Minimum wages frozen

Last week I argued in the Canberra Times against the minimum wage, pointing out that last years minimum wage increase lead to no higher disposable income and 16,000 jobs lost (or not created). I went on to write:

The commission will decide next month by how much it will increase the minimum wage. The economic situation facing the commissioners is very different to last year, but the basic trade-off remains the same. Whatever gains it gives to workers will be substantially reduced through tax and inflation, and will lead to relatively lower employment.

Instead of concentrating on minimum wage, the government could use the tax and transfer system. Tax cuts and transfer payments directly help workers and they don’t destroy jobs.

Today we have the good news that the Fair Pay Commission has decided to freeze the minimum wage at $14.31/hour, thereby giving low-skilled workers a greater chance to find and keep work. In their summary of the decision the Commission explains that:

In the current environment, the ability of employers to offer sufficient work has been curtailed and there is a heightened risk that an increase in regulated minimum wages would reduce employment and working hours

Excellent. Thank you Ian Harper for putting the interests of low-skilled workers ahead of the moral posturing of the latte left. The Commission goes on to note that the next minimum wage review will be done by Rudd’s new “Fair Work Australia”. We can only hope that they will continue the current pro-job approach.

43 thoughts on “Minimum wages frozen

  1. You just want unemployed people to have jobs! You have no care for the social angle of anything! How bad will the govmint look if it doesn’t mollycoddle… er.. look after the workers? We need minimum wages to keep the govmint in power! (Do you want Turnbull to be Prime Meddler?)

  2. Does anybody know what percentage of the workforce earns minimum wage and how this percentage has changed over time?

  3. If we didn’t as a society have to collectively subsidize do-gooders and predators who vaporize scarce resources promoting and implementing feel good tyranny, basic real wages and living standards would definitely improve pretty quickly.

    Doesn’t running a whole cottage industry and bureaucracy dedicated to net socially destructive nazi laws have a carbon footprint that’s contributing to the destruction of the planet?

  4. Damian, I recently sent a letter to my MP stating something similar. Needless to say, I got nothing back

  5. Damian, stop speaking common sense! People only understand gibberish! If you speak everyday Gibberish, the average voter will understand you, and vote for you.
    It’s not rocket science.

  6. “Today we have the good news that the Fair Pay Commission has decided to freeze the minimum wage at $14.31/hour, thereby giving low-skilled workers a greater chance to find and keep work… Thank you Ian Harper for putting the interests of low-skilled workers ahead of the moral posturing of the latte left.”

    No, no, no! Low-skilled workers already have work, by definition; it’s a tautology. What this would do is help the unemployed at the expense of low-skilled workers. It’s important to remember that there are two different groups with different interests here, albeit with rotating memberships. In the past, there have been approaches like the White Australia Policy that aimed at stopping the rotation and firming up one interest group, eliminating the other, to suit various agendas; so it’s no quibble.

    Perhaps this is a good time to remind people of my suggestions for this area.

  7. What this would do is help the unemployed at the expense of low-skilled workers.

    And an increase would have helped the latter at the expense of the former. Why the bias in favour of those who already have jobs?

  8. TerjeP, I don’t have that bias, I was just trying to sort out an ambiguity that conflates two groups and makes it harder to analyse what actually happens – which includes at the political level, where some people’s agendas do have that sort of bias.

    John Humphreys, with the greatest respect, “increasing the minimum wage (especially in a low-growth environment) is likely to result in some low-income workers losing their jobs” isn’t true in general, only for minimum wages achieved by mandating them. However, there are other ways, including but not limited to what I referenced just above.

  9. PM:

    So are you suggesting that a rise in minimum wage would have been beneficial to employment prospects? Is that what you’re peddling.

    Your argument as I see it is actually a form of spin. Here’s why?

    They raise the minimum wage and of course nearly all the people at the minimum wage level will get the increase. A few of course will get laid off.

    Looking at it at one exact point in time will show that yes, there was an increase and all these people are still employed, so of course it must be a success. Must be, right?

    Wrong.

    We know of course that simply isn’t true. The effects corrode employment potential for others and keep them out of the workforce. This doesn’t even include the people fired as a result of the increase and those unable to raise their income due to firms having to adjust their habits such as not being open on weekends.

    It’s far better not to put up these obvious spin points when discussing such an issue as it confuses people in terms of what the real effects are.

  10. JC, I’m suggesting what is at the link I gave (on this very site), plus what I actually wrote above.

    The former shows one (not the only) way of, yes, raising both wages and employment for all the people concerned. Overdoing it wouldn’t hurt either their pay or their prospects for work, but would hurt wider GDP. However, doing it at the right levels would actually improve GDP over what we have now!

    Far from the latter being spin, it is an attempt to keep people’s eyes on the ball, by pointing out that terms like “low-skilled workers” take attention away from the key points – the very points you raise. If people don’t keep their eyes on the ball, they will become vulnerable to spinners armed with statistics proving that minimum wages make low-skilled workers better off – technically accurately, from not making these suitable distinctions and looking at the correct groups. This sort of distortion even has a name, “survivor bias”, e.g. releasing patients early from hospital improves hospital mortality rates whether it helps the individuals concerned or not. Once the jargon hits, the flurry of irrelevancies means these things get a lot less obvious than you think.

  11. PM:

    You say:

    The former shows one (not the only) way of, yes, raising both wages and employment for all the people concerned. Overdoing it wouldn’t hurt either their pay or their prospects for work, but would hurt wider GDP. However, doing it at the right levels would actually improve GDP over what we have now!

    Nice try. One huge point I would like to make here. I think I can speak for every single libertarian on this issue.

    There wouldn’t be one of us on this board that doesn’t think higher wage rates are a good thing. Not one.

    However unlike you, it seems, we would prefer to see wage increases decided by the market rather than prescriptive decisions made by a semi judicial body.

    If a judicial body must be used (because we have a bunch of trogs in government that think they can delegate such decisions to a bunch of their appointees)… if we are to go that route then the best decision at this point in time seems to be that not increasing the minimum wage is beneficial to the people at the bottom rung of the scale.

    And yes, I do think you point was spin.

    Demand/supply curves slope down for obvious reasons and the clearing rate can only be determined by the market.

    Big difference.

  12. JC, that’s a straw man. Nowhere, not nowise, not nohow, do I ever recommend “unlike you, it seems, we would prefer to see wage increases decided by the market rather than prescriptive decisions made by a semi judicial body”.

    Go and follow the link I provided. It’s all about restoring a properly functioning labour market by undoing the externality created by unemployment benefits and the burden of funding them.

    Quite simply, you made that up out of nothing.

    I was not making a spin point; you seem to be using that description as a justification for not looking at what I actually put.

  13. I never went to the link, PM as i had thought you’d explained your position quite well.

    So should we ignore what you wrote and just read the link then? If that’s the case perhaps the link alone would have sufficed.

    Even the other guys seemed to have understood what I also understood by your comments.

  14. PM

    I took a quick look at the link. Sorry but I have no inclination to do “homework” because you think I shouldn’t accept what you’ve said here as being you position.

    Judging what you’ve said here it seems you don’t really believe the market ought to be setting wage rates otherwise the comments you made wouldn’t have made sense.

  15. hmmm blind faith in the market…seems to me as it is starting to have religious overtones…perhaps a crusade is in order! Nothing like a bit of blood shed hey boys!

    “I think I can speak for every single libertarian on this issue.”

    mmmkay what about the rest of us? I think Nicholas put it best we he said
    “you speak everyday Gibberish, the average voter will understand you, and vote for you.
    It’s not rocket science.”

    I am not particularly pleased with the condescending self righteous tone of this thread.

  16. JC – I think you are missing the nuance of PMLs position. Based on past discussions with PML he thinks we should, as a transition measure, increase employment prospects via employer tax breaks specifically targeted at labour usage (eg a negative payroll tax). As a transition measure from high tax, high welfare, high unemployment state to a lower tax, lower welfare, lower unemployment state I his proposals are pretty good and very practicle. However I think the point John Humphreys was making in this article is pretty spot on in the current policy context and PML is a bit guilty of knit picking. Not that I’m immune from ever doing that myself.

  17. Okay, thanks Terje… perhaps when I have time I’ll read his link. However I don’t think i misunderstood what he said on this thread.

    Cross;

    No one is self righteous on this thread other than you.

  18. JC, by all means don’t bother to use the link to clarify what I wrote if you don’t have any problems understanding. I only reminded you it was there so you could use it, if you felt something needed sorting out. Only, don’t make things up about what I wrote either. You didn’t misunderstand a thing when you accused me of wanting “unlike you, it seems, we would prefer to see wage increases decided by the market rather than prescriptive decisions made by a semi judicial body” – you downright, flat out, made it up. There’s nothing in what I put to be misunderstood that way. At the most charitable, you went off on a reflex because you were reminded of something someone else once did or said somewhere else – and you couldn’t be bothered to check if your conclusion was correct. Apart from the complete reversal of values mistakenly ascribed to me, it is no different to the slurs thrown around with casual disregard at John Quiggin’s blog when I tried to present the same sort of material there, where I got accused of wanting people to work until they dropped and then keep working; it doesn’t fit preconceptions, so the nearest preconception is substituted for what I actually put. That’s not misunderstanding, that’s prejudging and barring any actual looking.

  19. “Judging what you’ve said here it seems you don’t really believe the market ought to be setting wage rates otherwise the comments you made wouldn’t have made sense” is a pretty solid worked example of “it doesn’t fit preconceptions, so the nearest preconception is substituted for what I actually put. That’s not misunderstanding, that’s prejudging and barring any actual looking.” Rather than concluding that there has been a failure of communication, there is a substitution of things not stated, on the grounds that only the preconceptions are possible.

  20. PM with due respect this is what you said,

    No, no, no! Low-skilled workers already have work, by definition; it’s a tautology. What this would do is help the unemployed at the expense of low-skilled workers. It’s important to remember that there are two different groups with different interests here, albeit with rotating memberships. In the past, there have been approaches like the White Australia Policy that aimed at stopping the rotation and firming up one interest group, eliminating the other, to suit various agendas; so it’s no quibble.

    And this:

    .John Humphreys, with the greatest respect, “increasing the minimum wage (especially in a low-growth environment) is likely to result in some low-income workers losing their jobs” isn’t true in general, only for minimum wages achieved by mandating them. However, there are other ways, including but not limited to what I referenced just above.

    To be perfectly honest, it doesn’t still seem to me that you support market-derived wages.

    Sending me to a link to do my homework is not what I had in mind. You could just as easily have said, yes I believe in market-derived wages and wrote a piece on it here if you would like to see it.

    Even John seems to have characterized what you said the same way I did.

    As this is what he also said:
    PML — increasing the minimum wage (especially in a low-growth environment) is likely to result in some low-income workers losing their jobs.

    So I’ll ask the question again, do you support market it derived wages. If you do, I’ll go and read the link and try to understand it, however if you equivocate I’m frankly not interested as I’ve seen enough lame arguments before.

  21. JC, I am not going to reply directly and in full just yet because I am very angry with you – though I will later. For now I will content myself with telling you that you continue to be disingenuous and untruthful, e.g.:-

    – “You could just as easily have said, yes I believe in market-derived wages and wrote a piece on it here if you would like to see it” – that’s what that link leads to, a piece here on the subject. If you won’t look now, how would another one help?

    – “So I’ll ask the question again, do you support market it derived wages” – that’s a lie; you never asked that before, you made accusations.

    – “I’ll go and read the link and try to understand it, however if you equivocate I’m frankly not interested as I’ve seen enough lame arguments before” – and that is a lame argument. From what I’ve seen so far, if I don’t try to clear up what is or is not a properly functioning market I’ll be told I’m making a lot of fuss about nothing because there is a market (and never mind that the one we’ve got is distorted), and if I do try to clear it up I’ll be told I’m equivocating.

    So you’re demanding a short answer and ruling out a complete one. What else can I do but refer you to material? Later, you’ll get a full answer – but, from what I’ve seen, as soon as there’s more than one paragraph you’ll call it equivocating or some such. So I’m not even going to try until long enough after these misrepresentations for me to calm down. There simply is no reason for you to make stuff up and substitute it for what I actually put, even if you can’t be bothered to follow up or won’t take the face value of what’s right here. There isn’t even any way to get your accusations from the stuff you quoted that I originally wrote! I simply didn’t address those value judgments one way or the other, and it is impertinent to read a set of values on my part from there being something that doesn’t take a position. What is this, loyalty oath time? And if I give a snappy “yes” or “no” will I be read as having signed up for or denied whatever you mean by “market”?

  22. Pm

    You’re overdoing it with the angry bit surely.

    I honestly don’t understand what you’re upset about. You made several comments that I understood meant you weren’t in favor of market determined wages. I wasn’t going to read anything that argues otherwise as I know all the lame excuses now.
    I asked you to just confirm you support this in principle and you’re still equivocating.

    Do you or don’t you?

    And it’s not a swearing in ceremony, I’m just trying to get a handle on where you stand and therefore if it is worth going to the link.

    thanks.

  23. JC, I suppose I’m angry because it touched a sore spot, arising from earlier abuse in similar circumstances over at John Quiggin’s site following this post of an earlier submission of mine to the Henry Tax Review (which I later made into appendix C of the submission I referred to above). That started low key like this, but then built when I took it at face value as genuine enquiry and replied accordingly. Everything I stated was taken as meaning something else, progressively more and more vile and unwarranted. So I’m going to wait a day or two to make sure of being calm enough for a thorough reply – but it won’t be as short as a sound bite, even if you think that is equivocating.

    As for seeing if the link is even worth following, consider TerjeP’s views as expressed above or consult him directly. But really, it would be easier to assess my views from that material in the first place, and my views have little to do with whether the work is sound.

  24. Oh, and I’m not equivocating – it’s just that I cannot give a straight yes or no answer until I have cleared up what I mean by a free labour market. So until then, I’m not equivocating, I’m just not answering. And if you end up thinking that clearing that up is equivocating, you have a blind spot.

  25. PM

    Of course you’re equivocating otherwise you wouldn’t be avoiding simply answering with a Yes or a No.

  26. JC, you don’t know what you’re talking about (because you won’t look at the details and I haven’t told you separately).

    Both yes and no are wrong answers, if they aren’t attached to what a free market is. If I gave a snappy answer, you’d run with it to a wrong conclusion – and it would be my fault for turning you loose.

  27. PML… thanks for all the respect. 🙂

    I was referring to government mandated minimum wages, so I don’t think we disagree.

    JC — I haven’t read PML’s links, but I took his comments to mean that he doesn’t support a government mandated minimum wage, but that he likes being pedantic about the words people use. 😛

  28. Again Pm, you can’t answer that.

    —–
    Sorry John, I don’t accept that assertion you make. PM won’t answer a simple question as it seems he afraid what it would convey about him. I really don’t care if he’s for market determined wages or not as lots of people are… I’m even married to someone that is 🙂

    the reason i care is that I don’t think I actually misread PM’s comments at all in terms of what he was saying.

  29. Okay, I read the link. Pm basically discusses taxation, its effects and offers some solutions.
    It seems to be a very good paper offering some useful ideas. there’s nothing there to suggest, PM supports market determined wages though.

  30. JC, I have absolutely no intention of answering you while I am as irritated with you as you have achieved – because it is not, as you wrongly suppose, a simple matter that would only need a simple answer, and it would do neither you nor me justice for me to indulge in any premature expostulation. And you did not so much “mis”read my comments as read into them things that are not actually there – since I made no observations on the point one way or the other, and shall not while your constant prodding or anything else maintains my level of irritation; it would need some lapse of undisturbed time for that to subside. (You may note my excessively formal phrasing lately; I tend to retreat into that under such circumstances, to help keep control of what I say or write.)

  31. Pm:

    Don’t be so highly strung and loosen up a bit. This pent up anger which seems to be turning into unquenchable rage is harming you as rage/anger is essentially a form of stress and stress is terrible for the human body.

    Take deep breaths and calm down, will you please?

    Look I may be a very irritating individual at most times, however I try to be straight up and down.

    Now when you’re calmed down, just give a yes or no answer and all will be forgotten.

    How about thanking me for reading your tax link? I told you it was good, so that should have lowered you rage decibel a little , no?

    Okay, I’ll await your answer which I hope will be a calm yes or no and nothing else. Email me the answer if you’re too embarrassed about it. Ask John H for my email address and just email a yes or no. I’ll keep it confidential too. Scouts honor on that one.

  32. JC, I have every intention of calming down. The method of doing that is waiting without it being renewed – so you are not helping with this further prodding, just making things worse. And the answer will not “be a calm yes or no and nothing else”, if for no other reason than “because it is not, as you wrongly suppose, a simple matter that would only need a simple answer”. While you wait, you might want to find a copy of Lippsey’s “Positive Economics” and read up the illustration, complete with graphs, of how certain cases work out in unexpected ways.

    As for “Now when you’re calmed down, just give a yes or no answer and all will be forgotten”, didn’t you bother to read what I just told you about how it is more complicated than that?

    “How about thanking me for reading your tax link? I told you it was good, so that should have lowered you rage decibel a little , no?” – no, because you are trying to manipulate, not to learn, and it came along with more prodding. So back off and wait.

  33. Yeah, P.M. but that is what JC is trying to do… It greatly amuses him and mildly amuses the rest of us…

  34. PM:

    Any chance of a reply? You still cannot be angry surely, as no human being could hold that sort of road rage equivalent for as long as you say you have.

  35. My guess is that it would take me the better part of a week without interruptions to regain perspective. For well over a week, you have been crowding about every day – so it hasn’t happened.

  36. “Last week I argued in the Canberra Times against the minimum wage”

    John, you horrible bastard, will you not think of the children? Why do you want to starve ‘the workers’, eh?

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