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Feb 07, 2018 · By Shivani Kabra and Anirudh Krishnaa

The Economist explains South Korea’s soaring minimum wage

Technological unemployment is the loss of jobs caused by technological change
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The creation of the Fair Pay Commission as part of the government’s WorkChoices legislation has led to a debate about the role of minimum wages for Australian workers.

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Then the political equation suddenly changed on April 6, 1933 when the Senate unexpectedly approved a liberal bill concerning wages and hours that would cut the workweek to 30 hours for the same daily wage. It meant a significant pay raise despite a likely decrease in productive output. Sponsored by one of the few Southern liberals in the Senate, Hugo Black, later to be appointed to the Supreme Court by Roosevelt, the bill was based on the argument, heartily supported by organized labor, that the measure would spread work and increase purchasing power at the same time. Neither Roosevelt nor any business group liked the idea for a variety of reasons. Leaders of the NAM, along with several corporate moderates, including Teagle of Standard Oil, testified against it, which reminds us that Teagle was not a minor figure on policy issues of major concern to the entire corporate community. Secretary of Labor Frances Perkins found the legislation unacceptable for her own reasons: it did not include a minimum wage provision.

 

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Problems with the measurement of productivity gains aside, the CED policy statement recommended that the package of wages and benefits for employees "should rise as fast as -- but not faster than -- the rise of output per man-hour for the economy as a whole..." However, the wage-benefit package should not absorb the whole productivity gain because the rate of profits should grow, too. CED then offered a suggestion for "voluntary restraint" by corporations and unions that was resisted by some trustees and advisors, who feared it seemed to confer legitimacy on voluntary wage-price guidelines set by the government: "We must rely on the forces of competition and on the in price and wage policies by business and labor to prevent this [inflation] from happening" (CED 1958, p. 15, my italics). However, voluntary restraint did not fit with the laws of competition, as CED advisor Neil Jacoby, pointed out in the context of a long letter to the chair of President Eisenhower's Council of Economic Advisors: "The hortatory approach to the problem of containing inflation is not merely ineffective; it is also contradictory in the sense that it asks people to behave noncompetitively" (Gordon 1975, p. 116). Thus, as in-house critics of the CED formula for wage-price guidelines had feared, it generated tensions within CED for the next 17 years. As also feared by the in-house critics, CED's formula opened the door to wage-price guidelines, however voluntary, that would be determined by economic experts employed by the federal government. And, within a few years, the Kennedy Administration tried to take advantage of the opportunity. The issue was usually debated using the vague concept of an "incomes policy," which can be broadly defined as any approach to influencing the economy (and especially controlling inflation) that does not rely exclusively on the traditional market system and the minimal governmental laws needed to support it. By the late 1950s, one form or another of an incomes policy had been tried in a few Western European countries, usually involving multi-party negotiations that brought together employers, organized labor, and government officials to determine prices, wages, and taxes.