Feminists claim that one example of sexism in society is the fact that women get paid less than men. Conservatives counter by claiming that this difference is not due to sexism but to actual differences between men and women. They claim that men are better educated, have more experience and specialise in better paying (often more dangerous jobs). So which is it? Is the gender pay gap an example of sexism in society or is it just a myth that denies genuine differences in work done? Continue reading “The Gender Pay Gap Revisited”
I have finished reading a fascinating book by Truman Bewley called “Why Wages Don’t Fall During A Recession”. It’s an interesting book not only for its topic but also for the way in which the author conducted his research. Unlike most economists who conduct studies based on complicated mathematical models, Bewley did something unusual and interviewed business owners to understand more about how they run their business. Economists traditionally viewed the market as automatically self-adjusting so that wages and prices would easily change to the right level in response to market conditions. However, it has been found that wages are rigid and almost never decline so between 1992 and 1994 Bewley interviewed 336 people in the North East of the United States (the book was published in 1999). The studies were meant to be qualitative and as such are not random or representative. They provide a very interesting insight into the mind of business managers. Continue reading “Why Wages Don’t Fall During A Recession”
In Ireland it is common for people to go abroad towards the end of college to somewhere warm and work for the summer. J1 visas are easy to get and it’s a great experience. You get a job for the summer, go drinking and do a bit of travelling. I was no different and this summer I sent 3 months in America with a group of my Irish friends. There were seven of us in a 2 bed apartment house, which was a smaller group than most Irish; it was more common to have 10-15 people in a house. It was a fantastic experience and I don’t regret it a bit, but this post is not about my J1, but rather one part of it, my job. Continue reading “Overworked and Constantly Shouted At – My J1 Working Experience”
Economics is a broad and vast field comprising intricate areas that would take years to master. This makes it very hard to summarise or reduce it to a simple point. However, if there was one simple lesson that I wished everyone knew about economics, one easy sentence or sound bite that could explain the essential core to people who know nothing else about economics, it would be: “My spending is your income”. This simple point, properly understood, explains everything you need to know about the important policy issues of the economy. It doesn’t explain everything, but it explains the important parts.
My Spending Is Your Income
At the moment the government is trying to negotiate a deal to best cut public sector wages. However, any such deal will only make the recession worse without reducing the deficit. Here is a guest blog I wrote on the topic.
– Robert Nielsen discusses the ongoing dispute over the Croke Park II proposals, and why cutting wages is always a bad idea.
At the moment there is a great deal of controversy over the Croke Park Deal. In essence the government is trying to cut the wages of public sector workers while the public sector unions are opposing this. Regardless of the politics of the agreement, cutting wages is bad economics. It depresses the economy, worsens the recession and doesn’t even achieve its objective of reducing the deficit. The union membership was absolutely right to reject the Croke Park Deal and the government must completely reconsider its plan of action, because the current one isn’t working.
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Whenever there is a great debate over wages, be it the minimum wage or unions effect on wages, opponents cite the marginal productivity of labour. They argue that this prevents businesses from paying higher wages and if they did, it would only lead to higher unemployment. This theory is unquestionably stated as fact in all textbooks and the impression is given that there is an iron law of economics that fixes wages. Despite its wide use, it is completely false. The vast majority of workers do not have a marginal productivity of labour and those that do are not paid it. It is a theory that has long outlived its day and continuing adherence to it means the wrong decisions are being made. Continue reading “Challenging Economics – Marginal Productivity Of Labour”
What if I told you about an economic theory that assumed every person in the economy understood economic terms and kept up to date with the state of the economy? To be exact, what if I told you about a theory that assumed everyone in the economy based their decisions on the rate of inflation? You’d (rightly) say that was a daft and unrealistic assumption completely out of touch with how real people think. The reason for this is due to what is known as the Money Illusion. Continue reading “The Money Illusion”
It is common to hear people complain about immigrants taking the jobs of locals. The logic behind this is simple; if an immigrant has a job then that is one less job for a local. It is therefore deduced that a large influx of immigrants would be disastrous, leading to mass unemployment and a decline in the standard of living. However this is not supported by the evidence. There are several examples of huge numbers of immigrants entering a country within a short period of time, yet the economy does not collapse. Continue reading “Immigrants Don’t Steal Our Jobs”
Orthodox economics treats labour as a good like any other subject to the laws of supply and demand. However this misses a crucial point that we are not dealing with commodities but rather people. With goods, demand is decided by consumers and supply by producers, whereas with labour, demand is decided by producers and supply by consumers. The entire system is turned on its head yet neo-classical economics claims the results will be the same.
Continue reading “Labour Market In The Real World”
Once upon a time there was a car manufacturer. One day he proposed to double his workers wages. The business community was stunned. Was this man insane? A socialist? Did he not understand the laws of economics? Surely his business would instantly go bankrupt and nothing more would be heard of him. In response he simply pointed out that with a wage increase his workers could now afford to buy the cars they made. Business boomed, profits rose and the company redesigned the entire car industry. The man’s name was Henry Ford. Continue reading “Pay More, Get More”