If you pay more money to the working poor who actually prop up this economy, well, we rich people will have to increase our demands too:
THE biggest slump in national output since Paul Keating’s early 1990s recession seems an awkward time to be contemplating a hefty across-the-board wage rise or higher interest rates.
Yet Fair Work Australia’s Geoffrey Giudice yesterday delivered a 3.4 per cent pay rise – worth between $19.40 and $38 a week – to 1.4 million or so workers on award wages.
Although purporting to help “low paid” workers, the decision applies right up the award pay scales and is likely to form a wage bargaining floor just as Australia’s biggest ever mining development boom heats up.
We cannot afford to let the widening chasm between rich and poor be in any way reduced!
(I love Stutchbury’s scare quotes around the words “low paid”, too.)
Oh, and in case you people struggling at the margins were in any way persuaded that your salaries increasing would be a good thing, don’t worry – we haven’t forgotten how to scare the shit out of you:
Wage rise threatens to push up interest rates
So shut up and leave us to gobble up all the pie. That you’ve been making.
Moved On 
I’m on an award. I’m not sure if this means I get a pay rise as a result of this decision? I certainly wouldn’t classify myself as part of the “working poor”…
Government’s haven’t budgeted nearly enough for this, including those that endorse the FWA decision.
Good point Micheal S – its obvious the lowest paid (great 25 bucks a week extra, it’ll seem like double that now I’ve quit durries,) workers are responsible for this increase in the cost of living thats hitting those on >$150K a year.
Mining boom this cost of living that – obvious culprits – low paid workers.
The bastards should be working for free, after all every major economy collapses once it loses its supply of slaves and other cheap resources. The selfishness of the plebs never ceases to amaze me.
(Case in point – I don’t own a mortgage or any other debts, being too poor to afford to get into debt or something, so I couldn’t care less about interest rates, and the way things are is simple. If you are “poor” you will be screwed over. Thats how it goes. An extra 20 or 30 bucks a week won’t make much difference for very long.)
Wonder if we’ll ever see this headline;
‘Mining profits rise threatens to push up interst rates’
Just as likely (possibly more so), but a snowflakes chance in hell of ever gracing the pages of The Australian.
WAAAYY off-topic …
Sorry Jeremy I don’t have Twitter … do you mean to tell me an SUV was really truly covered in environmental stickers?!?!?!
And here I was thinking that to put a “One Less Car” sticker on my bike was a bit twattish …
We so desperately need a “Maximum Wage Law” to balance the minimum one. Pick a number, enough to live like a king – 2 million, 5 million, 10 million. Whatever the amount, every dollar earned in a calendar year over that amount is taxed at the rate of 100%. And tie any periodic increases for CPI or whatever to similar percentage increases in the minimum wage. No safe harbours, charities, wholy-owned-companies, or pseudo-non-profit shenanigans. Just strip it from them. They aren’t recirculating it into the economy anyway, so make them.
“Sorry Jeremy I don’t have Twitter … do you mean to tell me an SUV was really truly covered in environmental stickers?!?!?!”
Yes. I noticed while I was sitting in traffic in my car.
@uniquerhys, given that vast majority of people with earnings in excess of say $5 million a year are either upper level management at a multinational corporation, banking or hedge fund trader types, or entrepeneurs of some description – most of whom are pretty free to become overseas residents for tax purposes – how much revenue do you think your top 100% marginal rate will actually collect?
And I’m still curious to know if anyone can tell me if I get a pay rise, purely by virtue of being on an award.
Not necessarily a contradiction, depending on the model of the car and how its used. A large segment of the 4wD driving populace don’t need them and are burning fuel for not much more reason than to own a status signal. But some people may actually drive such cars off-road, and pay for Green Power on their electricity bill or do all sorts of other quite environmentally conscious things, without being a hypocrite.
“most of whom are pretty free to become overseas residents for tax purposes – how much revenue do you think your top 100% marginal rate will actually collect?”
There are laws related to transfer of large sums of money overseas. I know this because of the stupid questions on the custom forms every time I fly overseas and back on a business trip. (As if I’m going to carry $10,000 in cash out in my pocket! That’s what credit cards are for!) Set transfer limits and have the banks deduct the tax on the way out.
I’m aware that it isn’t very workable. It’s nice to dream though. Takes the edge off the feeling of helplessness in the face of the aristocratic twerps. At least for a while.
I don’t mean that these people will have their income paid in to overseas bank accounts. I mean the multinationals, banks, new businesses, etc will all be headquartered in Singapore instead of Sydney, and the people making $10 million even if Australian citizens will become Singaporian residents, at least for tax purposes, while the organisations they are part of will continue to sell their services in our country. If push came to shove, they would probably give up their Australian citizenship if necessary, given you’re proposing to forbid people earning over a certain amount.
The pattern happens time and again. You can follow the majority of the OECD and set a top marginal tax rate somewhere above American levels to sensibly maximise revenue; but if you start going significantly higher than 50%, people will just move, like the Beatles did when they were paying 98 cents in the dollar or whatever it was.
That’s the problem – there should be a maximum, but you can only do it if everyone else in the world does it, too.
Which they won’t.
Anyone who has a solution for this, I’d be very interested to hear it.
A potential solution? – Tweak the mathematics basically.
http://en.wikipedia.org/wiki/Pareto_distribution
http://en.wikipedia.org/wiki/80-20_law
Its definitely a systemic problem, and there may bne no solution, but there may be, if you can figure out how to tweak the maths surrounding it.
Why should there be a maximum?
Flattening a power law distribution by imposing a maximum is “tweaking the mathematics.” There’s no way to achieve the effect that’s not equivalent to legislating a maximum income.
But it doesn’t work if you just force people to move overseas. And even with a Socialist world government that imposes a 100% top marginal tax rate on every living person, there’s an argument you just remove a large enough part of the incentives that many productive people will stop working once they’ve reached the limit. People are not Homo Economicus, but they are close enough to it for a Laffer curve argument to still carry some weight. Who is going to found the next Microsoft, Berkshire Hathaway, Google, eSolar, or Tesla?
P.S. If this is a duplicate comment, please delete it. It appears WordPress’ new authentication system is, amazingly, even more screwed up than the old one.
Flattening a power law distribution by imposing a maximum is “tweaking the mathematics.” There’s no way to achieve the effect that’s not equivalent to legislating a maximum income.
Honestly I can’t see legislation ever working, ever with a socialist world govt.
“People are not Homo Economicus, but they are close enough to it for a Laffer curve argument to still carry some weight. Who is going to found the next Microsoft, Berkshire Hathaway, Google, eSolar, or Tesla?”
Yeah but:
Do you think if Bill Gates got laid in high school, do you think there’d be a Microsoft?
Of course not.
You got to spend a long time in your own locker with your underwear shoved up your ass before you start to think,
“You’ll see. I’m going to take of the world of computers! I’ll show them.”
Neither can I. But there’s no other way to enforce an idea of maximum income – you have to take any excess off people, using force of law, wea
So do you perhaps think the solution to unequal distribution of income is to mandate nerds get more sex in high school?
“there’s an argument you just remove a large enough part of the incentives that many productive people will stop working once they’ve reached the limit.”
That happens anyway. I’m nowhere near the limits I made up above, but I have enough savings that right now I can take some substantial time off between jobs to just do my own open source thing with no hope of remuneration. Giving my “productivity” away just for the betterment of humankind, basically. I have a few other friends in the same financial position.
The people who accumulate massive wealth beyond the limit are usually not the kind to just quietly retire and let others tackle the hurly-burly of 9-5. They are usually psychopaths who get off on lording it over others and buying and selling human lives for profit (usually – there are exceptions). If giving them a limit makes them stop and retire early on a private beach somewhere, then we’re all better off for it.
I suppose you could pass a law that requires that I must work if I’m capable of it. I’m sure some psychopathic multinational CEO could squeeze a few more years of coding out of me, purely for their own amusement and profit. Because my “productivity” is only valid if someone can monetize it – not if I donate it to the world – right?
Your savings no doubt represent a limit that would still seem very wealthy to a person on a globally average income.
If we were going to decide this in a truly democratic way, and a majority favoured $50,000 as the limit (just as arbitrary and plausible as $500,000 or $5 million), would everybody here be willing to take it?
Nonsense. The altruistic wealth creators and psychopathic parasites exists all the way up and down the wealth scale. Your hard working childcare workers are matched by your hardworking green energy entrepeneurs, and your welfare scammers are matched by your multi-billion dollar ponzi scheme merchants. If everyone at the top of the system were such a net drain on the rest, the system would rapidly collapse.
No, in fact, that’s not right. Net global welfare of course goes up more if your own values and beliefs make you want to give away some your work and not retain any the benefits for yourself. That’s a good thing, regardless of how much money you make. We should hope for more regular people to do volunteer work, and more billionaries to give most or all of their fortunes to sensible charitable causes.
Nonetheless, most people are at least somewhat selfish. Until you’ve cured humanity of greed, Marxist ideas won’t work. This is why socially democratic systems with progressive taxation – governments taking and redistributing a share of private gains, rather than commandeering all of it – is the best compromise.
jordan
I’m on an award. I’m not sure if this means I get a pay rise as a result of this decision?
Depends which award – they vary considerably. Some of the pre-Hawke awards prescribe that a hike in the bottom wage is to be passed on to all pay grades, but that’s rare now (and they didn’t cover executive pay).
If yours (probably one of the still-active Industry Awards) says something specific about such a rise, it probably just prescribes a higher cap than the legislation.
In short, if your take-home is more than 500-600 a week, you’ll probably miss out.
So says the Little Red Book that SB’s about to accuse me of quoting:)
Or you could use this Award Search engine if you don’t mind doing a LOT of reading.
http://www.fwa.gov.au/index.cfm?pagename=awardsfind&norightcol
jordan no … I’m suggesting that its more than income that motivates someone to take over the world using computers.
Funny you mention Tesla and wealth tho. If that Randian economic meritocracy bullshit was true he wouldn’t have died a pauper.
Yes, it certainly is. In fact fundamentally, desire for income is only an imperfect proxy on other more fundamental desires. 100% marginal tax rates still don’t work.
We certainly don’t live in an economic meritocracy despite the delusions of the Rand worshipping naieve Libertarians. But I was talking about the company, not the scientist.
http://en.wikipedia.org/wiki/Tesla_Motors
Thanks for the award info Lykurgus. It makes sense to me I wouldn’t get a raise from this decision, but the Australian piece misleadingly gives the impression that I would.
The $38 a week figure I assume would only be applicable to somone on one of those rare pre-Hawke awards?
Re Tesla Motors – Yeah I know you were Jordan.
“Yes, it certainly is. In fact fundamentally, desire for income is only an imperfect proxy on other more fundamental desires. 100% marginal tax rates still don’t work.”
I know they won’t, I’m just not entirely convinced thats the only way to “tweak the maths” but I really don’t know enough to say more than that.
Within a business/organisation, income levels for the highest paid positions ought to be linked to the income of the lowest paid. Using a set multiplier, say for simplicity 100, the top salary paid in a firm paying its cleaner $30’000 pa can not exceed $3 million. If the CEO wants to earn an extra $1 mill, he/she has to make sure the people at the bottom of the pyramid are not forgotten and also get an extra $10K per year.
The only factor limiting the upside to top executives earnings potential for is under their direct control.
This way Australian society will benefit from the ever increasing remuneration packages paid to more or less successful top executives not by punishing them with prohibitive tax rates once their income passes a certain threshold, but by ensuring that a rising tide lifts all boats.
I kind of like that idea juanmoment. But to put my contrary jordanrastrick hat on for a moment ( 🙂 ), the cleaner and other low-paid jobs are usually contracted out and not actually employees. Even a lot of the middle-tier work goes to consultants and contractors these days.
The CEO of the cleaning company would be restricted by the junior cleaner’s salary, but the CEO of the investment bank that hired the cleaning company wouldn’t be – they’d be restricted by the junior stock broker, earning much more than the cleaner. We’d still end up with a two-tier system of wages, and ineffectual limits on the top-end.
So, more laws required to close loopholes created by clever org structures. Or unify it across industries – the CEO’s salary is limited by society’s minimum wage, not his/her company’s. Which brings us back to a Maximum Wage Law and how to enforce it.
Does Bolt read the comments here and fleece them for ideas?
Yesterday we briefly talked about Parento Distributions and income and now Andy is using one wrt tax to complain about the poor not paying enough. I know this ain’t PP but it is kinda funny.
Its impossible to say whether such a tweak is possible unless you can specifiy your desired outcome more clearly.
You could probably make the distribtion non-Pareto without a tax rate on any finite income, say with a marginal rate not bounded by any amount below 100%. Say every time income triples, the percentage you get to keep is multiplied by 2/3.
However this is really just having a 100% rate for high earners in practice but avoiding one technically.
Interesting. Link?
Its nice not to be the only one 😛 Where’s SB or Jarrah when you need someone else to denounce all the pinkos?
I’m still not convinced one is justified even if it were possible.
Ayn Randites commit the “all wealth derives from merit, therefore taxes are evil” fallacy. But this seems to be the opposite extreme. If some proportion of the next dollar I earn is deserved, being the result of my own work and intelligence – and I’d say this holds for the vast majority of people – what justifies the government taking all of it?
That is certainly true for some firms uniquerhys, But whilst they might farm out the cleaning jobs, most of those business would still employ relatively low paid receptionists or secretaries. Then again, those roles could also be outsourced I guess.
One way of overcoming this problem is by setting the multiplier in accordance to the existing wage structure of a business. For example, in company A at the time the multiplier is set the CEO is on $1 million and they have a cleaner earning $33K, hence this firm’s the multiplier will be 30. Across the road, at company B, the CEO is also getting $1 million but their lowest paid employee is a secretary on $50K, meaning their multiplier is 20. To make the scenario slightly more realistic sounding, lets assume a reduction factor of 50%.
Should firm A want to pay the CEO an extra $300’000, then their cleaner needs to get an 50% of 10K extra, earning now $35’000. In firm B’s case, for the CEO to get the $300’000 more, the secretary would have to earn 50% of $15K more, $57’500.
These are just some rough figures, and are not taking into account actual on the job performance and other qualifiers such as length of service etc. The important part here is the link between the low and high incomes paid within a company.
Jordan here’s Bolts article, complaining that 10% of earners pay 50% of all income tax, and 60% of earners pay less than 10% of all income tax.
http://blogs.news.com.au/heraldsun/andrewbolt/index.php/heraldsun/comments/progressive_enough_for_you_60_per_cent_pay_just_10_per_cent/
Or another way of looking at the figures – over half the money earned in this country is being pocketed by the 10% at the top and they are begrudging about giving any of it back to the 90% that worked in the factories, farms, mines, shops, and offices to help line the 10%’s pockets in the first place.
Yes,. uniquerhys, thats about it.
The other way of looking at the figures is what jordan and I were talking about yesterday. An economist called Parento found that income distribution tended toward the top 20% earning 80% or some similar thing. 20% of the population controlling 80% of the wealth or resources or whatever.
Its a favorite idea of Fascists cos they reckon it reinforces their darwinian worldviews about some people being born to rule.
Parento distributions are just an observation about how income tends to be distributed. People who attribute any kind of “proof of virtue” to them are silly.
The RBA looks at a range of factors, not just wages. and the current media releases from the RBA show very little concern over wage growth.