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October 11, 2007
The Australia@Work report by the WorkPlace Research Centre argues that AWAs reduce wages of unskilled workers and increase their working hours – in short that AWAs decrease their hourly wage rate.
The response by Sinclair Davidson and Alex Robson to The Australians at Work report is from the perspective of Milton Friedman, who opposed the New Deal, stood against Keynesianism, and deemed economic freedom to be superior to political freedom. Friedman, Davidson and Robson say, argued that unions raise the wages of their members at the expense of the unemployed and that higher union wages price workers out of the labour market and force those lucky enough to have a job to work longer (unpaid) hours.
Davidson and Robson's interpretation of The Australia@Work report is that it suggests Friedman was right. The report's headline statistics state that workers on collective agreements (aided by unions) enjoy higher wages. This is deemed to be a bad thing. Lower wages are good. Since AWA's produce lower wages for less skilled workers, then they are good. It is bad to employ low skilled workers on high wages that exceed their low productivity, as this will generate unemployment.
Dead simple really. What is really needed is further labour market reform---more deregulation and flexibility --- to reduce the minimum wage and allow for the quick shredding of workers in economic downturns. Harry Clarke outlines the rationale:
The wage system should pay workers their worth in terms of production. With enough competition firms are forced to do this because workers will otherwise quit and accept bargains that benefit both employers and themselves elsewhere. This competition increases the more workers are employed – with higher unemployment, because wages are too high, it becomes harder for unemployed workers to get a job and harder for employed workers to shift out of a job they don’t like. If firms have to pay more than the opportunity cost of labour, perhaps because of trade union activity, then fewer workers will be employed. Minimally prescribed pay and conditions do simply create unemployment.
Labour market reforms keep costs in line with productivity. Social justice is not the concern. The minimum wage is an obstacle to full employment.Obstacles to full employment should be removed. As Friedman argued there is no meaningful content to the "ideas" of common good, public interest, or social justice.
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Gary,
the new Rights agenda agenda is one of defining democracy in terms of economic freedom and restoring the power of the executive branch.The market defines the totality of human fulfillment, and the policy aim is to to cut back on social expenditures and the welfare state in order to re-establish “fiscal probity”.