For The Labourer is Worthy of His Hire
For The Labourer is Worthy of His Hire
Bob Day has just given us a telling demonstration
of the truth of the theme for this conference "For
the Labourer is worthy of his Hire".
It is now my task to give the sermon on this text.
It might have been more appropriate if this sermon
had been held over until Sunday. There is, as well,
a hymn which is most appropriate for this text;
- "Forth in thy name O Lord I go,
- My daily labour to pursue."
We are now moving into the pre-election period for
the 1993 federal election. The Opposition's Fightback
program has been successfully bedded down, at least
in terms of public acceptance of the GST. However,
in many speeches since the November launching of Fightback,
John Hewson has made it clear that labour market reform,
not tax, is the crucial policy issue dividing Government
and Opposition, and that only the Coalition can provide
the measure of reform necessary to bring back full
The full detail of the Coalition labour market reform
package is still to come but the broad outlines are
well known. The existing structure of arbitral tribunal
and registered organisations will be maintained. There
will be a statutory prohibition on closed shops, and
other less dramatic reforms of the system will be implemented.
But, and this is the big but, for the first time since
1904, there will be a Commonwealth mandated opportunity
for employers and employees who wish to opt out of
the system, to write their own contract of employment,
and have that contract recognised as superior in law
to any arbitral decision either state or federal.
The constitutional problems which arise from this
ambition were discussed at length at our last conference
in Adelaide. I do not propose to go over that ground
again today. Let us assume that the Commonwealth Government
will have constitutional power to legislate this freedom
for at least that part of the work-force which is employed
in the corporate sector.
That is the good news. The bad news is that there
are certain constraints which the Coalition proposes
to impose upon these contracts, which have the capacity
to negate the power of the new labour market regime
to solve the unemployment problem. I do not believe
the significance of this contradiction can be over
The most serious constraint with which the Coalition
is grappling is a minimum hourly rate which must apply
in all of these contracts. The current policy states:
- "Section 2.8. An agreement must provide for at least
the relevant minimum award rate of pay for ordinary
weekly hours of work for the particular classification
of the employee. For the purposes of the agreement,
that award rate of pay shall be calculated as an hourly
In other words if the parties settle on a minimum
hourly rate less than that stipulated, by some arbitral
tribunal, the contract loses its legal standing vis
a vis the various arbitral tribunals which would otherwise
dictate the terms and conditions of employment.
Coalition spokesmen defend the imposition of the
minimum hourly rate constraint on the grounds that
many people believe that without it, some employers
would exploit, to use the Marxian terminology, their
employees. As John Howard wrote to me,
- "As far as the economic quality of the policy is concerned,
I imagine one of your worries relates to the minimum
wage stipulation. I believe this is something we shall
simply have to disagree on as I hold a strong view
that discarding the minimum wage provision could affect
significant support the policy now enjoys in the community."
There can be no doubt that a lot of people agree with
John Howard on this matter. It is not clear whether
such people themselves believe in the Marxian theory
of value which underpins the whole notion of working
class exploitation by the greedy capitalists, or whether
they hold that everybody else believes in it, and that
these beliefs have to be accommodated. I suspect it
is the latter.
I think it is quite clear that Mr Howard himself fully
understands that the Marxian notion of working class
impoverishment and capitalist class enrichment is absolute
nonsense. But it is also clear that he does not want
to come out and simply say so. There are a number of
examples, familiar to many people, which demonstrate
that Marx got it totally wrong, and to which Mr Howard
could refer. The examples from the housing industry,
which Bob Day has just given us, are familiar to most
people. It is not a major political problem.
John Howard was brought up in a Methodist household.
So was I. Methodism has vanished, along with six o'clock
closing, but the imprint of many sermons still remains,
and this text "For the Labourer is worthy of his hire"
is one which tells us that Mr Howard ought not to be
frightened of Marxian shibboleths.
None of this would matter if the minimum wage constraint
on these contracts was an irrelevant bit of decoration
to a policy. But a fundamental purpose of labour market
reform is to bring an end to the scandal of unemployment,
not only amongst unskilled, poorly educated, young
people, but also the unemployed of my own generation,
those in their fifties, for whom retrenchment or bankruptcy
has brought an end to their working life and their
The Prime Minister has sought to take unemployment
off the political agenda with proposals to change the
flag and to ditch the monarchy. He has had some success
in this venture. Nevertheless the cancer of unemployment
continues to eat away at almost every level of society.
The most optimistic economic prognoses are forecasting
an increase in unemployment figures. The Coalition
cannot escape the question in the lead up to the next
election "What are you going to do about unemployment?"
Indeed John Hewson has been seeking to ward off the
Prime Minister's attacks on the constitution, and the
flag, by making the point that none of the changes
proposed by the Prime Minister will create one new
The only effective remedy to unemployment is contractual
freedom in the labour market, an end to legal privilege
for trade unions, and, as in the United States, dole
payments which are limited in duration. It is an interesting
corollary for those of us who are deeply concerned
at our monetary regime and the theoretical structure
behind it, that in a recent mammoth treatise on unemployment
by some eminent labour market economists from the London
School of Economics and Oxford University, (Layard,
Nickell and Jackman), inflation is seen as a crucial
determinant of unemployment.
The minimum hourly rate constraint, then, which the
Coalition proposes to attach to its voluntary contract
system has the lethal property of preventing the employment
of those young people who have never had a job, and
the re-employment of the middle-aged unemployed. It
will also disemploy a number of people who presently
have jobs, illegal jobs no doubt, but whom the custodians
of industrial law have, for political reasons, left
Some of you will recall that Senator Cook, Minister
for Industrial Relations, and persecutor of President
Barry Maddern and his colleagues in the Industrial
Relations Club, was threatening wool growers around
the country, a couple of months ago, with visits from
his departmental inspectors to see if award rates and
conditions were being paid in the shearing sheds of
the land. One Queensland woolgrower was contemplating
spending a weekend in jail because his contract of
employment, with his shearers, was not in writing.
For some years now Aboriginal groups have been trying
to make a go of some cattle properties in the Northern
Territory on land purchased or acquired under the Northern
Territory Aboriginal Land Rights Act. The Aboriginal
employees on these stations have never been paid award
wages, because it has been impossible to pay such wages.
There has never been a visit from a departmental inspector
to these cattle properties, nor the threat of one.
John Howard's minimum hourly wage will almost certainly
mean that these people will continue to be illegally
employed. He will, eventually, have to answer questions
why this is so.
There are two issues, then, which have to be clarified
on this minimum hourly rate problem. The first is the
likelihood, if not the certainty, that it will maintain
unemployment. The second is the power of the myth which
is apparently forcing John Howard to put at risk the
future of the next Coalition government, let alone
the well being of hundreds of thousands of Australians.
In January last it was clear from press reports that
John Howard was grappling with this problem. He is
convinced that Australians will not accept voluntary
contracts without a minimum hourly rate, but he understands
the threat to the next Coalition government if unemployment
does not quickly subside once the labour market reform
legislation is passed.
In this context we should not forget that it is unlikely
that the Coalition will win control of the Senate,
and that the Democrats have committed themselves to
blocking the Howard labour market reform legislation.
The Coalition has responded by promising a double dissolution
and a joint sitting of the both Houses to get the labour
market reform Bill passed. This means there will only
be one bite of the cherry. The reform package has to
produce the goods first time. There will be no second
John Howard's problem is that award rates, as established
by the arbitral tribunals, have given rise to the very
unemployment, particularly amongst young people, which
his reforms must solve, and it is the award rate which
it is proposed to use as the minimum hourly rate for
voluntary agreements. It is no use stating, as the
existing Coalition policy does, (Section 4.17) that
the Commonwealth will institute proceedings, in co-operation
with the States, to have junior wage rates set in all
applicable awards. It took Simon Crean and his trade
union colleagues nearly ten years to abolish junior
rates in the industries in which his union was involved.
To reintroduce them, at a level which will encourage
employment, will take a similar time. That is not a
solution to youth unemployment today.
A minimum hourly rate will do either one of two things.
It will either be so low as to not destroy any job,
anywhere in Australia and if it is that low there is
no point to it. It is below the market rate for all
employment, anywhere. That, however, is not the proposal
now in the policy. If, contrariwise, the minimum hourly
rate does destroy employment opportunities then the
Coalition's prestige as a Government able to solve
unemployment will quickly vanish.
The minimum hourly rate which is just low enough so
that nobody, anywhere in Australia, is denied employment
is a figure, actually a very large number of figures,
which no one single person, no arbitral tribunal, can
possibly know. It will change from place to place,
and from month to month.
The problem with which John Howard is grappling is
the problem which defeated the socialist enterprise
in the Soviet Union and Eastern Europe. Hayek and von
Mises pointed out in the 1930's that the function of
prices is to inform people where to invest their time,
their talents and their capital. Prices provide, above
all else, the information which, like Adam Smith's
invisible hand, enables millions of people who cannot
know one another, to cooperate in producing the goods
and services which provide us with the prosperity we
take for granted.
Prices which contain accurate information, which really
mean something, cannot be determined by bureaucrats
or by tribunals. They can only be determined in a marketplace
in which buyers and sellers continuously interact in
voluntary exchange. For decades prices in the Soviet
Union were determined by bureaucrats, sometimes using
Sears and Roebuck catalogues from the United States
as a guide. The consequence of this economic planning,
as it was called, was bankruptcy on a scale of which
we are only just beginning to comprehend.
John Howard would respond by saying that he is only
proposing a minimum price, not the price, at
which the hire of the labourer is to be agreed. Immediately
however, he runs into the problem that this minimum
price either puts nobody out of work, in which case
it is unnecessary, or it does put someone out of work,
in which case it is socially and economically disastrous.
Let me now turn to the text for this brief paper,
and the theme of this conference - "For the Labourer
is Worthy of His Hire." On the face of it, it sounds
like a text which Henry Bournes Higgins could have
used to justify the Harvester decision. But it turns
out to be no such thing. The key preceding text is
- "The harvest truly is great, but the labourers are
few: pray ye the Lord of the harvest, that he would
send forth labourers into his harvest."
In secular terms we can paraphrase that text by observing
that humans are never satisfied. However well supplied
with material possessions, with cultural or religious
services of whatever kind, we can always think of something
else we would like to have, or to do. The harvest
truly is great. This is a simple rebuttal to the
Keynesian or pseudo Keynesian view that an economy
can manifest inadequate "demand". I have never met
anybody that has any difficulty spending his income.
I have never met anybody who thinks he would find it
difficult spending twice his income.
To be able to consume, however, requires that one
has either to produce, or to have inherited a sizeable
slab of capital. It is through the price mechanism
that we are rewarded for our labour, and in spending
that reward we enjoy the benefits of what other people
Karl Marx developed a theory of value which held that
the value of an artefact or a service was determined
by the quantity of labour, alone, which was required
to produce the thing. On that basis he held that capitalist
economies would suffer from a continuing crisis of
lack of demand, in that the rewards to labour would
always be insufficient to allow it to consume all that
would be produced. This in turn would force capitalists
to drive down the wages paid to labour in a positive
feedback type situation of ever growing crisis of surplus
production and inadequate demand.
It is this Marxian legacy which John Howard believes
makes it necessary to have a minimum hourly rate in
the voluntary agreement package. It is absolute garbage.
The Marxian theory of value, and the resulting immiseration
of the working class was the first piece of Marxian
garbage to be thrown in the intellectual dust bin.
It is impossible, unless you run a totalitarian society,
to force people to become "wage slaves". If you refuse
to pay people what they are worth they will find an
employer who will. Have you ever heard of a plumber,
or a painter, who would work for you for free? If you
want a baby sitter or someone to clean the house, both
services still completely unregulated as far as I know,
you still have to pay the going rate, a market determined
What a labourer, and we are all labourers in this
context, is worth is determined by the value of his
product, a value determined not by one isolated employer,
but by employers competing for the services of employees.
If employer A does not think labourer B is worth $50,000
per annum, then employer C may be very glad to hire
labourer B at that figure, since his contribution to
the employer C's enterprise will be worth perhaps $70,000.
Judgments of this kind usually involve subjective evaluations,
at least before making commitments. But that does not
destroy the validity of the argument. In the end all
questions of value are decided on subjective grounds.
In economic terms the rent for a labourer is, or tends
towards, the marginal productivity of his or her labour,
and the text from St Luke's Gospel is fulfilled.
The great problem for unskilled, inexperienced young
people is that their marginal productivity is extremely
low. The Federal Government is subsidising the cost
of employing these people as far as it can without
enraging the trade unions. In doing so it implicitly
recognises, as does Laurie Carmichael in the recent
Carmichael Report, that they have been priced out of
the job market.
It will be administratively difficult, and politically
impossible, for anyone to set minimum hourly rates,
to apply all over Australia, which will not act as
a barrier to someone, somewhere, getting employment.
The labourer is always worthy of his hire. The rent
for the labourer's services may be low, but what matters
for the young, untrained person, who has never had
a job, is getting a foot on the first rung of the employment
A good sermon should never be longer than fifteen
minutes. Let me conclude by referring, as all good
preachers in conclusion do, to the text for the day.
Jesus was sending out his disciples, two by two, to
do some advance publicity. He told them that the harvest
was great but the labourers few.
He was sending them as lambs among wolves. They were
to stay in those houses in which they were welcomed,
eating and drinking such things as they were given,
for the labourer is worthy of his hire.
These disciples were selling religious services. They
were content to work for their keep. Their psychic
income was high. They agreed voluntarily and enthusiastically
to do want they wanted to do for the rewards they were
Because our society has become much more productive
than the Palestine of the beginning of the Christian
era, even the most unskilled labourer will be able
to earn more than his keep. Through experience on the
job he will be able to increase his human capital and
command a higher rent in the labour market. He will
always be worthy of his hire.