Continuation of the exchange with ‘Anon’
Friday, August 29, 2008
This item addresses the last challenge put by Anon under, Second reply to Anon:
“wouldn’t abolishing or reducing trainee wages allow the market process to operate more freely? After all…”
To summarise the exhange to date, in reference to the clowns of the HR Nicholls Society and their pal, John Day, Anon put a question in comments on apprenticeships and wages.
The question Anon put that initiated the exchange actually turns on: the HR Nicholls Society holds, amongst many fallacies and their subsequent crude blunders, what the ACTU also happens to rely on to attack free labour markets; wage rates are indeterminate. Secondly, to the exchange, they hold the height of wages is decisive for employment and its reverse, and this is also false.
The height of wages blunder is assumed by the nonsense of Hugh Morgan’s tripe, and parroted by Bob Day:
“The ratio of minimum wage rates to the median wage rate explains whether wages are either about right or too high. Wages are 58% of the median, they are too high.”
Wage rates are not indeterminate. They are set by the marginal value of the product of labour. The ratio of capital to labour sets the height of wage rates. This is crucial, and it showed out; the Howard Cabinet swallowed the snake oil pumped out by the HR Nicholls Society that free labour markets raises the productivity of labour. The ACTU and the then Labour Party Opposition seized on this to effortless devestating effect:
Not only is it false, but in free markets wage rates can fall. Why? The problem is the telling ratio, capital to labour and the mvpl. Next, only capital accumulation raises wage rates, because only this raises productivity. To illuminate it, it’s all the difference between using a digging fork to plant 1,000 acres with potatoes and a single man using a massive, modern tractor hauling a seeding machine.
Can anyone doubt who will earn more in a period of time, the second seeding 1,000 in a day or two, or the former manually digging them in over a couple of years? Well, yes, apparently. After all, Liberal Party Ministers only echoed the rubbish labour itself can raise production. Amusingly, the Rudd Cabinet also claims labour raises production. Their twist is, mass re-education, ‘credentialism’, will make labour super productive, a great leap never before witnessed in history. No doubt, if enough bits of paper stamped credential are glued together, the resultant papier mache will be a machine superior to tractor towing seeding machine; except when it rains - paper tends to sogginess and disintegration in the wet.
It must be noted, if the HR Nicholls Society’s grasp of labour market economics was sound, they could have effortlessy have smashed the ACTU on these facts, as well as other facts of economic laws. This is why the ACTU fears Jackson, and not the insular buffoons of the HR Nicholls Society.
In an article in The Australian, Bob Day stated that tradesmen on construction sites are doing very well under labour market reforms. Needless to say, the ACTU seized on this. Combet replied in The Australian with the obvious, Day committed the fallacy of treating what might be true of some as a universal truth. Combet finished off the Day ‘expert paper’ on labour markets by observing that there are those who are not doing anywhere near as well as the HR Nicholls Society claimed they would.
What voters in 2005 correctly concluded was Hugh Morgan, puckering up to the ABC camera ‘who loved him’, telling them that they are paid too much. That, their wages must be cut, and this way Australia will prosper.To reinforce this, the HR Nicholls Society asserted that employees could be compensated by income transfers! It was truly numbing reading their ‘labour market economics’ material.
Returning to Anon:
He put the question:
“wouldn’t abolishing or reducing trainee wages allow the market process to operate more freely? After all, the trainee wage is a minimum wage, not a maximum wage…Rather, a lower minimum wage rate might encourage employers to recruit those jobseekers who are currently locked out of the labour market.”
This is still loaded with the error of the height of wages. If jobseekers are “locked out”, it points to an effective minimum wage is in force. Though, to be sure, this is not intended to unreasonably press Anon’s statement, in view of the qualification:
“I wasn’t suggesting, not for a second, that wages “be forced down below market rates.” Rather, a lower minimum wage rate might encourage employers to recruit those jobseekers who are currently locked out of the labour market.”
It must be observed, if a prescribed minimum does not deliver unemployment, it cannot be an effective minimum. So long as a prescribed minimum is equal to or less than market rates, it is not effective. Anon’s reply raises the question of, is the prescribed minimum effective? It might well be.
Secondly, labour is not homogeneous. A prescribed minimum might be only a minimum in some cases, but can be an effective minimum in others. The problem is, it is not market processes setting minimums.
The statistic Anon gives, 45% of apprentices are paid above the minimum centrally prescribed rate is useless. The only additional remarks to be made are stresses, e.g.:
- Some of the 45% might be apprentices who, some time into their apprenticeship, do have higher mvpls, and so will be paid more.
- Some of the 45% might reflect the ACTU is enforcing closed shops and effective minimum wages. Next:
“After all, the trainee wage is a minimum wage, not a maximum wage, so employers would be free to pay above that rate, as many (52% of employers) already do…”
As a price floor, is it an effective minimum? This is a real concern, contained in the real problem: If it is, it wipes out the opening of some apprenticeships.
The trainee wage rate, however, was raised as an attempt to counteract imposition of effective minimum wage rates, and the capacity of the ACTU to extort effective minimum wage rates. The floor was actually lowered. The ALP hotly contested this in Parliament and to check here are some documents from Hansard:
WORKPLACE RELATIONS AND OTHER LEGISLATION AMENDMENT BILL 1996: Second Reading
These are only a tiny fraction of the documents in which ‘trainee and youth wages’ is a price ceiling is the subject of the document, or one of the subjects raised.
To reiterate, the problem is, it is not free market processes setting rates, it is capricious central authority, in no position to discover market rates, fixing them.
It must be noted that employers are not bound by ‘trainee wages’ as a ceiling. Next:
“I don’t think the 45% statistic is completely meaningless. To me it demonstrates that employers value some workers more than others and so, I think, reinforces your earlier point that “labour isn’t homogenous.”
In addition to the above remarks, this sentence also treads dangerously close to Adam Smith’s error.I’m not saying Anon intended it but it does read so. Smith resurrected the erroneous notion of the value of labour. It had been demolished as false long before Smith. Why did Smith commit it?
Perhaps it was because of his Calvinist background. Smith’s mistake is now a vulgar commonplace. Some clergymen, for example, echo it when they bang on about the dignity of labour and the labourer is worthy of his hire. To the former, dignity of labour, this is rubbish. Only those who hold really nice, comfy jobs are prone to this nonsense. The scholastics, drew the right distinction, work is a fact of life, we are physical beings.
They asserted the dignity of the man, not work. They held no nonsensical, mystical sentimental belief about work. They simply said, we have to work, we have to produce, in order to live, advance, prosper. They did not insult modest men, women and children that in their day engaged in backbreaking, and for some also very dangerous work to earn modest pay indeed.
The scholastics observed market prices was for the labour supplied. There is nothing personal about wages. Market rates are not an insult, it is the value of labour at the time.
The problem is, to say employers ‘value some workers more than others and so…’ injects a false moral note that obscures labour markets and the economics of labour markets. Let’s put it in the ACTU’s slang, “Fair pay for a fair day’s work…equal pay for equal work”, also committing the fallacies of indeterminancy and, from perfect competition, labour is homogeneous.
Adam Smith also committed the error of indeterminancy, and this leads into the next matter Anon raises:
“…a lower minimum wage rate might encourage employers to recruit those jobseekers who are currently locked out of the labour market….I can’t see what is wrong with this:
“The solution lies in allowing… tradesmen and apprentices, regardless of age, to negotiate indenture agreements which satisfy both parties.”
Bob Day’s expression is ‘indentured apprenticeships’. Now either this is a silly misuse of language, to appear scholarly by throwing in an anachronism, indentured, or it means exactly how it reads, binding apprentices to an emplyor. Day asserts that this will resolve retention of apprentices. Let’s return to more errors committed by Adam Smith, and Mr. Jackson who remarks:
“According to Smith employers can force labour into “compliance with their terms. The masters, being fewer in number can combine much more easily”….
…Smith is viewing wage rates as indeterminate…”
[The H. R. Nicholls Society torpedoes the case for deregulated labour markets]
Observe that Smith also commits the fallacy of ‘imbalance of power”. As another example, in this quote Smith committed both errors:
“[They] should receive a wage sufficient at least to support a standard of living that allows them to participate actively and fully in the community.” (Wealth of Nations)
The HR Nicholls Society committed it too, and the importance of this is: The ACTU asserts ‘imbalance of power of employer over employee. Day commits it too and, unfortunately, so has Anon. Anon must appreciate that in the insular, narcissistic world of the myopic “Right”, they don’t believe the man in the street should draw conclusions and act accordingly, they should do as they are told. Also, the callous “Right” believe in benign tyranny and hold rather feudalistic sentiments, and the man in the street acts. We can be sure of this because not only did the HR Nicholls Society blow the fight for reform out of the water, they blew up the Liberal Party with it. The man in the street told this lot of arrogant prigs:
“Nick off. We are not your slaves.”
They did so in the 2007 election when enough put on their steel capped, hob-nailed boots and sent the Liberal Party scudding across the House onto the Opposition benches.
Lastly:
“Here’s another statistic for you: around 53% of trade apprentices fail to complete their training. Again, I can imagine some people (I’m sure you can guess who) claiming that increasing trainee wages would help reduce the high drop-out rate.”
I’m not sure ‘who’ would say that. I certainly would not say that. However, the matter of retention is part of the HR Nicholls Society’s desire to press ‘indentured’ labour. They believe employers must be an updated version of vassal lord? They have delivered enough evidence to say they in fact do hold this peculiar notion, leaving:
Employees should be grateful to an employer for taking them on and they are ingrates for daring to consider leaving employers. And, accept humbly whatever an employer capriciously decides to pay them.
It might be those who do not complete have found a different line of work that for them pays higher, which means they are engaged in work that has a higher mvpl. Secondly, these alternative jobs might also lead to greater opportunities into the future. It is rational to leave jobs that are dead end streets - short with a hard stop at the end. Yet, this is a subjective matter; some-one’s dead end is another’s open highway.
It is possible to list infinite reasons and motives but this has nothing to do with the matter in hand, wages and generation of apprenticeships. It is not the height of wages that is the trouble. It is whether effective minimum wage rates are in force, and whether Union closed shops are still asserted. I do note Bob Day’s concern for the unemployed. Unemployment is vicious, but it is not cured with abject nonsense purveyed as the analysis of labour markets.
To the contrary, abject nonsense destroys sound correction, as the HR Nicholls Societ masterly destruction of the fight for reform demonstrated. Now what do we see? These cretins blaming Howard for what they did. At least one of these unctious moralists, Bob Day, whining about their inability to obtain labour, preferably in vassal form. These illiterates still doing their best to ensure the campaign for reform is permanently buried. This lot are as much responsible as the ACTU is for this abysmal state of affairs and the appalling upshot of high unemployment. They supplied the ammo to ensure this abysmal state of affairs.
The saddest thing is, Liberal MPs, did not challenge the HR Nicholls Society clubmen, including Peter Costello and Senator Nick Minchin. They did not seek out sound alternative advice. Committed to the ignorant man’s intellectual heights, pragmatism, they swallowed the snake-oil and lived long enough to tell Australians what a wonderful potion it is. Then they died.