Mangled Thoughts

The first reply to “Anon” concentrated on one of the many fundamental blunders the HR Nicholls Society committed, that served only the ACTU and the election of the Kevin Rudd ‘brown pantalooned’ Cabinet:

It is not the height of wages that decides employment and unemployment. It is whether there is an effective minimum wage rate in place. An effective minimum is a rate higher than the market rate and it is this that delivers 100% pay cuts called unemployment.

An imposed minimum rate does not entail unemployment, if it is equal to or less than the market rate. In this case, it is not effective. The ACTU is only interested in enforcing imposed effective minimum rates, and, bound up with this, controlling supply of labour.

It is not a matter of driving down the height of wages, contrary to the arsenic ladled out by the ignorant “Right” and their “advisers”. How poisonous?

Many voters heard Bob Day, Hugh Morgan, Ray Evans, Des Moore telling them that they are paid too much and should be satisfied with a pittance. Voters gave their reply in the 2007 election, “Get stuffed”.

This is only one of the many grave falsehoods these clowns committed on labour markets but the most publicly visible blundering error. Unfortunately, they were the sole advisers to Cabinet on labour Markets and reform. Their pals such as Michael Kroger and Senator Nick Minchin made sure no alternative advice was brought before Cabinet.

‘Anon’ did inject something which is misleading, statistics:

“Of the apprentices employed, 45% were paid above the minimum prescribed wage rate…”

It doesn’t disclose anything much, and the Hugh Morgan – Bob Day wage ‘ratio’ absolutely zero. What is really going on with employment of apprenticed labour cannot be answered without asking some questions and it takes economic reasoning to do it, and a bit of investigation to flesh it out accurately.

In his HR Nicholls Society ‘classic’, Day asserted two things:

1. There is a shortage of supply of apprentices due to many school leavers directed into faux university degrees. This, and other measures, is government intervention cutting supply, thus forcing up wage rates.

2. On the other hand, he asserts high wages means employers cannot employ as many apprentices.

If 1, then forcing down pay is guaranteed to cut supply again. High economically rates are a signal to enter and not avoid. Noting the complement as Day himself relates, demand for apprentices has not fallen.

There is a real crisis, as poring over other material indicates. So, what is going on? It points to effective minimum rates are in force, and it points to a sufficient number of firms in which supply of labour is controlled by Unions and thus they have choked it through one of three things:

1. Extracting effective minimum wages.

2. Constricting supply of labour to Unionised labour, to force prices up.

3. A bit of both.

Either one of these three alternatives will do the damage of cutting, slicing and dicing of apprentices.

Yet, the above is not the total picture. 45% ‘paid above the minimum prescribed wage rate’ could be composed of apprentices some time into their apprenticeships when the marginal productivity of their labour is rising. A new apprentice is not capable of producing even a smidgeon of what a 2nd or 3rd year apprentice does.

The fight over labour in the building industry during the 1980’s through to the first term of the Howard Cabinet was a tough and nasty fight. Wage-fixing enforced by union thugs devastated creation of apprenticeships and it buttressed, until Howard broke their control, constriction of qualified tradesmen. This thuggery, and it was enforced by real, violent thuggery, strangled the capacity of firms to build at market prices.

What must be kept in clear view is meaningless statistics state nothing. The questions Anon raises must be worked through from strict, sound economics. This is what the HR Nicholls have never done and, consequently, caused so much damage. Their ‘labour market economics’ is non-existent. The trouble is, their arsenic has crippled the capacity to address very serious matters not simply as a matter of economic point making, but for what economic reasoning and analysis prepares for, action.

There is a real problem. It requires sound working through to sort it out. Now, Mr. Jackson is not only a leading exponent of Austrian school economics, but through it he shows concentration on capital theory, money, and labour markets. The reason I mention this is, there are considerations which, unless deliberately attended to, can be missed and thus damage a thorough account. There are considerations that can aggravate the problem at hand, money and keynesianitis. It takes considerable care to sort through a case.

Anon’s questions arise from taking on trust statistics for which there is not even an ordinary justification. The 45% is empty of content, therefore entirely misleading. It involves what concentrating on the height of wages is, a blunder, a bad blunder. Oh, I’m not saying this of Anon at all. It is clowns who pretend to know economics who have done the damage.

Anon has only raised questions about where I stand and he is right to do it. All one is doing is the right thing by Anon: stating a position and defending it - something the clowns in the HR Nicholls Society never do.