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The Forum > Article Comments > Let the people work > Comments

Let the people work : Comments

By David Leyonhjelm, published 13/12/2013

Labor's Shadow Assistant Treasurer has demonstrated that Australia's minimum wages cost jobs. Can he bring his party with him?

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I could support to a lower minimum wage if,

1. The Australian dollar was at the level of say 70-80 cents and steps were taken to keep it there. That might require that mine development should take second place to creating employment in import replacement industries.

2. That the steps between wages and salary levels were about what they were when the Hay Point compensation scheme was prevalent in major companies in Australia. That scheme set the steps at about 40% per step and it was accepted that if the RC Church could operate with about four clear supervisory steps then big business could operate with five or six. The companies decided that that system was unfair to the upper crust. There is no way the CEO's of banks make decisions that make them worth millions per year. The 15th September, 2008 events should have made that clear.

3. Only salaries at five times the minimum pay rate were allowed as taxable deductions in company accounts.
Posted by Foyle, Friday, 13 December 2013 7:55:55 AM
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Yeah and I can now see former holden workers growing wings and flying.
Posted by imajulianutter, Friday, 13 December 2013 11:45:39 AM
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David, I think there is some merit in your drift; wages are too high in Australia. But the main problem here is the middle/ upper class workers such as yourself and for that matter Holden employees, corporate and bureaucrats etc, not to mention the CEO's with their snouts in the trough for millions. Salaries have risen far to high; let all of them take a salary cut first.

I do hope you don't advocate a blanket removal of the basic wage or going the way of the US where it is pitifully low:

"The US minimum wage sits at US$7.25 an hour. Over a 40-hour week, that is just $15,080 annually. New York fast-food workers earn an average yearly salary of $11,000. About 3.6 million people, most with children, attempt to make ends meet on this wage. Most of this vast army of workers relies on public benefits to supplement their low income. (Side note: McDonald's CEO Don Thompson takes home about $25,000 per day.) The US is the most fiercely capitalist country in the world. It’s a nation in which union membership sits at just 11%."Long time unemployed people who want a leg into the job market could be allowed to be paid a sort of 'apprenticeship' for say 6 months on as little as say $13 an hour.

Is this the sort of country you'd like Australia to be? Have you ever worked for $8 an hour? The $1/ hr I earned in the 70's as a farm hand equated to a similar wage but I only did it for a year or two, was given three meals on top of it and could go to my parents on the weekends........

Perhaps long term unemployed could be given the opportunity to work for a 6 month 'apprenticeship' for say $13/ hour, but it shouldn't be allowed to become entrenched long term.
Posted by Roses1, Friday, 13 December 2013 12:51:32 PM
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Roses1

Wages are not “too high” in general, but the minimum wage is too high to make it worth employing some people. Cutting CEO salaries will not help. Businesses don’t have a lump of money to spend on wages that can be distributed to more workers if some take a smaller share. They make employment decisions at the margin – if I employ this person, will they generate enough money to cover the cost of their employment (wages, superannuation etc.) and make a profit? If you set the minimum wage above what a business expects to gain by employing a person, the business will not employ them.

If the main objective is to prevent poverty and ensure people have enough to live on, it’s much more efficient to do this through the social security and benefits system not the wages system. This can take account of an individual’s circumstances (housing costs, family dependents etc.) far more effectively without excluding them from the workforce.

Your argument for a temporary lower minimum wage for formerly unemployed people may have some merit, but it’s hard to avoid rorts. A similar scheme applied in the 1990s but employers just sacked employees when the lower rate expired and took on new ones.

You are right, though, that this is a societal issue as well as an economic one. In part we have minimum wages because we feel it is socially unacceptable for people to work for an amount which is too far below what most people earn. But we need to recognise there is a trade-off between the indignity of low-paid work and the indignity of unemployment. Libertarians like David feel this is a choice best left to the individuals concerned.

Like you I have in the past worked for very low wages, though happily now that’s no longer the case. Would I have been better off if that work paid more? Yes. Would I have been better off if that work was not available because the employer was compelled to pay more than the work was worth? No.
Posted by Rhian, Friday, 13 December 2013 3:09:37 PM
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Lowering the minimum wage for people that are struggling to survive on what they get now is just welfare for the rich. I'm sure McDonalds, Coles, Woolies would love Government meet the shortfall through centerlink with healthcare cards and what not!

When I was younger and started working, the idea was if you couldn't get a job because there weren't enough, you created one yourself and then employed people. But who would do that in this country now with all the bureaucracy and crap you need to go through just to get started? Well not many people according to statistics.

Cut out all the crap taxes, rules, and bureaucrats that just get in the way and let business get the infrastructure back to a level where people can start businesses easier and create employment again!

And this free trade bullshite is pulling everyone down, everyone can see it except of course those with vested interests. Free trade my arse. There are no rules in China, you can't compete against no rules when you've got both legs tied and lead ball called Government around your neck!
Posted by RawMustard, Friday, 13 December 2013 3:15:52 PM
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why not just go the whole hog and bring back slavery?
Why not star with lowering personnel income tax and governament hand outs to middle and upper class people who don't need it?
Posted by Cobber the hound, Friday, 13 December 2013 4:56:37 PM
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If minimum wage laws don’t cause unemployment, why not make the minimum wage $100 per hour? That would be an even more liveable wage, wouldn't it?

I'm not racist but.... it's all those dreadful Chinese, isn't it? Daring to engage in productive activity! Bastards! Can't we just have laws that shut us off totally from the outside world? Think how rich we'd all be then?

And if people persist in mutually beneficial consensual private relations, that should be decreed an economic crime. The death penalty would not be too good for these uppity peasants, but at the very least they should be tasered, handcuffed, and locked in a cage with a gorilla called Bubba who has "L-O-V-E" and "H-A-T-E" tatooted on his knuckles dragging. That'll teach people to want an income more than the dole! Who do they think they are, daring to question their betters in the Labor party, the vanguard of the revolution
Posted by Jardine K. Jardine, Friday, 13 December 2013 6:18:09 PM
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Re minimum wage, there are way more incompetent high earners than there are incompetent low income earners. The both cost the rest of us dearly.
Until the majority of the population realises that we can no longer afford to "keep" people even on a minimum wage we can't change anything. We must move away from the notion of "entitlement" & move towards reward for effort. The right mindset for that could be achieved by way of non-military national service. Instead of education we must focus on training better mentality & a national service will do that. It will make people more competent & therefore useful & employable. Businesses can't afford to just keep them, they need to be able to make a profit because they're not charities.
Posted by individual, Friday, 13 December 2013 7:09:46 PM
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Is your post aimed at me, Peter Hume, Jardine whatever your name is today?

Must be as I'm the only one that mentions China.
I think you've miss interpreted my post.
Posted by RawMustard, Friday, 13 December 2013 7:14:05 PM
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I am not an economist, so I make no presumption to tell whether or not the idea of lowering/removing the minimum-wage is economically good or sound.

All I can say is that it is outrageous and totally unacceptable when two adult and fully-informed individuals freely wish to enter into a deal between them (assuming that deal doesn't hurt anyone else), yet the government intrudes and labels the one 'employer' and the other 'employee', then sets conditions on what their private deal must or must-not include.

I concede that if one (or both) of the parties is a company, then it is an economic matter, which should be left for the economists among us to discuss.

The rationale for that difference is that while government has no right to take away individual freedoms, nothing forces anyone to incorporate themselves with the government, so if they choose to use the government's "incorporation service", then there may be a price to pay.

What is absolutely clear, is that all individuals who operate in their individual capacity must be IMMEDIATELY exempt from all IR laws.
Posted by Yuyutsu, Friday, 13 December 2013 7:24:45 PM
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What a load of garbage Yuyutsu. Power relationships between employer and employee are rarely on a level playing field. We need industrial relations interventions to stop exploitation. If you do not think exploitation exists, try talking to some workers especially those working in small businesses.

Those people advocating lowering the minimum wage do not seem to realise that the basis of capitalism is consume and spend. If your population is so badly paid that they cannot buy your goods, what happens to your business?

It only seem to be the well paid who come up with this rubbish and they are unlikely to take a pay cut themselves - real not in my backyard thinking.
Posted by fancynancy, Friday, 13 December 2013 8:01:24 PM
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These 'studies' vaguely referred to in the article obviously haven't done a simple comparison of how the minimum wage levels in various countries correlate with their unemployment levels.

Countries like Mexico, with one of the world's lowest minimum wages (US$0.58), has the same unemployment level as Australia (about 5%), which has the world's highest minimum wage. In fact, countries with the highest minimum wage levels also have among the lowest unemployment levels.

Until the GFC, high minimum-wage countries like Ireland and Greece had low unemployment levels. The sharp rise in unemployment in recent years had nothing whatever to do with the level of their minimum wage and everything to do with the hyper-salaried CEOs, politicians and banksters who ran their countries into bankruptcy to pay for their own mistakes.

It's the MAXIMUM wage that has done so much damage to the world economy, not the minimum wage.
Posted by Killarney, Friday, 13 December 2013 8:50:33 PM
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Don't attack the poor bastards on the minimum wage or welfare payments. Attack the unionised bludgers who are paid too much. That includes government employees at all levels including Statutory Authorities and Government sponsered organisations or enterprises.
Bring the inflated salaries down and scrap the red tape (esp climate change and whs) that they endlessly produce then we would become much more efficient, productive , and more of us would become wealthier. Especially the poor.
Posted by imajulianutter, Saturday, 14 December 2013 6:42:57 AM
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the election cycle gives unions much punching wait. Every State election nurses, police, teachers, child care workers scream that the State next door earns more than them. The unionist line their pockets and the grossly overpaid ABC staff report on the poor teacher who can't live on $80000 a year despite at times being totally incompetent. We are going to find out the hard way that you can't play this game forvever. Many more will not have jobs and they won't be happy despite gaining degrees from the education industry (really how many economist who can't predict anything do we need?)
Posted by runner, Saturday, 14 December 2013 1:45:20 PM
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For long time problem for unemployed was not minimum wage level, rather they were punitive cut-off deduction points and rates imposed by Centrelink (Social Security).

Eventually the start point for deductions was raised, and the % deduction rates reduced.

Eventually allowing work credits to accumulate influenced the start points.

In order to consider lowering employment wage rates essential is to review these deduction rates, how they impacts on potential employees.

Minimum wage rate influences some employers decisions to employ.

Many employers, mostly in small business act mostly in hope nothing goes wrong as aware they currently break the law.

Those who employ people short term off the books, some partly to avoid pay-rates, some partly to avoid age restrictions.

Many employ off-the-books paying cash-in-hand to avoid needs to satisfy what they regard as encyclopedia volumes of legal requirements they struggle to understand and complete.

What stats for those who work cash-in-hand, how many actually earn enough to lose most to Centrelink ?
Posted by polpak, Saturday, 14 December 2013 6:31:29 PM
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Dear Nancy,

Your arguments are of an economic nature.

As I said, I am not an economist, nor a capitalist, nor responsible for whatever economic reasonings other people give for lowering/removing the minimum wage or otherwise. Frankly, I don't even care about economics and the economy or about undermining the basis of capitalism.

So if you want to discuss economic reasons for-or-against the minimum wage, then please go ahead and discuss these, but not with me.

My case is simple: two people, of free will, fully informed and acting in good faith want to make a deal between them (note that if the deal is not in good faith, then it is a case of fraud and/or coercion and there already sufficient laws in place to cover that). None owes the other anything, they just freely choose to relate between them in a certain way. Neither of them calls themselves an 'employer' or an 'employee' or their deal 'employment' - just two individuals who want to conduct their life privately, without hurting anybody else and without being under anyone else's umbrella. Then out of the blue, or rather out of the black, comes government and tells them that they are not allowed to make that deal, that if they proceed it will take one or both to jail. That is violence and that is completely unacceptable. So basic and simple that it must come way before and override any economic considerations.
Posted by Yuyutsu, Saturday, 14 December 2013 9:35:13 PM
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Sometimes I despair at the stupidity of so many. Repeat a lie often enough and the mob will believe it. The earth is flat, the minimum wage causes unemployment...

".. businesses would be willing to take a chance on these job seekers and pay them more than the $5 to $10 an hour they currently receive on welfare." And this is sooo incredibly generous! Unless of course you know that the welfare rates in Australia are so low that no adult can actually survive on them. (Do you know what dumpster diving is?) So paying more (but less than $16 an hour) is supposed to help them? If this author thinks so, I think he should be prepared to tell us what his hourly rate is.

Worse, some casuals get "over $20 an hour". How extraordinary! A person who gets no sick pay, no holiday pay, no security of tenure should get $20 per hour! What happened to the concept that society was supposed to "improve" the lives of people. This author urges we go backward. And somehow that is not surprising. On-line opinion gets more reactionary all the time.

The only comment worth repeating:

"..the article obviously haven't done a simple comparison of how the minimum wage levels in various countries correlate with their unemployment levels.

Countries like Mexico, with one of the world's lowest minimum wages (US$0.58), has the same unemployment level as Australia (about 5%), which has the world's highest minimum wage. In fact, countries with the highest minimum wage levels also have among the lowest unemployment levels.

Until the GFC, high minimum-wage countries like Ireland and Greece had low unemployment levels. The sharp rise in unemployment in recent years had nothing whatever to do with the level of their minimum wage and everything to do with the hyper-salaried CEOs, politicians and banksters who ran their countries into bankruptcy to pay for their own mistakes.

It's the MAXIMUM wage that has done so much damage to the world economy, not the minimum wage.
Posted by Killarney, Friday, 13 December"
Posted by The Future, Sunday, 15 December 2013 9:39:03 AM
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Almost a decade ago, I published a study which concluded that increases in the West Australian minimum wages led to some job losses. This result should not have been a surprise to anyone: I doubt there’s a person in the country who believes that we could double the minimum wage tomorrow without some job shedding.

But what David Leyonhjelm’s article misses is that the employment effect of raising the minimum wage is only half the picture. To know whether raising the minimum wage is a good idea, we also need to look at its impact on earnings.

While the evidence is somewhat mixed, it seems likely on balance that raising the minimum wage delivers a considerable pay increase to the working poor. Shop assistants and hairdressers, early childhood workers and cleaners are among the workers who rely on minimum wages.

To pretend their pay packets are irrelevant is like complaining that Australia lost 9 wickets in the first innings of the Adelaide test. If you can’t also acknowledge that we made 570 runs and won the test, you’ve kinda missed the point.

Our nation’s anti-poverty toolkit shouldn’t just contain one instrument. To address disadvantage, we also need quality early childhood services, school resources targeted where they are needed the most, a great TAFE system and fair superannuation taxes. On all of these fronts, the Abbott Government is slipping backwards.
But minimum wages matter too. Like most Australians, I don’t want to live in a nation where adults can be paid as little as $5 an hour for their labour.

In January 2004, shortly after my study was released, I wrote an op-ed for the AFR which concluded ‘The evidence from the West Australian minimum wage experiment appears to provide support for regular, moderate increases in the federal minimum wage.’ I haven’t changed my view since then.

Andrew Leigh is the federal member for Fraser and the Shadow Assistant Treasurer.
Posted by Andrew Leigh, Monday, 16 December 2013 10:25:05 AM
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You need to have a minimum wage that supports an individual. If you are worried about unemployment that can be fixed easily.
If somebody has been on benefits for 12 months. They have to take on a trade or some other training. Else there they can spend time in the defense forces. In addition set up a Government investment bank. So the people who come up with a bright idea (after there been educated/trained) can get it financed. You generate more business employ more people in a nutshell more competition.
Business laws need to be relaxed. Why do I need to have a turn over of at least 80,000 to be registered for GST?. If I'm not registered for GST I can't run a business. No one will deal with me as then they can't claim GST input credits. It reduces competition. Isn't competition the end game for a free democratic capitalist society? Or are we just protecting the fat cats at the top end?
Posted by JustGiveMeALLTheFacts, Monday, 16 December 2013 11:20:06 AM
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Dear Andrew,

<<I don’t want to live in a nation where adults can be paid as little as $5 an hour for their labour.>>

If I were to list all my "I don't want to live in a nation where..." statements, then 350 words would not be enough, not even 10,000.

But it is not up to me, nobody asks me and nobody is obliged to even listen to my dislikes, how more so to eliminate them. What other people do or don't is none of my business.

So while I appreciate your sentiment about disliking people being money-poor, that gives you no right to control other people, or else that would render you morally-poor.

Given two people who live peacefully and in harmony, who probably never even volunteered or consented to belong to your 'nation' thing (you just happen to count them in without their permission), make a friendly private deal between them, something like "I will do this for you for so many hours and you will give me that many dollars" (that's the simplest form, the deal could of course include other elements as well), you have absolutely no right to tell them "No you won't because I don't like it, so if you do so, I'll send my thugs after you to throw you in jail (and kill you if you resist them)".

As an individual yourself who feels as you do, you have of course every right to decide: "I will never talk with or befriend anyone who pays another only $5/hour or who only asks for $5/hour for their work" - perhaps they never wanted to have anything to do with you either.

Note that the above applies only to individuals, rather than to bodies legally incorporated by the state (which most employers are), as the later, by incorporating, have voluntarily accepted the state's authority and favours, hence there is nothing fundamentally wrong with them also needing to accept its rules.
Posted by Yuyutsu, Monday, 16 December 2013 12:45:32 PM
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Yuyutsu

You are throwing around a whole lot of libertarian-esque piffle to justify the right to exploit desperate people - indeed to create the very social conditions that spawn desperate people.

OK, sure. I could freely offer two bucks an hour to an unemployed guy or single mum to do some work for me and they can freely tell me to find a cliff and jump off it. But that's not the point.

Lowering or abolishing the national minimum wage creates a national work environment in which that unemployed guy or single mum has no alternative but to accept my offer, because the next offer will be just as low. According to those who advocate this system of neo-slavery, that guy and that mum should feel grateful to me - Ms Bountiful - to be given the opportunity to keep starvation at bay and/or sleep under a roof for just one more day.

Andrew Leigh

I'm with you, mate. I would be deeply ashamed to live in a country 'where adults can be paid as little as $5 an hour for their labour'.
Posted by Killarney, Tuesday, 17 December 2013 10:06:42 PM
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Dear Killarney,

<<creates a national work environment in which...>>

That says it all: in order to achieve certain national-goals, albeit undoubtedly noble on their own, you have no misgivings about dictating to others how to live, including others who never even consented to belong to your 'nation'.

There's of course nothing wrong in creating a national environment for and among those who voluntarily wish to belong to your nation.

One of the main features an advanced nation offers is welfare. Should your single-mum wish to have the protection of the nation, all she needs is to ask! In this recent-thread: http://forum.onlineopinion.com.au/thread.asp?article=15791 I'm totally in favour of ensuring that this single-mum will never need to go hungry.

Your unemployed-single-mum also has recourse to unions who would prevent their members from working for Ms. Bountiful; She could even, for example, tell everyone else who's willing to listen, how bad Ms. Bountiful is and ask them to stop talking or conducting business with her - that would be perfectly legitimate.

What is illegitimate, is to use of police to drag Ms. Bountiful to jail, who have done no harm to anyone. Ms. Bountiful has the perfect right to not be part of your nation and to refrain from contributing towards its goals (whether actual or perceived).

Had Ms. Bountiful ever asked any favour from your nation/state (such as incorporation), then your nation/state would have the right to ask for things in return, such as observing minimum-wage laws. Assuming she hasn't, you would be building your nation on a foundation of cruel violence.

The last thing I want is slavery, but that includes slavery to a nation, so here is another example: A free-standing Kibbutz-like community wants to be isolated from the rest of society. They own their land, share their food and don't allow outsiders in. Due to their isolation, the amount of money circulating in the community is limited, so both their wages and commodity-prices are significantly lower than outside. Technically, that would be against current minimum-wage laws, but it ignores the fact that everything is cheaper there and food is shared.
Posted by Yuyutsu, Wednesday, 18 December 2013 12:06:32 AM
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fancynancy, The Future, Andrew

If minimum wage laws don’t cause unemployment, why not make the minimum wage $100 per hour? That would be an even more liveable wage, wouldn't it?
Posted by Jardine K. Jardine, Sunday, 29 December 2013 8:16:06 AM
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