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Joblessness and income inequality: has Australia taken the wrong turn? : Comments
By Fred Argy, published 27/1/2006Fred Argy explains the relationship between jobs and income equality and asks if Australia has the right mix.
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>>they currently are paid low wages and they are being offered lower wages<<
One of the most significant problems at GM right now is the drag caused their massive pension scheme, and the ballooning costs associated with their health care programmes.
How did this come about? Back in the 1950s, the union persuaded the company to fund these benefits. As the Washington Post reported last year, "Commitments for pensions and 'other post-employment benefits'... had little initial impact on GM's profit statement and didn't count as obligations on its balance sheet. So why not keep employees happy with generous benefits? It was a free lunch."
But as everybody in business knows, there is no such thing.
When the accounting rules changed, and companies were forced to show these commitments as liabilities in their balance sheet, a massive hole - over $80billion in GM's case - showed up.
What role did government policy play in all this? They certainly didn't force GM to agree to the unions' demands. What they did – eventually – was to insist that companies properly account for these demands, at which point the truth emerged.
The reality is that businesses survive when their revenues exceed their expenses. Governments have little impact on this equation in a positive direction, and plenty in the negative. If the government makes it more difficult (read: expensive) to hire the next employee, jobs are likely to suffer. In addition, the company is prevented from growing as fast as it might.
I'm still recovering from the shock I received seven-odd years ago when my business got to the size where I had to pay Payroll Tax to the State government. For every fifteen or so employees, the government actively extracts from my company the dollar equivalent of the sixteenth person.
If only there was one government minister who actually knew how businesses run. Or even someone in the Public Service with some hands-on experience, to advise. Instead we have academic timeservers advising a bunch of ex-schoolteachers and lawyers.
That's a generalization, of course.