I’ve been thinking about the debate over welfare, which began with the Budget, and has continued with the claim that the IR reforms will create employment for those currently excluded from the labour market.
The argument about minimum wages and employment creation ignores the current disincentives to work embedded in the interface between welfare payments and taxation, or to the degree that this is recognised, it’s suggested that lowering the level of either welfare payments (as in reducing the disability pension and single mothers’ benefits to the lower level of Newstart) or wages will somehow fix this issue.
In fact, there are two barriers to work inherent in current policy settings - the incentives structure which governs the Job network and the lack of radical rethinking on how to restructure the tax/welfare interface and thus ameliorate the high nominal tax rates those moving from welfare to low incomes face.
There’s been some interesting debate on both issues on a Catallaxy thread, so I’m going to flesh out some of the arguments I’ve made over there.
The problem with long term unemployment is that we as a society have perpetuated educational and social inequalities - previously we produced poorly educated people who could get unskilled assembly line or labouring jobs, but those jobs no longer exist in the same numbers that they did. Most of the unskilled jobs now are in the service industries - call centres, retail - where the preferred employees tend to be women with kids or young people. But many who are long term unemployed are males in their late 30s, 40s and 50s, many with a low level of formal education, poor literacy and numeracy, and often physical and mental health issues, in many instances compounded by drug addiction or alcoholism. The problem with the current welfare to work thing does not lie in wage rates. It lies in the incentive structures which govern the Job network. Job network providers get a payment when people enter work and more if they stay there for at least twelve weeks. The way that they respond is to do nothing for people who have skills and are job ready - these people find jobs through their own efforts and the job network provider picks up 4 grand without having to lift a finger. The “assistance” that is provided to those who are not job ready is a joke. It’s things like basic computer courses for 50 year old blokes. Or putting people in a room for 8 hours and making them spend the entire time writing job application after job application. If there is no realistic chance of making a buck out of placing these people in work, then the job network provider will minimise its costs by providing generic and low cost “training”.
Most Job network providers are either Church-based charities or for profit businesses - often associated with training providers. Very rarely commented on is the degree to which the privatisation of employment assistance through a quasi-market has effectively subsidised these organisations. Most Church-based charities, for historical reasons, are associated with “mainline” Protestant churches where the tradition of philanthropy and voluntary assistance has been strong. The growing Pentecostal and evangelical churches place little emphasis on social justice and outreach. These organisations faced a funding crisis about ten years ago, as the majority of their dwindling congregations reached retirement age and could no longer afford to put $20 in the collection plate every Sunday. Such organisations turned to the government for funding - and with the Howard government’s election found a convenient source of income in providing employment assistance. Because this can be used to cross-subsidise other Church social and welfare services, they also have an incentive to maximise the income from employment assistance and minimise the outlay. Problems also arise from the fact that the quasi-market for employment assistance is very quasi indeed. The government is both the regulator and the customer, and purchases the services on behalf of clients through criteria it itself establishes. Under the Keating Government, there was an independent regulator for the employment assistance quasi-market (headed by Joan Kirner), but this was abolished by the Howard Government. So despite the rhetoric, welfare recipients are not clients of the Job network. Choice of a provider is made at the initial point of contact with Centrelink, and is constrained by the client load of providers and geographically restricted to organisations operating in the area served by the local Centrelink office. Once a Job network provider is chosen by a job seeker, it’s almost impossible to choose another one, no matter how ineffectual or inappopriate the service provided is. Centrelink approval is required, and the process is complex and bureaucratic - and discouraged by Centrelink. The ability of the Job network providers to breach clients (recommending administrative penalties which either stop or reduce payments) - soon to be beefed up - reinforces the degree to which the Job network is about surveillance and social control rather than assistance to job seekers.
Those Job network providers who operate for profit training businesses (often associated with secretarial or administrative training or colleges offering VET diplomas) will often steer clients into their own courses, even if inappropriate for their needs, or if a more appropriate course is available at a TAFE or a competitor institution, thus again preventing competition and responsiveness to clients, and artificially subsidising their own profit making businesses at the expense of others which are not aligned with Job network providers.
There is a place for contestability and tailored assistance in employment services, but the current model provides job seekers - and the broader community - with a poor return for the limited investment we make.
Realistically, intensive and tailored assistance for people who are difficult to sell to any employer is very expensive and no-one is prepared to spend the money. The problem exists as much as on the supply side as on the demand side.
Rather than the current social control model, I’d much prefer to see a guaranteed minimum income or a negative income tax model - once proposed by Richard Nixon and supported recently by conservative sociologist Peter Saunders and a number of economists including Ross Garnaut (though I note my disagreement with the specifics of Saunders’ proposal). This would have several beneficial effects: taking the stigma out of receiving “welfare”, saving an enormous sum by dismantling the Centrelink bureaucracy and allowing money to be freed up for both genuine labour market programmes and reducing income tax scales for all wage earners - particularly those earning below 50k. Another benefit would be the simplification of the taxation system - eliminating the many inequities and contradictions that come from the proliferation of one-off payments, baby bonuses, trifling payments to pensioners for specific purposes, income splitting, and the numerous other instances of middle class welfare that the Government is so fond of. This is a model that both libertarians and social democrats could support.
We’ll never get it from the Liberals though - they get too much political capital out of pushing the “tough on welfare” line, and from all sorts of monetary sops to special interests and voter demographics. It’s heartening that Wayne Swan on behalf of the Labor Party has indicated some openness to this model.
Elsewhere: Ross Gittins points out that the welfare reforms in the Budget actually increase the effective marginal tax barriers for those categories of recipients who will receive Newstart rather than pensions. In the blogosphere, Currency Lad agrees with me that there’s a gap between ideology and actuality in the welfare reforms, while Ken Parish at Troppo gives the unfair dismissal reforms qualified support. There’s more comment on the IR reforms at Cut Price Commentariat, and Immanuel Rant looks at the empirical evidence on unfair dismissal, while The Daily Flute does the same for income distribution.
This was the entire social idea behind the New Deal, and behind the post-war welfare state in Australia. The idea that even the women and men who had been failed by the economy still deserved money to live on, and necessary services provided. Come on people—it’s not that difficult, and doesn’t threaten anything you hold dear.
Problem is, the electorate don’t want people being paid to do nothing. So you are back to the farce and dysfunction of a ‘work test’. My own view is that the minimum income should be paid and that jobs should be generated which pay at 90% of the basic wage. Thus one would work (or train) at 90% of the basic wage until one had ‘earned’ one’s minimum payment. This would keep a person busy for around 3 days a week, with two being left for job seeking.
One hopes that charities could generate the jobs in return for the free labour being supplied at the expense of the state. But governments should also spend more expanding training which (up to a certain amount) those drawing the minimum payment would have the right to instead of make work.
Mark
You do realise that economists like Garnaut support this negative income tax model in combination with labour market deregulation. The idea being that insofar if less burden is placed on using legislated minimum wages and conditions to keep people out of poverty there will be greater aggregate employment and in return the negative income tax is used instead. So if we want real progress, the issue is whether the left would be prepared to accept having a less regulated labour market (perhaps by freezing awards at current levels and abolishing the IRC) and using the negative income tax as a top up for the working poor - creating more ‘entry level’ jobs (ideally with people staying in these jobs for only a short time to get a foothold in the job market) in return. And would the right like Rafe be prepared to move away from a ‘bash welfare dependents’ in return for this greater flexibility. I for one regard greater flexibility in product and labour markets as far more important than cutting back the welfare state and would be supportive of a package along these lines.
There’s a very good article on Margo Kingston’s Web Diary here
Down and Out in Oz before Howard’s IR revolution
http://webdiary.smh.com.au/archives//001081.html
I’m fully with my atheistic friend Jason Soon on this.
The one area that this wouldn’t work is for the over 40’s such as myself.
Here most (blokes) want to work but the problem is on the supply side.
This will eventually change when the late 20’s early 30’s people who make the decisions get older and realise older workers are essential if theor company is to be well run (in 5-10 years time on present estimates).
Hate to be predictable, but what Jason said.
“This will eventually change when the late 20‚Äôs early 30‚Äôs people who make the decisions get older and realise older workers are essential if theor company is to be well run (in 5-10 years time on present estimates).”
[Voice of Nelson Munz] Ha-Ha!
That’s right, GenX is currently running the country. Tell that to Uncle Rodent.
Actually, in 5-10 years’ time, many of those early 30s people are likely not be in their early 30s, so I can’t fault your logic there, Homerkles.
Jason, I’m not convinced at all by arguments for labour market deregulation, though I haven’t studied Garnaut’s specific proposals in that regard closely. I’m not persuaded that the actual behaviour of bosses in the real world will conform to economic theory, particularly in the small business sector where all these jobs will supposedly be created. Such nostrums (nostra? may be more appropriate given the tendencies towards cartels and oligopoly inherent in business - why else do we need a competition regulator) need supplementation by specific studies of Australian managerial ideology and behaviour. I am opposed to any “reform” which seeks to reduce wages.
Having said that, as I’ve made clear on a number of occasions, I don’t want to identify myself with a defence of the current IR regime holus bolus (and I see the need for flexibility as well as equity), though I do think that the Queensland IR system is in many ways innovative and efficient.
“I am opposed to any ‘reform’ which seeks to reduce wages.”
But Mark, PJK - your friend and mine - and the ACTU oversaw the deliberate reduction of real wages in order to boost productivity and thus employment. Are you only opposed to such reforms when the Dark Side is in charge?
No.
But there’s a big difference in the reduction of real wages and compensation through tax cuts and an increase in the social wage under Hawke and Keating and an absolute reduction in wages with little meaningful tax relief at the lower level, the continuance of high effective marginal tax rates for those entering the low paid workforce, and the evisceration of public services in healthcare in particular (but childcare is also important) under the Howard government.
“But there‚Äôs a big difference in the reduction of real wages and compensation through tax cuts and an increase in the social wage under Hawke and Keating and an absolute reduction in wages with little meaningful tax relief at the lower level,”
and it’s possible to have that under a NIT combined with labour market deregulation. I am perfectly happy to have a highly redistributive tax system (including inheritance taxes and green taxes) in return for a labour market that is mostly dependent on contracting with little or no legislative minimums. So if the net effect is that the poor are taken care of and have greater opportunities to enter the labour market, why is this tradeoff so difficult for the left?
You need to clarify what you mean by contracting, Jason. Do you mean individual employment contracts - common law or AWAs - or independent contractual arrangements (ie contracts for services rather than contracts of service)? It’s not all about wages - there are employment conditions such as sick leave, mat/pat leave, family leave etc which need to be community standards rather than up for negotiation.
Most larger employers also prefer collective agreements because of the transaction costs of reaching individual agreements.
And the short answer is that a focus on monetary income alone doesn’t address issues such as power imbalance, power relations at the workplace, gender inequity, autonomy and self-determination and industrial democracy etc. In other words, the left is concerned with equity as well as economic efficiency. A balance needs to be struck between the two, to be sure, but attention must be given to the first.
Mark
I am using contracting in the generic sense. Obviously if employers prefer to use collective agreements because it reduces transaction costs then they should be able to under a more liberal labour market system, just like some entrepreneurs prefer to organise production via ‘firms’ than contracting on a spot market. Perhaps ‘freedom of contract’ would be a better term but even this suggests that the primary mode of organisation should be a contract which is not what I mean to suggest. frankly I do not understand why, except for perhaps sick leave which might have external effects (i.e. employers not taking sufficient account of the social costs of getting sick people to work) anything else should be subject to ‘community standards’ including holidays.
Mark
If as you claim, money equals bargaining power, then it should be trivial to demonstrate that any ‘ideal bargaining condition’ that the Left wants to achieve to ensure a guaranteed minimum level of welfare to each individual can also be achieved by moving some of the intervention away from the bargaining process itself and simply ‘monetising’ this endowment. Questions would still remain on how much monetisation you want to swap for regulation and what this level of guaranteed minimum welfare should be but these do not refute the basic logic that ‘monetisation of welfare rights’ can achieve the same effective minimum endowment of well being desired by the Left for each individual
So the beauty is you get the decentralisation and flexibility of the market plus your equity
PS I should note that what I am outlining intuitively is of course familiar to economists as the first and second welfare theorems
http://cepa.newschool.edu/het/essays/paretian/paretoptimal.htm
First Fundamental Welfare Theorem: every competitive equilibrium is Pareto-optimal.
(ii) Second Fundamental Welfare Theorem: every Pareto-optimal allocation can be achieved as a competitive equilibrium after a suitable redistribution of initial endowments.
If as you claim, money equals bargaining power
But I don’t make that claim. There is a structural assymetry of power within the employment relationship owing to the substitutability of labour for the employer, and in bargaining, usually to the relative advantage enjoyed by employers in terms of a temporal strategy (ie the employer saves money by declining to bargain in good faith while the employee falls behind as inflation erodes the value of their wage). Factors such as unionisation and also the effect of coordinated bargaining on wage competition in product markets also affect the balance of power in collective bargaining.
I really don’t know what you mean by “monetisation of welfare rights”.
I strongly suspect we’re talking two different languages here!
Do you mean, how much money it’ll cost to give unemployment benefits to workers sacked unfairly, as they look for new work? Why didn’t you say so?
Somebody needs to write the blogosphere guide on how to argue with an economist. For what it’s worth, I agree with Liam that when we’re talking about labour markets - ie people’s lives and livelihoods - we need to descend from the abstract realm that these economic discussions seem to reside in.
Whaddaya mean?
What’s hard to understand about “Pareto-optimal allocation can be achieved as a competitive equilibrium after a suitable redistribution of initial endowments”?
You just haven’t learned how to read the textual dialectic. The semiotic signifiers couln’t be mythopoetically clearer.
Actually I think it’s interesting that in labour market debates, it’s often the employer interests who neglect economic competitiveness arguments. Many developments in labour markets are essentially about protecting employers from having to compete in the labour market.
For example, Wal-Mart’s low wages in the US let that corporation displace smaller stores that better fit the ideal of the enterpreneur, have better trained staff and generally are a better citizen in a healthy economy.
The Wal-Mart URL is
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2004/08/03/BUGH081LMP1.DTL
Tony’s quite right. Historically, acceptance of unionisation, arbitration and collective bargaining by employers in Australia has been driven by a desire to take wages out of competition.
Transaction costs of bargaining are also relatively higher for small businesses. Hence the fact that in many sectors, the predominant model for wage fixation in small businesses is award wages. That’s one reason why a robust award safety net is necessary.
There’s also an argument - exemplified in the Meidner model - that collective bargaining forces employers to compete on quality and innovation rather than the price of labour, and also to seek productivity improvements, thus driving inefficient firms out of various product markets.
The other general point to make is that “deregulation” is a misnomer. All we’re talking about is regulation designed to a different end. The Workplace Relations Act is an immensely complex piece of legislation, as you can see here.
Tony
small does not always equal beautiful. it may be a pity that some small stores disappear for aesthetic reasons but there has been no evidence that consumers are worse off as a result as shops like wal mart offer longer trading hours, cheaper prices because of economies of scale and scope etc. there are antitrust laws to deal with the possibility of predatory pricing but there is no argument for treating like the economy like a sheltered workshop for the quaint and quirky. the same incidentally should apply to agriculture - there would probably be benefits from having agribusiness take over family farms
I think Tony’s point is probably that the employees at Wal-Mart are disgracefully exploited.
Against their will, Mark?
Jason,
There is another, more pragmatic argument against a proposal that ameliorates greater wage inequality with a more redistributive tax system; there’s little reason to trust the right to implement the second part of that trade-off.
How much screaming from the op-ed writers of the AFR do we get about how the horribly punitive top marginal rate of taxation provides a massive disincentive for “knowledge workers” and the now? Are we supposed to assume that such screaming will miracuously stop over the next couple of years? Did the Libs, knowing perfectly well that they were intending to introduce IR policies that will strip income from the low-paid over the next few years, decide to compensate with a more redistributive tax policy in the last budget? No bloody way.
And I can just imagine the screaming all the way from the landed National-voting gentry to the North Shore if inheritance taxation was mooted…
Would you work there, Fyodor?
I have to agree with Steve Edwards on this: the cognitive dissonance of those on the Left who want to take in more immigrants (legal or otherwise) and also demand a perfectly regulated labour market is high
Liam,
No I wouldn’t - couldn’t stand the customers. Plenty of people choose to, however. Whose fault is that? Walmart’s or theirs?
and I daresay some are illegal hispanic immigrants. one man’s exploitation is another man’s opportunity
My personal choice of work would be Brad Keeling’s or Lachlan Murdoch’s jobs. Lots of play money, champagne and cold chicken, long lunches, fun for all, and when I eventually fuck the whole thing up I go back to Dad for a loan.
If only ‘choice’ were so simple.
What Liam said. Get real, Fyodor and Jason. There’s not too many to choose because Walmart’s market power, as Jason indicated, drives other companies that might pay better and allow unionisation out of the market. And the US is hardly a shinging example of providing equal educational opportunities. I doubt - contra Jason - that there are many budding Hispanic Horatio Algers working for Walmart at the moment. More likely people condemned to working minimum wage for the rest of their lives until they drop dead because neither Walmart or the State provides healthcare.
Liam,
The cold chicken and champage does wear you down after a while. I’m sure Lachy would much rather a job working with the common man on honest toil. The boss would probably be more forgiving, too.
I can’t be assed finding the url, but what Christopher Sheil said a while back here at LP was on the money. These issues are going to sort the Chards from the Beermugs, and the Chard economists and their latte libertarian allies aren’t going to be much use in this struggle. It’s one which will play out along class and party lines, which is itself interesting.
Anyway, I’m off to learn the lyrics of Joe Hill, The Internationale and the Workers’ Flag to sing at the next Karaoke night at a postmodern pub down the road from me. Workers of the world unite - you have nothing to lose but welfare economics jargon!
No pasaran!
“I doubt - contra Jason - that there are many budding Hispanic Horatio Algers working for Walmart at the moment. More likely people condemned to working minimum wage for the rest of their lives until they drop dead because neither Walmart or the State provides healthcare.”
Again: whose fault is this? Would you rather Walmart wasn’t employing the non-Horatio Algers? Life sucks for many people, and whinging about how crappy their jobs are doesn’t improve their lot in life.
I’d rather the US had a decent labour law regime so that Walmart didn’t exploit them, and universal health care.
I’m off to join Kim in practising red tunes for po/mo pubs!
whinging about how crappy their jobs are doesn’t improve their lot in life.
Yeah but when they try to unionise to improve their lot in life, how does Walmart respond? I suppose they should all traipse off to Arkansas - if they can afford the bus fare - and politely and severally ask the benign entrepreneurial billionaire for a living wage.
I notice that nobody’s defending the thesis that Walmart and its employees have equal bargaining power.
Now, Fyodor, I’m with you. Individual whingeing is totally useless. Nobody’s going to give good wages or healthcare away—they’ll be fought for.
How does the song go?
“Money speaks for money, the Devil for his own
But who’ll come to speak for the skin and the bone?”
“I‚Äôd rather the US had a decent labour law regime so that Walmart didn‚Äôt exploit them, and universal health care.”
And I’d rather everybody had rich daddies and mummies to provide fairy bread to all the good gnomes and pixies. In the meantime do you assume there’d be no trade-off in fewer jobs from increasing the cost of employing staff?
“Yeah but when they try to unionise to improve their lot in life, how does Walmart respond? I suppose they should all traipse off to Arkansas - if they can afford the bus fare - and politely and severally ask the benign entrepreneurial billionaire for a living wage.”
Pappa Walton’s dead, Mark. His descendants - or, more accurately, the managers he hired - run the business now. And you’re right: Walmart is intolerant of unions, to say the least. Guess what? People still want to work for the company. What should Walmart do? Insist on paying higher wages? You get real.
these same idealised ‘workers of the world’ supported laws against ‘colored’ immigration throughout the western world precisely because they were aware of the tradeoffs people. so somewhere down the line you;ll either go down the libertarian path with freedom and opportunity for all or the Pat Buchanan path
People still want to work for the company. What should Walmart do? Insist on paying higher wages? You get real.
How much choice do they have? I invite you to read the link I posted above to an article on how work at Walmart actually works. The sort of welfare to work regime you probably support would force people to take a job at the Australian equivalent if it were offered to them regardless of whether they “wanted” to.
It’s very easy to prattle about “freedom and opportunity for all” when you can capitalise your economics degree into high waged employment.
Mark
I never said Walmart’s competitive advantage came only from labour cost cutting. See this
http://www.dynamist.com/articles-speeches/nyt/walmart.html
the McKinsey Global Institute, the research arm of the McKinsey consulting firm, reports that Wal-Mart’s impact on the economy goes further than most ever imagined. Wal-Mart’s managerial innovations contributed mightily to the big increase in American productivity in the late 1990’s, an increase most observers assumed came from high-technology companies.
The McKinsey study looks at why labor productivity shot up in the late 1990’s and how important information technology was in that acceleration.
“Surprisingly, the primary source of the productivity gains of 1995 to 1999 was not increased demand resulting from the stock market bubble, as some economists have claimed. Nor was information technology the source, though companies accelerated the pace of their I.T. investments during those years,” reports a summary of the findings published in The McKinsey Quarterly. “Rather, managerial and technological innovations in only six highly competitive industries — wholesale trade, retail trade, securities, semiconductors, computer manufacturing and telecommunications — were the most important causes.” (The journal is online at http://www.mckinseyquarterly.com, and the entire study is at http://www.mckinsey.com/knowledge/mgi/feature/index.asp.)
Competition and better management, not simply the spread of computers and the Internet, made the difference. Nowhere was that clearer than in retailing.
From 1987 to 1995, labor productivity grew an average of 1 percent a year. From 1995 to 1999, it grew 2.3 percent a year. This big jump, combined with increased employment, meant that real output per capita grew nearly 4 percent a year — an extraordinarily fast rate, comparable with those of some Asian economies during their period of economic takeoff.
A quarter of that increased productivity came from retailing. And about a sixth of the improvement in retail productivity came from general merchandise, most of it directly or indirectly from Wal-Mart.
“More than half of the productivity acceleration in the retailing of general merchandise can be explained by only two syllables: Wal-Mart,” writes Bradford C. Johnson in a McKinsey Quarterly article “The Wal-Mart Effect.” As Wal-Mart became more and more efficient, its share of the market expanded, thereby applying its efficiency to a larger portion of total purchases. And Wal-Mart’s rivals began to emulate its highly productive practices.
Most of those practices aren’t glamorous. Take the big-box format. Larger stores increase sales per square foot by encouraging customers to buy additional goods, often on impulse. Big-box stores also let retailers spread fixed labor costs like store management and cleaning crews across more sales.
While the public knows Wal-Mart for low prices, business analysts admire its logistics management. It has always been efficient at moving and stocking goods, building its stores as spokes around distribution center hubs. In the late 1990’s, it was better.
Instead of simply maximizing efficiency at the warehouse, for example, Wal-Mart began to analyze costs over the entire shipping process, including how quickly goods can be moved onto shelves once they arrive at the store. In some cases, not completely filling a pallet with goods can save so much time in stocking the store that what seems “inefficient” at the warehouse is more productive over all.
That attention to detail makes for big savings when it is applied to an operation the size of Wal-Mart and then spreads to competitors. Other advances include tracking how busy cashiers are, so they can be used elsewhere during slack times, and using forecasting tools to figure out how many checkout employees to have in the first place.
Throughout its operations, Wal-Mart applies information technology. But the operations come first.
After the fact, the study’s results seem obvious. Retailing employs a huge number of people and accounts for a lot of the economy. But the importance of retailing to the late-1990’s boom wasn’t clear before the study began.
“It’s certainly surprising to people outside the United States,” says Lenny Mendonca, a McKinsey director and chairman of the McKinsey Global Institute. Europeans tend to assume that American growth is driven by Silicon Valley and that they can emulate that growth by developing their own high-technology industries.
When retail and wholesale operations turn out to be as important as semiconductors and communication, that can change how foreigners think about economic policy.
“It’s as much about competition policy that discourages retail innovation” as about technology policy, Mr. Mendonca said. In Europe, anticompetitive retail policies are common, restricting real estate use, store hours and what can be sold by whom. Wal-Mart developed in a largely unregulated retail environment, so its big-box model can’t be copied in much of Europe.
And Jason’s remark is reminiscent of Rafe’s rhetorical move suggesting that we all accept responsibility for Stalin’s crimes. Yes, the union movement in the past exhibited xenophobia. But I don’t see free movement of labour being at the top of the agenda of the globalising neo-liberal elites. Freedom of trade these days goes along with authoritarian and draconian restrictions on free movement of labour.
Sings - “which side are you on, boys, which side are you on?”
Rob’ll have to retract his LP as an echo chamber remarks though.
Yes, apologies if I’m losing my accustomed civility but I really do think there’s a failure of imagination and empathy at work in many of these comments.
And we know which side Hayek was on - up against the wall! Ha!
In the meantime do you assume there’d be no trade-off in fewer jobs from increasing the cost of employing staff?
Yes, given Walmart’s corporate balance sheet.
“How much choice do they have?”
Probably not a lot if all they can get is minimum wage, but then Americans are highly mobile and will often move for work. The problem is the lack of demand for labour, not Walmart’s hiring policies. Raising the cost of labour is not going to create labour demand, but will increase Walmart’s cost of hiring staff. Who will that benefit?
“The sort of welfare to work regime you probably support would force people to take a job at the Australian equivalent if it were offered to them regardless of whether they “wanted” to.”
That “probably” came awfully close to pigeon-holing, didn’t it? I’ll make it easier for you: I don’t believe all people have a right to an income, so making the employable work for welfare income is fair, IMO. If operating a till or flipping a burger is all they’re good for, so be it. Won’t work? No income.
“It‚Äôs very easy to prattle about “freedom and opportunity for all” when you can capitalise your economics degree into high waged employment.”
What should I do, Mark? Opt for low-wage employment and thereby deprive the poor of my tax dollars? Jason might be able to explain the pareto efficiency of that option.
Probably not a lot if all they can get is minimum wage, but then Americans are highly mobile and will often move for work.
Another state, another Walmart. The whole discussion presumes that these people will accept low wages due to their lack of marketable skills.
If operating a till or flipping a burger is all they’re good for, so be it. Won’t work? No income.
And currently people are entitled to refuse work offered if it’s below award wages. That’s not going to last now, is it?
What should I do, Mark? Opt for low-wage employment and thereby deprive the poor of my tax dollars?
Don’t be absurd, Fyodor. All I’m asking you to do is to put aside your economic nostra and imagine yourself in the place of a Walmart worker.
Who would a rising cost of labour for Walmart benefit, Fyodor? Its employees.
Here’s the balance sheet. They’re not exactly struggling.
“Another state, another Walmart. The whole discussion presumes that these people will accept low wages due to their lack of marketable skills.”
No presumption necessary: they already do.
“And currently people are entitled to refuse work offered if it‚Äôs below award wages. That‚Äôs not going to last now, is it?”
Don’t know - probably not.
“Don‚Äôt be absurd, Fyodor. All I‚Äôm asking you to do is to put aside your economic nostra and imagine yourself in the place of a Walmart worker.”
I have put aside my cosa economica, Mark. If I were in the place of a Walmart worker, I would probably think Walmart was a relatively good deal. It’s you who can’t understand why poor people take crappy jobs. Causing there to be fewer jobs may make you feel better about the working conditions of the employed, but I’d argue they’re not the ones who really need your help.
what Fyodor said.
this stuff about ‘failure of empathy and imagination’ is particularly annoying because Fyodor and I would claim you have a failure of ‘imagination’ in understanding how what you advocate might reduce employment opportunities. warm and fuzzy feelings of compassion don’t help people. jobs do
Kim,
As I implied in my previous post, higher wages would help the employed, but not the unemployed. The webpage you posted is instructive, but not for the reason you may think. Did you notice that Walmart makes $0.036c in profit from every $1.00 of revenue? You may look at the big numbers and think they can afford to pay more, but those are slim margins. There’s not a lot of fat there to play Santa Claus.
Well, Fyodor, please point me to a study which takes account of the actual propensity of Australian employers to take on unskilled labour and perhaps I’d be inclined to agree. But you’re not going to convince me with abstract economic “laws”.
You might also like to explain where these extra jobs will be created - since the fastest growing sectors of the labour market are already low skilled occupations such as retail, personal services and hospitality? Almost all the growth of course is in casual, award remunerated jobs. The argument that employers - unconstrained by the rigidities of awards and unfair dismissals - will convert these positions into full time ones ignores the fact that the drive to casualisation stems from the need to have flexible working hours and a desire to reduce labour costs by reducing the oncosts of employing permanent part time and full time employees (the only oncosts relevant for casuals being workers comp and a derisory amount of super). The suggestion that’s been made that penalty rates will be up for grabs tells us which way the wind is blowing.
I’m not competent to debate on the pareto-optimality playing ground (level or otherwise) but I’m happy to engage in a discussion of the realities of Australian managerial behaviour and the labour market.
this stuff about ‘failure of empathy and imagination‚Äô is particularly annoying because Fyodor and I would claim you have a failure of ‘imagination‚Äô in understanding how what you advocate might reduce employment opportunities. warm and fuzzy feelings of compassion don‚Äôt help people. jobs do.
Well, Jason, perhaps you’ll also explain where these jobs are going to be created.
Poor Walmart, Fyodor. Perhaps they’ll focus on increasing their margins by substituting technology for labour costs?
Mmmm. Feels like the 1890s all over again. What happened to that commonly-held belief that an employer who couldn’t afford to pay a living wage didn’t deserve to be in business?
Sunshine Harvester—wasn’t that its name?
“Where have all the Deakinite Liberals gone? Long time passing…”
Jason, the employment relations regime as presently constituted has supposedly delivered record job growth and record low unemployment (soon to rise because the gov’t will be pushing people with disabilities and single parents onto Newstart and thus into the unemployment stats).
Any realistic analysis of both the current government’s motivation for its IR changes and welfare reforms and big business’ support for same would demonstrate that it’s not actuated by a desire to create jobs but rather by a desire to push down labour costs to increase profit margins and destroy a key cultural institution which is aligned with the ALP. I return to my previous point about the extreme complexity of the current “deregulated” regime and how far it is from a free labour market, and also refer back to Dave Ricardo and derrida derider’s arguments at Catallaxy about the degree to which these reforms can be seen as proving or disproving theses about clearing labour markets.
Home ground, eh? OK, I’ll play.
FTR, I wasn’t the contributor relying on microeconomic “laws”. I also didn’t argue that there would be a significant increase in employment in Australia arising from the IR reforms. In fact, I think we’re functionally close to full employment, particularly given labour shortages in many industries. That’s part of the reason why I’m more than a little cynical about the doom-mongering on unfair dismissals etc. I’ve been hearing from THE LEFT. For the same reason I hold little fear of wage declines. If anything, Australia due for some sharp wage inflation due to labour shortages, not deflation.
So, on balance, I don’t think Howard’s changes will do much to employment in the short term (next year or so). In fact, in about a year or two we’ll look back and wonder what all the fuss was about. Longer-term, I think Australia will have a higher level of full-employment at the margin due to increased participation rates (some of it involuntary…) and higher productivity due to these reforms, but my crystal ball is no better than the next bloke’s.
In short: storm in a teacup. Now, everybody go back to work.
Ok, Fyodor. I await some enlightenment on microeconomic laws from Jason.
“Poor Walmart, Fyodor. Perhaps they‚Äôll focus on increasing their margins by substituting technology for labour costs?”
I believe the robot staff are experiencing teething problems. Their service ethic really sucks, too.
I believe the robot staff are experiencing teething problems. Their service ethic really sucks, too.
And their hive mind is disturbingly collectivist and reminiscent of yewnions. Road to serfdom, anyone?
THE LEFT’s argument isn’t that removing unfair dismissals will badly affect the economy, Fyodor, it’s that it will badly affect workers who’ll be able to be unfairly dismissed.
Walmart’s approach to retailing competition is disturbingly Borg-like.
The robot staff seem also pretty reluctant to spend their pay on manufactured items, goods and services. They must be made to consume and experience all the desires of the marketplace!
Must say I feel really chuffed and kinda important to be part of THE LEFT.
“THE LEFT‚Äôs argument isn‚Äôt that removing unfair dismissals will badly affect the economy, Fyodor, it‚Äôs that it will badly affect workers who‚Äôll be able to be unfairly dismissed.”
Believe it or not, Liam, but I’m more worried about the people losing their jobs than I am about the economy. The economy is doing fine. My point is that I don’t think we’re likely to see an increase in unfair dismissals as a result of these changes. In a growing economy, labour becomes a scarce - and thus valued - resource. This is how it should be.
And one day, in a Horatio Alger like moment, a Walmart robot staff member (Hispanically manufactured in Mexico under the NAFTA labour law provisions) could be the first non-human President!
Or should that be the second non-human President?
“Must say I feel really chuffed and kinda important to be part of THE LEFT.”
Looks impressive, dunnit? I wanted to convey the monolithic quality of the hostility to IR reform. Everybody’s come out swinging. It’s touching to see the socialists in their red finery again. I’d be disappointed if you didn’t stick to purple, however. Crimson might be an acceptable compromise.
I’d put it this way: in any set growing economy, some labour becomes a scarce resource, and is relatively valued. There’s always a hierarchy of labour, and unfair dismissal legislation doesn’t really affect the more highly-valued sections of labour, who can protect themselves. Removal of unfair dismissals legislation implicitly affects workers who are at risk of being unfairly dismissed—those who are of least individual value to an employer.
It matters a great deal whether the person who does the accounting knows how to count, but who gives a shit who the kid who flips your burgers is?
Well, I’m off soon to go have pizza with my leftie friends and see Tariq Ali speak wearing my argyle jumper with different shades of purple and mauve.
I should get back to the microfilm from which I’m supposed to be taking notes, so that I can finish my degree and never again have to work in market research.
Liam,
I gather the following Yuppie professions are experiencing labour scarcity:
bricklayers
hairdressers
pipefitter-welders
miners
On the unfair dismissal, I’m inclined to be optimistic that bosses won’t sack people for dumb reasons, e.g. wearing berets to work, but don’t hold me to it.
Love the toast story, BTW. Now get a full-time job and a mortgage and see if that changes your perspective.
And a haircut?
Please. Beret-hair is not a good look.
Jason, McKinsey reports are about as useful as Arthur Andersen reports. McKinsey is a globalisation spruiker and its positions are always predictable.
The increases in labour productivity the report refers to derive precisely from its ability to drive down wages. Now, globalisation spruikers always fall back on free markets here, as if their own endeavours are pure enterprise. Yet they are critically dependent on the support and intervention of the state to enforce banking laws, property laws (including copyright) and personal safety laws, and to provide the educated workforce and the road system they need. So, given that dependence on the state, it’s legitimate that the state ensure that all citizens benefit fairly from the resulting commerce. That means fair wages and employment laws.
Other aspects of its price reductions are sometimes admirable, but sometimes represent the shifting of costs onto other parties such as suppliers and transport companies. In that, Wal-Mart operations resemble the operations of Coles and Woolworths here in Australia.
I also find it fascinating that McKinsey whinges about labour market regulation, but then advocates for greater regulation in South America, where small businesses enjoy benefits over multinationals.
Jason, agribusinesses are the ones in America receiving the huge subsidies.
“Freedom of trade th