Professor C. Benham constructed tables showing the relationship between wages, production and unemployment in Queensland for the period 1916 to 1924. (The Prosperity of Australia, P. S. King & Son, LTD, Orchard House, Westminster, 1928). The result was a striking vindication of standard economic theory. I converted one of Benham’s tables into the following chart.

The left hand side measures unemployment while the right hand side is the ratio of the value of production to the average wage for those years. According to standard economic theory there should be a negative correlation between the ratio and the unemployment rate, meaning the higher the ratio the lower the level of unemployment. This is precisely what the chart shows. As Benham said of his tables:

It would be hard to find a clearer proof of our thesis [that excessive wage rates cause unemployment]”.

Of course Keynesians could argue that the figure are purely coincidental and that the changes in the unemployment were due to changes in aggregate demand. When confronted with this kind of nonsense it is better to refer to the master rather than to any of his disciples. Keynes asserted, without any supporting evidence, that

Whilst workers will usually resist a reduction of money-wages, it is not their practice to withdraw their labour whenever there is a rise in the price of wage-goods [consumption goods]. (The General Theory p. 9).

This is a clear admission by Keynes that the problem is not mythical demand deficiency but excessive wage rates, which includes all oncosts. Keynes convoluted argument suggesting that direct cuts in wages could lead to a reduction in demand (pp. 259-60) only served to reveal how much at sea he was on the subject.

Benham also pointed out that though Australia was highly unionised it had lagged behind Canada and the US in terms of real wages and economic growth. He noted that

Women and juniors are within the ambit of wage-regulation to a smaller extent than adult males, yet during recent years their wages have risen more than those of adult males. In the United States and Canada where there is relatively little wage-fixing, average real wages have risen more than in Australia (op. cit.)

According to Mr Hulls and his advisors this is just not possible. Even more damning for Hulls’ argument is the fact that during the 1920s Australian unemployment averaged about 8 per cent against an average of about 3.6 for the US. Moreover, union membership “per 100 non-agricultural workers” in Canada was 11.6 per cent and about 9 per cent for the US. In Australia it was 46.2. The following chart reveals that there is no correlation between union membership and the growth in real wages.²

Stressing the point further, the next chart[3] also shows how the rise in real wages moves in tandem with rising productivity. Take particular note of the period 1930 to 1941. It was then that wage rates, the dotted line, greatly exceeded the hourly product. It was also a period of massive and prolonged unemployment.

(See Richard K. Vedder and Lowell E. Gallaway’s Out of Work for a devastating statistical critique of this period. It should also be noted that Mountifort Longfield’s Lectures on Political Economy, 1834, described how capital accumulation raised wage rates).

Faced with Hulls’ economic demagoguery the only argument that our free market advocates appear able to muster is the fallacious one that Australia’s 1.1 million firms put a floor under real wages. (I and others have noticed that advocates of this view do not tell us what that floor is). Let us visit Asia for a moment where it has been reported that “labor shortages at hundreds of Chinese factories” have emerged (New York Times, 3 April 2006).

Does this mean that Chinese wage rates are now as high if not higher than Australian rates? After all, China has more companies than Australia and her manufacturers are having a hard time getting labour. Of course the answer is no. What basically matters with respect to the height of real wages is not the number of firms competing for labour but the capital-labour ratio. The greater the ratio the higher real wages will be regardless of the number of competing firms. This is because capital is the ultimate key to productivity.

As that arch Keynesian Paul Krugman wrote:

History offers no example of a country that experienced long-term productivity growth without a roughly equal rise in real wages. (Pop Internationalism, The MIT Press, 1997).

Mr Hull expressed concern for the welfare of his fellow Australians is just another sickening example of this mob’s disgusting hypocrisy. The government of which he is a part callously priced thousands of people out of the housing market by imposing outrageous taxes on residential construction. And for what? More revenue and more greenie votes. Even more sickening, at the behest of Muslim bigots this government has been viciously persecuting two Christian pastors for the crime — and I kid you not — for quoting accurately from the Koran.⁴

1. This chart was taken from Douglas A. Irwin’s Free Trade Under Fire, Princeton University Press, 2002.

2. The Tucker series converted to hourly rates and adjusted to the cost of living, Employment and Wages in the United States by W. S. Woytinsky and Associates, New York: The Twentieth Century Fund, 1953.

3. The data is from John W. Kendrick’s paper National Productivity and Its Long-Term Projection, National Bureau of Economic Research, May 1952.

4. Bracks’ Star Chamber commission applies the law selectively against Christians in favour of Muslim bigots

Muslim bigots impose blasphemy laws on Victoria

Bracks’ religious tolerance laws

Muslim goons silence Danish journos while in Australia Premier Bracks helps Muslim bigots persecute Christians

Gerard Jackson is Brookes’ economics editor

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