Self-Defeating Economics of the Penalty Rate Cut

The Fair Work Commission's decision to cut wages for Sunday and holiday work in the retail and hospitality industries will exacerbate the stagnation of wage incomes in Australia, and undermine the standard of living of hundreds of thousands of workers who are already among the most underpaid and precarious in the whole economy.

Here is a full-length commentary on the decision by the Centre's Director, Jim Stanford, that appeared February 25 in The Age, The Sydney Morning Herald, and the Canberra Times.

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A Ringing but Ineffective Defense of Globalization

Economic elites around the world are rightly alarmed by the rise of right-wing populism, many streams of which (like the Brexit movement and Donald Trump) have directly challenged previous policies of free trade and capital mobility.  Here in Australia, the One Nation party exemplifies some similar isolationist and xenophobic tendencies.

However, the main response of these elites to the challenge has been to simply double down on their standard argument that globalization as currently practiced is universally and self-evidently beneficial.  Apart from temporary "transition difficulties" (that could easily be addressed with assistance for training and relocation), everyone is a winner.  To counter the rise of populism, they urge governments to step up their efforts to "educate" concerned citizens about the virtues of free trade.  Commonwealth Treasurer Scott Morrison made a strong statement in this vein recently to a business audience in Sydney.

Unfortunately, the real world economy doesn't actually work like the theoretical models predict, and denying that anyone is permanently hurt by globalization both flies in the face of empirical evidence, and will be ineffective in countering populist arguments.  Instead, politicians should acknowledge that globalization is producing both loses and winners, and implement policies to reduce the costs and share the benefits.  Here is Director Jim Stanford's commentary on Mr. Morrison's speech, published in the Huffington Post.


The Flawed Economics of Cutting Penalty Rates

It was a "sleeper" issue in the recent election, and led to the defeat of some high-profile Liberal candidates.  But now the debate over penalty rates for work on weekends and public holidays shifts to the Fair Work Commission.  The economic arguments in favour of cutting penalties (as advocated by lobbyists for the retail and hospitality sectors) are deeply flawed.

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Looking for "Jobs and Growth": Six Infographics

We have prepared six shareable infographics based on material in our research paper, "Jobs and Growth... and a Few Hard Numbers," which compared Australia's economic performance under the respective postwar Prime Ministers.

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Jobs and Growth... and a Few Hard Numbers

Voters typically rank economic issues among their top concerns.  And campaigning politicians regularly make bold (but vague) pronouncements regarding their competence and credibility as “economic managers.”  In popular discourse, economic “competence” is commonly equated with being “business-friendly.”

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6 Reasons to Be Skeptical of Debt-Phobia

By Jim Stanford, May 2 2016

In the lead-up to tomorrow’s pre-election Commonwealth budget, much has been written about the need to quickly eliminate the government’s deficit, and reduce its accumulated debt.  The standard shibboleths are being liberally invoked: government must face hard truths and learn to live within its means; government must balance its budget (just like households do); debt-raters will punish us for our profligacy; and more.  Pumping up fear of government debt is always an essential step in preparing the public to accept cutbacks in essential public services.   And with Australians heading to the polls, the tough-love imagery serves another function: instilling fear that a change in government, at such a fragile time, would threaten the “stability” of Australia’s economy.

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State Income Taxes Would Promote Inequality and Debt

by Jim Stanford, April 5 2016

The latest “big idea” on tax policy from the Coalition government is to grant independent income tax powers to the states.  This would be accompanied by a devolution of funding responsibility for big-ticket services like health care, hospitals, and schools.  Prime Minister Turnbull argues that forcing state governments to raise the money they spend will lead to more accountability and efficiency in public service delivery.  And it’s a politically convenient response to the demands from states for more revenues: “If you need it so much, go out and raise it yourself.”

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