>>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.
But the bosses are also competing against each other for labour in the labour market, so they may have to try to outbid each other, raising the wage. This is a fairly normal state of affairs too at certain points in the business cycle, reserve army of labour notwithstanding.
>>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?
Well the point is that they may need to pay higher wages than the current going wage because they are recruiting from a limited labour pool in competition with other employers.
>>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.
It doesn't take cartel or monopolistic behaviour to enable firms to pass on costs in prices though. If all firms in an industry have the same tax applied, no-one's in a position to start price-cutting competition, unless they already were before the tax. How much of the tax they pass on in price increases depends on things like the price-elasticity of demand for the product, on the overall effect of the price increase on revenue. Of course, in reality, all firms in an industry will not have the same tax applied because they will be in different countries. But these other factors are still relevant.
So I don't agree that "in the context of market forces, taxes are at the expenses of profit." It depends on the market forces. I don't think there's a simple binary between 'market forces' and 'monopoly'. Competition is always in effect, but in complex ways.
>>>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.
It's debatable as to how it worked out in practice though. That was the rhetoric, but it simply wasn't in the power of the government or unions alone to determine the ultimate effect on real wages.
Cheers, Mike Beggs scandalum.wordpress.com
>>
>>>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
>>
>>___________________________________
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