Tuesday, April 04, 2006

Work illusions

I did something unusual (for me) tonight by attending a La Trobe Politics Society discussion on 'Working Life Under Howard'. It included Elisabeth Wynhausen, who spoke on her book Dirt Cheap: Life at the Wrong End of the Job Market , and Jill Murray, a LaTrobe University law lecturer who spoke on the Work Choices Act (2005).

It was a discouraging evening for me dominated by leftist political rhetoric, little analysis and no understanding of basic economics. Wages were a social welfare tool that need bear no relation to productivity. Employers were irrational agents who would sack workers, to quote Murray, if they disliked someone's 'red hair'. Is this typical of political science in Australia today?

I am uncertain about some implications of this 'Act. It is not clear that minimum wages do have strong impacts on employment outcomes as Card and others have argued. There are adverse implications of weakening awards and conditions in situations where firms have monopsony power. This is relevant for low-income workers with low bargaining power. But there are offsetting effects - with fewer restrictions on agreements between workers and firms there are likely to be more jobs. And if unemployment is reduced below 5% in Australia the bargaining power of most workers will be high because of competition. To some extent, at least, forcing employers in low productivity sectors to pay high wages or to meet onerous work conditions will limit job creation. There is a strong argument that desired distributional outcomes should be met through the tax-transfer mechanisms not by restricting willingness-to-hire.

I was struck by the low level of the discussion. Models and data were not used to argue a case and discussion was based on anecdotes and media reports. There was a pervasive anti-Liberal, pro-Labor ethos and no attempt to separate ideology from analysis. One wonders what sorts of graduates are being produced by these programs. While economists sometimes have an excessively narrow vision, my vision was not enhanced by this discussion.

4 comments:

conrad said...

I hate these boring talks with interesting titles also, its false advertising. Make sure you take a seat at the side of a row in case of potential doubt.

Anonymous said...

I agree that perhaps a better introduction, to provide a frame of reference about the approach taken by the Howard Government to industrial relations policies, would have made the presented findings and comments clearer; and so, it would have deepened the general level of discussion. They probably needed a political economist or a labour economist to do so. However, I have a question. Did you go because you were interested in the topic or just to find a way to criticize?

Anonymous said...

what sorts of graduates are being produced?
poor ones

hc said...

First anonymous post. I went along to find out about the Work Choices Act. I was also curious to see how political scientists would look at such issues.