The wages of economic sin

The disconnect between the stimulus and our subsequent problems seems ever-present. You spend money on waste – school halls, pink batts, NBN, green technologies – and the result is a draining of productivity into the swamp. Real wages cannot rise if you do not increase our ability to produce the goods and services those wages are intended to buy. Here’s the latest news:

The growth in wages in the private sector is at a record low and is forcing workers to lower their expectations.

The 2.2 per cent increase over the past year recorded by the Australian Bureau of Statistics will not surprise those workers experiencing real wage cuts because employers have imposed temporary pay freezes or granted below-inflation salary rises.

The funny bit about wages is that no one has to do anything in a market economy to raise real earnings when the economy is going well. The competition for good employees does all the work for them. Unions can raise wages in some areas by killing off parts of an expanding industry, but overall wage rates remain almost entirely untouched. It is national productivity that matters, and we haven’t seen it grow in a while.

It may make everyone warm and fuzzy to pretend to be doing something about unemployment by some kind of Keynesian stimulus or helping the environment by promoting green (ie very expensive) energy. But reality is all too real. We have squandered billions and now cannot afford the incomes we once did.

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