Politics - Federal

Liberals Roll Over on Budget

By Ryan McGreal
Published January 29, 2009

After complaining that the new Conservative budget doesn't do enough to extend Employment Insurance benefits and may lead to structural deficits, Liberal leader Michael Ignatieff proceeded to roll over and acquiesce to it, insisting only that the Conservatives report in periodically on how the budget is working out.

The Conservatives, no doubt pleased to confirm that the Liberal Party didn't acquire a spine with its new head, gladly accepted this 'concession', pointing out that reporting to Parliament and facing confidence votes it isn't exactly an added burden.

As House Leader Jay Hill put it, "You know, this is nothing new. We're always accountable to Parliament and to the Canadian people".

So now we're left with a stimulus budget full of sound and fury that won't actually do much to stimulate the economy. Infrastructure money will still seep through the tangled Building Canada Fund (and municipalities will still have to come up with matching funds), and most unemployed people will still be left in the lurch.

Meanwhile, the tax cuts - which even the government admits will do little to spur economic growth - will lead to structural deficits and the need to cut spending down the road.

Ignatieff had a chance to insist that the Conservative government make real improvements to the budget or face defeat. That is, Ignatieff had a chance to be a leader. Instead, he revealed himself as merely a calculating sycophant.

It turns out that we have a coalition government after all: a coalition between the minority Conservatives and their Liberal enablers.

Ryan McGreal, the editor of Raise the Hammer, lives in Hamilton with his family and works as a programmer, writer and consultant. Ryan volunteers with Hamilton Light Rail, a citizen group dedicated to bringing light rail transit to Hamilton. Ryan wrote a city affairs column in Hamilton Magazine, and several of his articles have been published in the Hamilton Spectator. His articles have also been published in The Walrus, HuffPost and Behind the Numbers. He maintains a personal website, has been known to share passing thoughts on Twitter and Facebook, and posts the occasional cat photo on Instagram.


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By Frank (registered) | Posted January 29, 2009 at 09:16:40

Wah wah wah! I'd rather have that than a Liberal-NDP-Bloc coalition or an election andy day of the week!

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By Rusty (registered) - website | Posted January 29, 2009 at 10:56:30

But this is all politics - Iggy rolled over because he doesn't have the public backing to stand his ground on any of the issues you've cited. Are we going to have a riot or an election over the EI formula? No (not yet anyway).

I recall the Thatcher inspired recession of England in the 80's. It took years for public dissent to raise to a level sufficient enough to make the politicians pay attention. People are hurting in isolation right now, and they're too worried to take action against their government. Give this thing a few years to wear people down and then maybe we'll see changes. But for now this is just the government treading carefully as usual, doing what it needs to do to keep themselves in power.

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By Frank (registered) | Posted January 29, 2009 at 11:34:31

I suppose Ryan has access to all the numbers and knows what will happen if the spending goes his way. That's why he's NOT the finance minister nor has anything to do with government in general...other than complain about it. If you don't like it, get some money together and some signatures and run in the next election. Then at least you can whine in parliament. Lots of people have suggested it and you seem to think you could do a better job... Perhaps you don't understand that no matter what happens people will complain...if not you, someone else. So get used to not being satisfied all the time. We'll see what happens and deal with it when it does happen.

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By A Smith (anonymous) | Posted January 29, 2009 at 11:58:42

Ryan, I would be interested to hear what your budget would include, keeping in mind your appeal for fiscal discipline. Here are a couple of links that may serve as a good first start...

>> ttp://cansim2.statcan.gc.ca/cgi-win/cnsmcgi.exe?Lang=E&Accessible=1&ArrayId=T1328&ResultTemplate=CIISNA___&RootDir=CII/&Interactive=1&OutFmt=HTML2D&Array_Retr=1&Dim=-#HERE

>> ttp://cansim2.statcan.gc.ca/cgi-win/cnsmcgi.exe?Lang=E&C2Fmt=HTML2D&CIITpl=SNA___&ResultTemplate=THEMSNA4&CORCmd=GetWrap&CORId=1039#HERE

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By A Smith (anonymous) | Posted January 29, 2009 at 12:38:32

Ryan, why would you listen to a government that has produced three years of poor economic growth? Furthermore, the idea that money spent by individuals is less likely to result in real output gains, then money spent by the government is laughable. Just look at Japan. They spent most of the nineties building infrastructure (and running high deficits) and it did nothing to increase real output. In recent years, as the government has been forced to tighten up its budget, thus increasing the role of the private sector, the economy has started to grow again.

The best way for Canada to get real output growing again is to limit government spending to population plus inflation, stop increasing the minimum wage (which only makes it less likely that businesses will want to hire workers) and allow anyone who wants to come here to work to be able to do so. Luxembourg has allowed businesses the freedom to bring in workers for decades and they have a per capita GDP twice that of Canada. In fact, I believe that two thirds of the people that live there aren't even citizens.

Furthermore, if government spending is so effective at increasing real output, why is it that Harper and Co. have seen such poor economic performance since they took over? They have grown government spending much faster than Chretien did and yet while Chretien was in office, Canada's economy was one of the best in the world. Explain that?

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By Milton Friedman (anonymous) | Posted January 29, 2009 at 13:00:49

Couldnt agree with you more A Smith

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By Zombie Friedrich August von Hayek (anonymous) | Posted January 29, 2009 at 13:13:06

Hey, don't forget about me you guys! I've got Zombie Ludwig von Mises with me too so it should be a real Austrian/Chicago School blast!

On the other hand I do recall having once said, "probably nothing has done so much harm to the [libertarian] cause as the wooden insistence of some [libertarian] on certain rules of thumb, above all of the principle of laissez-faire capitalism."

Bear that in mind, young whipper snappers!

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By Rusty (registered) - website | Posted January 29, 2009 at 13:41:39

I've lost the thread here completely...(!)

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By A Smith (anonymous) | Posted January 29, 2009 at 15:15:09

Luxembourg only has 40% of it's population comprised of guest workers, not two thirds as I stated before. Nevertheless, it is still an interesting statistic.

Zombie, results are all that matter, not ideology. That's why Harper has failed to capture political power. His policies have resulted in a tepid economic growth, in contrast to Chretien, who helped the economy grow by basically getting out of the way.

Government is best when it allows individuals the freedom to make their own spending decisions and this includes allowing businesses to hire who they want, no matter where they come from. Individuals are always striving to maximize the value of their dollar, so when government spends money on what it thinks is valuable, it does so at the cost of the individual.

However, because government officials don't spend money on their personal desires, but rather on what they "think" their constituents want, they end up wasting money. A great analogy is Christmas shopping. When people buy gifts for other people, many of the purchases are less than optimal, as reflected in the fact that 40% of people return at least one gift for refunds. The point is that no one can spend money better than the individual, so by introducing a middleman into the equation, you simply add a level of confusion into the allocation of capital that isn't necessary, nor beneficial.

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By Grassroots are the way forward (registered) | Posted January 29, 2009 at 19:12:15

A Smith: I would like you to explain your theory on not raising minimum wage. Because from where I stand, minimum wage is currently $8.75 and those workers are having a hard time paying shelter, food and transportation costs, many of those who are the working poor have been trying to access the foodbanks, yet many have been denied because they cannot prove that they are poor. Do you believe in slave labour? Just asking.

It seems you are promoting that those from other countries can come here and work for starvation wages, which puts the pressure on other employers to drive down wages, but the costs to live are ever increasing.

Do you think people should be working for say $2.00 per hour, three, what????

Though I do agree with you analogy of the government, that the bureaucracy is ever growing, the malfesceants in the government which demand over the top living wages, benefits packages, pensions, yet deny those at the bottom to live in dignity, you know those technocrats who want to control every facet of ones life.

Should not getting Canadians jobs be the priority??????

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By A Smith (anonymous) | Posted January 29, 2009 at 22:45:01

Grassroots, Walmart earned 3.14 billion in profit last quarter. However, in order to earn this, it needed to sell 98.5 billion. Therefore, for every dollar in sales, it kept about 3 cents. Therefore, if Walmart was forced to pay it workers more, the only option Walmart would have, other than losing money, would be to either lay off workers and install more automation, or hike prices for consumers. However, since most people that shop at Walmart are on the lower income scale, doing this would just mean that poor people would have to buy less goods. As you can see, just because government tells businesses they must be nicer to their workers, doesn't mean that they can create real wealth out of thin air.

If you really want to help poor people, you need to increase the amount of goods and services that the economy produces. For example, if you started up a company tomorrow that could produce cars with only a single worker per plant, this would free up other workers to produce other goods and services. As a result, each dollar of wages would now be worth more, since the growth in output would have risen faster than the money supply.

Simply telling employers what the minimum acceptable wage should be, does nothing to increase the wealth that businesses create and therefore can do nothing to help the average person. Companies simply will not pay people more than they are worth, so by forcing firms to have a minimum wage, the government is forcing those with few skills to stay unemployed.

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By Grassroots are the way forward (registered) | Posted January 29, 2009 at 23:50:30

You used Walmart as your example. Ok let's examine this, first off, in terms so of Canadians jobs, how much of their product line comes from Canada? How many Canadians companies have been lost by those that practise the "globalization" model that Walmart follows. How are they creating Canadians jobs, if all their product line is coming from outside sources?

Anyways, personally I do not like Walmart, or their labour practises one bit. This corporate entity has caused much grief and is part of the declining ability of the people to earn a living wage, which would in turn enable those have the least to spend back into the local economy, which would create jobs.

Anyways, to make any firm judgement, one would have to see the financial statements, in order to analyze the costs, particularily paying attention to all payroll costs attributed to those at the top vs those at the bottom. It could be that those at the top are paid too much? Maybe their value to a company is way overstated, while those at the bottom are understated.

Are you a practising globalist????

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By A Smith (anonymous) | Posted January 29, 2009 at 23:58:39

Ryan, assuming that the money supply is stable (no inflation that drives real wages down), when you increase nominal wages, you make labour more expensive relative to tools and automation. Therefore, if you are a smart business, when the government increases the cost of one input (labour), you employ less of it and switch to something else (machinery and automation). Even if this machinery costs more than using labour at free market rates (the optimum solution), it still is better than using labour at distorted prices.

Since all firms employ only the minimum inputs they have to, increasing the wage cost of labour ensures that firms will get rid of workers that can't produce the output that would justify the higher wage level. Companies will simply not pay people more than they are worth, it won't happen.

Here is something I found funny >> "Raising the minimum wage restores a price for labour that still allows employers to be profitable but leaves more money in the hands of workers. This, in turn, leads to more consumer purchases, which provides more revenue for employers and more overall growth in GDP."

First of all, the net profit margin of all businesses in aggregate is zero, so there is never a good time to raise their costs. All this will do is force more businesses into the red, because it does nothing to increase real output. Think about your peak oil scenario and then switch labour for oil. Therefore, by creating peak wages, you ensure that businesses will use less labour and more automation.

Secondly, just because you transfer money to employees and away from owners, does not mean the economy will produce more output (GDP). Output gains are driven by productivity and not simply consumption. In fact, without new business investment, there will be less innovation in the future.

The best reason not to set artificial prices for labour, however, is because it can only distort the optimum set of inputs it takes to produce the largest amount of goods and services. In doing this, the government ensures that capital will be wasted on unnecessary input costs, thus decreasing profits for further investments and increasing prices for consumers.

Think of it this way, if I can produce a car with $4000 in labour costs and $10,000 in others, this gives the consumer a car for $14,500. However, if I am forced to switch off of labour and into more automation, my new costs will be $3500 in labour and 10,800 in others. Therefore, to produce the same number of cars, it now costs me $14,300. If I want to keep the same return on investment, I must charge the customer $14,810. The net result of this scenario is that the economy produces goods and services less efficiently than it needs to (decreasing real wages) and more people would be out of a job.

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By A Smith (anonymous) | Posted January 30, 2009 at 00:09:47

Grassroots, why does it matter where people buy their goods and services from, so long as they are a good value? If China wants to sell us subsidized electronics, then that is a good thing. Just to take this scenario to the extreme, imagine if China sold subsidized cars to us for $1. That would put domestic autos out of business, but it would also mean that consumers had an extra few thousand dollars to spend every year on other items, like restaurants, sporting events, retail, etc. This would also mean that displaced workers would simply shift from producing autos, to something else.

The net result would be a consumer with more buying power and a nation that could invest money in newer industries.

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By A Smith (anonymous) | Posted January 30, 2009 at 01:23:43

Ryan, what studies and by whom. Take a look at the U.S. right now. They recently increased the minimum wage at the Federal level and lo and behold unemployment has gone up, interesting? Same goes for Canada.

However, if you are correct, then why stop at $8.75? Why not set the minimum wage to $15 or $20 an hour? If, as you say, increasing the minimum wage increases output, why not move it to $1000 an hour?

If increasing real output is as easy as the government demanding so, then our leaders should pass laws that make businesses produce double the amount of goods and services every year.

The fact of the matter is, real wages represent the amount of stuff that a country produces, so unless you can make more stuff, you can't really increase real wages. Any extra money you give to Bill, you take away from Tom. It's that simple.

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By A Smith (anonymous) | Posted January 30, 2009 at 02:01:18

Ryan, here's another option. Let government set a minimum wage, but then allow people the freedom to opt out if they so chose. If this was allowed to happen, workers who wanted the protection from government could have it, but those who felt they didn't need it, perhaps because they lived at home, were older, etc, could still find employment fairly easily.

If, as you say, minimum wage laws don't affect the willingness of employers to hire, then having the ability to opt out should have zero affect on employment at acceptable wages.

Lastly, there is no such thing as a monopsonistic market for labour. Workers wages are priced at what they produce and any industry that tries to keep wages artificially low, will soon find other companies that are willing to accept lower profit margins. If you disagree, please give me an example of a monopsonistic industry.

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By Grassroots are the way forward (registered) | Posted January 30, 2009 at 09:01:46

A Smith: It does matter where products come from as we need to look at several issues such as the labour practices of an company operating outside of Canada. So even though the product may have a low price per se, what has been foregone, such as wages, are they sustainable, what about workers health and safety issues, what about the materials going into the products, I use the example of lead paint in children's toys. There are many things to look at.

While the globalists want to expand markets and exploit workers, they seem it have issues with the spreading of labour rights, thus this leaves these many workers with no rights.

Anyways they are studies out there that prove the raising minimum wages does not greatly effect local markets, while you may not agree with the results, that does not mean that the numbers and information are irrelevent.

Anyways, why should "business" have all the say and none given to the workers? Personally in today's world, it makes much more sense to have open discussions between labour and management, I mean think of it this way, does someone who is a number cruncher have any reality of operating a machine in production, no they would not, their focus is on the numbers, which do not include many factors, which are of a human nature, when looking at numbers, there is no social cost that is defined.

Anyways to your discussion about the variances between variable or fixed costs, Since studying this in post secondary education, accounting, the model since the 1980's has been to focus in on cutting labour costs, as Man power hours, the variable costs have been replaced with the fixed costs of machinery. So in essence if a company no longer relies on manpower hours but adopted the fixed cost model, then during times of financial hardship, they cannot be as flexible, in terms of cutting out a machine that is vital to the production process, where as before, one could just cut man hours. You still have to pay for the rent or mortgage of the fixed asset, so if your profit margins fall, well you're in a bit of a spot if you cannot pay the bills.

Looking at numbers is one thing, but the reality of the working world is another, things happen such as there can be delays, thus when looking at the models like JIT, there can be additional costs incurred when the delivery does not happen just in time, but then in your world, the blame falls where? Who is punished, is it the managers who spend thier time looking at spreadsheets trying to revamp their numbers to fit their model or is it the workers?????

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By Rusty (registered) - website | Posted January 30, 2009 at 10:05:49

It seems we have simplistic economics - dare I say 'ideology' - (A Smith) versus evidence based arguments (Ryan). With a sprinkle of social conciousness and realism (Grassroots) thrown in.

So far my money's on Ryan...:)

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By Skeptical (anonymous) | Posted January 30, 2009 at 10:27:53

Ryan's comments regarding minimum wage are very one sided. Gathering articles on the Internet can argue any side. It is the new gen way of guerrilla point-proving.

I could find articles that suggest a 3-tier hamburger is beneficial for ones digestive system.

If you want to get to the truth all you need to do is put yourself in the position of a business person who is about to open a franchise or location that enjoys freedom that other areas enjoy. When you weight in all the parameters, adding a mandatory wage hike is a deterrent.

There is no question that many of Hamilton's business community feel the crunch with all kinds of "requirements", where cities like Burlington -- quarter the size of Hamilton in population -- get major investments. Not just in big-box, as I am sure someone will point to, but also major investment in quality corporate grounds.

Burlington (or other like-cities) resident's quality of life is better, surely due to many reasons, but not being bullish to the business community certainly helped. And many would argue that minimum wages in cities like Burlington are inherently higher simply because freedom allowed for it as a byproduct of the businesses eventual success.

The neoliberal blanket statement is a way of detracting a good or bad idea. Shouldn't matter if someone is a Conservative or a Liberal. A bad idea is a bad idea. A good one, a good one. Who's mouth it comes from shouldn't make a difference.

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By Practical (anonymous) | Posted January 30, 2009 at 10:30:51

Hooray. Ryan for King!!

So what would have happened if Iggy hadn't 'rolled over'? An election more than likely and a Conservative majority to implement Thatcherism because we know that's where Harper wants to be.

Iggy did the responsible thing; and he is biding his time to get these bums out.

Put that in your Grassy pipe and smoke it all you idealistic head in the clouds blabbers!

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By A Smith (anonymous) | Posted January 30, 2009 at 11:00:03

Ryan, if raising the minimum wage helps the economy grow and doesn't affect unemployment, then why is the U.S. and Canada, who have recently upped the minimum wage, are now shedding jobs? How do you explain that? If minimum wages are a net benefit to the economy and workers in general, why have things gotten worse and not better? How do you explain that correlation, because it argues against the studies that you cite.

Furthermore, the studies that you mention, tend to look at very short time frames and all of them cherry pick the best years as evidence that minimum wage laws don't drastically reduce employment. In one of the studies, it shows how high minimum wages states outperform in job creation compared to lower wage states. Except of course, if you look at the decade before, the complete opposite is true. Therefore, if you want to be fair, you need to look at longer time frame, that compares both expansions and contractions, not simply the boom years.

As for diminishing returns to the minimum wage, who decides where that level is? How do politicians know exactly where to draw the line? Just as they could choose a rate too low, they could just as easily choose a rate too high? What is the measure you use to know where to stop?

What about people that earn above the minimum wage? If employers are able to set wages where they choose and are not affected by the laws of supply and demand, then why does anybody earn more than the minimum wage? Why do companies pay engineers more than $9.00 an hour. If employers truly call the shots, then they shouldn't and yet they do. The reason for this is simple, if a company refuses to pay the market rate for labour, it will find itself at a competitive disadvantage relative to its competitors who do.

Think about it this way, if you pay an engineer $9.00, but their work produces $22.00 in profits, you are are exploiting that worker for $13. However, if I am willing to accept a $5 exploitation rate, it will allow me to lower my prices to consumers and pick up market share at your expense. Furthermore, if businesses really control the prices they can both charge consumers and also pay for labour, why is it that companies such as Walmart only have 3% profit margins. Explain that.

Furthermore, higher wages do not motivate people to work harder, if those wages are not tied to performance. Why would anyone work harder if they got paid high wages regardless of how hard they worked. If anything, setting a floor on wages will make people work less diligently, simply because they have the government to back them up.

>> "When already-wealthy people make more money, they tend to invest it, but when poor people make more money, they tend to spend it. As a result, a policy that increases income to the poor has a bigger impact on GDP than a policy that increases income to the rich." >>

First of all, without investment in new technologies, you can't increase productivity. Consumption is important, but no more important than investing in the future. They are two sides of the same coin. However, if you are concerned with increasing the purchasing power of low income people, why not raise the personal exemption to $20-30K and abolish the GST and PST on incomes less than the median. This way, low income people would have more incentive to work and the businesses would enjoy more sales because of their greater disposable income and lower transaction costs when making purchases.

Just as a side note, even after the government has cut the GST from 7% to 5%, this tax still brings in almost the same amount of revenue to the government as it did before. In 1999, it brought in 12.34% of all government revenue. At the end of fiscal 2008 (Mar 31, 2008), it comprised 12.21%. This is all the more amazing considering the fact that oil revenues are much higher today than in 1999. What this means is that the government is now taking a smaller piece of a bigger pie. There are more transactions because of lowering the GST, otherwise it should only bring in 5/7 of what it did before, which would have been 8.81 % of overall tax revenue.

Therefore, if you want to help poor people, let them earn and spend tax free up to a reasonable level (30- 35k or the median income), but don't force employers to pay the cost. If the GST tax reduction is any lesson, it's that the government can raise just as much money by using low tax rates, simply because it increases the amount of activity in the economy. Let's abolish the GST and the PST as soon as possible.

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By skeptical (anonymous) | Posted January 30, 2009 at 12:13:19

Ryan wrote:

>> I posted links to peer reviewed papers written by well-respected economists and published by reputable organizations. Unless you can find issue with the evidence, arguments or conclusions, your comment amounts to a mere ad hominem fallacy.

Oh, okay. I guess you're right, then. Your references don't pertain to our economic environment, nor do they prove anything above and beyond "perspective statistics". Reference to ideas or facts, not opinion.

>> No. That is the route of reasoning from a priori assumptions, and it is not a reliable way of testing economic theories.

No, Perhaps not. But it is definitely detracting for those who are reasoning from "a priori assumptions". We all lose. Good turnout.

>> The evidence does not support this conclusion. Again, raising the minimum wage tends to:

What evidence? Economics is science. Unless you weight in every single variable, you cannot call it "evidence". We call that religion. Again, I can find articles that would reference the other side of that of that, respectfully.

>> The difference between your a priori reasoning and the empirical studies I cited is that the latter produce actual *evidence* that must be taken into account by the working hypothesis.

Your interpretation of "evidence" seems to be legacy. Evidence needs empirical proof, as you said. These articles reference experience after specific changes were made, but completely negates on event managing any other potential changes that could have occurred. Your "evidence" is closer to chaos theory.

As A Smith said, "Furthermore, the studies that you mention, tend to look at very short time frames and all of them cherry pick the best years as evidence that minimum wage laws don't drastically reduce employment."

"Cherry pick the best years" -- as I said, religion -- not evidence. This is no where near empirical. Selling it as such is an attack on everyone's intelligence.

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By A Smith (anonymous) | Posted January 30, 2009 at 12:48:17

Ryan, if there was no minimum wage in Canada today, do you think it would make it more likely, or less likely that employers would keep people on the payrolls in this economic downturn? If you say more likely, then the argument for wage controls is harmful to both workers and employers. If you say less likely, then explain why business that face reduced sales always try to reduce labour costs.

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By A Smith (anonymous) | Posted January 30, 2009 at 13:04:52

Ryan, >> It's not an exact science, as the evidence clearly demonstrates. The important thing for policy is to get the minimum wage into the right ballpark. The prudent solution, IMHO, is to do as the more successful jurisdictions have done and increase the minimum wage incrementally, observing effects on employment rates as you go.

Therefore, if your argument is that minimum wage rates should be set according to unemployment levels, this means that they are currently to high. If we want full employment (say 3-4% unemployed), we should allow the minimum wage to fall until this number is hit. This sounds like a better idea than simply moving wages in one direction.

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By Canon (anonymous) | Posted January 30, 2009 at 13:30:26

I by no means have any educational background in economics but my experience has bee that applying formula to an area that is driven by subjective choice will always be inconsistently viewed.

Lets say I were to put myself into the position of a small scale (10-15 employee) business that makes decent money (significantly better return than straight up investments). I have the business set up to make money. I pay minimum wage or higher. Everyone is paid for the position/tenure/qualifications.Now tell me that I have to pay more at the bottum. Well doesnt that change a lot? I mean doesnt that mean that every employee is effected because my business model is changed. I need to miraculously change my output scenario or decrease costs dramatically because the bar has been raised in relation to ever employee. Wouldnt that dramatically change my business? How wouldnt it?

I not looking for studies. Just an answer.

Our economy seems to be flawed at its core. No one wants to work a job that actually drives an economy ie sweat equity jobs. Everyone wants to be a god damn academic! As I see it raising wages or any other stimulas doesnt address that fundamental problem. People need to be unemployed, economies need to go into the shit'er. I believe failure is the only option at the moment to bring us out of this artificially unsustainable fallacy were living in now

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By Skeptical (anonymous) | Posted January 30, 2009 at 14:07:57

We're meeting in the middle here.

I am not an expert, to be sure. But, I don't want to accept the "noise", as you put it, as a replacement for not knowing what is happening.

I'd actually like to hear your take on Resource-based economics. My thoughts are that I would love to see this evolution, but it is unlikely in my generation -- this makes me sad.

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By A Smith (anonymous) | Posted January 30, 2009 at 14:16:00

Ryan, >> Based on the evidence, I'd say it wouldn't make a difference, except that people making the lowest incomes would be in even worse shape than they are today.

Then why is it that firms lay people off when the economy slows? If wage costs are not an issue to employers, then they shouldn't fire anyone.

>> This is a read herring. Businesses will cut jobs regardless of whether a minimum wage exists

Businesses don't care about cutting jobs, they care about cutting labour costs, there is a difference. In fact, if Walmart could double the size of their workforce, thus increasing their output, they would, so long as they could keep acceptable (to them) profit margins.

>> As I already pointed out, unemployment is not rising because of the minimum wage; it's rising because of a global economic crisis.

Wrong, unemployment is rising because total labour costs are too high relative to sales. If labour costs were brought down (by decreasing the minimum wage), businesses could keep the same number of people employed and still retain reasonable profit margins.

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By Skeptical (anonymous) | Posted January 30, 2009 at 17:09:53


Thanks for your point of view. You clearly took some time to explain your thoughts. Admirable, to say the least.

I'm still trying to grasp the idea. There are a few elements, some you mentioned, that I can't wrap my head around.

Futurist and inventor Jacque Fresco (www.thevenusproject.com) seems to think that it can be done and he has an answer to many of the questions you've asked.

I've considered visiting him and asking for his point of view next year (honeymoon potentially to that area) on a few of these elements.

He's a smart man, although a lot of people don't pay too much investment into his ideas because they appear too advanced for our current state, although if you break some of the elements down to their prime you find that most of the ideas aren't incredibly far fetched.

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By Grassroots are the way forward (registered) | Posted January 30, 2009 at 19:14:44

A Smith: you keep going on about profit margins, so you are referring to gross or net profit margins. Ideally, material, labour and overhead are the main expenses in calculating a gross profit. But there are many other costs, right. Again I will focus on the amounts paid to those at the top, are they overvalued to the contribution as a whole, as it is the labour force, that actually makes the product or does the work, not the CEO types. So if there is no labour, then Mr Capital, who does not do the work, will not make any money either.

Why do you go on about Walmart, in fact there was a story not to long about about a family in which the walmrt worker was in an terrrible accident, though she did have benefits, once the insurance settlement came in, Walmart forced them to pay back all the benefits, leaving the family with nothing to care for the injuried person, who will need lifetime care.

How much are the goons at the top being paid? How many millions, billions? This company exploits workers to no end. I have no symapthy for companies like these period, while I do for the small and medium size companies, family businessess, which are the backbone, that will be eventually overtaken by the big multinationals like Walmart.

Please put some thought into things. Instead of attacking the workers, wage rates why not attack the root cause, the big multinational corporations that are consolidating their power. Aren't these guys that ones that influence policy? Taxes?

Are you a globalist?

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By A Smith (anonymous) | Posted January 30, 2009 at 21:39:37

Grassroots, >> you keep going on about profit margins, so you are referring to gross or net profit margins.

Net margins.

>> I will focus on the amounts paid to those at the top, are they overvalued to the contribution as a whole, as it is the labour force, that actually makes the product or does the work, not the CEO types

It is possible, but that is up to the shareholders (owners) to decide, not government.

>> Why do you go on about Walmart,

These same arguments apply to any company, I picked Walmart simply because most people have the impression that it makes obscene profits. The truth is that Walmart is in an extremely competitive marketplace and passes most of it's lower labour costs onto the consumer in the form of low prices. How is this a bad thing? Furthermore, if people don't like the fact that Walmart pays it's workers low wages, don't shop there. If Walmart started suffering low sales due to a bad reputation, I'm sure they would change their wage policy very quickly. The consumers in this case have the power to force companies to do what they want.

>> Please put some thought into things. Instead of attacking the workers, wage rates why not attack the root cause, the big multinational corporations that are consolidating their power. Aren't these guys that ones that influence policy? Taxes?

You do make me smile grassroots. To tell you the truth, I really don't care what government does. If it wants to tell companies what to do, then that's okay with me. Keep in mind, however, that if labour costs per unit of output is more than what the product sells for, then the firm will simply go out of business. Seeing that Walmart currently has 3% margins, this does not leave much room for wages to increase. But go ahead, try to extract every last cent you can from the evil corporation. It will only mean that prices for goods go up for consumers (primarily low income), but if you don't poor people having to pay higher prices, jack that minimum wage up.

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By Grassroots are the way forward (registered) | Posted January 31, 2009 at 00:09:15

A Smith: you write: It is possible, but that is up to the shareholders (owners) to decide, not government.

Given the current state of affairs, I do not think individual shareholders hold a whole lot of "say" on issues of compensation packages of its CEO's et al or actually anything.

If you ask me,I don't think the people have much of a say in much, at the present time, but that could change, at least their is always hope there be an awakening.

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By A Smith (anonymous) | Posted January 31, 2009 at 18:54:23

Grassroots, be a good person, treat people like you want to be treated and that's all you need to do. If someone else wants to take advantage of you, then let them. In the long run, God/Karma/Balance will ensure that you are rewarded for your hard work and kindness and they are punished for their bad behaviour.

Furthermore, even though I don't agree with you on economic issues, you seem like a good, caring person, so I hope you have much success in the future.

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By LL (registered) - website | Posted January 31, 2009 at 20:53:52

Everyone assumes the improvement of conditions for the working poor to be a desideratum. Yet no one has bothered to consider the possibility of what the working poor themselves want.

Picture this: someone devise a poll where low wage workers were informed of the debate over raising the minimum wage. In the preamble, they're informed that one group of "scientific experts" says raising it will increase unemployment, and another group says it will have no effect. What side do you think they will favour?

Ryan said:

"Far from the simplistic analysis of neoliberals, employers and workers are asymmetric agents in monopsonistic unskilled and semi-skilled labour markets, i.e. employers have considerable power to drive down wages (since a corporation is a formal combination of thousands of shareholders pitted against separate and individual workers). As a result, employers can pay workers less than a fair market would produce."

True true. There is another gaping chasm between a theoretical perfect market and the actual program the neoliberals want us to swallow: that is, with corporate globalism, capital is quite free to cross borders, whereas "labour" (aka immigrants) are highly restricted in their movements across borders. This surely constitutes a major market distortion that works to capital's advantage.

But I doubt writing articles and asking nicely will do anything. "Iggy" is always going to listen to the people who fill the Party coffers and send lobbyists to Ottawa. If workers want a living wage and other social gains, they have to organize and fight for it. No serious change comes without struggle.

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By LL (registered) - website | Posted January 31, 2009 at 20:56:43

skeptical said:

"Economics is science. Unless you weight in every single variable, you cannot call it "evidence". We call that religion."

Economics is neither science nor religion. Economics is a political praxis. Until we clue into that, we will continue to chase our tails as a civilization.

First of all, it would be impossible to "weigh in on every single variable" since, in a "complex system", every variable affects every other variable. (I'm not saying that empiricism doesn't have it's place for social questions; I'm just saying recognize its limits.)

Secondly, human subjectivity is itself a variable in the system. When an economist makes a prediction on television, the very broadcasting of the prediction affects the outcome.

Third, as I will continue to point out, economic behaviour is historically conditioned. In the face of massive factory closings, workers in Buenos Aires responded by illegally occupying factories and running them democratically. Faced with a similar industrial failure, workers in Buffalo responded much more quiescently.

The difference? Buenos Aires has 100 years of revolutionary opposition and a culture of solidarity. They've been through a military dictorship that "disappeared" thousands of "individuals" in the name of "libertarian" Chicago-style economics. They know not to listen to such horses#!t.

When classes and communities begin to coordinate as economic "actors", the possibility of a "self-organizing system" emerges, wherein "self" denotes the ethical human personality - not just the system as a whole, with humans existing as manipulable components.

My point? Working people need to organize for a living wage.

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By Grassroots are the way forward (registered) | Posted January 31, 2009 at 21:17:47

A Smith: Thanks for the words.

LL: You bring up good points, that is why is it important for workers to organize. If you check you the events on Word on the Street, you will see an upcoming event that will give workers, specifically those trapped in the temp industry a chance to group together. From a grassroots perspective, it is imperative to get the voices of the people to the forefront. Their voices need to be heard about what they want, not what the system thinks they should have.

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By LL (registered) - website | Posted January 31, 2009 at 22:09:27

Grassroots: thanks. I did know about that temp worker demo, but thanks for reminding me. I was in that boat ten years ago, so I know how badly the situation needs to change. Although, so much has changed already - so much grassroots organizing that didn't exist then.

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By Grassroots are the way forward (registered) | Posted February 01, 2009 at 00:03:40

LL: I hope you can make it to the forum, spread the word around to all that you know. A point that is not talked too much is that Ontario Works, in junction with many of the not for profits, shuffle people into temp work, well actually, one does not really have a choice, if you do not accept the job they offer, even though you may not get paid for two to three weeks, because you have received an OW cheque, as they system deems this as training, you will be cut off Ontario Works. So for the workers that may exhaust their EI benefits and may have to access OW, will find out just how tyrannical the system really is.

It should be noted that many of the working poor are denied access to the foodbanks because they cannot prove that they are hungry. They do not accept pay stubs, if know what I am mean, only your papers from the system.

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By here (anonymous) | Posted February 01, 2009 at 16:04:00

Stop with the irritating facts, its annoying the ideologues here.

Economics is not a science, its an art form. As a science, economist have a worse record than the weatherman.

Finally, minimium wage prevents the a Dickensian race to the bottom. It may not conform to an economic model but it does conform to human needs.

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By A Smith (anonymous) | Posted February 01, 2009 at 17:53:32

Here, a good way to help the poor, if history is any tool, would be to raise the marginal tax rates on the rich.

>> "h"ttp://www.visualizingeconomics.com/wp-content/uploads/income_top_0_1_marginal_tax.gif

As you can see, when government taxes the rich hard, you tend to lessen the gap between rich and poor. The funny thing is, however, the government actually gets less money from the rich and more from the poor. Nevertheless, by increasing rates on the rich, you drive real wages up for the poor.

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By OccassionalCommentor (anonymous) | Posted February 02, 2009 at 15:46:56

"Finally, minimium wage prevents the a Dickensian race to the bottom. It may not conform to an economic model but it does conform to human needs."


"Stop with the irritating facts, its annoying the ****ideologues**** here. "


No sense.

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By Cityjoe (anonymous) | Posted February 10, 2009 at 03:24:49

Walmart has 2 another options.
"Take less in profits."
"Invest in your employees."

Yes people who earn Walmart wages need to shop at Walmart. Would it surprise you to know that many people who do not work at Walmart earn a hourly wage which is substantially less than a Walmart worker, given that Walmart does give increases several times a year, & they are not just a bump up to minimum wage. Things even out, because the none-Walmart worker probably works long hours per pay period.

'Just sayin'..... ;-)

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By A Smith (anonymous) | Posted February 10, 2009 at 11:43:11

Cityjoe, okay, how about this for an idea. Instead of implementing a minimum wage, let government apply a wage benefit to the employee's paycheque. Therefore, if the government wants a minimum wage of $10 an hour, it can tack the additional $2 an hour onto their wage level. The employer has the benefit of hiring workers at a competitive cost structure and the worker gets to increase his skills, rather than just collect a welfare cheque.

Think of it as a modified form of workfare.

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By mwoods (anonymous) | Posted February 11, 2009 at 08:09:25

There are more useful things in this budget than I would have expected from Harper, given his past performance. However, the budget is unfocussed and has a number of obvious holes and its ultimate impact is questionable. The implementation will also be important.

While one can think of things which would be obvious improvements (such as EI eligibility) it would be essentially impossible for an opposition party to get in there and try to revamp this budget to an overall better budget they could have confidence in. Even trying to do some minor fixes comes at the risk of triggering an election if Harper doesn't agree (and provided he could pin the election trigger on the opposition, it seems almost certain he would win the election). It also comes at the risk of tying the budget to the opposition, a budget which even with a few changes, would be one they can't have good confidence in.

I think both Ignatieff and Layton are trying to strengthen support for their own parties, but I think Ignatieff's budget response is more in tune with Canadians right now, who largely would like to see government work for a while, if at all possible.

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