Comments on: Wage growth does not automatically equate to inflationary pressure… http://twasink.net/blog/2009/07/wage-growth-does-not-automatically-equate-to-inflationary-pressure/ Robert's Rambling Ruminations Regarding Reality Mon, 19 Jul 2010 23:02:46 -0400 http://wordpress.org/?v=2.8.4 hourly 1 By: Steven Shaw http://twasink.net/blog/2009/07/wage-growth-does-not-automatically-equate-to-inflationary-pressure/comment-page-1/#comment-818 Steven Shaw Thu, 06 Aug 2009 22:39:34 +0000 http://twasink.net/blog/?p=663#comment-818 Could we have our own economic revolution if we say increased the minimum wage to $30/hour? Could we have our own economic revolution if we say increased the minimum wage to $30/hour?

]]> By: Robert http://twasink.net/blog/2009/07/wage-growth-does-not-automatically-equate-to-inflationary-pressure/comment-page-1/#comment-795 Robert Tue, 28 Jul 2009 12:15:01 +0000 http://twasink.net/blog/?p=663#comment-795 Also, it's worth putting some numbers in the debate. A FTE employee works 40 hours a week, 52 weeks a year, plus 4 weeks leave - 2240 hours. The FairPay commission recently knocked back a 50c/hour ($21/week) increase in the minimum wage. That would have been about $1000/employee. Let's take BHP - 15426 Australian employees. They could fund that rise simply by not giving their last chairman his $18 million termination payment for bad performance. You wouldn't see a dint in the $13 _billion_ profit (up 28% from 2007). What about Telstra? Good old Sol pocketed $27 million for 3 years. Last year, Telstra made $2.5 billion in profit - I think we can peal off $46 million to give a 50c/hour wage increase. (And just think - 10 years ago, that $2.5 billion would have been going into government coffers; last year was the point where the lost income from revenues matched the amount raised in the selloff) What about supermarkets? Woolies - 91,000 employees, $1.01 billion in profit. Coles - 160,000 employees, $540 million. Give the checkout chick a pay raise, and they still return $380 million in profit. Also, it’s worth putting some numbers in the debate. A FTE employee works 40 hours a week, 52 weeks a year, plus 4 weeks leave – 2240 hours. The FairPay commission recently knocked back a 50c/hour ($21/week) increase in the minimum wage. That would have been about $1000/employee.

Let’s take BHP – 15426 Australian employees. They could fund that rise simply by not giving their last chairman his $18 million termination payment for bad performance. You wouldn’t see a dint in the $13 _billion_ profit (up 28% from 2007).

What about Telstra? Good old Sol pocketed $27 million for 3 years. Last year, Telstra made $2.5 billion in profit – I think we can peal off $46 million to give a 50c/hour wage increase. (And just think – 10 years ago, that $2.5 billion would have been going into government coffers; last year was the point where the lost income from revenues matched the amount raised in the selloff)

What about supermarkets? Woolies – 91,000 employees, $1.01 billion in profit. Coles – 160,000 employees, $540 million. Give the checkout chick a pay raise, and they still return $380 million in profit.

]]> By: Robert http://twasink.net/blog/2009/07/wage-growth-does-not-automatically-equate-to-inflationary-pressure/comment-page-1/#comment-794 Robert Tue, 28 Jul 2009 11:56:43 +0000 http://twasink.net/blog/?p=663#comment-794 Yeah - the IT revolution (which drastically improved productivity) was the economic expansion that was not linked to a rise in wages. Hence why we're entering a recession with real-wages going in at about the point they were when we left the last one (and it's worse in the States). Yeah – the IT revolution (which drastically improved productivity) was the economic expansion that was not linked to a rise in wages. Hence why we’re entering a recession with real-wages going in at about the point they were when we left the last one (and it’s worse in the States).

]]> By: Robert http://twasink.net/blog/2009/07/wage-growth-does-not-automatically-equate-to-inflationary-pressure/comment-page-1/#comment-793 Robert Tue, 28 Jul 2009 11:54:51 +0000 http://twasink.net/blog/?p=663#comment-793 It's a problem because the disparities from nepotism (and other closed-circle relationships, such as "the old boy's network") and inherited wealth are huge, and they build up over time. Yes, people can overcome adversity and escape poverty - in that sense, our economic system is a lot fairer than many that have been tried. But it is almost infinitely easier for a child of high-wage earners to get through high school and university than it is for a child born into a low-income family. The income disparity is huge - the top 20% of income earners bring in just under 40% of the total income; the bottom 20% bring in about 5%. The disparity is growing worse - the ABS figures for 2005-2006 show that the bottom 20% saw effective wage growth of 8% between 2003 and 2006 (a whopping AU$24/week!), the top 20% saw effective wage growth of 13% in the same period. Income disparity in turn leads to asset disparity - poorer people are vastly less likely to own their own home, or have savings for retirement. In the 2003-4 figures, the top 20% of income earners owned 59% of all assets - average net worth of $1.4 million - while the bottom 20% owned 1% of all assets - average net worth of $23,000. In 2005-6, it got worse: the bottom 20% had increased to an average net worth of $27,000 (an increase of 17%), but the top end of town had increased to 61% of all assets - an average worth of $1.7 million (an increase of 21%)! If the rich had just stayed where they were, and that wealth distributed downwards, it would have sufficed to buy low-cost housing for the entire bottom 20%, getting them out of rent traps - in just a 3 year period. Furthermore, every time the issue of minimum wage rises comes up, the business community argue that it will cost jobs. However, salary increases at the top end don't seem to cost jobs... It is certainly true that simply raising the minimum wage, in a knee jerk fashion, will cost jobs and will be inflationary. However, more delicate reforms could be made to address income disparity - not eliminate it, but to make it less obnoxious. Furthermore, doing so will stimulate economic growth in the long run. We should also do more for non-minimum wage jobs, especially government funded ones - teachers, nurses, police & emergency services in particular. It’s a problem because the disparities from nepotism (and other closed-circle relationships, such as “the old boy’s network”) and inherited wealth are huge, and they build up over time. Yes, people can overcome adversity and escape poverty – in that sense, our economic system is a lot fairer than many that have been tried. But it is almost infinitely easier for a child of high-wage earners to get through high school and university than it is for a child born into a low-income family. The income disparity is huge – the top 20% of income earners bring in just under 40% of the total income; the bottom 20% bring in about 5%. The disparity is growing worse – the ABS figures for 2005-2006 show that the bottom 20% saw effective wage growth of 8% between 2003 and 2006 (a whopping AU$24/week!), the top 20% saw effective wage growth of 13% in the same period. Income disparity in turn leads to asset disparity – poorer people are vastly less likely to own their own home, or have savings for retirement. In the 2003-4 figures, the top 20% of income earners owned 59% of all assets – average net worth of $1.4 million – while the bottom 20% owned 1% of all assets – average net worth of $23,000. In 2005-6, it got worse: the bottom 20% had increased to an average net worth of $27,000 (an increase of 17%), but the top end of town had increased to 61% of all assets – an average worth of $1.7 million (an increase of 21%)!

If the rich had just stayed where they were, and that wealth distributed downwards, it would have sufficed to buy low-cost housing for the entire bottom 20%, getting them out of rent traps – in just a 3 year period.

Furthermore, every time the issue of minimum wage rises comes up, the business community argue that it will cost jobs. However, salary increases at the top end don’t seem to cost jobs…

It is certainly true that simply raising the minimum wage, in a knee jerk fashion, will cost jobs and will be inflationary. However, more delicate reforms could be made to address income disparity – not eliminate it, but to make it less obnoxious. Furthermore, doing so will stimulate economic growth in the long run.

We should also do more for non-minimum wage jobs, especially government funded ones – teachers, nurses, police & emergency services in particular.

]]> By: scot http://twasink.net/blog/2009/07/wage-growth-does-not-automatically-equate-to-inflationary-pressure/comment-page-1/#comment-792 scot Tue, 28 Jul 2009 11:40:42 +0000 http://twasink.net/blog/?p=663#comment-792 Also, higher paid workers are generally happier and more productive. Productivity is what counts (output for cost), not just cost. Also, higher paid workers are generally happier and more productive.

Productivity is what counts (output for cost), not just cost.

]]> By: Ben http://twasink.net/blog/2009/07/wage-growth-does-not-automatically-equate-to-inflationary-pressure/comment-page-1/#comment-791 Ben Tue, 28 Jul 2009 10:39:08 +0000 http://twasink.net/blog/?p=663#comment-791 "One of my coworkers tossed out this line today: 'We can’t just increase the minimum wage, because that would cause inflation'" Wish I was there for that one, maybe I should start spending lunch with you guys again :-) "income disparity is huge, and asset-disparity is even worse" How is this a problem when we are all given access to the same resources? Granted there are some disparities from nepotism and inherited wealth, but at the end of the day everybody is given similar opportunities, invalidating any basis for complaint. “One of my coworkers tossed out this line today: ‘We can’t just increase the minimum wage, because that would cause inflation’”

Wish I was there for that one, maybe I should start spending lunch with you guys again :-)

“income disparity is huge, and asset-disparity is even worse”

How is this a problem when we are all given access to the same resources? Granted there are some disparities from nepotism and inherited wealth, but at the end of the day everybody is given similar opportunities, invalidating any basis for complaint.

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