Thursday, May 8, 2014

Class War for Dummies.

Observe the picture below:


A little background is in order.

The Federal Government, headed by PM Tony Abbott (National/Liberal Coalition: "conservative, centre-right, libertarian"), created said Commission to advise the Government (already obsessed with the need to cut the fiscal deficit) that… there was a need to cut the fiscal deficit…

Understandably, such a difficult endeavour required the unique talents of experienced managers, so Tony Shepherd (former head of the Business Council of Australia) was put in charge.

At the risk of stating the obvious: the Government asked advise on fiscal matters to a former boss of the top bosses' union.

And advise they did: their report is some 1,200 pages long. Although there's much of interest there, here we'll focus on a non-fiscal policy recommendation the Commission added:
"The minimum wage should be frozen for a decade, reduced to 44% of average weekly earnings and vary between states and territories, according to the Commission of Audit.
"The current minimum wage is $622.20 a week, or $16.37 an hour, about 56% of average weekly earnings. Reducing it by 44% this year would see it fall to $486.20 a week.
"The report recommends that the cut could be implemented over 10 years by keeping the growth at 1 percentage point less than inflation."
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Australian businesspeople and their toadies in think tanks, media, bureaucracy and parties have long been pushing for lower wages (see here, here and here), so is no surprise they took advantage of the opportunity Abbott gave them.

The specific rationale changes, but wages, which for them are invariably too high, hurt the economy somehow. You know, either they (A) threaten inflation, (B) are driving businesses broke, or (C) "some unemployed people were priced out of the job market because they did not have the skills worthy of the minimum wage" but receive unemployment benefits, thus causing the fiscal deficit (as it is claimed now). But give them time and they'll come up with new theories, like how our "soaring" wages also cause cancer, child abuse and weather change.

Whatever the excuse du jour, one thing is clear: wages are never set the way mainstream economists would have us believe. For one, it doesn't happen through bargaining between two equal parties. You see that above: the parties are not bargaining (neither individually, nor collectively) and they are not equal. People on minimum wages cannot afford lobbyists, so their voices are never heard; therefore wages are unilaterally imposed from above, and kept as low as possible.

Marx knew that and wrote about it; in fact, other classical authors, like Adam Smith (yes, him, believe it or not) also did. If you actually work for wages, you know that, too.

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If you work for wages, you better be clear on this: this abuse will continue for as long as you put up with it.

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Further Reading:
Audit Commission's war on the poor, at Macrobusiness

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