish to be treated yourself’.

  19. I suggest you look at left-wing writers on your questions because they would have carefully reviewed and weighted up the consequences of higher taxes for incentives before advocating them.

    The labour party’s opposition to Howard’s GST would have been backed with solid documentation in the rawlsian tradition.

    The NZ labour party’s decision to lift the top income tax rate from 33% to 39% in 1999, and promise to their return it to that level again when reelected will also have similar balanced discussions of incentive effects.

    The 1/3rd differences between European and US labour supply because of 1/3rd higher marginal taxes might be another good place to start.

    In Issues in the Comparison of Welfare between Europe and the United States, Robert Gordon attributed the poor economic performance of Europe to the tax/welfare explanation, employment and product market regulation and generous unemployment benefits.

    While Europe’s level of productivity almost reached the US level in 1995, its income per person never exceeded 75 percent and has since fallen below 70 percent.

    p.s. let’s consider the social outcome health: Professor Angus Deaton, a leading health economist, concluded that: “It is not true that income inequality itself is a major determinant of public health. There is no robust relationship between life expectancy and income inequality among the rich countries, and the correlation across the states and cities of the United States is almost certainly the result of something that is correlated with income inequality, but is not income inequality itself.”

  20. thanks for the further information Jim Rose. It is hard to see how any unequal split of goods can benefit the worse off over and above an equal distribution, as any unequal split of goods reduces the status of those on the crummy end of the division.

  21. @gregh

    do you know of any developing counties that are using a equal distribution of income and wealth as their springboard to becoming a wealthy country such as like Australia?

  22. It’s more the power equation, which means that the inequality continues, or more usually is accentuated. Interestingly there are often cultural pressures for some redistribution which lessens this effect, but not to the extent of preventing the rich from getting richer at the expense of the poor, or more normally, at the expense of the country’s resources.

  23. @gregh
    Your views on relative status may put you at odds with the Rawlsian tradition permeating the Left, as I am told.

    Rawls’ veil of ignorance deprives the parties to deciding what the social institutions of society of all facts about where they might end up in that society: their race, class, gender, age, income, wealth, natural talents, preferences, likes or dislikes, family and social commitments and more.

    Behind Rawls’ veil of ignorance:
    1. the parties are not motivated by envy – by how much citizens besides them end up with;
    2. the parties are not assumed to be either risk-seeking or risk-averse; and
    3. the parties must make a final agreement on principles for the basic structure – there are no do-overs after the veil of ignorance is lifted and the parties learn which real citizen they represent and where they end-up.

    One justification Rawls offers for excluding envy is principles of justice are chosen should not be affected by individual inclinations, which are mere accidents.

    Another and more important justification by Rawls is that parties behind the veil of ignorance should be concerned with their absolute level of primary social goods, not with their standing relative to others.

    Rawls also argued that background institutions (including a competitive economy) make it likely, in Rawls’ view, that excessive inequalities will not be the rule.

    Envy is most often felt toward those with whom the subject perceives himself to be in competition. great disparities in well-being are not envied. Envy is about dragging neighbours down, not far-away strangers.

    As the old Russian joke goes – when a peasant was given one wish by an Angel from heaven, the peasant asked the angel to shoot his neighbour’s cow!

  24. @Michael of Summer Hill
    see #14 that says “Most of the leftwing discussions I’ve seen (most recently Cohen) take Rawls as a starting point (though they may disagree with him), which rather undermines your claim.”

    I was not present for those discussions but I am sure they happened.

  25. Chris #4. It is hard to make these kind of definitive statements about rewards in the Public Service. The CPSU has undertaken significant research into the inequalities in pay that occurred as a result of the Howard Government allowing individual agencies to bargain with their employees. Those in Aboriginal Hostels receive far less than those in Dept of Finance at the same level and probably deal with far harder issues as well. However departments with a social welfare agenda are in almost every case more poorly paid than their peers in defence or taxation.

    The efficiency dividend has had a deleterious effect but not at the top of the public service where the decisions are made as to who is “surplus”. The cuts have been at the bottom as decision makers will get rid of two people doing the job at the bottom of the ladder rather than get rid of one of their own. It has not helped efficiency at all as it means that managers are often left with few staff to manage and have to flog those under them to deliver. That cuts are often made at state level means that governments have become increasingly isolated from the programs that are delivered.

    The SES on the other hand (tier 2 in Prof Q’s assessment) have done far better and secretaries (the top rung) particularly well. The distortions that have resulted from this are part of the reason that Ministers have been left dangling by departmental heads who aren’t prepared to admit failures in case it affects their annual bonus.

  26. gregh, tell ‘it’ that Libertarian Rawlsekians such as Will Wilkinson of the Cato Institute are now more interested in Rawls. But having said that I must admit there is nothing wrong with maximizing the minimum and improving the status of those in the lower rungs of society struggling to make ends meet and that was the reason why I fully supported Rudd’s Resource Super Profit Tax.

  27. If the discussion here is about John Rawls, then I consider John Rawls much like Keynes…in the rush to greed, these were the people with the truly good and decent ideas, slighted.
    I dont have a lot of time for critics of either….now.

  28. @Jim Rose
    Behind Rawls veil JR – the parties are naked as they should be. This is the starting point of the basic structure of society – what decency would you nargain with a person as naked as yourself – with nothing known about him or her and they know nothing about you? You are not ordinary Joe negotiating with Rupert Murodch. None of that is known. You are both naked. What would each negotiate as the basic rights and decency they would grant each other? That is the basis of what an humane society should afford its particpants.

    There are basic rights, basic access to protection, basic access to civil liberties…in a civilised society of which Rawls knew much more….Rawls also advocated a democratic process free of the meddling of donations and political lobbying by the powerful and the rich….the democratic political process funded publicly and collectively by each person in society.

    A basic change needed now if we are ever to recover and get the government we really want and deserve as voters.

    Right now.

  29. It would be far far better if the left the middle and the right took Rawls seriously JQ, not simly as a starting point they want to dispute fine details with later.
    There always inferior intellects who follow and want to challenge great intellects that preceded them (ego).
    It doesnt mean we should discard the great intellect especially when a minor challenge is successful – test of time applies. Who is really remembered by most? Who is moved by most across time? Chances are they were right.

  30. Update, Update, Update, I just listened to the Bear bagging Labor over their spending spree but who could forget how disingenuous former Treasurer Howard was back in 1983 by not telling the public of the humongous $9.6 billion budget blowout.

  31. @Alice
    Your ideal election would have been the Tasmanian House of Assembly election in, as I recall, 1982

    No party campaigns, no TV or newspaper ads, no how to vote cars and all candidates could only solicited votes for themselves, not for others in their party or anyone else. That is my memory

    This was because a late legal opinion from the equivalent of the DPP was that any form of expenditure on co-ordinated campaigning and joint solicitation of votes would be added to each individual candidate limits of $1000 or so separately, as I recall.

    I remember this well because I forgot to vote.

    With no party campaigns, no TV or newspaper ads, no how to vote cars and all candidates could only solicite votes for themselves, the date of the election slipped my mind and I forget to get a postal vote before going inter-state for a holiday.

    The liberal party won in a landslide.

    The campaigning ban seemed to give an advantage to the party already leading because the party on the nose could not dig itself out of a hole in the campaign by pointing out that they may be bad, but, on closer inspection, the other side led by Robin Gray is worse. I do not know of any studies of this unusual election.

    What was the famous Louisiana bumper sticker: vote for the crook, it’s important.

  32. @jquiggin

    Yes, as cleaners are now called ‘sanitation engineers’ the old clerk class 9 – 11 were renamed as Executive levels 1 and 2. [Previously also senior officers C and B]

    The other Division (2nd division) which was once “assistant secretaries” then became ‘SENIOR executives’, and of course above these are now ‘CHIEF executives’. There is a vast pyramid in public service staff structures, and the work levels of ‘senior executives’ is comparable with deputy vice chancellor and up.

    Middle level concepts no longer apply because inpolicy areas, all lower grades have been removed unless there is a graduate trainee on rotation as part of their first year.

    Most work below executive level, is now piled-up into the workday of the el1, and el2s.

    In general the pay scales of public servants have all fallen dramatically wrt average wage and Henderson Poverty line. Most of the damage was done by Fraser by his “Wages Pause Act”.

  33. @Chris Warren
    you could accuse Fraser of a lot of things, but neoliberalism?

    there were many partial wage indexation adjustments for inflation betwen 1977 and 1983.

    the 1984 accord restored full-wage indexation in return for the unions not demanding more.

    the unions had not got anymore than inflatation, as a recall, in most years since the mid-1970s and often less, so the deal was a one-way street in favour of the unions.

    after a few years, flat dollars per week adjustments rather than percentage of wage adjustments were not unknow.

  34. Do other people have a list of what they think are the most important political policy issues? My list would include global warming, the Afghanistan involvement, a Federal Charter of Human Rights, and housing affordability.

  35. @Jim Rose

    I think “neoliberalism” is a meaningless tag. Fraser, or at least his Tory Cabinet, was a noxious capitalist regime, that used legislation to boost capitalism, such as;


    One-way street? In favour of who? What evidence?

  36. Update, Update, Update, reports indicate that small business don’t like what they hear from the Coalition when it comes to industrial relations. According to one Yarraville small business owner, Iain Munro, ‘Tony Abbot flipping around about (Work Choices) leaves me unsettled’ and intends to vote for Labor and certainty.

  37. @Jill Rush

    What is the reference to the CPSU significant research on;

    the inequalities in pay that occurred as a result of the Howard Government allowing individual agencies to bargain with their employees. Those in Aboriginal Hostels receive far less than those in Dept of Finance at the same level and probably deal with far harder issues as well. However departments with a social welfare agenda are in almost every case more poorly paid than their peers in defence or taxation.

    I have read most things CPSU “researchers” have produced over a long period.

    The research you refer to was probably the excel spreadsheet developed by the DEST negotiating team during a past CA negotiations. It showed that various agencies were dudded compared to others as you indicate. The CPSU had no idea what was going on. It was subsequently emailed to a senior organiser in CPSU in Canberra. They were asked to continue with it.

    But it was not done by vague “CPSU researchers”.

    So what precisely is this research?


  38. @Chris Warren
    Union power is not what it used to be if it depends on going cap in hand as supplicants to a government regulator.

    The union wage premium is supposed to be based on union power to collectively withhold labour, not regulatory capture of wage regulators and minimum wage law-makers. regulators and parliaments are supposed to be the tools of the all-powerful capitalist class?

    a wage pause for commonwealth employees is not what it seems.

    I started working a 19 day week during the wages pause when working at the commonwealth bank to get around the pause. the other banks had started opening outside of 10 to 3, and the state owned bank had to play catch-up.

    Banks being open from just 10 to 3 is another part of the good old days in the 1970s and 1960s that many social democrats long to see again.

  39. Guess what drongo said this, ‘Let me say WorkChoices did not cost the former government the election’.

  40. Update, Update, Update, today Tony Abbott announced another me-tooism backflip policy on the run whereby the Coalition will lower the corporate tax rate to 28.5%. That is correct another me-tooism backflip policy on the run. Sounds familiar. It should be, and don’t believe a word of it for pensioners and families will end up paying for Abbott’s so-called paid parental leave scheme through the hip pocket.

  41. @Jim Rose

    Yes, obviously, wage setting, parliaments (via cabinets) and regulators are all driven by the needs of capitalism.

    You seem a bit scared of this fact so, as a tactic of last resort, you misrepresent this as “tools of the all-powerful capitalist class” hoping that when people by someone reject this ugly cartoon they will thereby, to some extent, be blinded to the underlying reality.

    There is no union wage premium. Over time more and more public servants have been falling below the Hederson poverty line, and the share of GDP going to labour is falling.

    So it seems capitalism thrives on a general workers wage-penalisation, that unions try to mitigate.

    Only capitalists see this as a premium, because they only want to pay forever less for labour. Any wage above serfdom, under capitalism is a premium.

  42. @Chris Warren
    Joan Robinson was the economist who took marxist economics most seriously, I hear. In 1942 Robinson’s An Essay on Marxian Economics concentrated on Karl Marx as an economist, helping revive the debate on this aspect of his legacy.

    What was the battle cry of the 1848 communist manifesto: rise up ye workers, rise up, for you have nothing to lose but your chains!

    Joan Robinson observed that “You have nothing to lose but the prospect of a suburban home and a motor car would not have been much of a slogan for a revolutionary movement.”

  43. It may just be because this is – mostly – an economics blog, but the almost total belief apparent that all issues are at root about money tells me that Marx was right to predict that in the last stage of capitalism everything would be commodified and reduced to a single monetary denominator. I wonder if those who think this is a good thing ever wonder if there is a possible downside (even if the proletarian revolution is nowhere in sight).

  44. @Peter T
    On the 100th anniversary of capital, Paul Samuelson wrote of Marx:

    “was Marx right as a prophet of the future of Victorian capitalism? The immiserization of the working class, which he thought to deduce from the labor theory of value and his innovational concept of surplus value, simply never took place. As a prophet Marx was colossally unlucky and his system colossally useless when it comes to this key matter…”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s