Sorry, I only did that because I was taking lines from old comments – and I didn’t want other people getting confused.

It is more than a conversation – it is also something for other people to read 🙂

“But if penal rates are applied, the hourly rate is higher. Sharpen up man.”

Penal rates are for specific days (such as weekends) – not for the whole pay period. As a result, having penal rates IN NO WAY indicates that people will get paid the same or more to work less hours – your argument is not logically consistent.

“Oh but it does. The reduction in penal rates was one of the key reasons that real wages fell under the ECA. Why is this so hard for you to understand?”

I didn’t say anything about the ECA or what happened to real wages – you are changing the point again to make it sound like you are right! You said the re-introduction of penal rates would lead to people working less hours and getting paid the same amount or more.

This depends on both:

A) The elasticity of demand for the penal hours,
B) The proportion of total hours made up by penal hours.

In most cases this won’t be sufficient to ensure that people are paid the same to work less hours.

Now I suspect you might say “arrgg you used theory, which means what you say is irrelevant”. However, that shows an inability to think on your part – it does not indicate that you have a superior knowledge of “reality” to me.

Again, theory is a way of organising ideas – as a student I thought you might have to do this occasionally.

“Why do you persist with ideas that have so little basis in reality then?”

Just because what I say doesn’t conform to your view of reality does not mean it isn’t correct, or based in information. Try to stop sounding so arrogant.

Please don’t address me in the third person. We’re having a conversation here.

“Now if hours are lower, and the hourly rate is the same”

But if penal rates are applied, the hourly rate is higher. Sharpen up man.

“Your evidence does not defend what you said at all.”

Oh but it does. The reduction in penal rates was one of the key reasons that real wages fell under the ECA. Why is this so hard for you to understand?

“Do you realise that I spend all day, about 6 days a week, going through economic numbers”

Why do you persist with ideas that have so little basis in reality then?

Then when I disputed that Roger said “So what the hell are you basing your claim on?”

The identity that pay=hours*hourly rate – and you have said that they would get paid more when working less when the employer is taxed for making them work.

Now if hours are lower, and the hourly rate is the same (as taxing overtime, or taxing all hours would not increase their net hourly pay) it doesn’t imply that there pay will be greater.

Your evidence does not defend what you said at all.

“Here’s a bit of reality, my theoretically focussed friend:”

Do you realise that I spend all day, about 6 days a week, going through economic numbers, checking samples, checking survey questions etc. Most applied economists do. I still don’t understand why you don’t think we pay any attention to the data?

But Matt – from 1991 (when controls on no-standard work began to be dismantled) to 1996 (when they were all but gone), the median hourly wage rate fell, as did the median weekly income. In those five years GDP per capit grew by nearly 20 percent, and negative wage gains. Business profits grew exponentially though

Here’s a bit of reality, my theoretically focussed friend:

As to levels of remuneration, the most significant impact that the ECA had on those working in the secondary labour market was the incremental reduction in the existence of penal rates. Awards typically contained clock hour clauses, which provided that workers engaged to perform work outside normal hours of work, typically Monday to Friday, 8a.m. to 6p.m., were to receive additional payments or “penal rates” (Harbridge and Walsh, 2002: 431). Under the bargaining arrangements of the ECA there was a 40 percent reduction in hours paid as overtime for all employees from 1991 to 1993 (Hector, Hemming, and Hubble, 1993 cited in Danin 1997: 240). This reduction was more pronounced in the secondary labour market. For example, in the restaurants and hotels sector premium or penal rates were reported to have all but disappeared by 1995 (Hammond and Harbridge, 1995:370). Furthermore, in McLaughlin and Rasmussen’s (1998) survey of the retail sector it was found that 80 percent of those working weekends reported receiving no weekend rates and 75 percent of respondents received no overtime pay. Even where penal rates remain there has been a trend towards their trimming down (Harbridge et al., 2000 cited in Harbridge and Walsh, 2002: 431).

This attack on penal rates in the secondary labour market from the mid 1980s through to the late 1990s had a massive impact on the pay packets of those in the secondary labour market. Remarks from an interviewee of “The Second Sweating Commission” are indicative of this impact …. I cannot stress enough how important these penal rates are to our profession. They are the difference between paying the bills this week and saving up and paying them next week or the next (Bunkle 1990:10).

So what the hell are you basing your claim on?

Roger, if you actually want a civil discussion about these issues you need to stop going on about economists in this way. Have a derived a single equation in this post. Have I ever used maths on this blog outside of accounting identities and they odd logic check? Constantly pestering us about using maths (as a logical check of ideas – which is a good way of using it) isn’t going to get us anywhere.

I do realise that there are asymmetries in the bargaining process. Government can help this to a degree – and I think it currently does. Economists do not ignore this sort of thing, no matter how much you tell yourself that they do.

“But this is where right-wing economists usually fail – social costs are less important than “economic efficiency” or “growth”, because they don’t fit nicely into your little equations”

Again that is rubbish. For one, they do fit nicely in our mathematical representations.

Secondly, you call me a right-wing economist, which implies you think I ignore social costs.

However, I CONSTANTLY propose that we should have things like a fat tax, or a petrol tax, in order to cover social externalities – hell I was even the one that suggested the externality idea for this post!

Economists do not think growth is the most important thing – they think that being in a situation that provides the most happiness for society is the most important thing. That is why I stated that I wasn’t concerned about a current account deficit in a later post that you have commented on – if all I cared about was growth I would hate the current account deficit.

“They are hard to quantify and therefore frustrate you, so you discard them as unimportant”

If you read much modern economic literature you would realise that this statement is wrong – I’m sorry but you are attacking economics instead of attacking the fundamental ideas, and you are mis-representing economics in the first place so that you have a straw man to attack.

“If employers were taxed for the externalities involved of over-working their employees, employees would have to work less hours for the same amount of money”

No, they would be paid less. The cost of an employee would increase, but the share going to the employee would fall.

Now, if you cut out all the lingo out “right-wing economists” and “mathematical models” I’m sure that you would see that we agree on large portions of what is going on here. We might just have different subjective beliefs surrounding the size of any “income externality” in society. That is fine – subjective beliefs are based on experience, we are allowed to differ and should both stand up for these beliefs. However, you are not doing this case any favours with your lines of attack.

I was actually being a bit lazy with that one. It’s as much about getting off-side with your employer as it is with possibly losing your job.

When I worked for a furniture moving firm, i was working 45-50 hours between monday and friday, and then the boss would often demand that I work saturday, and sometimes sunday. This went for many of the other workers as well. If I refused to work the 50-60 hours per week that he wanted me to work he would harass me for the rest of the week – which was extremely uncomfortable, so I just gave in and worked the extra hours. I can’t imagine how this would work if I had children, etc…

I had friends in the workplace and was well established there so didn’t really want to re-establish somewhere else etc… You see, this is where the theory just doesn’t concord with reality – humans are social beings, and don’t always fit within the assumptions of algorithms.

“if we believe there is a negative externality associated with “too much work”

Clearly there is. There is a social cost, especially when you have a family that you want to be with in the weekends. But this is where right-wing economists usually fail – social costs are less important than “economic efficiency” or “growth”, because they don’t fit nicely into your little equations. They are hard to quantify and therefore frustrate you, so you discard them as unimportant.

“Employers screw ever more hours out of workers lives because labour is so cheap.”

If employers were taxed for the externalities involved of over-working their employees, employees would have to work less hours for the same amount of money. Are you really suggesting that most employees wouldn’t prefer that situation? If not, then clearly employers who demand employees work longer hours are certainly making employees work longer hours than they would prefer.

How many jobs are actually like that? Even if they are – there is a choice to leave the job. When we have a tight labour market, as we currently do, this choice offers a higher reservation payoff than just the unemployment benefit. Firm’s still have to AT LEAST meet this reservation level – so what is the problem?

“No. I would prefer overtime to be available at time an a half, like it is in most OECD countries.”

Now I’m not arguing with that – if we believe there is a negative externality associated with “too much work” overtime allows us to tax this externality (note I am not saying I support it either).

However, the data isn’t even saying that – overtime hours fell! People reporting that they were “under-employed” (eg would work more hours) is still at the same level it has been for a while. This data does not say what you did which was:

“Employers screw ever more hours out of workers lives because labour is so cheap.”

That is what I’m disputing.

“Would you prefer it if the work and the additional pay that comes with it wasn’t available for people?”

No. I would prefer overtime to be available at time an a half, like it is in most OECD countries.

Well telecommunications networks probably have increasing returns to scale going on – which implies that areas with larger populations will get lower prices.

Actually, a more convincing story is that the more dense the population it is, the lower the average and marginal costs of servicing the area – as a result of our lower population density you would expect prices to be higher in NZ.

That would be my guess anyway 😛