Answer Me This About Mandated Minimum Wages

Don Boudreaux, Professor of Economics at George Mason University, made this excellent point earlier today regarding the minimum wage:

You should ask these minimum-wage supporters the following questions: “If government enacts legislation setting the minimum price that people can pay for a new car at $50,000, do you – you confident supporters of government-mandated minimum prices – believe that this legislation will result in people paying $50,000 for the likes of Toyota Corollas and Ford Fiestas?  Or do you realize that if government obliges car buyers to pay at least $50,000 for a new vehicle, these buyers will choose to buy no low-end cars and opt (if they buy a new car at all) instead to purchase a new BMW, Lexus, or other luxury model?” Read more

Productivity and the Pathway to Success

My letter in Saturday’s Australian (below) contains, naturally, only a limited coverage of developments under Labor in productivity and labour costs.  Although these developments reflect various influences,  there is an important question as to why they did not perform better in circumstances where Labor has continually boasted about the growth in the economy  being in line with trend of 3-3.5% per annum and economic growth also being much better than in most other countries.  The following might be added.

>The graphs attached to Rudd’s address to the Press Club show the changes in economic growth in selected other countries compared with Australia under Labor since the December quarter  2007. The comparison is not on a per head basis. I have not done the per head calculation but it would probably deflate the aggregate comparison favouring Australia by 4-5 percentage points. The graphs also show one year comparisons of budget balances and net debt (including on a per head basis) but no data on employment growth or increases in labour costs.

>During the 11 years the Coalition was in office labour productivity grew at an annual rate of about 2 per cent, much faster than under Labor.

>Labor has frequently boasted about the 900,000 jobs created (sic) during its period in office (recently this seems to have been increased to 1,000,000). But the rate of growth in employment  has averaged much less than under the Coalition – 1.6 per cent per year (now down to 1.3%) compared with 2.7 per cent per year over a similar period of time.

> Under Labor the unemployment rate has increased by 1.8 percentage points. Under the Coalition it fell over a similar period of time by 1.2 percentage points.

>Prima facie the diminishing growth rate in employment, and increase in unemployment, in circumstances where the economy has grown at trend confirms a faulty regulatory system. Indeed, one could equate the diminishing employment growth with the  increasing regulatory growth. Read more

The Changing Industrial Relations Landscape in Australia

The following is a presentation given to the 2013 HR Nicholls Society Annual Conference:

I’d like to take you on a brief journey as we sit as passengers on the bus the Government have put us in.  As we drive through the changing IR Landscape in Australia, peering out through the window with no control over which roads we take, which direction we head or how fast or slow we hit those bumps along the way.  This is how things have looked for businesses and practitioners over the last few years!

There have been many changes to the Australian Industrial Relations system since Kevin Rudd was elected as Prime Minister in 2007.

Firstly the Workplace Relations Act was replaced with the Fair Work Act (‘FWA’).

It took some time for a number of the changes to be tested and for their true impact to be realised.  Unfortunately for the Australian Economy, the impact on business, on jobs, and on productivity, have indeed been realised. Read more

Labours cost unless Abbott rushes reform

Yesterday, I made some critical comments on the Press Club address by Prime Minister Rudd, Mark 2. Today even in the Fairfax press it is difficult to find praise: The Age does not even run an editorial on the address.

By coincidence the Financial Review has published a letter I sent its Letters Ed before Rudd’s address (see below) and which happens to focus on the main theme promulgated by Rudd viz the need to lift productivity. As I pointed out in my critique of his address, his suggestion that the Fair Work Act “represents a reasonable balance for the future” indicates that, if re-elected, there would be continued difficulties in reversing the lamentable productivity performance under Labor.

But there is also a major problem with the Coalition’s policy of continuing the Fair Work arrangements during its first term. My letter suggests a way to change that policy without attracting undue critical reactions – after all even the biased journalists who report on workplace relations would find it difficult to defend the destructive unionism that has occurred under Fair Work and the need for an immediate review. The Coalition has available a large amount of data on destructive productivity behaviour by unions, including that revealed at the recent HR Nicholls conference. But, unless it uses that data to good effect, most of the media will let it fly over the shoulder.  Read more

Rudd on the Economy

In yesterday’s Press Club address Prime Minister Rudd rightly argues for policies that lift productivity and improve Australia’s international competitiveness. The address, text attached, contains numerous assertions about what is needed to attain such objectives. But Rudd fails to explain why previous Labor policies did not achieve them and he is short on detail about the policies which Labor will now be able to adopt successfully.

It is, for example, easy to assert that we need “a new approach to the regulatory impost on business from all levels of government”. But how then to now achieve the “one single integrated assessment system” Labor failed to reach? Rudd has apparently discussed (!) this with NSW Premier O’Farrell – but how to get agreement with State and Local governments on a matter that has long been disputed in our federation and in regard to which the Commonwealth itself under Labor has failed miserably, particularly in regard to environment decisions. In short, as Labor has tried and failed already, including under Rudd Part 1, how might it now succeed? Read more

Should we increase Youth Wages?

The Shop Distributive & Allied Employees Association has a television advertisement out at the moment. It features a young girl, Rachel, bemoaning youth rates of pay and urging us to join her in the “fight for fair pay”. Rachel tells us she works hard to pay her way through university and it is just not fair that she does not get paid more. Perhaps a persuasive emotional tale on its own, but it is a misleading one that completely ignores empiricism. Read more

Unions Won’t Let Rudd Change The Rules

Ken Phillips, a member of the HR Nicholls Society Board of Management, has a piece in today’s Australian (paywall protected) on how the Unions won’t let Kevin Rudd changes Labor’s Leadership rules:

ANYONE who thinks that Kevin Rudd can change the ALP’s leadership selection rules is ignoring the history of Rudd in his first term as prime minister. Ultimately, unions won’t allow him to make the change. What they will allow is the impression of Rudd being a strong leader as a political ploy for the election campaign. After the election they’ll predictably knife him again. Read more

True Unemployment Double Official Figure

The Daily Telegraph:

REAL unemployment is double the official figure – with 13 per cent of Australia’s workforce wanting a job or longer hours.

The Australian Bureau of Statistics (ABS) yesterday released a new analysis that combines the official unemployment rate with “discouraged” jobseekers, the “underemployed” and those who want to start work within a month, but cannot begin immediately.

The 13.1 per cent rate of “extended labour force under-utilisation” in August 2012 was more than double the official unemployment rate at the time of 5 per cent.

The ABS counts people as employed even if they only work an hour a week.

But the new measure also counts underemployment – workers in part-time or casual positions who want a permanent job or longer hours.

And it includes those “discouraged” jobseekers who want to work but have given up looking because employers consider them to be too old or too young, if they are ill or disabled, lack the necessary training or experience, cannot find a job locally or in their line of work, or cannot speak English well.