It is not just workers who should be backing unions and voting Labor. Small and medium business owners should too. Yes, I’m deadly serious. Let me explain.
There is a reason why business owners have traditionally despised unions and voted Liberal, and why many workers have been convinced to punch themselves in the face by doing the same. It’s because they’ve bought into two big lies told by liars – Liberals, big business, employer groups and their parrots in the media. The first lie is that corporate tax cuts create jobs, and the second is that pay rises are bad for the economy.
I call them big lies because they have big consequences for all of us; they clearly hurt workers, who haven’t had a pay rise in years, and also hurt the businesses who rely on their customers having money to spend. In turn, these lies hurt the economic prosperity of the entire country, reducing spending, gutting demand and discouraging investment. So, you can see why it’s time we understood just how corrosive these lies are, and worked to convince the lied-to to stop putting the liars in control of the economy.
The first lie is easy to refute. Corporate tax cuts do not create jobs, nor do they increase wages. I’ve explained here why this lie is codswallop. Sure, tax cuts could be spent on higher wages and hiring new staff, but could doesn’t mean they are. The best predictor of the future is the past, and judging by the past experience of companies receiving tax cuts, workers aren’t getting a pay rise from Turnbull’s latest round of cuts.
The reason why workers and business owners believe this lie is because they are lied to so regularly. Whenever they open a newspaper, they read statements like this from the AFR:
‘The Labor party and an increasingly determined Australian Council of Trade Union secretary Sally McManus are punting on winning hearts and minds through a return to interventionist wages policy. Pitted against them is a Coalition determined to do what it can to stoke investment, hiring, and pay packets through corporate tax cuts’.
You don’t even have to read between the lines here to see the clear implication is that villainous Labor and unions will hurt ‘investment, hiring and pay packets’ by intervening in the economy, whereas the heroic Coalition (liars) will ‘do what it can’ to improve all these things with a corporate tax cut. Lies!
The truth is, there is only one reason why the liars want, lobby for, and deliver through their political-arm-Liberal-Party, corporate tax cuts, and that is to increase their profits. Increased profits are great for them and their off-shored millions, but do nothing to increase employment or wages. Lies!
The second big lie – that pay rises cost jobs – was on display on Q and A Monday night, when spokesperson for the liars, James Pearson, CEO of the Australian Chamber of Commerce and Industry said:
‘there’s something worse than having subdued wages growth, and that is not having a job at all’.
In other words, stop complaining that you haven’t had a pay rise in years – you’re lucky to have a job at all! This threat, that pay rises cost jobs, as I explain here, has been a clever little strategy for the liars as it has resulted both in productivity increases going unrewarded and also workers, through fear of job losses, turning against unions. Unions negotiate pay rises, and therefore in the lied-to-workers’ eyes, unions threaten their jobs.
These two big lies have therefore become a circular problem for the lied-to-workers, the business owners, and in turn, the economy. Workers have been so successfully turned against unions and the Labor Party – turned against themselves – that the labour movement is struggling to deliver pay rises for workers who fear losing their jobs if they are paid more, and in turn, businesses are struggling because their customers can’t afford what they’re selling. What an economic clusterfuck the liars have caused!
But wait, I hear you say. Businesses aren’t struggling – they have had huge profit increases year after year. So how can they be struggling if they’re making so much money? And yes, you’re right. Not ALL businesses are struggling.
At this point it’s important to differentiate between big business, and medium or small business. And, for medium and small businesses to see how the big business liars, who they keep voting for and helping to bash unions, are hurting them too.
Big businesses are making huge profits. That’s true. Big businesses also care most about corporate tax cuts, because they’re the ones who benefit from them most. Big business are the ones who most often get away with paying little to no tax because they can afford clever accountants with offshore tax schemes. Big business, often foreign owned, are more credible, but still not entirely credible, in claiming they can take their investment elsewhere if we don’t do what we’re told and vote for Liberals who will give them a tax cut. In reality, I can’t really see how Qantas is going to move offshore and still service Australian-based customers, or how BHP is going to mine Australian dirt in South Africa, or how huge banks and energy companies are going to gouge Australians of almost every cent they earn without investing their capital in the Australian economy. But either way, hugely profitable big businesses, who don’t pay their fair share of tax, who offshore most of their profits, who fund the employer groups and the Liberal Party in order to get the tax cuts they want, who own the newspapers which lie about tax cuts and pay rises, are, I admit, not the ones most hurt by low wages.
No, the ones hurt by low wages are the local small businesses, the medium sized employers, the Australian investors, who are suffering because their cash-strapped-customers can’t afford their products and services. It’s the owners of these businesses who are being hurt by the big liars, just as much as the workers missing out on pay rises.
Sure, small and medium businesses might not enjoy giving their staff pay rises, but they sure enjoy their customers earning more cash. Without pay rises, the self-employed painter sees his customers paint their homes every 10 years instead of every 5. Without pay rises, the café owner sees less coffee orders. Especially after paying their mortgages to hugely profitable banks and their power bill-shockers to privatised overseas owned electricity companies, workers without pay rises can’t afford to spend. This means small and medium business owners can’t afford to invest, and can’t afford to hire anyone, because there is not enough demand for the products and services they sell. As any good economist knows, capital investment comes from the promise of return on that investment. Return comes from demand. Demand is dependent on the customer’s ability to pay. When customers haven’t had a pay rise in years, they can’t afford to pay. So, bye bye revenue, bye bye potential returns, bye by investment, bye bye jobs and economic growth.
Remember this equation when you hear the Labor Party and unions opposing corporate tax cuts and calling for higher wages. Be warned, there might be a little voice in your head, put there by the liars, that makes you think Labor and unions are hurting the economy. But think of the small and medium businesses. Think of workers as customers, and understand why the economy relies on customers who can afford to spend. Call out the lies that are hurting all of us.
And next time you speak to a small and medium business owner, tell them they should join unions and vote Labor instead of supporting lying-employer-groups and voting for the liar-Liberal-Party. Tell them this story to explain why, if they really want to see their businesses succeed, this is the smartest thing to do. Unions and Labor governments are good for the economy, no matter what part in the economy you play. Spread the word.
Great article Victoria and I think it’s something many Guardian readers have been thinking for a long time. I can stretch a bit further and think of your “Big Business” as monopolies because the struggling small businesses can’t get a look in. Unemployed/ underemployed people should consider themselves as small business and they should join a union and the Labot Party is the only place which is organised enough to produce some sort of resistance
Yes..that would be an ideal, Victoria…unfortunately, this capital-based economy we rely upon fosters and thrives so very much on the “black economy”…:Cash money..Many building trade based small-business, particularly those involved in renovations and or alterations/additions, are financed and paid with black money…The client, because they have cash they do not wish to declare who are creating asset improving building to their premises they do not want the tax office to know about and so they offer the trades a percentage in cash..a sometimes troubling thing for the tradie as he too has to demonstrate to the tax office where his sudden show of capital comes from…so an air of secrecy becomes beneficial to all sides and this can mean that any union involvement in pay disputes could uncover much duplicitous behaviour.
Unfortunately, this same cash economy benefits donations to political parties…particularly the LNP. so it is in their donors interests that they continue to slag off on unions..
I recall one tradesman doing renovations for this business couple complaining that whenever he put in a progress or materials account, the owner would take him to the boot of his Merc’ and pay him in cash from a suit-case full of money in the boot….placing him (the tradie) in the unwanted position of conspirator in the affair.
A well argued article Victoria.
Joseph: some tradies are more upfront about it; when quoting a job they will quote x for payments by electronic transfer and say x less 10% for hard cash.
A very good article Victoria that I believe to be economically sound.
The Liberals and Nationals and their neoliberal corporate masters spread a few more lies though:
That federal government deficits and debt will burden future generations and lead to crippling interest payments when the truth is that only deficits of sufficient magnitude can ensure near to full employment by the private and government sectors and will leave a healthier and more just economy to future generations. Federal debt is met with issued money and does not need to be repaid ever.
That we need to remove trade protection completely for our manufacturing sector so as to gain adequate trade access for our resources and bulk agriculture export sectors. Our East Asian, European and North American trading partners all protect or subsidise important segments of their economies and similarly Australia would gain by modifying our FTA’s to implement a moderate 15% tariff on imported passenger vehicles, steel, white goods, some building materials and similar so that we retain a substantial manufacturing industry. The tariff provides revenue to government and so can offset other taxes.
That Australia is dependent on foreign capital to develop its natural resources. Former resources minister Rex Connor in the Whitlam government knew that the federal government could provide stable low interest finance for the development of the Australian resources industry, for infrastructure and for industrial development alongside local private capital. In this way all Australians could have benefited to a much larger degree from our natural resource wealth rather than predominantly the owners of foreign capital and a few local super rich as is the current situation.
That the unemployed must be treated harshly by our social support system so that they seek out any available work. Full employment policies as were practiced by all governments from WW2 to the mid 1970’s, free education and where necessary social support to assist those that face challenges finding or holding employment are the only real solutions.
That the market is the best allocator of resources. Our rapid increase in wealth inequality especially during the neoliberal era shows that not to be the case. Most of the wealthy relied on inherited wealth, connections, a lucky break or the lobbying of government (eg. super fund management, privatised utilities or health insurance) to gain the ascendency rather than special merit. The global warming crisis and the ongoing failure to phase out fossil fuels is an example of extreme market failure. The overuse of our fresh water resources is another example.
That big resources projects create jobs. During the construction phase they do but many more local jobs would be created if local content was higher. During the operational phase very few permanent jobs are created but due to the huge value of exports this raises the dollar making other exports more expensive and imports cheaper which results in more job losses than gains over the whole Australian economy. Many resource project economic impact studies detail this paradox. Given royalties and tax revenues are often minimal and that most of our resources industry is foreign owned the net result is that the Australian people like our Aboriginal people gain very little from the exploitation of our natural resources.
That the government can’t afford universal healthcare, quality education from childcare to multiple degrees, aged pensions at age 60, excellent roads, public transport and other infrastructure, disability support, arts funding, protection and restoration of the natural environment and so forth. An enforced progressive taxation system, minimising tax avoidance and evasion, minimising tax concessions for the wealthy, competent economic development policy, optimal fiscal policy can deliver all of this as well as full employment.
…. and a few more
The austerity of the neo-liberal era was based on a lie and it was in reality just a plan for wealth redistribution upwards and has harmed over 90% of us including much of the business sector which has suffered from stagnant consumption and sales which Victoria has detailed in her article.
Ms. Rollison, It is offensive the way you write of the ‘ worker ‘ as if they be an ignorant dolt who wouldnt know which way the wind is blowing
Joseph both you and Victoria are right in this, but for small business in particular the thought of lowering demand for their goods and services is a serious consideration particularly when utilities ad facility costs are increasing exponentially.
Lowering wages will drive, small businesses to loose demand which will result in lowering of employee hours, which will drive incomes down further and thus reduce even more demand for goods and services.
The black economy is only viable whilst the buyer of goods and services are getting their purchases for a lower price, this is the real black economy problem, because it reduces the price of goods and services and thus the revenue from the supply of goods and services, sooner or later tradies will realise the black economy is bad for them too as it actually reduces their incomes in the long run.
Incidently, pensioners, might welcome cash in hand work, the pension is a mere 404 a week if you work you can earn an extra 82 a week before you start to loose on your pension. Thus pensions, newstart and other welfare payments actively encourage the black economy.
The neoliberal agenda began with Hayek, Freidman, and Lewis Powell of the 1970s building on the age old “horse and sparrow” ideology (1896) it continues today.
ace Jones, it is offensive the way you write
Excellent work, Victoria.
We need goals to strive towards, particularly common-sense goals which unites small businesses and workers – because this is the basis of community and, (in spite of what big business and neo-cons like to believe) the basis of a healthy economy.
Well, not the true basis of a healthy economy, because that is really the foundation a fecund environment provides…
Suffice to say if we did not have ideals and hopes we may as well just give up now. We know there will always be the rorters, so let’s create the conditions to keep parasites to a minimum.
Interesting that some feel the article was offensive to the worker, well why does the common worker keep voting LNP. Because they were lied to, And they believed it. I rest my case.
Ace Jones: Victoria makes the case that workers are not fools but that by and large they have swallowed plausible-sounding claims by big business.
Another explanation is that Labor has been neoliberal lite for many years and has not represented their interests.
Andreas: an excellent post on the many lies and misrepresentations that big business, most bank economists and complicit politicians foist on us.
I have repeatedly tried to spread the word that these lies are very damaging for most of us.
Andreas Bimba.
You say “Federal debt is met with issued money and does not need to be repaid ever”. And that is true. A fiat currency. A national bank, the Fed. Res. Bank, means currency is controlled by Govt and Res. Bank, as is spending.
Therefore, if you argue “that the government can’t afford” anything unless there is an “enforced progressive taxation system, minimising tax avoidance and evasion, minimizing tax concessions” you imply that the Govt. requires taxes to spend. That is clearly wrong because the Govt. can afford anything it chooses to purchase in our economy that uses Aust. Dollars. That list as you point out, can all be paid. However, that list can be paid without raising revenue through tax. The only risk to the economy is inflation, kept in control whilst there are goods and services, spare capacity in the economy, that can be bought.
Otherwise, good summary of the financial lies the right are trying to sell us.
Governments have been persuaded by neoliberal ideologues to abandon the post-war commitment to full employment and create a pool of the unemployed and underemployed.
Neoliberal economists, most of whom were trained (indoctrinated is not too strong a term!) in the 70’s and 80’s, have provided theoretical cover for this appalling side-lining of workers by invoking the notion that stable inflation requires a certain minimum number of people out of work as a deterrent to employees seeking wage and condition improvements. “Full employment” was redefined from the frictional minimum that was the norm in the 60’s and 70’s from about 2% to more like 5%.
Big business has also been given much more industrial power today by means of privatisations of government utilities, outsourcing and offshoring, and laws such as “fair work” and the drive to “balance the budget” rather than spend sufficiently to avoid high unemployment. As a result most employees have seen their productivity snaffled from them and used to enrich CEO’s, managers and shareholders. Unions are marginalised as was the plan. Labor, after Whitlam also abandoned most of its social-democratic policies and adopted neoliberalism with almost the same zeal as the Coalition. Many employees are now under severe financial pressure as they pay either high rents or mortgages, high cost of childcare, utilities etc. They literally cannot afford to strike- though the right to withdraw one’s labour has been all but abolished.
There are few mechanisms left to turn this situation around. I agree that higher wages to restore the share of national income that used to be enjoyed by employees would be beneficial to the broader economy because it is demand, not tax cuts that drive higher employment.
What is desperately needed is for the threat of becoming unemployed to be less financially disastrous.
This could be achieved by a scheme in which anyone who wants to work but cannot get it is offered employment at a living wage (at least the minimum wage plus other benefits and training). To be financially sustainable it needs to be funded by the creator rather than the issuer of money: the federal government. The actual employer would be local government, which is aware of local needs but lacks the funding ability to offer enough work. The work could be anything the private sector does not do. It would be voluntary, not compulsory work for a very low payment,
Unemployment could be history if a scheme like this was introduced. Instead of a pool of the often long term UNEMPLOYED who are the casualties of neoliberal ideology we instead will have a pool of the EMPLOYED. Since by definition the unemployed are “not required” by business and since they would be paid at about the minimum wage there is no competition with business, though business will be free to attract those in the pool by making them a better offer.
Overall demand in the economy would be increased, benefitting both small and not so small business. Regions would benefit both from the increased spending power of those previously sidelined on the pittance of “Newstart” and the socially useful tasks and jobs previously not done. Oh, and no painting of rocks or digging holes and filling them in again.
Most people of working age who are able to work want to contribute to society, they do not want to be bored without a role in life and their work-readiness should not be allowed to atrophy. Our youth in particular is suffering due to neoliberal ideology. We could end up with a generation that will never be employed with all that entails for them and society generally.
The Guarantee of a job for all who want to work but cannot get it is only one of several key steps needed. I see it as only a start to turn away from the neoliberal disaster.
Here’s a nice business owner and rather legendary sounding human being. http://www.abc.net.au/news/2018-02-11/gardener-questioned-over-paddy-moriaty-disappearance/9419380
Harry
There is a lot of that written about in Bill Mitchell’s Blog, if you’re not familiar with his work. Examples follow.
A basic income guarantee is a neo-liberal strategy for serfdom without the work.
http://bilbo.economicoutlook.net/blog/?p=35705
And in that is a link http://bilbo.economicoutlook.net/blog/?cat=23 That will provide a number of articles to browse. Some of those are :-
Employment as a human right
http://bilbo.economicoutlook.net/blog/?p=36334
Work is important for human well-being
http://bilbo.economicoutlook.net/blog/?p=34412&cpage=1
Wayne: I am familiar with Bill MItchell’s blog. Read it most days.
Definitely not keen on a basic income guarantee but I can understand its attractions – until one truly understands that its a deeply flawed macroeconomic idea.
I think that in line with the article above, we are headed in the wrong direction. Neo-lib and it’s trickle down is a failed experiment. MMT is the way to go and part of that is full employment. I wish the Fed L/NP govt. had someone worthy of the job of Treasurer but alas, disappointment until they are all gone will be mine.
Personally, I think income guarantee is a great idea. Has worked in a couple places I have heard about. More money in our economy will be a massive stimulus and local businesses will be the winners our country will be a much happier place. So hopefully, we agree to disagree but it is brilliant to see an article like this one and more power to the author and The Aim Network [theaimn] for publishing this very important message of another way.
There was a time when the ALP used to represent the hopes of the 13 million strong ‘labour’ workforce in Australia, since then the party, thanks to who controls it behind the scenes, has drifted toward the right of politics, so business owners could feel quite comfortable inside the ALP now. The 13 million workforce not so much.
Thanks Harry and Wayne.
The comment about improving the taxation system and reducing concessions is really about social engineering where the top is trimmed of a portion of their income and assets to reduce inequality and their power and privilege. The other aspect is the wealthy should provide more economic space for government spending than the less well off, so as to limit inflation.
In any case I don’t see much harm in many continuing to believe taxation funds federal government spending but that deficits are funded by issuing currency.