Details, details

John Garnaut, writing in the Wall Street Journal* yesterday:

"It would not be long before the benefits from not working, which are indexed to either prices or average earnings, will exceed the benefits from working," says Professor Mark Wooden, deputy director of the Melbourne Institute, in the Journal of Political Economy.

Wait. The Journal of Political Economy, one of the world’s top three economics journals, is interested in Australia’s IR reforms! This is rafter-swinging stuff.

Actually, no. Garnaut meant to say the Journal of Australian Political Economy. Small difference. And I think perhaps I meant to say the SMH instead of the WSJ….

Incidentally, the article is an interesting one, particularly Craig Emerson’s implied suggestion that the minimum wage should always exceed welfare. As Bob Gregory and Paul Frijters point out in a paper appearing in the Quarterly Journal of Economics Economic Record next year, another way of regarding welfare is as a surrogate minimum wage, albeit one that operates in a softer way than a standard wage floor. Assuming we’re going to have a wage floor, I’m not sure why the hard version should be above the soft version. (And yes, the minimum wage probably pushes up wages a bit, but the elasticity of hourly wages with respect to the minimum wage simply can’t be all that high.)

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2 Responses to Details, details

  1. gringo says:

    Benefits will come to exceed minimum wage only if policy remains the same. Following the changes to single mother and disability pensions last year, perhaps there are further welfare changes afoot …

  2. gringo says:

    Ooops … hadn’t actually read the WSJ — the are discussing single parent payments specifically.

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