>An upper limit to real wage
>growth is set by the fact that cutting into profitability will curtail
>investment, and lower demand for labour, but below that limit there's a
>lot of room to move and that's certainly compatible with a rising real
>wage given productivity increases.
The room to move is restricted severely by the competitive context. Boss (a) might be a generous boss, but if he has to compete against Boss (b) who has a lower cost of production, his only room for manouever is the breadth of his own profit margin.
The boss who produces product at the lowest possible cost of production will usually out-compete the boss whose cost of production is higher.
All this is elementary. So where's this room to move that you speak of? Where's this capacity to pay higher wages than are necessary to recruit the labour necessary? How is it theoretically possible to pay more wages than you need to, more wages than you have to, without going broke in the end?
>The achieved standard of living also
>sets a lower limit, below which you'd generally expect to see some
>serious labour troubles.
Yes. Not to mention some serious inadequacies in quality of the labour. There aren't a lot of jobs that starving illiterate cretins can perform adequately a modern economy.
>Competition in the labour market isn't all that's relevant in
>determining where a tax falls anyway. The ability of firms to pass on
>cost increases depends on the nature of competition in goods markets,
>too, as well as the price-elasticity of demand for their products.
Well sure. If the market isn't competitive, then limits only apply at the upper and lower extremes of what is materially possible. But its a lowest common denominator situation isn't it. If the whole world agrees to stifle the market, it can work. But (in the context of a privately owned means of production) all it takes is one or two rebel jurisdictions to break up the party, to re-introduce competition.
>So a business tax might ultimately come out of profit, or it might come
>out of wages. Depends.
Yeah, we agree it depends on whether the economy operates under market forces or not. We agree that, in the context of market forces, taxes are at the expenses of profit.
It just seems that we're in that tiny minority of deluded people thinking there is a competitive market in goods and services operating. I'm "whackadoo". I need to get out and smell the wage and price freeze, the impenetrable tariff barriers protecting monopolies in the world market. The guaranteed adequate wage. The Emperor's new clothes. I can't see these things, lock me up in a padded room. Medicate me, I'm as mad as a hatter!
>Actually, Australia under the Accord in the 1980s provided an
>interesting little example - where income tax cuts and superannuation
>benefits were traded to workers explicitly in return for wage restraint.
Yep. Good example of what I was saying. Income tax cut = wage cut. It was explicit there, but it is always at least implicit that an income tax cut will be the basis of a corresponding wage cut, or alternative to an otherwise unavoidable wage rise.
Bill Bartlett Bracknell Tas