CEO pay trends in Australia are unjustifiable on any reasonable grounds

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1. Privatisations and anti-union laws plus the relative growth of the white collar financial service industry and the shrinking of the traditional blue collar, unionised manufacturing industry has marginalised the power of the average employee.

   Its at this stage difficult to see where push back might come from. An increase in the share of wages as a share in National Income should benefit many business as employees are not only a cost of production but they are also consumers.

   Will the best hope come from the election of a government that understands its fiscal capabilities and will use a Job Guarantee and the Public Service as a pacesetter for higher wages or will the union movement somehow work out how to engage and enlist non-unionised workers??

2. Wow average earnings of $60,600.
   At best I’m making 50,000 (in a good year) with job insecurity (casual work and self employed)
   That doesn’t reach the threshold to begin paying off my student loan. Then I wonder, what the point of an education was?

   @Barri,

   I can’t see the push coming soon but I can see it coming.
   The youth are largely locked out of the housing market, forced to pay obscene rents and have insecure work. It’s only a matter of time before they begin organising.

   In my view, the union movement has to reach out to these disenfranchised young Australians (many approaching 30 with job insecurity and lack of secure housing) and begin speaking the truth.

   Governments choose the unemployment rate, as a society we choose what we make public goods, the government can ALWAYS meet payment obligations, it must spend so we can earn, every generation chooses their own level of taxation.

   We then need to start massive stop work protests and cut the flow of income to capital until we get what we want.

3. Wow ! That’s not just a typical conclusion is it ?

   Wonderful writing.

4. As most people did, I received a letter from Fahour explaining that due to tough circumstances, postal prices would rise to $1 and henceforth Aus Post could only guaranteed a six day delivery. However, for those who wanted, for an extra 30c, letters could be delivered within 3 days. In short – a 60c cent rise in postal cost for the same service, an increase of 85.7% and not a murmur from either government or opposition. Then we hear a few months later about the money being splashed around the “executives” by the board of Aus Post. Do any of these thieves have to answer for their decisions? OK so we know all about this. But what occurred to me is that we are now going through exactly what gave the US to Trump – stagnant wages, CEOs receiving pay that can be considered nothing less than theft and the shifting of resources to the top end – we pay 85.7% more for letter delivery while Aus Post board and Fahour and his cronies end up with obscene bank balances. So what the hell do ordinary people do about this? I suppose the best I can do I write to my Federal member who happens to be a Liberal.

5. ‘The lesson was that workers will only take so much’

   It seems to me that private debt has allowed this farce to continue for so long. Without the banks extending credit on steroids there would have been a backlash much earlier.

   In the UK, the docility has bean breathtaking with people swallowing the Government guff that it is the fault of the ill and those unemployed -the media hammered this for the last 7 years.

   Now that the Labour Party has moved Left (albeit with bogus , semi-neoliberal understandings of the monetary system) there are SOME signs of change.

6. I have just finished doing some research, and wanted to make sure I am understanding some things correctly.

   According to yours and others work, if a government causes the money supply to increase without there being corresponding goods and services to match, this has the potential to increase inflation. Correct?

   Is it not true also though, any private agent who profits from his dealings (with passive income or buy low sell high), is also increasing purchasing power without corresponding goods/services to match, and is thus potentially increasing inflation?

   With these two scenarios, it would suggest to me that the ‘only’ way to prevent any increase in money supply (whether by public or private sector activity) from causing inflation is to ensure that that money is spent on investment in producing more goods and services (which must also have a certain % of that turned to investment). Would I have this correct?

   Why is it then, we are claiming to have a free-will autonomous based system if everyone complains that either the govt, or the CEO’s, or the guy next to me is increasing purchasing power without backing, and yet its ok for me to do it with my house? If my house goes up in value and I take that profit and spend it on gambling, drugs, overseas holidays, cable tv, etc, which does nothing for investment, then how can I then have cause to complain about anyone else doing it?

   In other words, it doesn’t matter from which side of the political spectrum you sit, you are the pot calling the kettle black when you complain of the other side increasing purchasing power without investing it. What am I missing here?

7. “Is it not true also though, any private agent who profits from his dealings (with passive income or buy low sell high), is also increasing purchasing power without corresponding goods/services to match, and is thus potentially increasing inflation?”

   From what I know, no. Buying and selling by players in the market just moves buying power from one player to another — increasing one person’s power while decreasing another’s. AFAIK lending by private banks does increase the money supply, with a time limit, and subject to the private bank’s ability to service the borrower’s spending.
   Given enough business activity, banks can net out the spending of their borrowers so as to commit less of their own money than the activity the borrowers create.
   For a very rough kind of parallel, in the 16th century, Jakob Fugger’s bank collected a fee from the Vatican for conveying collection plate revenue from Sweden to Rome. The bank didn’t actually move the money. They could use the collection plate contributions to pay their own debts in Northern Europe, and pay the Vatican with the proceeds of the loans they’d made to borrowers in Italy. Much handier and less risky than trying to move gold and silver across Europe.

8. “From what I know, no. Buying and selling by players in the market just moves buying power from one player to another – increasing one person’s power while decreasing another’s.”

   Thx Mel.

   I wasn’t referring to simple spot exchanges.

   To put it in context, I’ll refer to this link from the treasury dept

   https://archive.treasury.gov.au/documents/1156/HTML/docshell.asp?URL=01_Brief_History.asp

   where it says on capital gains tax and why it was introduced

   “In 1985, based on equity grounds, it was argued that, ‘because real capital gains represent an increase in purchasing power similar to real increases in wages, salaries, interest or dividends, they should be included in any comprehensive definition of income’ (Australian Government 1985 page 77).”

   So what I was referring to are all those elements in any exchange which result in some increase in purchasing power. If my house increases in value through no effort on my part, then is that not contributing to an increase in purchasing power?

9. Dingo, you start off very wrong- Bill Mitchell does not say that causing the ‘money supply’ to increase will cause inflation. Bill Mitchell is always very careful to point out that any increased spending can cause inflation, especially if the economy lacks the real resources to increase production in response to that spending. The ‘money supply’ has nothing to do with that- it is spending, which may or may not increase with whatever measure of the ‘money supply’ you want to use in any particular circumstance.

   And then, as Mel points out, you seem to confuse ‘buying low and selling high’ within the private sector with increasing the amount of potential demand in an economy, which is wrong because it is better understood as transferring spending ability from the individual ‘buying high’ to the individual selling the asset at that time. Unless there is NEW spending power created which can happen through bank loans that create money for their duration, or through government spending.

   And MMT is not really concerned about the ‘money supply’ or about preventing it from increasing. MMT recognizes that in the monetary systems we live in, the ‘money supply’ is primarily determined by the economy itself. If there is too much spending, and inflation results, MMT says tax more. Or spend less. Nothing to do with ‘money supply’.

10. Yes you are right: I have gone over some other posts and found the following:

    “Inflation is a product of spending rather than build up of bank reserves. ”
    “So it is not the monetary policy setting but rather the final spending in excess of productive capacity that causes inflation.”

    and you said “If there is too much spending, and inflation results, MMT says tax more. Or spend less.”

    So where does this final spending, in excess of productive capacity, come from? What enables one to be in a position to finally spend more than production? Does it come from profits? Does it come from Govt spending? Is anyone suggesting that before I get to spend in excess of productive capacity that it should be taxed out of my hands and reinvested in more production? (I’m not agreeing or disagreeing, I am trying to determine the objective)

11. Dingo, spending in excess of productive capacity could happen in a number of ways as far as I understand. The worst way I can think of is that productive capacity suddenly dropped, such as through a terrible drought affecting food production or some other supply side catastrophe. Not much policy can do to prevent inflation there except for trying to prevent the situation from occurring in the first place. As far as inflation caused by increased demand for a continuous supply? – that can happen whenever there is a downshift in the overall savings desires of the private sector, or an increase in demand from the government for production from the private sector. I don’t think MMT says these are easily predicted or easily dealt with, just that they can be. One thing Bill Mitchell points out is that usually, capitalist economies are more often constrained by lack of demand, not lack of supply side ability. Which seems correct when I look at the history of my own country (US) for the last 100+ years. Except for a few years with the OPEC oil thing and maybe towards the end of WW2.

12. Thx Jerry

    “As far as inflation caused by increased demand for a continuous supply? – that can happen whenever there is a downshift in the overall savings desires of the private sector”

    That is an interesting statement. Where does savings come from? Is it not true that savings can only come if income is higher than expenditure? Is it mathematically possible for every entity with a balance sheet to save all at the same time?

    Someone else from the US said the following on his blog:

    “Capitalists will rarely spend enough into the economy to provide for full employment because the profit motive is too strong. One could actually argue that the idea of “full employment” is at odds with the natural profit seeking goal of capitalism.”

    I believe this was said in context of whether or not capitalists should be forced to reinvest profits toward more production. Hence the reason I posed a similar question on here.

    This made me ponder the validity of any legislation which mandates for full employment and also the impact it must have on one of the main principles of our common law, i.e. the common law right to individual autonomy. This legislation (if aimed at the total populace) is at odds with this common law principle (and I do not say this in defense of capitalists either).

13. Jerry and Dingo, don’t forget about debt in this discussion. First, when you talk about saving, you need to be clear about whether you mean a flow of assets into savings or saving net of new debt. A sector can spend more than its overall income by taking on debt in excess of its saving. It was large increases in private sector debt that fueled the U.S. economy leading up to the great recession. It is also true that taking on debt in the private sector increases some measures of the money supply, so when you talk about money supply you have to qualify which measure you mean.

14. Based on the objective of full employment, I wanted to ask if we think that not only should everyone have some form of employment, but should we all be aiming to own our own homes also?

    Do we believe from a mathematical perspective that both full employment and home ownership for every household unit is possible?

15. Dingo: This legislation (if aimed at the total populace) is at odds with this common law principle (and I do not say this in defense of capitalists either).

    Well, the only way full employment can be at odds with individual autonomy is if the legislation mandates that capitalists employ everyone who wants to be employed. This is a morally bad thing. And I do say this in defense of the capitalists individual autonomy! 🙂 It is also foolish and unworkable, but that is not the MMT proposal – where the foundation of full employment is the JG, employment from the state. Of course this greatly increases individual autonomy – more than anything since the end of slavery.

    Do we believe from a mathematical perspective that both full employment and home ownership for every household unit is possible?

    Of course. Why not? In the unusual circumstance that every household unit wants to own a home, there is no obstacle to it in today’s societies. Why would one want to force individual household home-ownership on those who prefer to rent, or live in condominiums or communes or whatever?

    To varying degrees, during the postwar era, the whole world tested such policies of full employment and enough affordable housing so that homelessness was thought of being of something in the past – and they were very successful. But then the dark age of economic understanding fell, and there was Full Employment Abandoned (hmm who wrote the book on that?).

    It takes quite a lot of contortions, illogic and intellectual gymnastics to see government-organized full employment as infringing on individual autonomy etc. Which is not to say that people haven’t been paid to perform such circus tricks, and hypnotized many into believing them.

16. The job guarantee program is based on a so-called human right which is defined as the ‘right to work’ but then does not give the worker the right to define what work really is or means.

    The legal definition of employment is:

    “A species of contract by which one person agrees to perform a job, service or task for another, with or without remuneration although, as with all contracts at common law, some form of consideration must flow.”

    If any job guarantee program enables one to develop, cultivate, and practice whatever skill or talent they so choose, whether motivated by money and property or not, and whether valuable or not from an economic perspective, and further does not force the same to bind any other legally as a result of practicing said skill, and as a result of said development, cultivation and practice, has their human needs met, then I’m all for it.

    If however, a job guarantee program specifies that you may not define the meaning of work, but only an economist and/or politician/law maker may so define work, and as such you may be forced to employ a skill that only has value from an economic perspective, and further, you will be forced to hold others legally accountable as the means by which to express said skill in return for human needs, then I am against it because there is no personal autonomy. Personal autonomy starts and ends with the individuals ability to define work, value, and contribution to the community. It does not rest with anyone else.

    However, in saying this, if your definition of work includes a goal to pursue private property and wealth, then it must by definition only have value from an economic perspective. One can not own economic wealth if they do not create economic wealth.

    I shall explore this job guarantee program you speak of and see if it fits with individual autonomy.

17. Glad to see your reply. Gotta go very soon.

    Quick answer. I think the MMTers would agree that the biggest scale single work program they mean was the US’s New Deal alphabet soup- the WPA, Harry Hopkins etc. Harry Hopkins spent more money than the US did on WWI! There is no question that the New Deal programs were much closer to your “enables one to develop . . .” model than the other one.

    Second – an important point – ” valuable or not from an economic perspective” simply makes no real logical sense. The gubmint in paying the money for socially decided purposes using individuals’ skills defines “valuable from an economic perspective”. We live in monetary economies & money is a creature of the state. The money that the capitalists are all after is the money made valuable by the government, by government taxation and by government spending, like the WPA. Cartoon capitalists just want this socialism for the rich folks like them, only, so they can be permanent feudal aristocrats, doling out dimes and degrading jobs to the masses.

18. It was fascinating reading something Abba Lerner said which made me question why governments are so adverse to the idea of eliminating business cycles, implementing JG programs, and so forth.

    Would we agree that if any government implemented a JG program and/or always mopped up surplus output, that the country itself would become extremely prosperous in relative terms (compared to other countries)?

    Could this be what is actually feared, on account of the fact that it would create envy from other countries, create huge surges in migration, and so forth. It seems to me that if any country wishes to employ this model it is really only going to work if everyone does it.

    Thoughts?