This week we’ve made a conscious decision not to write about p——y or h—–g. Even though we’ve come across a few gems worth commenting on. And even though several readers have sent us a couple of choice morsels too.
But, we’ll stick to our guns and leave any p——y or h—–g comments until next week.
Anyway, our comments on pay equalisation seem to have set off something of a discussion both on the Money Morning website and in emails we’ve received to the Money Morning mailbag.
It’s an interesting topic so I thought it worth our while having another look at it based on some of the comments we’ve received.
A few interesting comments include this from ‘Zengirl’ that was left on the Money Morning website:
“It’s overwhelmingly disappointing that the attitudes of men toward equality are no different in the 21st century than they were in the last few. Using the concept of ‘competitive advantage’ to justify inequality is outrageous and simply cannot be supported in any way. Indeed, if your argument had any weight, then indigenous people (who are paid far less than any of us) would be the most competitive in the labour market!”
And also this from RB:
“IF women have a ‘competitive advantage in the workforce’ by being paid less, why do we not see women as heads of most of the board rooms, businesses and corporations throughout the country?”
Plus this one from CB:
“You have to be employed at a decent wage, so that your employment actually bestows you a decent spending power for it to be much good to yourself, your dependents, and even the overall health of the economy.”
And this comment from Nick:
“None of my staff’s pay is rated on anything else but job description and ability. Only a fool would jeopardise his company or business just to save a couple of dollars. Good people are the foundations of any business. I have found that people who are loyal to their employer are also loyal to their families, and visa versa. And if an employer is incapable of recognising that, they will suffer in the long run.”
Finally there was this gem:
“Charming re the low pay for women… women do 90% of the work on the planet and own 2% of the assets Big Daddy… disgusting especially when 99% of men are less intelligent than I am. get knotted Kris”
The first point to make, before we go any further, is that there will always be a degree of generalisation with this issue. The numbers from the pressure groups who favour pay equalisation trumpet the ‘fact’ that women are paid on average 17% less than men.
Is equal pay fair?
The call by them and others is that pay should be equal regardless of whether you’re male or female.
‘Equality’ is interesting because it suggests that all people should be paid at an equal rate. Therefore it suggests if Person A produces 200 widgets a day they should be paid the same as Person B who produces 201 widgets per day.
Is that fair? Probably. It’s close enough not to worry about anyway. But what if one is producing 300 and the other only 150? Is it fair they are paid the same? Now, this example isn’t specific to gender pay rates, but what it does is provide a case for employees to be paid different wages.
Once you agree that one method of determining different rates of pay is valid then you have to accept that there may be other ways of determining different rates of pay – not just based on the amount of widgets produced.
Then there are other comments that suggest there already is pay equality. That bosses would be mad if they paid female employees less than male employees.
We’ve no doubt that’s true. If there is no need or incentive for an employer to pay one group of employees differently from any other then the employer will pay the same or similar rate to all.
It will be a decision the employer has made based on experience and the market.
Furthermore, there’s the argument that female employees don’t “accept” lower pay, that rather it’s forced upon them.
We’d argue that everyone who takes a job “accepts” the level of pay. If they did not “accept” it they would not take the job. People only work if it’s in their interests to do so. They may not like the pay, but if it’s more beneficial for them to work than not to work, then they will work.
Finally, a quick note on the excellent comment from Zengirl, “if your argument had any weight, then indigenous people (who are paid far less than any of us) would be the most competitive in the labour market!”
‘Do-gooders’ cause more harm than good
Isn’t this an argument against arbitrary wage policies? If it’s true than indigenous Australians are discriminated against, then doesn’t it make their position much harder if they are unable to compete in the labour market?
If a minimum wage is set at $10 an hour a discriminating, racist or unenlightened employer may choose to employ a white person as that is their preference. But if there is no minimum wage, perhaps a discriminating, racist or unenlightened employer would be prepared to pay only $8 an hour to an indigenous Australian.
Perhaps the discriminating, racist or unenlightened employer would soon figure out that the indigenous Australian is just as – perhaps more so – capable than the white Australian and therefore increase the wage to $10 an hour.
However, at a mandated $10 per hour the indigenous Australian doesn’t have a chance, because the discriminating, racist or unenlightened employer has a prejudiced view that the indigenous Australian is less productive and is therefore only worth $8 per hour.
We’ve used the terms discriminating, racist or unenlightened employer, but we’re just using an extreme example. The fact is there’s obviously a barrier to employing indigenous Australians because even non-discriminating, non-racist, enlightened employers may be reluctant to do so.
Because if there wasn’t a barrier then indigenous unemployment rates would be the same as for all other groups. Our bet is that government interference is at the core of it – in fact, we’ll guarantee it.
There are plenty of other arguments and opinions as well. Feel free to leave your feedback when this article is posted to the Money Morning website later today.
But for now we’ll make this comment. Wage rates are determined by the market. In some cases it’s a free market, and in other cases it’s a manipulated market – eg. Award rates, trade union interference, government interference, etc…
No bumper pay day
But in all cases wages are determined based on what an employer can afford to pay. Artificially raising a wage rate doesn’t provide an across the board bumper pay day to everyone.
Instead it will provide a bumper pay day to some but create a pay cut or loss of pay to others.
Let’s take a look at a timely story that appeared in the Herald Sun: “Julia Gillard supports pay equity bid.”
According to the story:
“The Australian Services Union will launch a test case with Fair Work Australia today regarding the lower pay of community sector workers. They are the people who work in women’s refuges, family support centres, drug and alcohol rehabilitation and migrant resources. The union will argue that lower wages in the feminised community sector should be brought into line with pay rates in a similar, male-dominated industry.”
The article doesn’t specify which “similar, male-dominated industry” they want to align the wage rate with, so we’ll just have to make a whole bunch of generalisations. As I’ve mentioned it’s one of the things you have to do with this subject, so we’ll do that right now…
Our guess is that women’s refuges, family support centres, drug and alcohol rehabilitation and migrant resources jobs are either funded by government, quasi-government or charity-based organisations.
We’ll also make another sweeping statement to say that most of these services are either provided for free to the end user, or they may ask for a ‘donation’ from the end user to use the services. We’re prepared to be corrected if we’re wrong.
So, the question we have is how will the new higher wage rates be paid for?
According to the Herald Sun, “Australian Council of Trade Unions (ACTU) president Sharan Burrow admitted the push for a $100 a week pay rise for 200,000 community sector workers was not small.”
For the record, our Canon LS-100TS calculator tells us that’s an extra $20 million that these women’s refuges, family support centres, drug and alcohol rehabilitation and migrant resources organisations will need to come up with.
If we’re right and these organisations mainly rely on charitable donations and taxpayer funds then it means an extra $20 million will need to be raised just in order for them to provide the same level of service as they currently do.
Failure to do so will mean these groups will either need to reduce the number of staff or reduce the services they provide.
Naturally the argument will be, “Aha! If these are government funded then it’s easy, the government can just increase taxes to pay for it, it’s the socially right thing to do.”
Well, you know our opinion on taxation so we won’t delve into that again today. But let’s say the government does increase taxes to pay for it – after all, it’s just $1 per person per year, that’s not too much for anyone to cope with is it?
[Ed note: Our trusty calculator deceived us. Of course the full calculation is $100 x 200,000 = $20 million, times 52 weeks, equals $1.04 billion. That’s a cost of about $50 per Australian per year].
The problem is this. It’s our old favourite scenario of considering what is not seen.
What do I mean by that? If these government funded organisations do receive the extra money to pay for increased wages and they have done so due to higher government taxation, then it means less dollars in the pockets of individuals.
And perhaps it means that with fewer dollars in the pockets of individuals, there is less money for those individuals to donate to charities. With government subsidisation of one set of welfare organisations it potentially means other welfare organisations – those that rely on volunteers – could see a drop in donations.
Especially if taxpayers start to consider that a portion of their taxes is going to charities. Evidence in the early years of the National Lottery in the UK was that people donated less to charity as they were aware that a portion of the cost of their lottery ticket went to charities – that may have changed.
In other words, women’s refuges, family support centres, drug and alcohol rehabilitation and migrant resources gain, whereas donation-only or volunteer-only organisations potentially lose due to lower donations.
But that’s not the only potential problem. There’s the issue of the type of person drawn to these jobs.
Unskilled workers lose again
Let’s say for arguments sake that current employees in these organisations earn $30,000 per year (just to repeat, we’re just using this as an example). And let’s also say that this particular wage attracts a certain type of person, a person that has the desire to earn $30,000 per year and is skilled or qualified to do so.
So, what happens when the wage is increased by $100 per week to $35,200 per year? And let’s assume that the government stumps up all the extra cash so there are absolutely zero job losses.
Any guesses about what is likely to happen?
Well, one obvious impact is that the job will now attract all people who would like to earn up to $35,200 per year. We can take it one step further by saying – again using a generalisation – that those who expect to earn or who can command a wage of $35,200 may have more skills than those who were doing the same job but who were prepared to accept $30,000.
The consequence is that if the new legal minimum wage in this sector is $35,200 rather than $30,000 for what is in effect the same job, employers will be more inclined to employ someone with a higher skill set so that they are getting more ‘value for money.’
In other words, why would an employer pay someone $35,200 when they are only worth $30,000? They wouldn’t, not if they can attract someone with more skills who is potentially more productive for the same wage of $35,200.
Therefore, even though there may be a zero net impact on jobs, the effect is that the lower skilled workers are being priced out of the market by those with more skills. Simply because a mandate from the government decrees that $30,000 is too low a wage.
The employee that is only worth $30,000 to the employer is now unable to get a job in that industry and instead will have to seek work elsewhere. And that’s even though the potential employee may be perfectly qualified to do the job.
Of course, it implies the cost for the pay rise is fully underwritten by the government. In reality it won’t be. So not only will those with lower skills be pushed out of this type of employment, but there will also be fewer job opportunities for those with the skills as organisations will be forced to reduce staff levels.
Remember, pay equalisation doesn’t mean equality of pay for all. It means equality of pay for some at the expense of others.
Cheers.
Kris.
{ 50 comments… read them below or add one }
Nice piece of critical thinking Kris. I agree.
You said “…after all, it’s just $1 per person per year, that’s not too much for anyone to cope with is it?”
Well, actually it’s 200,000 workers x $100 per week which is ‘just’ $52 per person per year. Eeek!
wages were never too high
its just house prices going thru the roof & wages will never be able to keep up with em now
& GUESS WAT ??
put wages up= houses go up ..so wheres it end????
the child death occurred last week in melb ,13 people resided in the 1 house ,,prob all driving each other stir crazy.
is this the “new humane luxurious norm future slum” situation happening / tolerated in oz ???????
just keep bringing em in….by the hundreds of thous…………..stack one of atop of each other.of another
4 tier bunk beds yeeeeehhhhhhhhhhaaaaaaaaaaaaaaaa lololol
I just went to the doctor and the fees are up 20% and yesterday i found out my monthly membership at the gym went up 10%…. and the RBA says CPI is 2%!!!
Maybe we should change it Continence Price Index
yeah 2% is the new12%
watever figure they hand out,, just add 10% + or – 2% =just-about-right
etch @ 3:
lol – yeh – is that why u’re living in USA and not downunda?
Things not going as well in Ozz as everybody thinks.
I still reckon if you are one of the 80% of Americans who has a job (unemployment rate = approx 20% at moment?) then your cost of living is much much lower than here in Ozz…
‘Equality’ is interesting because it suggests that all people should be paid at an equal rate. Therefore it suggests if Person A produces 200 widgets a day they should be paid the same as Person B who produces 201 widgets per day.
Not really. I always thought the slogan was “Equal pay for equal work”? If a man and a woman do the same job, and are equally competent, then they should be paid the same amount. If the woman makes 201 widgets, she should be paid more than the man who makes 200, and vice versa.
lol, GB, a much more fitting name for the acronym. Isn’t this just the same old, same old? They are scaring the population to death with deflation, but in the meantime they are printing money like there is no tomorrow, with the inevitable result that all that excess money (over and above what would be justified by extra goods and services produced, i.e., honest to goodness growth) hitting the economy, starts to show up in price, first just here, then over there, and before you know it, everywhere. But have no worry, one day we are going to pay dearly for all this printing. It is, after all, borrowed money, which needs to be serviced and one day either paid back, or be defaulted on. Only if someone could sew Kevin Rudds little hands into his pockets and still better, took away from him the nation’s credit card …
Once again, this is what I think is happening: KRudd borrows and spends – all the excess money hits the economy and pushes up our prices – at which point the RBA says, oops, sorry folks, inflation isgetting ahead of us, so we need to increase interest rates on all the borrowed money – which in turn stresses out and imperils an already sickly economy – this in turn prompts KRudd to borrow and spend some more ——- and so we keep going around in a downward corkscrew, and who is foolish enough to believe that at the end of it all we are going to have a nice, soft landing? This is madness.
And, GB, this is why I am splitting my a!se by sitting on the fence regarding where house prices might be going next. On the one hand I see the high cost of housing relative to rents and other arguments that point toward house price deflation, but on the other hand I also see rampant money printing right around the world, done in the name of rescues and stimulus, and whatever you can and cannot think of, and I say to myself: where is all this money going to end up? Where will it go? Can I be sure that a good proportione of it not keep being poored into housing? And I find that I cannot. Just about the only thing that I can feel reasonably certain about is that all this money printing, regardless of where else all the cash is going to flow, is unlikely to do too much damage to the metals, especially given that those holding them, unlike a lot of those who hold property, are not holding it on leverage, and therefore thow holdings in silver and gold, are being held in what are called “strong hands.”
Sandra, it is The Wolf who is living over in the US. etch, I would guess, lives local.
etch, by the way, on the qeustion of house prices growing much faster than our incomes, here is a curved one for you, and Sayce, from his favourite spinner:
“Is there a Melbourne housing bubble?
What is it about housing that stimulates so much uninformed debate? … Extreme myths and misconceptions pervade almost every discussion one engages in … Between December 2003 and December 2009 the compound annual growth rate of disposable household incomes across all Australian areas was 5.7 per cent based on the ABS National Accounts data … So what have Melbourne house prices done? Unsurprisingly, the compound annual growth rate of Melbourne dwelling prices over the same period has been 6.8 per cent based on RP Data-Rismark’s Hedonic Index. In short, Melbourne dwelling prices have grown at a similar, albeit higher rate, than national incomes over the last six years.”
http://www.businessspectator.com.au/bs.nsf/Article/Is-there-a-Melbourne-housing-bubble-pd20100311-3ESVJ?OpenDocument&src=kgb
You see, etch, someone or other has got things awfully, terribly wrong. And I still cannot decide who that is. Only if someone would pay me good money to do my own research to find out ……….
yes cb its all just going to be possibly terrible with wat appears happening ,
unfolding.
i wonder if howard would’ve steered us in this direction ,
i know i’ve kicked his a5s but really i didnt mind him until WORKCHOICES !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
even his LPG rebate went great without a prob ,$10bill in the black .
but CRUDD is looting the country too $30 trill in the red when his done
I can see the price of widgets crashing in 2010.
I could never really understand how intelligent people can be so fixated on the following two things –
1. Constantly kowtowing to this principle we call “equality”; and
2. Constantly condemning this principle we call “discrimination”
First off, equality per se is not inherently bad or good it’s how it is applied. When practiced privately (voluntarily), and harms no one it is at best a way to benchmark yourself against others. When practiced publicly (coercively) through gunvernment fiat, it isn’t just wrong it is evil. Do you really want a society where families are allowed only one child, where females are forced to constantly cover their faces, where everyone is forced to vote on election day between the lesser of two evils? and on and on and on all in the name of equality…You may think the first one is absurd and I agree but it is life to many Chinese people, you may think the second one is wrong, but you don’t give a rats a$$ because it doesn’t happen in this country and you may think the last one is harmless so you are willing to play along. What you don’t realise is your complicit role in violating the rights of every individual by implicitly committing the sin of either o-mission or co-mission with the gunvernments in charge. Yes, not speaking up is music to tyrants ears.
Next time when you hear a politician talk about equality, think preferential treatment, think wealth distribution
The second principle “discrimination” actually goes hand in hand with the principle of “equality” and should really be a no brainer, yet for some unknown reason (my guess) through years of media spin the word carries a negative connotation. Think about it people, how did you come to being who you are today? …Answer: by constantly choosing between lifes limited choices…and that dear friend is what discrimination is all about, the ability to decide. When governments enact anti-discrimination laws all it does is reverse the discrimination by force and like equality laws gives preferential treatment to a certain group of people in society, E.g. disabled people. Now before you yap on about the poor people with disabilities, think about this. What sort of attitude do you think anti-discrimination laws will cultivate in the business owner who is now forced to provide a $20,000 accessible ramp to his building so that people in wheelchairs can enter without assistance, apathy or empathy? nuff said
Next time you hear a politician talk about anti-discrimination laws think preferential treatment, think wealth distribution but also think dumbing down and think less choice.
Cost of living in Houston is low if you are employed on a pretty good wage. I think Houston is one of the lower cost of living cities in the US, and with Texas not having any state income tax, that is a big plus. Some states, eg. California, cost of living is pretty much like Australia, when you factor in the 10% extra state income tax, and other hidden taxes and the like.
Most importantly you need to be employed, and have your employer access a good health care plan for you and you family.
Australia has a relatively high cost of living, given the size of the country, its low population and remoteness. There is just so much competition in the US for the retail dollar, that the benefits just flow on. There are a lot of parallels in the US and Australia… I nearly fell out of my hotel window (am in Vancouver at the moment) reading the story of how the stimulus has created most of the jobs (or arrested the steep decline)…they have been banging on about this for 6 months in the US…admittedly they haven’t raised interest rates, but the effect of the $$ slathered everywhere is the same. It really does seem like Australia ran out of beaches for the storks to put their heads in the sand…Australia is a follower…and right now it is a bubble inside a bubble (China)…that is scary…
Back to the article…sort of…isn’t part of the solution education & training? Wouldn’t it be a real suprise if instead of a “work for the dole” program, it was mandated a “study for the dole” program was initiated ?
I am all for equality of pay. I am also for rewarding those who perform better than others, and highlighting that fact to those who whinge and whine about “Kris getting more than me, etc, etc, etc”.
That said, some will be happy to take the wage and work just hard enough not to get fired, and that is ok too, if that is acceptable for whom they work for.
For me, it is all about education and skills.
cb, Japan has spent 20 years pumping obscene amounts of money into their economy and they still have deflation. However, they were a huge manufacturing base so maybe this scenario better fits what would happen to China if they saw a similar bust – all that excess capacity sitting idle.
As for the US, i think a similar problem exists at the moment. Prices are falling in the property market making people feel poorer and then you have high unemployment (20% in 8 californian counties). Thats not conducive to rising prices and I think once China slows down oil, commodities… will fall and prices will again decline.
The customers (US,EU) are broke and the factories (China, Asia) have yet to adjust their economies to this slower growth. Slower growth means less work for the same amount of people and they will bid prices lower to win the contract/job.
As for gold in a deflationary environment – dont know. I am still on the fence. I have some USD but cant bring myself to buy gold. Do people really need gold in a deflationary environment when the purchasing power of cash, which they readily have, is strengthening?
GB_”"”Do people really need gold in a deflationary environment when the purchasing power of cash, which they readily have, is strengthening?”"”
so cash is king @ moment u think?
I just spent the past week in China and I can tell you that if PF and cb are still relying on the Chinese to keep Australia afloat then they are in real trouble.
That country is a joke, no productivity, no efficiency, no investment in human capital.
They are just keeping people empoloyed for the sake of it and there inability to evolve their population will mean this game of building things forever will one day be revealed as just as much of a mirage as the US consumer economy over the past few decades.
On Joye, I cant beleive people dont think he is a total scum bag after his misreprentations regarding the debate against Keen. He came across as a decietful ego-maniac, most likely because thats exactly what he is.
cb – by the way, I totally retract my apology to you and PF. After reading your posts over the past few weeks I have realised you and PF are just like Joye. You lie, decieve and twist to suit your cause and its clear you have no ideological beliefs and that you are simply here to boast about investment success, spruik property to suit your interests and shoot down Sayce because his straight-forward analysis leaves your mindless blabbling for dead.
On the matter of whether I was right all those weeks ago about what Kris was saying in terms of the Banks being risky, cb, you know I was 100% right and you were just like Joye v Keen (trying to beat me to the punch to hide your complete embarrasments about being proven wrong).
I am back and intend to be more aggresive then ever because I understand now that it was not at all my fault for losign my temper all those weeks ago and it was solely because of your insane nonsense and refusal to accept reason that compelled me to insult you. An insult you clearly deserved for beign a weak and deceitful sore loser.
PF – the way you try to defend Joye makes you look like a complete moron. You say Kris makes personal attacks on Joye, what about the other way around??? You are a complete hypocrite
As far as I can tell, no one is suggesting equality for unequal output. They are suggesting equal pay to opposite sex for the same level of work. To suggest otherwise is an egregious distortion of views, and a little sneaky.
As to your comment people don’t have to “accept” lower pay. Incorrect – you can argue otherwise until you’re blue in the face, and putting “ marks around the word accept does nothing to strengthen your argument. Some do, Kris. The realities of life and people’s circumstances dictate that they need a job, and in some cases this means compromise, even if the terms of the employment could be considered unjust.
Yes, I’m sure an employer would jack the pay up from $8 an hour to $10 an hour for the indigenous Australian. What a furphy. In my experience (11 years as a telco engineer abnd 5 years in a newsagency whilst at uni), employers almost only EVER pay what someone is worth if they threaten to leave, if there is a market wide rise, or if it is mandated.
Viz:
Whilst at the newsagency, I basically managed the place and improved how it ran, allowing the owners lots more sleep and peace of mind – they were no longer wedded to the place. Reward: minimum wage according to my age. Sure, I could have left. But I liked it. HOWEVER, that doesn’t mean I didn’t deserve a payrise.
As an engineer, specifically at my current place of employment, I have taken my role and almost completely automated it, in the process unlocking loads of value and saving the company around $2 million in the last 24 months (notwithstanding several more million over the next 2 years) – this is a 200 million a year revenue enterprise (so let’s say an improvement of 1% to the bottom line). Reward? 1% a year, less than inflation. And that was even a struggle. Last they froze everyone’s wages (blaming the GFC) and there are rumours of a repeat.
Of course, you’ll claim, you can leave. And yes, I can. And will. But some can’t. They don’t have the skill, experience, whatever. However, this does not abrogate my point: despite me saving the company millions of dollars, clearly identifying myself as someone worth more than I get, there’s no incentive for them to pay more. None. So my example also negates your point about what employers can afford to pay.
And please. This argument about a payrise (notwithstanding the morality or appropriateness of it) for the CSU sector employees, actually putting them out of jobs. Horse$shit.
I’m all for a free market, but with some boundaries. You make it sound like companies (I particularly refer to big corporations) are cuddly companies who love their employees. Rubbish. They pay them what they can get away with (as you accurately identify). They continue to pay these boundary rate as long as they can and usually only pay more begrudgingly.
Some people need protection.
So, your point does not stand in my opinion.
If you like, I can add a zillion ones to my post.
OMG LOLZ 111oneoneone!!!!shiftshift1111oneone!!!!!!!!! LMAO.
Zillions of exclamation marks is very year 7.
***
By the way, what’s with it taking so long to get the daily post to the site. Surely you could post on this blog then use Feedburner’s RSS->email plugin to email the post out (plus a weekly digest). Not very web2.0.
CB @ 6, I agree this is madness. Have you seen Chris Martenson’s ‘Crash Course’? Very interesting but pretty scary stuff.
http://www.chrismartenson.com/
Puntpal – nice to see your back – I hope you had a good time in China.
Cheers…
Hiya Kris,
In relation to your latest article and the contention that real wages would not go to zero…
I beleive you present an interesting argument but somehow it still seems lopsided to me…
I’ll tell you why…
A while back I used to contribute to Money Morning… and was rapt to do so… after initial hiccups with the level of detail I was providing in my submitted articles, I managed to prove consistantly that I could write in a style that required minimal correction and input from your good self, and I received a few positive comments, during the time when the whole comment section on this wevbsite was in its infancy.
A numger of articles later, and all well and good, I was a “published” technical analyst through your worth yvehicle and doing something I enjoyed…
Each article would take me maybe two hours to write… certainly not just pulled straight from brain to document, and thus included labour and thought and skills built up over many years as a technical communicator and a few less years as a technical analysist and trader.
Now for these articles, I receive no monetary compensation, and certainly no offers of compensation, until I arced up a bit and managed to get a free ticket to a function and film put on by Port Phillip Publishing (through one of the other editors as the initial request to you received no positive response).
Further enquiries from myself to yourself regarding swapping what I did for other services provided by Port Phillip Publishing for the same value as I was getting from my articles (IE For nothing) fell on deaf ears.
(bear with me, this is not some wah wah wah you’ve done me wrong thing… just making a point you will otherwise miss)
Effectively I “Created” a job (article writing for Money Morning) which I was effectively paid nothing for.
This may have been the only way in which Icould get published, I don’t know, but it does raise the point with a real life example that touches us both, that one cannot rely on “employers” to necessarily pay a realistic price for labour.
Bearing this in mind, it seems as though you have missed this point in your latest article, that is, if it is MORE profitable to employ someone for less and there is no incentive to pay more beyond the goodness of the employer’s heart (upon which we cannot rely) then the employer will seek to maximise profit and is more than willing, as are most humans, to accept something for free… including free labour if it is offered.
Contracts and minimum wages can be seen in this case to ensure that an employer’s profit is not unreasonably hiked by a common desire to minimise business input costs without regard to how they are minimised.
Cheers
Joe Zolin.
sayceo wants minimum wages reduced so he can pay 2 cents less per hour
than what was the minimum wage
>>>>>>>>>>> admit it sayceo,, ur a
PHHHHHUUUUCCCCCCCCENNNN IDIOT
lol, PF. You are a seeer. Or maybe not. Widgets, too, have been in a bubble. No?
For the Prechterites here, such as Jon, this is an interesting little assessment of Prechter’s record on predicting the gold price, based on Elliot waves. The first question that occured to me upon reading this article was this: Why would anyone choose to give credence to the predictions of a man with this sort of track record? Anyhow, here it is:
“Sunday, January 31, 2010
The Prechter Gold “Buy” Signal Has Been Triggered
The recent decline in Gold has not only caused mayhem in goldbug-land (especially those holding mining stocks), but also brought deflationists of all stripes – with, not surprisingly, Prechterites at the forefront – out of the woodwork shouting $400 Gold from the rooftops. Funny, all I remember is a deafening silence at $1200. Emboldened by the recent decline, Mr. Prechter has predicted a 40% decline in Gold prices from here. For those not in the know, Bob Prechter has been forecasting declining prices for Gold all throughout its decade long bull run. For example, in March of 2006 when Gold was about $560 he said, “Gold is in the final stages of a speculative surge…technical factors, in conjunction with a complete wave pattern and sentiment, point directly to a decline to at least $460 and probably close to $400″. It reached $730 in May and closed that year at around $650. In 2003 Alf Field – who beat Prechter at his own game forecasting Gold prices much more accurately than him using the Elliot Wave Principle – wrote, “In mid 1999, when the gold price dipped towards a low of $253, Bob Prechter forecast an extended rally in the gold price that would be followed by a final decline to below $253 to a low point approaching $200…he forecast (at the start of the move) that the peak would be about $360 and he recommended short sales in gold after the price moved above this level in February 2003. He now believes that the market is on its way down to new lows below $253″. Gold closed that year at around $430. What would have happened if you took his advice and shorted Gold at $360? You would have gotten reamed, that’s what. Ironically, for all his blathering about “sentiment” and being “contrarian”, Mr. Prechter has become a great contrary indicator for the Gold market.”
http://gordongekkosblog.blogspot.com/2010/03/prechter-gold-buy-signal-has-been.html
GB – you said:
“As for gold in a deflationary environment – dont know. I am still on the fence. I have some USD but cant bring myself to buy gold. Do people really need gold in a deflationary environment when the purchasing power of cash, which they readily have, is strengthening?”
Good question, and the following analysis is highly pertinent to answering it:
“Thursday, March 11, 2010
It’s Going To Implode: Buy Physical Gold – NOW
Evidence seems to be mounting that we are headed towards some sort of implosion in the paper Gold market, and perhaps the currency/bond markets in general. Let’s take a look:”
http://gordongekkosblog.blogspot.com/2010/03/its-going-to-implode-buy-physical-gold.html
And in the meantime in Sydney: “The state government is rushing to prepare laws to create a development authority with sweeping powers to compulsorily acquire and rezone privately owned land for resale to developers”. And in Vic, they want to build 4500 affordable dwellings.
Oh, governments…. with track records of fighting yesterday’s battles (to help their developer mates).
Run.
Joe Zolin – interesting perspective.
etch – I gave you 5 to repay the favour, and to counter a negative score.
Hi cb – yes dump the widgets, they are in a bubble.
PuntPal – Mate, seriously, you are seeing things, and probably getting into a state. I do not mean it in a demeaning way saying this, but if you are supposed to be on medication, you should not stop taking it, unless cleared by your doctor. And if you are not supposed to be on medication, then you might consider seeing a specialist to see if they have something that might help you keep a more even keel.
Please rest assured that I am saying this out of genuine concern for your welfare. I do appreciate that, while in this state, you will probably not believe me, and will be tempted to think that now I am being an egomaniac fighting dirty. I sincerely hope not, but that is all I am tempted, and able, to say. Take care, and peace be with you.
Good on ya, Joe Zolin. QED.
Alas, there is such a thing as a lesson being too close to home. This might be a case in point. In any case, at least for the rest of us, it has been well made, even if for Sayce’s benefit it might have been made rather too well.
SV – that is just unreal. Forcibly acquiring land in this way may have legs to stand on where critical infrastructure projects are concerned, but for purposes of reselling this land at a profit to developers, is unheard of.
Do you think it will stand up in court? This should be unconstitutional. After all, the developers should go to the owners and offer the land directly at whatever price they can agree on. This is just an obscene overreach by government bureaucrats and politicians, trampling on people’s property rights.
Thanks for the heads-up, Drew. I will certainly check it out.
Paper gold vs. physical gold:
“1. The GLD ETF
The problems with the GLD ETF are too numerous to enlist here but why bother when they have already mentioned ‘em all in their prospectus! It is simply another Wall Street scam designed to rip off the retail investor and rest assured, when the SHTF, you will be the last in line since the insiders need somebody to hold the bag in order for them to get bailed out. YOU will be the one left holding the bag. Unless you have a direct line to Ben Bernanke, I suggest you get the hell out of any paper ETF’s such as GLD, SLV, etc. Remember AIG? It’s all good until it isn’t.”
http://gordongekkosblog.blogspot.com/2010/03/its-going-to-implode-buy-physical-gold.html
cb – does the same apply to the ozzie “GOLD” etf? I thought that these were backed by physical gold. If they are risky too, then I will need to dig a hole in the backyard.
sv @26 – come on mate, that gives those reluctant vendors a competitive advantage.
They should be grateful.
cb – I have no clue of its legality; i suspect they are testing the waters with this “leak”. I also have no clue of its necessity, I suspect there isn’t any.
for all i know it can be done to benefit select few developers under the guise of public good.
Tel – If I were you, I would start digging at the earliest opportunity.
A little while ago Sandra and I have interrogated this very question with the following, rather startling result:
If you are a typical shareholder of GOLD on the ASX, you are nothing more than an unsecured creditor to the ETF’s Custodian, which is a US bank.
That is all you need to know. However, as always, do not take anybody’s word for it. There are two things I would suggest you should do to satisfy yourself about the matter:
1. Ring the local Australian Company and quizz them about what I have just said.
2. As them, not whether, but WHAT you need to do to take physical delivery of your supposed metal.
The answers will probably surprise, if not shock, you.
SV – Yes, certainly they will want to look after the developers who have been so dutiful with their contributions to Labor’s political campaigns – and who knows whose private coffers in the shadows, since one bird who wanted to sing on this has already been knocked off its perch. However, with NSW being so strapped for cash, and having failed to sell off electricity generation to raise money, they seem equally likely to want to make a killing on the scam themselves for the NSW Treasury.
Tel – I am quoting myself from a while back:
“The company running the GOLD ETF listed on the ASX is, it seems, an Australian Company, but that is neither here, nor there. These are merely paper pushers, looking after client enquiries, and bureaucratic paper shuffling associated with running a business. At the end of the day, they make money by collecting money from local investors, clipping a chunk of it off for themlevers in management fees, and passing the rest of the money to a broker to purchase the physical metal, which they are supposed to deposit with the custodian, HSBC Bank USA.
The local managing company is referred to as The Trustee of the ETF in the prospectus, and they are little more than front men, taking in the money and passing most of it on to others to buy and look after the physical metal. They are probably all very good people in their own right, but in the small print they do say that they are all care and no responsibility, as they do not audit the Custodian.
………………….
I see the major risk being the Custodian. The prospectus makes it clear that there are two types holders in the ETF. Those who are holding allocated metal, and those who are holding unallocated metal. Find out which category you fall into, but it is quite clear to me that unless you have purchased a whole brick of gold and have been advised the serial number for that brick of gold, you are classified as a holder of unallocated metal.
But the prospectus also makes it clear that unallocated holders of the metal are considered to be unsecured creditors to the Custodian, and that your supposed “metal” is mixed up with the rest of the Custodian’s assets, including its buildings, cars, computers, pencils and the office paper. This is your worry, because even if the Custodian is in fact holding gold bars that are not allocated to anybody in particular as a physical backing for your purchase, if they lose a bunch on some other idiotic trade and go belly up, all unallocated metal will be sold off along with the furniture to pay off secured creditors, and of course the liquidators and the lawyers, and god knows what other parasites, before unsecured creditors have a chance of getting any of their money back.
cb, etch
If i use the theory posted by MM and DRA then
Inflation:
Dollar is weakened and assets prices increase (copper, property, shares)
Deflation: – this is just the opposite of inflation so
Dollar strengthens and asset prices fall
cb – you always post about how inflation decreases the value of our cash so deflation must be the time when the value of cash increases.
Gold: where does it fit
The last 10 years we have seen high inflation – I will ignore the RBA inflation guide as it doesn’t really represent the inflation we saw during the boom – and gold went into a bull market
So its confirmed that in a high inflationary environment gold goes up so in a deflationary environment gold goes… (down?). Can gold up with inflation and gold go up with deflation – can something always just go up???? Gold is a tricky one because of they way people perceive it
GB – suggest you amend that slightly to;
“Inflation:
Dollar – Purchasing Power is weakened as assets prices increase (copper, property, shares, consumer goods, houses, rental, etc.)
Deflation:
Dollar – Purchasing Power strengthens as asset prices fall.
(copper, property, shares, consumer goods, houses, rental, etc.)
Be very careful with gold, not that it isn’t a good hold, but the REASONS for holding gold can change quickly in this enviroment.
Cheers…
PF – your defn is better and i agree with you on gold
Cheers GB..
SV @ 26:
Those thieving Labor BARSTADS!!!!
Hmmm ….. according to gold bugs, discussions like this indicate that we are still a long way off from the maniac phase of a bull market, when people queue around the block, trying to get to the dealer to buy their gold – so that is reassuring, and it confirms that this is still a safe time to buy, especially with the recent pullback.
Ah, the inflation/deflation question – that is a very murky one. There are different definitions of what these terms mean, and the MSM has a lot to answer for for the general confusion about the question. The main stream economists are also culpable, because they are the ones that perpetuate this conceptual framework within which inflation and deflation are being defined in terms of the general increases and decreases in prices.
I find this conceptual framework quite useless, and even pernicious, as it leaves people blind to the thievery perpetrated on the value of their savings and wages. A much more compelling and useful definition, I would suggest, is provided by the Austrian school of economic theory, according to which rising and falling prices are often symptoms and consequences of inflation and deflation. This is a much more complex theory, you might say, but in this case we really do need the conceptual complexity to do justice to the subject.
For this more useful definiton of inflation and deflation, we need to define first two more fundamental concepts:
1. The amount of goods and services present in the economy.
2. The amount of money and credit available in the economy fo the purchase of those goods and services.
With those two concepts, we are ready for these more sophisticated definitions:
A. Inflation is excess money and credit relative to the goods and services of an economy.
B. Deflation is the shortage of money and credit relative to the goods and services of an economy.
Only by working with more sophisticated definitions like these are we able to distinguish between price rises due to excessive money printing and price rises due to a shortage of desirable goods available for purchase. And, intuitively, you have to be able to make this distinction in economic thinking, or risk serious miscalculation.
To illustrate, it is very much a material question whether house prices are rising because of population pressures, or because of an excess flood of easy money and credit into the housing market. If the former, then you would be fairly safe in assuming that your downside risk is fairly well protected, whereas making the same assumption could be disastrous if the cause was in fact the latter.
But notice that the mainstream definition of inflation is incapable of making the distinction. The increase in house prices is taken at face value to BE inflation, rather than being due to inflation, or worse, being due to some other causes than inflation.
Thus, one of the chief advantages of the Austrian approach is that it enables you to make very useful distinctions between potential causes that may underlie the symptoms of rising prices in a certain asset category, because the underlying cause is highly relevant to the strategy you adopt in response. To illustrate, if a person is sinking below the waves, it could be that they cannot swim, but if in fact their leg is caught, the requirements of rescue might have to be entirely different.
And, finally, to answer GB’s question whether gold is going to lose value in a deflationary environment, the answer is by no means certain. As with any other asset category, it may, and it may not. It depends on a whole host of ther factors, and especially the demand-supply characteristics of the class at any given time. The gold market is so incredibly tiny, that even if asset prices in general fall, these falls are most likely to be happening in the leveraged asset categories, and depending on what else is going on in the economy and with the currency, enough money could continue to seek safety in the metals to ensure their continued upward push for a long time to come. As for where gold is likely to go, you need to look and see what the big boys are doing with their money, not what they are saying to you through the media. A classic example is George Soros, who not so long ago declared that gold is the ultimate bubble, only to be found to have been close to trippling his gold exposure over the past six or so months.
PuntPal – stop teasing me!!! You went to china and haven’t posted what you saw!!! Come on….
What I am interested in is commercial orientated. The chinese consumer is only a small fraction of their economy so its their factories, commercial real estate and PPI that i am interested in because i believe that is where their problems are going to start.
The latest info says that they have 20% vacany rate which will grow this year, 6% PPI, commercial rents are falling and commercial property prices are no longer rising – this could be the warning sign.
Some on the ground info would be great
Faber on China and Gold.
http://www.youtube.com/watch?v=OoEgIQTf1Js
But there is also an excellent article about holding gold in an Australian context, which I have referenced before. It goes by the title: Gold and Austrlia’s Monetary Inflation Delusion. I am not sure if the link will work, but do a search for it on the internet and it should come up on Google.
http://www.globalspeculator.com.au/documents/globalspeculator-Issue33.pdf
Incidentally, the article, which is mercifully short, but punchy, sports the performance of gold against a dozen or so currencies, including the Japanese Yen. That chart, in the bottom left hand corner, will answer the question about whether gold can keep on appreciating in an overall deflationary environment. If I read it right, gold has gone up from 40,000 to 100,000 yens between 2005 and 2009, so that’s that.
Looking at those charts again, there are nine of them. Notice that gold has been making new highs, and from time to time correcting at various times in various currencies. Right now, for example, gold has been hitting new highs in the Euro and the Pound, but is in a good 20% pullback mode from its all time high in AUD, which in a bull market is a pretty good opportunity to buy. Or at least that is what you are supposed to do in a bull market, buying the corrections.
I am half way through the video short course referenced by Drew. It is an excellent resource. This particular segment is on inflation, and it does a much better job at explaining it all with the aid of visuals. It also demonstrates what it means to live under a fiat monetary system, as opposed to one where there is a commodity based monetary discipline provided.
http://www.chrismartenson.com/crashcourse/chapter-10-inflation
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