Moving to Oz? (IX)

Amanda Pregl (25yo), a young German national visiting Sydney on a student visa, became this week a bit of an example of what may be awaiting thousands of foreign visitors or migrants to Australia.

According to Pregl, although for two weeks she worked seven days a week for a Maroubra (South Sydney suburb) pizzeria, her employer denied her any pay, apparently on the spurious grounds that she hadn't done some routine errands required of every person working in Australia.

After she told her employer she had gone to the Australian Taxation Office, she was finally paid, but at the flat rate of AUD14 an hour, two dollars less than the current minimum hourly wage, without any weekend extra pay. Two weeks later, Pregl lost her job.

" 'They were really taking advantage of me,' she said. 'But I really needed the money and so that's why I didn't say anything'." (See here)

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Mind you, among the cases exposed by a recent Fairfax Media investigation, Pregl's is not the worst, neither was it particularly bad: perhaps out of sheer luck, the amount of her loss is moderate; more importantly, the situation didn't last long and didn't involve irreversible damage.

But Pregl's is not an isolated incident; nor is everybody as lucky as she was. The investigation focusing on restaurants and diners, by Sarah Whyte and Clay Lucas, revealed people not being paid at all, or being paid AUD8 an hour, flat; employers keeping the tips patrons left for the staff. Below you find some of their articles.

And Pregl's case reveals something key: employers will take advantage of your need and naivety.

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But even those cases cited by Whyte and Lucas are not the worst that can happen to young tourists visiting Australia on working visas. Jessica Pera, also from Germany, is an example of the worst that can happen.

Arriving in Australia on a working holiday visa on November 17, 2010, less than a month later Pera was in Childers (Queensland), working as a fruit picker.

"In an email days before her death, Jessica anticipated temperatures of 35C to 40C. On her first day, December 10, Jessica was picking melons. This was heavy work and she found the going tough, so the next day she was sent to pick tomatoes. 

" 'With the melons there was some shade,' Mr Pera [Juergen, Jessica's father] said, 'but they tell me there was no shade in the tomato fields'." (See here)

According to the media, Pera collapsed around noon of December 11; the paramedics attempted to revive her, to no avail:

"Mr Pera said his 24-year-old daughter had been a healthy girl who was an experienced traveller.
" 'She never drank or smoked or did drugs', he said.
" 'She was a very good daughter. She had travelled a lot and she always had the proper checks before she went anywhere.'
"Mr Pera said Jessica's doctor said she was in good condition and health before she left.
" 'He [the doctor] said there was no reason he could see for her to die,' Mr Pera said.
"The grieving father said travelling around Australia had been Jessica's lifelong dream". (See here)

One year and a half later, ABC News reported:

"Farm fined over backpacker death
"By Kallee Buchanan. Posted June 10, 2011 11:55:00
"A farm at Childers, in southern Queensland, has been fined $25,000 for failing to protect workers against heat stress after a backpacker died.
"German backpacker Jessica Pera, 24, died while working at Barbera farms in 2009 [sic].
"The Brisbane Magistrates Court found the company failed to provide water, shade and protection from the sun on the day she died.
"Jamie Cupples from Farmsafe Queensland says the fine is appropriate.
" 'It's the lower end of the range I guess for a fatality,' he said.
" 'For a rural industry they can go up to $60,000, but given that when they look at these things they look at the issue entirely and they look at what should have been provided and what hasn't been provided and I guess in this case the judgment has said that they didn't provide certain things for the workers'."

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If you are already here, for the love of God, join a union. The Australian Council of Trade Workers Union (ACTU) should be able to indicate which union covers you.

Unions in Australia are not a magic bullet and they cost you money (tax deductible), but you'll have some support and advice: use it.

I could argue on the basis of workers' solidarity; but people nowadays are too "smart" for that. They know better than this old-fashioned class thing: it's every man for himself. I'll argue, then, in terms modern "smart" people understand. Think of unions as a kind of insurance: hopefully, you'll never need it and you'll whinge you lost your money; but you'll be sorry if you need it and you don't have it.

Let's face it, unions are less than enthusiastic about helping workers who never contributed to the union. And, in a world where everybody is "smart" and workers' solidarity counts for little, as it counts little for you, you can't blame them, can you?

Whether you join a union or not, don't accept being exploited. It's not fair to you, it's not fair to those already here and it's not fair to those on their way here.

The much maligned by the bosses Fair Work Ombudsman is another resource you should be aware of. It's probably a bit of a paper tiger (like all existing workplace protection and the unions themselves), as the information below suggests, but, like the unions and the crappy work protection, is better than nothing.

Ask locals about how things are supposed to be.

But, above all, understand something: your boss is not your friend or your relative; he/she doesn't care about you; what he/she cares about is making money on your work. Each and every one of them is the same, but some of them will stop at nothing.

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If you are thinking about coming: you have been warned. Good luck.

Fairfax Media is asking for further information. If you know more, contact them. The article entitled "Underclass of restaurant employees in Sydney grossly underpaid" details the alternative ways.

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Further Reading:

On Jessica Pera's case:
How did our daughter die? Parents demand some answers - Rick Feneley - March 13, 2010
Answers wanted for mystery death - Vanessa Marsh - Mar 13, 2010
He sacked them for pleading for water - March 13, 2010
Farm fined over backpacker death - Kallee Buchanan - June 10, 2011

On the Fairfax Media recent investigation on restaurants and diners:
Underclass of restaurant employees in Sydney grossly underpaid - Sarah Whyte and Clay Lucas - January 18, 2013
Restaurants' dirty secret revealed - Sarah Whyte, Clay Lucas - January 26, 2013
Wages of sin - January 26, 2013
Hard to swallow: restaurant staff tips taken by owners, says union - Sarah Whyte, Clay Lucas - January 29, 2013
Wages rot begins at the top - Sarah Whyte, Clay Lucas - January 27, 2013

Update:
24-08-2012. The Unions Australia website is designed to facilitate the process of joining a union. 

Ben Franklin, Paper Money and LTV.

Benjamin Franklin (c. 1875),
by Joseph-Siffred Duplessis [A]

Benjamin Franklin (1706-1790), the renowned American polymath, was "leading author, printer, political theorist, politician, postmaster, scientist, musician, inventor, satirist, civic activist, statesman, and diplomat".

Being such a prominent figure in American history, it's curious that two rather controversial aspects of Franklin's public life are much less mentioned: Franklin advocated the use of paper money.

To add insult to injury, in his 1729 pamphlet "A Modest Enquiry into the Nature and Necessity of a Paper-Currency" Franklin also explained why labour should be the real measure of wealth. [1]

In that pamphlet, and conscious that opinions on policy matters were affected by vested interests ("Men will always be powerfully influenced in their Opinions and Actions by what appears to be their particular Interest"), Franklin first explained why some interest groups would oppose an increase in "our present stock of paper money":

"I say all such [moneylenders/bankers] will probably be against a large Addition to our present Stock of Paper Money; because a plentiful Currency will lower Interest, and make it common to lend on less Security".

To make things worse, Franklin's advocacy of paper money did not propose anchoring the value of paper money to that of precious metals, but to labour:

"For many Ages, those Parts of the World which are engaged in Commerce, have fixed upon Gold and Silver as the chief and most proper Materials for this Medium [of exchange] (...) But as Silver it self is no certain permanent Value, being worth more or less according to its Scarcity or Plenty, therefore it seems requisite to fix upon Something else, more proper to be made a Measure of Values, and this I take to be Labour.
"By Labour may the Value of Silver be measured as well as other Things. As, Suppose one Man employed to raise Corn, while another is digging and refining Silver; at the Year's End, or any other Period of Time, the compleat Produce of Corn, and that of Silver, are the natural Price of each other; and if one be twenty Bushels, and the other twenty Ounces, then an Ounce of that Silver is worth the Labour of raising a Bushel of that Corn. (...)
"Thus the Riches of a Country are to be valued by the Quantity of Labour its Inhabitants are able to purchase, and not by the Quantity of Silver and Gold they possess; which will purchase more or less Labour, and therefore is more or less valuable, as is said before, according to its Scarcity or Plenty".

Those who've read my post Adam Smith and LTV should find the passage above quite reminiscent.



Notes:
[1] And that, if I had to guess, explains why some MMT supporters found "some convoluted passages" they didn't understand in Franklin's pamphlet.

Image Credits:
[A] "Portrait of Benjamin Franklin" (c. 1875), by Joseph-Siffred Duplessis. Source: National Portrait Gallery, Smithsonian Institution. Wikipedia.

Spain, Catalunya, UK and Taxes.

I haven't written about Spain in a while. But, what's to tell? Oh, yes.

The Parlament (nope, that's not a typo, that's how it's spelt in Catalonian) approved, 85 votes against 41, a declaration that the Catalonian people have the right to decide its own sovereignty. The Catalonian left, the Esquerra, voted in favour of it; the local PP (centre-right) and PSC (PSOE local branch) opposed. (See here, Spanish)

This leaves Artur Mas (CiU, also centre-right),  President of the Catalonian Generalit (i.e. state premier) free to call a regional referendum, to be held by the end of 2014.

It also gives Mas/CiU a two-year long honeymoon with the Catalonian people, during which the aim to achieve independence shall override any other considerations in the mind of the collective bride.

And the bride will need something to look forward to in the coming years:

"IMF Warns that 2013 will be Worse to Spain than Just Finished 2013
"The institution downgrades its forecasts and foresee a 1.5% GDP contraction for the current year.
"The recovery shall take place in 2014, with a modest 0.8% growth.
"The IMF believes the financial sector is still too big". (See here, Spanish)

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In the UK, Tory PM David Cameron (who has little to do with Spain) also promised a referendum, this time on the UK membership in the EU. The referendum should take place in 2017, conditional, of course, on Cameron/Tories being re-elected:

"Legislation will be drafted before the next election. And if a Conservative government is elected we will introduce the enabling legislation immediately...  And we will complete this negotiation and hold this referendum within the first half of the next Parliament". (See here, not in Spanish)

These rich, conservative people are so damned clever, subtle and original, aren't they?

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Back to Spain:

Treasurer Cristóbal Montoro (centre-right PP) announced that their fiscal fraud amnesty was a big success.

The amnesty, approved without parliamentary discussion last year, was supposed to collect EUR2.5 billion by means of a 10% "regularization fee" on an estimated EUR25 billion rich Spaniards had deposited overseas without paying taxes for them.

Instead, it collected EUR1.2 billion, over some EUR40 billion, for an effective "regularization fee" of about 3%. A big success, indeed. (See here, you guessed, in Spanish)

Although he was not asked, Luis Bárcenas, former centre-right PP treasurer, would probably agree that the fiscal fraud amnesty was a big success: after all, he may have regularized up to 10 million of the EUR22 million he allegedly had deposited in a Geneva bank.

Bárcenas is currently under judicial enquiries over his also alleged commission of crimes and complicity in the commission of crimes against the public Treasury and money laundering. (See here, you know the drill)

Adam Smith and LTV.

Imagine you are Adam Smith. It's mid-18th century Britain; following the Commercial Revolution, the Industrial Revolution is in its early stages.

Madeley wood furnaces: "Coalbrookdale by Night"
(1801), by Philip James de Loutherbourg [A]

Banking and finances, centered on London, changed remarkably in the previous decades. Physical production, which lagged behind them, began, during Smith's own time, to display unusual dynamism: new production lines, technologies and occupations appear; resulting in greater abundance and variety of goods. And with these changes come new fortunes with their own interests, not necessarily coincident with the traditional ones.

Consider the economy as a machine, as Smith, influenced by Newton, must have: stuff comes out at the right end; some of it is consumed, some flows back to the left entry point; something happens inside; even more stuff pours out.

That is economic growth. And Smith, living in a transitional time, must have been acutely aware of it.

Where does it come from? Can it be sustained? How you measure output? How is it distributed?

Smith and others attempted to understand this process.

I will focus here on a single aspect of Smith's work: how to appraise output.

We do this by using market prices (hence, nominal GDP, for instance). To us, this seems natural; to do otherwise would seem odd.

Smith, however, initially proposed the use of labour times, instead of market prices:

"In that early and rude state of society which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labour necessary for acquiring different objects, seems to be the only circumstance which can afford any rule for exchanging them for one another. If among a nation of hunters, for example, it usually costs twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for or be worth two deer." (The Wealth of Nations, Book I, Chapter VII)

Why would Smith make such a choice?

There might be several reasons. For one, assuming that science must be based on objectively observed facts, Smith's reasoning seems logically unassailable, at least within that hypothetical "early and rude state of society": there is no other objectively observable measure justifying any proportionality in exchange, as Smith himself remarked.

Further, if it were at all possible in that social state, it's not obvious that a modern system of market prices would do a better job.

For one, like market prices, virtually everything offered in the marketplace is there because someone, somewhere, spent time producing it. Unlike market prices, however, labour time is also spent to produce non-market goods and services (many of which are excluded from current statistics).

Indeed, in our own times the government's contribution to GDP is appraised in a way only a step removed from Smith's original proposal: it's valued at cost (i.e. other inputs, plus labour time).

More importantly, market prices are volatile (much more so than labour times) and in essence, in Smith's view, unpredictable. For Smith an invariant standard for measuring long-term economic change was important: it's not just growth that matters, but how much effort it costs to achieve it, a matter often overlooked nowadays.

In other words, Smith's choice was neither uninformed nor arbitrary and it may even be supported on some reasoning.

But Smith himself makes a better case for his labour times approach:

"Equal quantities of labour, at all times and places, may be said to be of equal value to the labourer. In his ordinary state of health, strength, and spirits; in the ordinary degree of his skill and dexterity, he must always lay down the same portion of his ease, his liberty, and his happiness. The price which he pays must always be the same, whatever may be the quantity of goods which he receives in return for it. Of these, indeed, it may sometimes purchase a greater and sometimes a smaller quantity; but it is their value which varies, not that of the labour which purchases them. At all times and places, that is dear which it is difficult to come at, or which it costs much labour to acquire; and that cheap which is to be had easily, or with very little labour. Labour alone, therefore, never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. It is their real price; money is their nominal price only." (The Wealth of Nations, Book I, Chapter V. My emphasis)

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As many other economic ideas, one can consider that the modern labour theory of value started with Adam Smith, if in an embryonic form.

Curiously, out of the many subjects Smith studied, this particular one has become highly contentious among mainstream economists. Apparently, Smith, who in general did a good job defending capitalism, in this particular case did not do a good enough job and, worse, may have furnished ammunition to critics of capitalism.

William J. Barber offers a different view of Smith's labour theory of value:

"Smith labour approach to the analysis of value has been severely criticized by later schools of economists. To one group of writers its fatal shortcoming was that it did not offer a full account of the determination of prices, and, most particularly, that it neglected the demand side of market behaviour. This criticism would carry more force had Smith sought to produce a systematic analysis of market price formation. But in fact this objective was peripheral to his main programme. He was more concerned with forging concepts that might provide leverage on the problem of measuring economic change over prolonged periods. The materials for developing a clearer analysis of the formation of short-term market prices were at his disposal. Concepts of utility and demand (which were to be used for their purpose by a later school of thought) had been part of the teaching he absorbed from Hutcheson. He chose to reject this orientation toward value theory, presumably because he regarded it as lacking relevance to his central purpose". (A History of Economic Thought. Chapter 1. Emphasis mine).

Eventually, Smith himself modified his views, to take into account later and less "rude states of society".

Ironically, it is perhaps in this change that Smith's real fault was.

Image Credits:
[A] "Coalbrookdale by Night" depicting Madeley wood furnaces (1801), by Philip James de Loutherbourg (1740–1812). Source: The Yorck Project: 10.000 Meisterwerke der Malerei. DVD-ROM, 2002. ISBN 3936122202. Distributed by DIRECTMEDIA Publishing GmbH. Wikipedia.