Fair pay?

[xalciene]

Yesterday the new Fair Pay Commission, in its first decision, put up the minimum wage by $27.36 a week, just short of the $30 the ACTU wanted.

This has been widely hailed as a vindication of the old Australian Industrial Relations Commission’s acceptance that high minimum wages support the lowest paid workers in our society. The Prime Minister and

Comments

[kewpid]

What does it mean for a business to operate flexibly?

[xalciene]

'flexibly' as in inputs are flexible. that is, the cost of hiring an additional unit of labour is the same as laying one off, when at the optimal point.

[kewpid]

Isn't one (wo)man's flexibility another's churn?

[xalciene]

churn?

I meant businesses (employers), not workers. A business with relatively flexible labour inputs would be able to hire workers when it needs them, and if it has to, lay some off when it has to. However, labor isn't completely indivisible (well perhaps in some parts of the manufacturing sector) -- there's different levels of 'capacity utilisation' workers can be used at. In downturns most firms keep workers on but a bit idler, to pass the time, rather than sacking them, due to the costs of getting rid of them, then eventually findiing replacements, training them up, etc (and not to mention govt regulations) -- I'm arguing that labour needs to be more flexible, but supported by stronger (fairer) tax-welfare system, where low income workers have their incomes supplemented directly from welfare, rather than through distortionary minimum wages.

... but that said, the magnitude of economic effects arising from high minimum wages are uncertain at best, even if you assume the impact on employment and inflation isn't a good one.