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The Minimum Wage Mirage (Or Not)

2:26 Apr 14^th, 2012 | 9 notes

It is common sense economics that when a product isn’t selling you lower the price. Unfortunately people can’t sell their product (labor) at a lower price because government mandated minimum wages. Which is one of the reasons unemployment is so high and people can’t advance in jobs. It is hard to advance when you can’t get a job in the first place.

Unemployment remains high; job growth is sluggish; and millions of Americans have given up hope of ever finding work. So how do creative legislators propose to generate new hiring? Easy: Make it more expensive.

That’s right. In Congress and several states, some lawmakers want to increase the legally mandated minimum wage. They think employers should have to pay more for labor. They say it should be illegal to hire people who are willing to work cheap.

This amounts to a stubborn defiance of simple reality. A recession puts strong downward pressure on wages and salaries. A slow recovery has the same effect, only milder. It’s an unfortunate consequence of a weak economy.

You can’t blame anyone for wanting incomes to grow. But trying to achieve that in this manner is like trying to start a campfire by aiming a hose at a swimming pool.

Still, the idea has no shortage of fans. Some supporters think it should be increased to $9.80 an hour by 2014. Sen. Tom Harkin, D-Iowa, chairman of the labor committee, told The New York Times a raise would “help hard-working families make ends meet, join the middle class, and help move the economy forward.”

New York Mayor Michael Bloomberg favors increasing his state’s floor. Even Mitt Romney thinks the federal minimum wage should climb automatically with inflation.

No one will deny that the minimum wage provides for a meager income. Under the federal requirement of $7.25 an hour, a full-time worker earns just $15,080 a year. Illinois’ $8.25 minimum wage yields an annual income of $17,160. The federal poverty level for a two-person family—say, a single mother and a child—is $15,130.

It would be nice if every worker were worth $9.80 an hour. But not all workers are. If you tell a company it has to pay $9.80 to someone who produces only $7.50 in value, the company may choose to pay that employee an even lower wage: zero.

That’s one way a higher minimum destroys jobs. Another problem is that by increasing labor costs, the change would inevitably tip some companies from profitable to unprofitable. A fast-food restaurant that can stay afloat paying $7.25 an hour might sink under the weight of a 35 percent increase. Some businesses would disappear, taking their jobs with them.

It’s a time-tested axiom of economics that when the government sets a minimum wage, it causes unemployment by pricing some workers—particularly marginal ones—out of the labor market.

It’s worth noting that Australia has had a federally pegged minimum wage since 1907. Our minimum wage rises with inflation, and is currently $15.51 an hour, or $589.30 a week. Our current inflation rate is 3.1%, unemployment is at 5.2% and steady. Australia didn’t enter recession during the financial crisis (along with Korea as the only two developed economies not to), and we have the highest median household wealth in the world (adjusted for exchange rates).

A high minimum wage has not hampered us by any means. To balance it we have a relatively flexible labor market (free from the rigidity of Europe’s, and the brutality of America’s), and low taxation on par with the US.

It appears from this that the minimum wage is by no means the economic catastrophe some would make it out to be. Rather, the minimum wage is labeled a bogie man—an easy scape goat for people’s frustrations and unwillingness to examine the deeper causes of why people’s wellbeing must be pushed so low to maintain economic stability.

Best not to make excuses, better to find solutions.

(via jtothemart)

Education Reform: Barry O’Farrell Begins to Walk the Wrong Path

10:29 Mar 11^th, 2012 | 1 note

There is a new vogue in conservative politics: education reform. Arguably started by Governor Jeb Bush (R-FL) back before President George W. Bush’s 2001 ‘No Child Left Behind Act’, the trend has now reached Australian shores; and Premier Barry O’Farrell is a willing convert.

The political argument goes like this: labor or left-leaning parties are too tightly aligned with teachers unions, and thus are incapable of implementing the changes necessary for school system to continue achieving at a high standard. To the rescue come conservative politicians, free of the shackles of unions and with all the answers to the questions of why students are doing poorly.

Naturally, the NSW Teachers Federation is dubious of Premier Barry O’Farrell’s new cocktail of reforms that the Daily Telegraph (a little too enthusiastically) labels ‘The greatest revolution to hit NSW education in 50 years’. At the heart of the plan lies ‘merit pay’, the system whereby teachers are paid for performance. It sounds like a nobel and fair minded idea, and it is. The problem is that no one has figured out how to do it correctly.

In the US, various merit pay systems have been developed, each with mixed success, and each with their own problems. The ‘Teacher Advancement Program’ is one such system, and while it has met with favorable outcomes, it costs between $250 and $400 per year, per student. Florida’s merit pay scheme also throws up numerous problems. The Tampa Bay Times reported in 2008 that three quarters of teachers who received merit-based bonuses worked in affluent areas, and only three percent worked in the state’s poorest schools. Rather distressingly, Florida’s Hillsborough county actually ran out of money before it had handed out all the bonuses teachers had earned.

New York’s merit pay system has created different problems. A report by the RAND Corporation (a not-for-profit research group) found that three-quarters of New York teachers believed that their system relied too heavily on test scores, and that one-third of teachers didn’t even understand how the merit pay system worked. RAND also found that teachers not part of merit pay systems were just as likely to undertake additional professional development training as those who were under merit pay.

Attempts to diversify the way improvements are measured have so far led to confusion. Chicago’s new merit pay scheme measures ‘quality management’ and ‘school climate’, while Denver’s ‘ProComp’ program measures ‘parental satisfaction’. Beyond issues with the way merit pay is calculated, there have been discoveries of large scale fraud by teachers seeking to improve their pay by changing student test results, encouraging low performing students to stay at home on test days, and even destroying entire tests after they are collected. Such events have been recorded in Georgia, and Washington D.C..

However, one of the biggest complaints teachers have about merit pay is that it strikes at the heart of a profession so deeply reliant on collaboration and teamwork. The central premise of merit pay is that individuals will work harder if incentivized, and that means getting ahead of your peers. Teaching has never been a profession that has attracted individuals who seek to gain the upper hand on their colleagues, because teaching has never been a zero-sum profession. To force teachers to compete will destroy the free flow of ideas that has been a hallmark of their vocation.

There is another way.

One need only look at the dazzling success of Finland’s education system to find a model proven to give results. Finland ranks 6th in the OECD in math, 2nd in the sciences, and 3rd in reading. What separates Finland from much of the rest of the developed world? The answer is the exact same foundation upon which merit pay rests: money. The entrance marks required to study teaching is equal to that of medicine or law. Only ten percent of applicants wanting to study primary education are accepted, and every Finnish teacher leaves university with a masters degree. To be a primary school teachers is to be as highly paid and respected as a doctor, or a lawyer. Finland throws out the concept of competition among teachers and competition among schools in favor of equity and high standards for all schools. Finland has no standardized testing, no national testing of any kind, and merely relies on the quality of its teachers to prevent students from falling through the cracks. Their current system is forty years in the making, but it works.

Australia, and NSW, who rank 15th in math, 10th in science, and 9th in reading, would do best to reject the failures of the United States (30th in math, 23rd in science, and 17th in reading), and instead begin to lay the foundations of a path towards Finnish-style success.

That, truely, would be the greatest education reform to hit NSW in 50 years.

The Foreign Mystery: The Labor Party appears to enjoy shooting itself in the foot over and over again.

11:24 Mar 2^nd, 2012 | 1 note

It’s almost as if we’re watching ‘Act II’ of a widely acclaimed piece of theatrical political satire. The first act was genius, but left many foreigners scratching their heads at such a weird plot. The Economist called it a ‘psychodrama’ about ‘good old-fashioned personal lothing’, making the connection with one of the production’s main influences: the Punch and Judy Show. TIME Magazine commented that the first act ‘doesn’t quite make sense’, while Slate Magazine none-the-less called it ‘amusing’. And The Guardian rather harshly editorialized that the show was more like a ‘soap opera’ than anything else.

Now, the show goes on.

Just a reminder to everyone; it was the Monday just passed that the Labor leadership ballot occured. Not at some distant point in the past, but last Monday. Four days ago. Mere days cannot pass before the Labor Party decides it is time for another damaging spectacle than achieves nothing and leaves me banging my head against the desk.

11:21 Feb 22^nd, 2012 | 9 notes

Prime Minister Gillard and I and the overwhelming majority of our colleagues have been applying our Labor values to the policy challenges in front of us and we’re succeeding despite tremendous political obstacles.

For the sake of the labour movement, the Government and the Australians which it represents, we have refrained from criticism to date.

However for too long, Kevin Rudd has been putting his own self-interest ahead of the interests of the broader labour movement and the country as a whole, and that needs to stop.

The Party has given Kevin Rudd all the opportunities in the world and he wasted them with his dysfunctional decision making and his deeply demeaning attitude towards other people including our caucus colleagues. He sought to tear down the 2010 campaign, deliberately risking an Abbott Prime Ministership, and now he undermines the Government at every turn.

He was the Party’s biggest beneficiary then its biggest critic; but never a loyal or selfless example of its values and objectives.

For the interests of the labour movement and of working people, there is too much at stake in our economy and in the political debate for the interests of the labour movement and working people to be damaged by somebody who does not hold any Labor values.

Julia has the overwhelming support of our colleagues. She is tough, determined, forward-looking, and has a good Labor heart. She has a consultative, respectful relationship with caucus while Kevin Rudd demeaned them. She’s cleaned up a lot of the mess he left her and has established a good, Labor agenda. She’s delivering major reforms, and getting things done that her predecessor could not. Colleagues are sick of Kevin Rudd driving the vote down by sabotaging policy announcements and undermining our substantial economic successes.

The Labor Party is not about a person, it’s about a purpose. That’s something Prime Minister Gillard has always known in her heart but something Kevin Rudd has never understood.

Deputy Prime Minister Wayne Swan’s release on Kevin Rudd

Well Done

10:48 Feb 22^nd, 2012 | 12 notes

It is as if carrying the card of the Labor party didn’t already come with enough baggage. But after tonight, the past four years of our policy successes and reforms now amount to nothing in the eyes of the public. Any time talk of politics enters a conversation I am in the questions immediately swing to sideshow leadership speculation, scurrilous rumors, infighting, party conflict and public spats, and are subsequently hurled in my direction. I am forced to remind people that behind this joke of a spectacle, reforms are being passed into law, the lives of Australians are being improved, and our standing in the world is growing. If this is what I dealt with yesterday, I dread tomorrow.

My generation will never remember that it was this Labor government that navigated the 2008 financial crisis better than any other government in the world. They will never recall that it was the Labor party whom introduced paid parental leave, or brought our telecommunications network into the 21st century with the largest infrastructure project in the nation’s history. Forgotten the fact will be that it was this government that ushered in the largest series of education reforms in decades, established Australia’s response to climate change, and removed discrimination based on sexual preference from all but one of our country’s laws. The list goes on, but these reforms will be a footnote in history after all is said and done. The events of February 2012 will come back to haunt the next generation of Labor leaders, dragging them down and holding them back. Who knows how long it will take for Australians to return to our party, to trust us again, to be proud that they voted for us.

So to everyone involved: Congratulations—you’ve screwed us for a decade.

Keeping Medicare Universal: Medicare must be kept universal if the program is to improve

6:30 Feb 16^th, 2012 | 0 notes

It seams strange having to discuss this, but means testing the Private Health Insurance Rebate (PHIR) has brought up questions as to the validity of publicly funded universal health care in Australia. Tim Wilson of the Institute of Public Affairs (who’s motto I think should be, ‘Government. Eww!’) stirred up just such a question on this weeks Q&A.

Let’s be clear: Australia’s financing of healthcare is very messy and inefficient. The 53% of us who purchase private health insurance (PHI) remain insured under Medicare (Australia’s universal public health system), meaning more than half the population is insured twice, but only ever enters the health system as a public patient or private patient at any one time. Similarly, doctors have an incentive not to reduce waiting times in public hospitals, because higher waiting times may drive people to the private system (with shorter waiting times) where they are payed more.

Several solutions are pushed by the ‘Government. Eww!’ people. One is an opt-out of medicare after purchasing PHI. The result is that once you enter the PHI market, you forfeit your right to use Medicare (and presumably the need to pay for it) for everything except emergencies—assuming that we don’t fumble that exemption like the Americans did for a while. The downside is that the people left using Medicare (those who can’t afford PHI) don’t generate enough revenue to pay for the same quality of care the system currently provides with everyone paying, leading to additional funding having to be drawn from other parts of the budget, or a decline in the quality of treatment.

A more radical proposal is a voucher program. You can probably guess where this is headed, because ‘Government. Eww!’ love voucher programs. The idea is to give everyone a cheque instead of directly sending those funds to public programs like Medicare. With said cheques, people choose where to place their money; in the private health system, or the public health system—whichever serves their needs best. The potential is for people to flock away from the public system into the private system, with the worst case scenario being the dismantling of the public system all together. You then have to hope that your cheque covers all of your health costs in the private system, or be left footing a bill that you never would have had under Medicare.

The problem I and many others have with these proposals is that they remove the universality of Medicare. While this may not always be done with malicious intent, it creates an environment where our attitudes towards this public program drastically diverge. At the moment, every man, woman, and child in this country is invested in Medicare. This is not only because we are all paying for it, but because we all have a claim to its use—we know it is there if we ever need it, free of charge, no questions asked. Removing the universality of Medicare breaks this mindset. All of a sudden, we are not all invested in making sure the quality of Medicare services are kept high, that the treatments delivered are the best available, or that new and creative solutions are found to the systems flaws.

Overnight, Medicare would turn into something ‘only poor people use’. Much like Centerlink conjures up images of ‘dole bludgers’ and ‘welfare queens’ despite the agency’s role of providing student support, the pension, the Family Tax Benefit, legal aid, grief counselling, and disability support; so too will Medicare become a target for disparaging remarks, and the first port-of-call when politicians start spouting off about the need to ‘remove the culture of dependency’.

New methods need to be found as to how we finance healthcare in Australia. Beyond adjusting the PHIR, we could adjust the system so that PHI covers only ancillary care, and not medical or hospital cover. There are many changes possible and with more debate, more solutions will arise. However, we must not forget that we must all be in this together. Dividing Australia into ‘haves’ and ‘have-nots’ in terms of healthcare will only weaken a strong public program. If we are to lobby for a better Medicare, we must all be invested in its success.

Obama’s 2013 Budget

6:30 Feb 15^th, 2012 | 0 notes

The New York Times has made a useful (and very pretty to play with) visualization of Obama’s new budget. Ignoring the fact that it will never pass congress (none of his have so far), it is none the less an important gauge of the President’s priorities for the coming year. So what appear to be his priorities?

Federal Highway Administration receives a 103% boost in funding
‘Housing Programs’ at HUD receive a 62.9% increase
The Consumer Financial Protection Bureau receives a 31.8% larger budget (they had a budget?)

More statistics can be viewed at the New York Times, and if you’re up to reading the entire 256 pages document, you can read it at the Office of Management and Budget’s website.

Fun fact: Obama’s budget paper is 256 pages long and spends $3.7 trillion dollars. The Australian Federal Budget is 1102 pages long and only spends $414 billion. Happy reading!

The Minimum Wage Mirage (Or Not)

Interesting Fact

Education Reform: Barry O’Farrell Begins to Walk the Wrong Path

The Foreign Mystery: The Labor Party appears to enjoy shooting itself in the foot over and over again.

Well Done

"The Labor Party is not about a person, it’s about a purpose. That’s something Prime Minister Gillard has always known in her heart but something Kevin Rudd has never understood."

Keeping Medicare Universal: Medicare must be kept universal if the program is to improve

Obama’s 2013 Budget

2012 Worldwide Cost of Living Index

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The Minimum Wage Mirage (Or Not)

Interesting Fact

Education Reform: Barry O’Farrell Begins to Walk the Wrong Path

The Foreign Mystery: The Labor Party appears to enjoy shooting itself in the foot over and over again.

Well Done

"The Labor Party is not about a person, it’s about a purpose. That’s something Prime Minister Gillard has always known in her heart but something Kevin Rudd has never understood."

Keeping Medicare Universal: Medicare must be kept universal if the program is to improve

Obama’s 2013 Budget

2012 Worldwide Cost of Living Index

Home Archive RSS Twitter My Likes

Home
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