Shave pay packets to share jobs?

More people would have jobs, or fewer would be unemployed, if those who do have jobs were to receive smaller pay rises, according to Mark Davis in the SMH. This proposal comes out whenever unemployment starts to rise. Could it be fair and true?

I do find it hard to believe in this concern by economics writers for the plight of the unemployed. The same writers, when interest rates were going up and up, explained the need for rate rises, because – unemployment was too low. Too low for…? what? (To keep those in jobs feeling just a bit insecure, so they would not to be so bold as to ask too much from employers, perhaps?).

But, bad faith aside (as it is not a way to judge the idea), the proposal has problems. I’m no expert on economics, so I’m just spilling some out.

One – how can we KNOW that our pay rise forgone will be spent on employing someone else? It’s pretty damn hard to know where money goes in this economy, although we do know that the rich have got comparatively a lot richer in the last 20 – 30 years. So why wouldn’t any saving to employers go into their own pockets? If the current crisis has hit the rich particularly hard, then why would they NOT take the money?

Two – in the current economic crisis, when production is being cut, will private employers necessarily want to employ more workers to boost production anyway?

Three – an idea like this sounds OK to someone who has a comfortable income. Delay buying the new car or updating the furniture and the house, take a cheaper holiday, eat in a bit more often and choose cheaper restaurants. But if you are struggling to pay the mortgage or rent and the bills, to meet education costs, to afford the dentist, to keep the car on the road and to have a holiday once a year, then this is a really bad idea. Davis is proposing for 2009 a “minimum wage increase of $12 a week as opposed to last year’s $22 increase.”

Four – So, why should the money available to pay workers be considered a fixed amount, whenever it comes to considering pay rises and jobs? Why can’t the pool of money available to workers be expanded, as opposed to money for such things as wealthy luxuries, executive salaries, property acquisition?

Five – Davis cites rising productivity as one reason for specific employers reducing the number of employees, and therefore for a general need for creating new jobs. Why is it that rising productivity is not used primarily to reduce the hours of work of the employed so that no job need be eliminated because of a productivity improvement?

Six – This brings me to my final issue. As Barack Obama quoted Ted Turner “money is the way we keep score”. Wages is the way workers generally get money, or a record of their score in the system. It’s always hard, being told that one person’s pay rise is another person’s job cut, or to be able to work out if you’ll have enough insurance or superannuation, or to know why prices of shares, currencies, futures etc go up and down. If money is good for keeping score, then shouldn’t it be easier to understand what money is worth and will be worth? And to decide what work needs doing, how much, for how long, and how to share it around, to support a well fed, clothed, housed, healthy, skilled, informed, happy and fulfilled population? So – it may be that one person’s pay rise could to some extent be another person’s job loss – but since money is so poor for even knowing the score (leaving aside the unfairness of the score) – then (a) I can’t accept an argument for taking money from workers to put more money in the hands of employers, and (b) I hope somehow by keeping on nagging at this topic, to get people thinking about a fairer and more transparent way than money and capital to score production and distribution.

A suggestion – whilst we are stuck with money – an alternative to shaving pay packets generally, is an income tested shaving of pay rises for pay packets above a certain amount (maybe the amount should be based on the minimum amount earned by anyone, such as Mark Davis, who goes on the public record advocating a pay cut to fight unemployment). The money forgone should go direct to the government specifically as a job fund.


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