IMF: 'Labour deregulation' NOT working

[jacee]

Labour market deregulations not working: International Monetary Fund

The last 30 years have not been kind to economic growth and wealth creation

OPINION

Recent and potentially watershed International Monetary Fund (IMF) documents have cast doubt on the merits of labour market deregulation of the last three decades, with important consequences for Canada. But will anyone listen?

The last 30 years have not been kind to economic growth and wealth creation.

The economic "successes" of the neo-liberal era, from roughly 1980 to 2007, pale in comparison to the three decades that followed the Second World War with respect to almost every economic variable imaginable.

One of the core arguments of the neo-liberal era, adopted at one time by the IMF and the World Bank, among other institutions, has been a belief in what economists have called labour market flexibility.

Labour market flexibility is aimed largely at making wage settlements more difficult and less generous, labour force reductions easier for the private sector, and labour union participation more difficult.

According to this argument, in a growing competitive global environment, Canadian companies have to remove any inefficiency in the labour market, especially any that could stifle the private sector's quest for flexibility and profits.

So efforts have taken place over the last three decades to make labour markets more flexible: A push toward term or temporary contracts, a de-emphasis on job security, laws that made participation in unions more voluntary. And the Harper government has been an active and willing participant in this misplaced quest for labour market flexibility.

The private sector labeled labour unions as disruptive and detrimental to their bottom line: Wage gains were too high and unions too powerful, thereby making it too difficult to "restructure" hiring practices to make Canadian companies competitive (a fancy way to say it was difficult to fire people).

In reality, of course, this was an awful idea in terms of economic theory and economic consequence. In terms of building social peace between labour movements and the private sector, it was no good, either. The attack, however, has been carried out largely on the backs of working Canadians. And now we have proof.

In twin reports, the IMF revisits the question of the success of these policies.

In what can only be labeled a gigantic mea culpa, the IMF now claims that these policies have failed and miserably, at that.

In two reports, the IMF carefully lays out the empirical evidence and it ain't good.

In one of them, dated March 2015, the IMF argues that

the decrease in unionization rates has largely fed the

increase in incomes of those at the top.

Subsequently, for its April 2015 edition of the World Economic Output (WEO) report, which featured data from 16 G20 countries, the IMF concludes that there is

no evidence that the neo-liberal deregulatory

reforms had any positive impact

on labour markets and economic growth.

These painful deregulatory policies, often imposed by force, have had no impact on total factor productivity.

Well ... I can't say I'm surprised.

Turns out corporate executives have been pocketing the money saved by union busting and hiring cheap temp and foreign labour, outsourcing off shoring etc. ... with no benefit to the market, the economy, and certainly not to the vast majority of us.

http://www.conferenceboard.ca/hcp/hot-topics/caninequality.aspx]

Median income increased from $45,800 in 1976 to $48,300 in 2009. This increase has been very modestjust 5.5 per cent over 33 years. Moreover, the gap between average and median income has been growing, which is not good news. The growing gap signals that income growth is distributed unequally.

So the bosses are getting much richer while employee wages have been essentially stagnant.

If the purpose of 'labour deregulation' was lining the pockets of the wealthiest with more gold ... it worked!

:/

Edited April 20, 2015 by jacee

[eyeball]

Better late than never?

Too late to matter now I think.

[jacee]

Better late than never?

Too late to matter now I think.

Too late? Not sure what you mean.

.

[TimG]

It is a pretty silly argument.

Inflexible labour rules kill jobs in the long term because they increase the costs associated with employing people without actually increasing the value produced. This is economics 101.

Edited April 20, 2015 by TimG

[eyeball]

Too late? Not sure what you mean.

.

Too late to turn things around, especially peacefully.

The only thing that might change that is a world wide epiphany - a realization of the need for global government to match the global economy, a world in which the rich have nowhere to evade having the living shit taxed out of them.

Of course the rich could decide to have a Kumbiya moment and do the right thing but, what are the odds of that happening?

[Michael Hardner]

The only thing that might change that is a world wide epiphany - a realization of the need for global government to match the global economy, a world in which the rich have nowhere to evade having the living shit taxed out of them.

Here's an idea (fuel for the fire only ) that would help you: make all money electronic, and all transactions open and electronically viewable. It would make it hard for people to beg for government money, cry poor etc. That's a much easier way to tackle your "100% monitoring" solution...

[eyeball]

It is a pretty silly argument.

Inflexible labour rules kill jobs in the long term because they increase the costs associated with employing people without actually increasing the value produced. This is economics 101.

Only for sycophants stoned out of their brains on kool aid.

[TimG]

Only for sycophants stoned out of their brains on kool aid.

I suppose you deny gravity and theory of electro-magnatism. Increase the price of something and you reduce the demand. This law is almost as fundamental. Now it is possible for other factors to mitigate or even cancel out the law of supply and demand but a discussion about increasing the cost of labour is not worth considering unless it includes an explanation for how job killing effects are mitigated.

[eyeball]

Here's an idea (fuel for the fire only ) that would help you: make all money electronic, and all transactions open and electronically viewable. It would make it hard for people to beg for government money, cry poor etc. That's a much easier way to tackle your "100% monitoring" solution...

Too expensive. Just concentrate on monitoring the relative few who are governing.

100% of people in power not 100% of society.

[eyeball]

I suppose you deny gravity and theory of electro-magnatism. Increase the price of something and you reduce the demand. This law is almost as fundamental. Now it is possible for other factors to mitigate or even cancel out the law of supply and demand but a discussion about increasing the cost of labour is not worth considering unless it includes an explanation for how job killing effects are mitigated.

Meh...figures lie and liars figure...don't show me the money show me the power that facilitates how both are manipulated and maneuvered away from the many and towards the few.

Edited April 20, 2015 by eyeball

[socialist]

Meh...figures lie and liars figure...don't show me the money show me the power that facilitates how both are manipulated and maneuvered away from the many and towards the few.

Check out this. Bangladesh - A Model of Neoliberlism.

[jacee]

Too expensive. Just concentrate on monitoring the relative few who are governing.

100% of people in power not 100% of society.

?✅?

[Michael Hardner]

100% of people in power not 100% of society.

But they're not the ones with the pervasive and lasting power. Money started out as a public register, viewable by all. It made it better to see who needed help.

[jacee]

But they're not the ones with the pervasive and lasting power. Money started out as a public register, viewable by all. It made it better to see who needed help.

They are the ones we are paying to spend our money and we have every right to monitor them, a responsibility to, in fact.

.

Edited April 21, 2015 by jacee

[Shady]

All one has to do is look at France as an example of how labour regulation can kill job creation and opportunity.

[eyeball]

Do you have any examples of how monitoring the rich and powerful have hurt us?

[Michael Hardner]

They are the ones we are paying to spend our money and we have every right to monitor them, a responsibility to, in fact.

.

Sure but... do we need to prioritize them ? Open money is a return to a great idea whose time has come.

[eyeball]

But they're not the ones with the pervasive and lasting power. Money started out as a public register, viewable by all. It made it better to see who needed help.

Okay, now we just need a way to see who's getting more help than they need.

[overthere]

News flash to OP and organized labour in general: don't worry about the cow leaving the barn. That cloud of dust you see on the horizon is the whole herd disappearing.

[Shady]

Do you have any examples of how monitoring the rich and powerful have hurt us?

That sounds rather Orwellian. Should they wear ankle braces too?

[dre]

I suppose you deny gravity and theory of electro-magnatism. Increase the price of something and you reduce the demand. This law is almost as fundamental. Now it is possible for other factors to mitigate or even cancel out the law of supply and demand but a discussion about increasing the cost of labour is not worth considering unless it includes an explanation for how job killing effects are mitigated.

There is no job killing effects associated with high wages. High wages = high consumption. Every single penny paid to workers gets spent back into the economy as dollars that other producers of goods and services can now compete for. High wages INCREASE demand for products and services because people have enough disposable income to by them.

Thats exactly why we saw such rapid economic growth while wages exploaded between the 1940 and 1970.

As for your claim that you are quoting some kind of fundamental economic law... this is just complete bunk. There is no such consensus amongst economists, and theres actually an emerging prevailant view that the opposite is true.

[TimG]

There is no job killing effects associated with high wages. High wages = high consumption.

Complete nonsense. High wages increase prices which, in turn, reduce the value of those wages. That said, global trade means that local wages can rise without an increase in prices because of imports from lower wage areas. This means the 'high wage' localities can be described as free loaders that cannot survive on their own merits. More importantly, it also means those high wages are NOT used for the local economy and are instead result in wealth leaving the region to import goods.

The last point is where productivity comes in. Increasing wages without increasing productivity reduces the efficiency the economy and leads to long term stagnation as local businesses close. Lower productivity also reduces the money earned from exports which makes it harder to buy those imports needed to keep those prices from rising. It is a lose-lose scenario.

I find it amazing that so many people think they can get something for nothing. If it was so easy to avoid the laws of economics the world would be a very different place.

Also, no serious economist disputes the basic principle of price and demand. Some will argue that other factors can mitigate the demand problems created by increasing prices but they will not argue the principle is wrong.

Edited April 21, 2015 by TimG

[WIP]

Complete nonsense. High wages increase prices which, in turn, reduce the value of those wages. That said, global trade means that local wages can rise without an increase in prices because of imports from lower wage areas. This means the 'high wage' localities can be described as free loaders that cannot survive on their own merits. More importantly, it also means those high wages are NOT used for the local economy and are instead result in wealth leaving the region to import goods.

This is what's complete nonsense! In the U.S. - where raising the minimum wage is a big issue...finally....the cheap retail outlets like Walmart and the fast food joints are rolling in profits that are going to the executives, the franchisees and of course - the shareholders, while the workers who do the damn work get poverty wages.

the ridiculous and fraudulent excuse that they can't afford to pay more, or higher wages will raise your burger meal costs (if your one of the unfortunate people who eats this crap on a regular basis) has been debunked time and time again by a number of economists (take your pick) who've gone over the numbers and shown that a very slight cut to top executive pay would more than make up for any additional payroll costs for employees who might actually earn enough to get them off food stamps!

An interesting recent story is that McDonald's profits slide may be due in large part because of the bad publicity they've received by being on the vanguard with Walmart when it comes to keeping wages down and people in poverty!

[bush_cheney2004]

This is what's complete nonsense! In the U.S. - where raising the minimum wage is a big issue...finally....the cheap retail outlets like Walmart and the fast food joints are rolling in profits that are going to the executives, the franchisees and of course - the shareholders, while the workers who do the damn work get poverty wages.

The workers do not have any right to profits....they (their labour and benefits) are an expense item.

[dre]

Complete nonsense. High wages increase prices which, in turn, reduce the value of those wages. That said, global trade means that local wages can rise without an increase in prices because of imports from lower wage areas. This means the 'high wage' localities can be described as free loaders that cannot survive on their own merits. More importantly, it also means those high wages are NOT used for the local economy and are instead result in wealth leaving the region to import goods.

The last point is where productivity comes in. Increasing wages without increasing productivity reduces the efficiency the economy and leads to long term stagnation as local businesses close. Lower productivity also reduces the money earned from exports which makes it harder to buy those imports needed to keep those prices from rising. It is a lose-lose scenario.

I find it amazing that so many people think they can get something for nothing. If it was so easy to avoid the laws of economics the world would be a very different place.

Also, no serious economist disputes the basic principle of price and demand. Some will argue that other factors can mitigate the demand problems created by increasing prices but they will not argue the principle is wrong.

Nobody is talking about wages growing faster than productivity... the exact opposite has been happening for nearly 40 years.

What I said is that high wages increase consumption... and in economy thats is 3/4 domestic consumption all low wages will do is result in less consumption.

And increasing wages increases consumption which in turn increases productivity which in turn puts more upward pressure on wages.

Higher wages mean higher income in most families; thus their consumption will usually grow as well.

Total consumption will depend on consumption attitudes of the other families, in particular of whose income heavily relies on dividends. Immigrants may save part of their income to send remittances home.

If total consumption grow, this will boost sales throughout the industries, increasing productivity. This, in turn, is conducive to a further growth in wages.

Through the Keynesian multiplier, income increase will be followed again by consumption, giving rise to a positive feedback loop.

If sales do not increase enough and the share of labour costs on total costs is large, which is not always the case, the increase in wages will be reflected in an increase of labour cost per unit of output. This, however, if the final markets are not very competitive, brings forth a very credible risk of inflation, with the involved reduction of real income. A wages-prices spiral will begin, with only nominal increase of both, keeping real things to a large extent untouched (but provoking a lot of social conflict).

Increases in nominal wages will boost payroll tax revenue, thus, other things equal, they will reduce public deficit.

On a more micro level, it is important to remember that wage level and dynamics are a key feature for individual motivation to work.

You can add to that the more compensation falls away from productivity the more need and and vote for government programs. This combined with reduced tax revenue from reduced wages grows public debt and government deficits.