I wrote:
>
>The Incomes and Prices Accord (in OZ)
>> . . . was based on national wage decisions for all workers. . . . Many deals
>> were in the form of increases in the "social wage" which were deliberately
>> intended to redistribute and realign factor shares in OZ towards
>profits.
>
Eric asked in response:
>Can you expand on this Bill? What form the the "social wage" take?
>How did the social wage help realign factor shares in OZ toward
>profits?
>
OZ has had a long history of centralised wage setting - unique in the world
actually. in 1983, the federal labour party (political arm of the unions or so
history goes) took power. there was a recession, and the early 1980s had seen a
brief return to collective bargaining (with agreements ratified by the wage
fixing tribunals) and some enormous wage outcomes (boosted by the rhetoric of
an impending resources boom which never really happended). so real unit labour
costs (another measure of the wage share) went up and unemployment also was
high as was inflation. the 1970s oil shocks had never really worked their way
through.
the labour govt set about installing a Prices and Incomes Accord in liaison
with the ACTU (OZ Council of Trade Unions - Peak body). the bosses did not take
part in the signing. the Accord sought to control wages growth (nominal),
realign factor shares, and in return the govt said it would increase employment
with expansionary policy and increase real wages (not via money wages growth >
CPI growth) via the social wage.
The SW was a central concept and included public goods like increased education
spending (the univ. system was expanded and children were encouraged to stay at
school longer which they did), better transport systems, the reintroduction of
the national health system (abandoned by the conservatives in 1975), family
allowance supplements (to bolster low income family resources) and tax
trade-offs.
for a time all was well. nominal wages growth was modest and lagged well
behind inflation which remained too high given the wages growth. in other
words, it was not possible to mount the argument that the inflation was cost
driven. definately margin push was responsible and profits soared and RULC
dropped in an unprecendented manner. to below the alignment that was seen
during the "golden" 1960s. the rhetoric was that the profit redistribution
would translate into investment and productivity growth and hence real wages
growth independent of the SW increases.
employment growth was the strongest in the OECD bloc up to 1988-89. but
something went amiss. the cappos who were meant to be investing were busily
getting further into debt with foreign loans (b/c in 1983 the financial system
was deregulated and no-one knew how to behave in the new free world), invested
in speculative real estate, CBD office blocks (which remained unoccupied), and
huge amounts of share deals, takeovers etc. its was a feeding frenzy for sure.
1987 saw it collapse. at the same time our terms of trade collapsed (well in
1985-86) which shaved off in value terms around 6 per cent of our GDP (via the
export losses) - a huge loss to digest in a year or so. the govt started to cut
back on the SW spending, employment started to slow down. then we had a series
of wage-tax tradeoffs under the SW concept.
this protected firms who were inefficient - b/c they avoided paying higher
wages. the workers gained higher real income and the govt deficit was put under
pressure b/c of the loss of the tax revenue. it was in the era of-course of
laffer curves and stupid idiots who said lower taxes were the incentive people
needed to work harder. i seemed to already see a lot of workers working hard,
and a lot of bosses who never paid fucking tax any way, playing golf at swisho
clubs. after the tax cuts, the workers still seemed to work hard and the bosses
still seemed to play golf (in fact yachting was the go - remember allan bond
won the americas cup during this era).
the tax cuts were also a default industry policy b/c they kept the high cost
firms in "subsidies". it was ludicrous when we were trying to become more
internationally competitive and trying like hell to get rid of the lazy
capital.
so the SW became fiscal austerity and the firms continued to cut real wages via
margin increases. by 1989, the lack of investment, the high interest rates to
bring down the imports and bolster the exchange rate (given the depreciation
due to the terms of trade shocks) and hence keep inflation in check, saw us
dive first of all the OECD countries into a deep recession. only then did the
inflation actually drop, as unemployment rose a lot. factor shares continued to
move towards profits. things only got better when the govt adopted some
old-fashioned keynesian spending in 1991-92.
interestingly
1983-1989 - real wages cut, employment grew strongly, demand expansion from
govt.
1989-1991 - real wages cut, employment growth negative, tight demand
conditions.
1992-95 - real wages cut, employment growth strong, expansionary demand policy.
i use this to advantage in my macro classes when i am dealing with neoclassical
explanations of history.
the accord was really a poor instrument for the workers.
it administered with the active consent of the ACTU real wages cuts.
it allowed with the ac. co. of the ACTU the profit share to expand.
it did not lead to increased investment.
it ultimately did not protect the workers via SW components which were
compromised b/c the tax cuts meant spending had to be constrained given the
feral behaviour of the budget deficit fetishists who were very fashionable at
the time.
it also saw a change in the wage structure b/c upper income earners who had
increments, classification change options as well as doctors, etc who were not
covered by the wage norms were able to improve their relative positions.
part of the feeding frenzy was also characterised by a huge blowout in
executive packages etc. it was a living disgrace i can tell you.
and all the time the ACTU - whose officials were wearing swisho suits (the two
previous leaders since 1983 have now or are about to get safe labour federal
seats in the govt) - engineered the erosion of workers' conditions. how anyone
could have faith in the union movement after this shit is beyond me. it became
a corporatist movement. it had nothing at all to do with class struggle. it
enslaved workers further rather than helped them. and if that wasn't enough,
these genii of officials agreed with the govt to move to enterprise bargaining
which has been even worse for workers, especially the disadvantaged.
the cappos have been laughing all the way to the bank. better to do away with
the unions i reckon and start again.
but then i am sad, revisionist, anti-marxist, arrogant, confused, wrong,
ignorant, un-dialectical, reactionary, disgrace for the left, and other things
i have heard about me on pen-l this last week or so.
i reckon i am one of the few realists on the left. i would rather get militant
than play these fancy corporatist games wearing suits and talking business in
bistros. but then if you get militant you don't cave in when the pension is
secure. you go for the whole bloody hog. otherwise, as has been shown so
clearly in france this last week, it is worse to take on the govt and show that
you can be partitioned and bought off. the train drivers have shown juppe that
money talks. there was nothing principled at all about their striking.
anyone i went beyond my brief, eric, hope that helps a bit.
kind regards
bill
--
#### ## William F. Mitchell
####### #### Head of Economics Department
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#################### New South Wales, Australia
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WWW Home Page: http://econ-www.newcastle.edu.au/~bill/billyhp.html
