Demonstrating The Market At Work

I know some may think I’m being alarmist and that Australia is sitting pretty in the scheme of things.  Just in case you think I am a left wing unionist thug, you’d be wrong. I owned and ran a successful business in a very competitive industry for twenty-five years. During that time, all my employees received all their legal entitlements, were paid award wages or higher, were treated with respect and were highly valued parts of the enterprise. In the end I retired, tired of the constant battle against competitors who either underpaid their staff or had sham contracting arrangements that led to hard working people not getting their fair share and me being unable to compete on price.

Even when I approached a government department with the proof of illegal behaviour by the contractor that had undercut us on a government contract that we had held for eight years, the public servants refused to investigate (presumably because their department would have to pay more for the contract). So I suppose you can understand where I’m coming from when I get upset at seeing such blatant abuse of workers. Have a look at Bakers Delight. According to an article in The Age, Bakers Delight have been using a  Victorian workplace agreement that was formulated in 2006 under the Howard era Workchoices system. This is despite the fact that Tony Abbott declared Workchoices dead and buried.

The owners and co-founders of the company, Roger and Lesley Gillespie, are apparently doing it tough. According to The Age report, they were listed in the 2015 BRW rich list with assets of around 150 million dollars. Its no wonder that they have to cut the penalty rates to teenagers on weekend shifts, how else can they make ends meet? I mean teenagers shouldn’t expect to earn a decent wage for weekend work and besides, according to the quote in The Age, …”A number of the younger kids, for example, want to work on Fridays, Saturdays and Sundays,” he said. “The flexibility around the workplace agreement not only suits our business but also suits the individual.”…

Now, excuse me if I’m being cynical, I would have thought that its Bakers Delight who want these young people to work on the weekends because I doubt that any adult would tolerate or work on weekends without receiving penalties. Employers cannot complain about the extra costs associated with weekend work – they choose to open on the weekends and employers are’t going out of their way to increase wages over and above award payments. In fact it could be argued, that as time wears on we see more and more examples of workers being paid below award rates of pay. Interestingly, the companies involved all seem to be making good profits. This is where I think the current capitalist system is filing. In days of yore, businessmen were largely respected and respectable. They provided employment and has sense of civic responsibility. Now, its the entrepreneurs that are lauded, but the term entrepreneur has now becomes synonymous with greed, cutting corners and dodgy dealings. Governments around the world have been taken for a ride, either through stupidity or through financial influence, and consistently fail to hold these people to account.

A classic example of this is Uber. Uber arrived in Australia to much fanfare and then started flogging its services to the public. When it arrived it was aware that what it was doing was in breach of local law. It instituted systems that prevented known telephone numbers of regulatory agents from accessing their system. If this had been any ordinary Australian citizen, we would have been charged with breaches of the law regarding the hire of vehicles, possibly charges relating to coerciong others to break the law and with obstructing the investigation of a crime. Uber’s spin merchants hopped onto their soapbox to tell us it was all about the new order of things and the sharing economy and the old model was dead because they said so. Not one politician or journalist asked the question “Why should we change our system so that you, an overseas company that avoids paying tax in Australia, can make a profit while providing very little of your own infrastructure and relies on the work of “independent”  contractors, while existing businesses have to abide by the law and pay award rates of pay?”

Why wasn’t the question asked? Why do politicians allow American “entrepreneurs” to tell us what is acceptable practice in financial markets and on the stock market? How can short-selling shares on the stock market be legal (in any other area if I sell something I don’t own its called fraud)?

Are We Going Down the Path to Oblivion?

Australia is not immune to Trumpitus, as is illustrated in the recent successes of Pauline Hanson’s One Nation at the last federal election. Once again, someone with no practical policies, playing to the disgruntled, largely white, working class – never correcting misleading beliefs regarding asylum seekers and their entitlements. Never acknowledging that global trade has increased the wealth of all Australians by providing low cost consumables and decreasing the cost of living but quick to bemoan the loss of Australian jobs. Of course job losses in Australia are an anathema to all fair minded people. The loss of jobs leads to decreased  income for workers at the lower end of the education spectrum and a reduction in cash flowing though the economy. With the advent of Artificial Intelligence systems, even jobs previously immune to automation are slowly coming under threat. Sadly the Liberal Party is facing this looming crisis by lurching to the right, intent on saving the bacon of its dominant financial base. Most Australian voters still do not understand that the Liberal Party (or rather, the economic dries of the party) are chasing that false American dream of small government. False because in reality, the wealthy are in fact fleeing taxes and that reduction in the tax base means that government programs have to be cut. Yet someone like Trump says there is a need for infrastructure investment – according to the economic dries, if infrastructure really needed to be upgraded then the private sector would step in and do it as part of the market at work. Tony Abbot has been fond of saying no-one has taxed their way to prosperity but that simplistic view of economics belies the truth that State and Federal Governments in the first eighty years of federation, especially in the post war period, built the infrastructure to create the conditions for a vibrant economy. The reality is that the private sector didn’t get involved with large infrastructure projects until Jeff Kennet’s reign in Victoria allowed them to take effective ownership of public property at bargain prices to underpin the creation of new Public/Private Partnerships (PPP). Indeed, many people still question how these PPPs are cost effective for the taxpayer. Surely if a private company is going to rake in ten billion dollars over the life of a project, the state should receive some of the benefit.

We need to be vigilant and call out people and parties that make outrageous claims against immigrants, or who express that tax cuts for the rich are vital for the economy, that companies can’t survive without massive corporate tax cuts.

Australia wake up, the future is in danger!

Look, up in Trump Tower, its Donald

With increasing gloom, we slide towards the 20th January, when a buffoon will take over the Presidency of the United States. Looking on from afar, its difficult to understand why Trump has such support (albeit he lost the popular vote) when he spouted so many obvious lies or distortions of the truth. Even if you ignore these utterings, why did white working class Americans believe that Trump is any different from those business owners who laid off staff and took manufacturing and call centres jobs off shore – their jobs. On the one hand he is saying that he is going to increase expenditure on infrastructure to boost the economy, yet on the other he decries the budget deficit as the fools on the hill spend big on borrowings. His grasp of economics is questionable when he then says that he will cut taxes for the rich, while still running deficits. My only conclusion is that these voters wanted to believe that someone was listening to them and that, even if they didn’t understand it, this person had a solution to their perceived problems. A sign of utter desperation that they forwent any critical analysis and suspended their belief in the existing system or parties.

Now Donald is telling General Motors if they move any manufacturing outside of the USA he will hit them with a massive border tax. Ah Donald, what happened to free trade? You know, the thing you want other countries to accept so that you can sell US manufactured goods without punitive import duties. You know the very theory that has allowed US companies to manufacture their goods in China so that local consumers receive lower prices. The very practices that YOU have indulged in to make more money. History shows us that US companies have been doing this since at least 1947 when the first American tyre company built its new factory in the Phillipines.

Gee, Donald, all this governing thing is very complicated but as long as you have twitter you’ll be fine.

Happy 2017, Good Riddance 2016

Well that didn’t take long – I made a New Year’s resolution to update the blog everyday and I managed to miss out the first one of the year. 2016 started well but spiralled down towards the end with two of my loved ones suffering serious illnesses. We can only hope that 2017 will bring us hope and relief from the illnesses at hand.

In the meantime we’ve got Trump’s presidency to look forward to – or not

How Time flies etcetera

Sunset at the Keep River National Park
Sunset at the Keep River National Park

We’ve been languishing in Broome since Tuesday, enjoying pleasant temperatures but its a bit windy. We joined a tour out to the Willies Creek Pearl farm yesterday for an informative look at the cultured pearl industry. We were given a well formed introduction to the methods of seeding oysters and the techniques of farming cultured pearls, after which we enjoyed a nice lunch in their cafe. Following lunch was a brief boat trip out into the lagoon to view the oyster racks on the long lines. We were also shown how the workers descale, debarnacle the oysters while aboard the shell cleaning boat doing 10 hour shifts. Good money but hard work. After that display it was back to the showroom in an attempt to sell us some pearls. Jenny succumbed and bought some cheap fresh water pearls from Asia. Today we went into the town centre to hit the shops. We met up with the Coopers for an iced coffee.

The view from our caravan park
The view from our caravan park

Melva is still struggling with her arthritis, her hands and wrists are extremely swollen and she appears to be in a great deal of pain. We suggested she increase her pain medication but it looks like they may just visit the pearl farm and then head off toward home. If she is really bad, I think Laurie will take her straight back down the Stuart Highway to home. It would be quicker that going down the coast. We have another tour tomorrow around the town and Jenny is doing the camel ride at Cable Beach (because that’s what you ave to do in Broome) tomorrow evening. We will depart Broome on Saturday and head out to Cape Leveque. How long we stay depends on how long it takes for us to get out there and what we find when we get there. A fellow traveller has suggested an alternative route to head down to Marble Bar so we may check that out after the weekend. The adventure continues.

We’re at Katherine

Just arrived at Katherine after spending two days at Mataranka. We made excellent time to Mataranka a full two days ahead of when we were travelling with our normal companions. Enjoyed the hot pool at Mataranka even though there were heaps of noisy school kids there because of the school holidays. Weather has warmed up now to a pleasant 30 degrees during the day and cool nights. Caught up with the Coopers yesterday and they are slowly travelling in front of us. They left yesterday but we anticipate that we may overtake them today. We’re heading to Gregory National Park to check that out and then onto Keep River National Park which will fill in the next two nights before we head into Western Australia.

The vehicle is going well, with only one minor alteration (my fault I meant to do it before we left but forgot). We cruised at 100 kph on the way up but decided we will drop back to around the 85 kph now we are in holiday mode.

Don’t know when we will have service again, until then keep well.

Oh Effie, I thought you understood

There she was the usual picture of beauty, Effie Stephanidis gracing the screens of the Today show. Effie (Mary Coustas) proclaimed (and I paraphrase) that penalty rates on Sundays should be paid to those important professions like ambos and the like but not to hospitality workers. Damn, I thought she was one herself! I’m sure that Effie didn’t really mean it – surely she is not saying the waiting staff are lesser people than paramedics. Or did she mean that highly paid paramedics need the money more than the struggling single mums and university students – no I can’t believe she would think that.

Perhaps she believes that by employing the low paid on Sundays will mean that because they now have to work longer hours to make up the difference in pay it will keep them off the streets and stop them wasting money on food and the like. Or perhaps it could be one of the main drivers in this debate – because the Productivity Commission (those unelected, unaccountable to the public, bureaucrats) says it must be so, and business both big and small like the idea of paying out less money on labour. That doesn’t make it right. We constantly hear how our society is now a seven day a week society but that is simply not true. Just because shops are allowed to open seven days a week does not mean we are a seven day a week society. If this was the case, then schools would open seven days a week. Office workers would be toiling seven days a week. Public Servants would be working seven days a week. If we truly live in a seven day a week society why are we paying fire fighters, police, paramedics and hospital staff penalty rates? By the very definition of a seven day a week society we would have to remove penalty rates for all workers not just the lowest paid because they are easy targets.

Make no mistake, this attack on penalty rates is about placing more money into the pockets of employers so that the well heeled in society can continue to have their coffee and cake on the weekend. In The Age this week one commentator suggested that if penalty rates weren’t reduced then businesses may have to put an extra levy on the Sunday menu in order to cover costs (I think he was trying to frighten us with the prospect of dearer coffee). Now that is equitable – you want to go out for coffee and cake on a Sunday then you pay the extra instead of expecting some low paid employee to take a pay cut so that you can enjoy your coffee at their expense. Oh Effie, I think the romance is over.


GST Increase to Fund Income Tax Cuts

The Turnbull Government has suggested that everything is on the table when it comes to tax reform. Turnbull himself has said that it would be possible to increase either the rate of GST or the spread of GST as long as the was compensation for the less fortunate. The thinking apparently being that income tax rates are unfair so the GST increase could be used to fund reductions in income tax. My question is why?

We are constantly being told that the government is facing a problem where expenditure is exceeding income. The future projections for expenditure on health and pensions appear to show that extreme pressure will be placed on the federal budget. So why would you collect more tax in the form of increased GST revenues but offset that by reductions in income tax. Don’t we need to have a net increase in the tax take? Or would it make more sense to limit the tax deductions that are available in various parts of the economy?

According to recent figures, removing the generous tax concessions for superannuation would save the same amount that is currently being expended on the aged pension. When you consider that these tax breaks are mainly used by the wealthy, there would be no need to pay compensation to the people in lower income brackets. The GST is a regressive tax, it penalises consumption but it is consumption that grows the economy. Income tax, on the other hand, increases with your capacity to pay. I must admit I am sick and tired of hearing commentators saying that the top end of town pay 49 cents in the dollar tax. That is patently incorrect – the top tax rate is only paid on the top end of the scale, i.e. when your weekly income exceeds $3461. I’m sorry, but I think if you are earning that much you can afford to pay the extra tax. In any case most don’t pay that rate as they minimise tax through superannuation arrangements and negative gearing arrangements for investment properties – both of which are of questionable benefit to Australia’s economy.

Penalising Penalty Rates

Here comes that old Liberal Party favourite – we need more flexibility in the labour market so reducing or removing penalty rates will fix the problem. Then we have the Labor Party’s automatic response – “Run for the hills. Work Choice!, Work Choice!”. So let’s have a little bit of a look at each argument.

  • Removing Penalty Rates will increase employment

Why? How? Let’s look at working on Sundays in the hospitality industry, the scenario that Malcolm Turnbull raised. Working on the premise that the cost of employing people  on Sunday is much more expensive (which, if you are paying penalty rates of double time or double time and a half, is irrefutable) then I would suggest that a competent business owner would be making the most efficient use of employees in periods of high wages cost. In other words, they will only use the minimum number of labour hours necessary which in turn means they are maximising labour productivity. By reducing penalty rates we may increase the productivity per DOLLAR but we do not increase productivity per HOUR worked. In fact if an employer paying less penalty rates increases employment by the same ratio as the penalty rate is reduced there is a decrease in productivity per HOUR worked and NO CHANGE per DOLLAR unless there is an increase in output. So the example of a service industry like hospitality, which does not produce outputs as such but instead services customers, has no increase in productivity unless more customers come into the business AS A RESULT OF REDUCED PENALTY RATES. Now, in this example of the hospitality industry, if a Cafe opens on a Sunday and employs waiting staff, their bottom line will only improve if (a) they keep employing the same number of waiting staff at a decreased rate of pay and maintaining their current level of pricing, (b) they continue to pay penalty rates and increase their prices compared to weekday rates, or (c) they lower their prices in an attempt to get more customers in. As any quality business will attest, option c is only a rush to the bottom and causes the eventual failing of the business, just have a look at the turnover of businesses in the cleaning industry. So my prediction is that the removal of penalty rates will result in no net gain of employee hours. It will make no difference to the rate of youth unemployment (in fact it may have the reverse effect, as at the moment, penalty rates encourage the employment of lower cost employees such as juniors). Most business owners set prices based on the rate the market will bear so businesses are unlikely to reduce prices to consumers unless there is a widespread push by the market. In any case, who will the reduced prices in the hospitality industry benefit? Those who work only during the week – the people that don’t have to work on weekends. Are the Liberal Party suggesting that those that HAVE to work on the weekend should take a cut in pay so that those that do not have to, can get cheaper coffee and cake? Really?

The Myth Expounded by Big Business

Off we go again. Big business and the Australian Federal Government are describing our current level of Company Tax as making us uncompetitive in this global economy. May I ask how? I ran my own business for twenty-five years. At at no stage did I weep into my pillow complaining that the company tax rate was making my life hell because I couldn’t compete against my opposition. Company Tax is not an expense of running the business, it is a levy that imposed on the profits from running a business. As such it occurs after the business has carried out its fundamental role.

I know I, like most other people, would have loved to keep that extra money in my pocket but we live in a society where not all people are equal which is what governments are there to help with. Now consider this when you listen to the Treasurer and the big business lobby groups, if the company tax rate is so unhealthily high why is it that the extremely wealthy love to convert their directly earned income into so called company income by forming questionable private companies? Simple, its the ability to claim almost anything as a legitimate cost of doing business, thereby reducing your taxable income substantially. My partner used to get upset with me because I refused to follow that lead. I held onto one main principle when it comes to paying tax – if we all pay our fair share then the tax burden would be able to be reduced on us all. Sadly, the wealthy are the one’s that have the government’s ear.