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An interesting idea to combat wage inequality

August 27, 2011 Leave a comment

I recently came upon an article by Daniel Indiviglio published in The Atlantic that put forth an interesting idea for combatting wage inequality. It immediately caught my attention as it stands out from most ideas for improving wage equality. Generally, ideas put forth to limit these disparities involve taxation and redistribution, or government mandated minimum wages. Occasionally there are even calls for some form of oversight or controls on the highest wages, as was the case with Wall Street bonuses following the economic meltdown. What almost all the generally proposed solutions have in common is that they all require the government to infringe on individual’s rights to their property. While the vast majority of people, myself included, have no problem infringing on these rights to some extent, a solution that does not require increased taxation or limiting individual’s rights to accept certain wages would be preferred.

So what exactly is this proposed idea? In one word, information. More specifically, publicizing information on wages and benefits for all jobs, and even potentially for individuals. The basic logic behind this is that individuals require information in order to act. Because compensation tends to be kept quiet, it is difficulty to negotiate for better compensation or to know if changing careers might be a better option. By providing people with information equivalent to what their employers already know, they can see if their wage is too small relative to what others make, and then either negotiate for increased wages or find another job.

While little empirical research has been done into this, there are still many reasons to think that it might have some effect. The few job markets that do tend to have widely available compensation information have very high wages and a tendency for employers to go out of their way to ensure that their compensation remains competitive. These two job markets, Wall Street bankers and CEO’s, both have strong and continually improving wages.

It would be silly not to recognize that there is a large difference between the job markets for CEO’s and those for minimum wage level jobs, and it is highly unlikely that this information alone would dramatically reduce the discrepancy between these two groups, but better information would likely put some pressure on companies that hire workers around minimum wage to compete on wages as anyone looking for a job can see if McDonalds is paying a little more than Wendy’s. From my personal experience at entry level jobs, people tend not to look for new jobs until they find out what sort of wages they could make in similar jobs. If that information was widely available a company would have trouble keeping compensation below any other similar company.

While doing some research into this I discovered that Finland actually does something similar to this. Income tax information is made public for the majority of people. Finland also has relatively little inequality although this is simply one data point and does not strongly suggest causation.

Categories: Economics, Politics

More competition in the Canadian cell industry

July 9, 2010 1 comment

People love to hate on monopolies. Or in the case of the Canadian cellphone industry, oligopolies. I doubt many people would say that they love their cellphone provider, but for the most part, prices are going down and quality is going up. Even with only three companies to compete with each other, markets work.

With that being said, more competition, as long as it is viable and able to sustain itself, is never a bad thing. Canada has recently opened its doors to more competition by licensing wireless spectrum to new companies. These startups face a difficult market where many potential customers are locked into contracts with their competitors or have multiple other services that can be bundled together for cheaper prices. It won’t be easy for them, but if they have good products, good plans, and better customer service than their entrenched rivals, they will be able to make money. Ultimately this increased competition is good for consumers. We as consumers shouldn’t care about which company offers us the better deal, if it is one of the older providers that is just as good for us. And that is where the law might get in the way.

One of the new startups is already looking to impose legal sanctions on Rogers because they dare to compete. These competition laws, which were implemented to stop the “horrible abuses” of market leadership, end up only hurting competition as it handicaps large companies from implementing what customers want. Rogers knows that many customers want cheaper and simpler plans on a network designed for urban areas only. They want to compete in this area with a new company called Chatr. I fail to understand how this is in any way bad for anyone but the shareholders at their competition, yet Canadian law may stop them from doing this.

Many might argue that as soon as the competition goes out of business, Rogers will jack up the prices again and consumers will be worse off but there is simply no evidence to support this view. I can not think of an example where an entrenched company offered a better product, or a cheaper product, than their upstart competitor and then after they went bankrupt jacked up the price or started producing an inferior product. One only needs to think of the recent example of iPods and their incredibly dominant market positions (far more dominant than any one carrier in Canada). As more competitors entered the market, Apple lowered prices and added better features and after much of the competition fizzled away (Creative, Microsoft etc.) they kept innovating and kept lowering prices.

Competition is good for Canadians, but laws designed to promote competition often do just the opposite.

Categories: Uncategorized

Obama’s healthcare bill is not a step in the right direction

March 28, 2010 2 comments

Regardless of what you think about the government’s proper role in health care, the recent bill that passed the House of Representatives in the U.S. is not good. It amazes me how many people, many of whom are otherwise good skeptics, will either praise the bill as an amazing achievement on its own merits, or say that it is a step in the right direction. Both of these positions are nonsense unless you support a bill that will raise costs for most people, and force people to buy insurance coverage even if they can’t afford it, all while bringing more revenue to the health care industry. Sounds like a great step in the right direction!

This fact sheet, released by Fire Dog Lake, is probably the best description of why this bill really isn’t good for anyone (except maybe shareholders in the big drug and insurance companies). I would highly recommend that everyone reads it over (it’s pretty short) and then reads through some of the sources. Hopefully it will give everyone a factual foundation from which to base their opinion rather than from the rhetoric produced by the politicians.

Texas is at it Again

March 16, 2010 Leave a comment

It seems that the Texas Board of Education has started another round of silly curriculum changes. In the past they have done their best to put evolution into question, and now they are going after history.

It seems like the primary purpose of their changes is to stop teaching the history of the philosophical ideas of a separation of church and state. Probably most bizarre to me is their plan to ignore Thomas Jefferson. It seems incredibly odd to ignore a figure of such importance to the founding of the United States of America in American classrooms. It would be like our classrooms in B.C. ignoring John A. MacDonald.

There are however some changes that seem perfectly fine to me (if I accepted the idea that government control over what children learn is a good thing, but I am taking that as a given right now). Some of these changes seem to have a lot of the left-wing blogs (like the linked Huffington Post article) angry. The curriculum will now refer to the U.S. as a constitutional republic rather than a democracy. Why? Because the U.S. is a constitutional republic moreso than a strict democracy. There also seems to be some concern over how history class will now examine the devaluation of the U.S. dollar and the abandonment of the gold standard. How are those topics bad? Why shouldn’t we explain to our children the effects of an inflationary policy. $10 in 1913 buys roughly what $218 does now. If you look simply at the expansion of the money supply it is even worse.

The political arena is sometimes a harmful place to decide what children learn.

Categories: History, Politics, Skepticism

An Ageing Country

March 11, 2010 Leave a comment

On a recent episode of Radio Freethinker we talked about issues surrounding overpopulation and aging populations. Because of time constraints I was unable to fully discuss the economic and political issues facing Canada and other countries that are facing rapidly ageing populations. I’ll use this blog post to better explain some of these issues.

I recently read an article in the Globe & Mail about the non-partisan Parliamentary Budget Office releasing a report skeptical of the Conservative Government’s belief that they can easily return to fiscal responsibility without massive changed to taxation or spending. What the report ultimately argues is that the effects of Canada’s aging population are being ignored by the official reports coming from the government. According to the low estimate of the PBO, Canada will reach a federal debt to GDP ratio of¬† 200% by roughly 2070 as opposed to the official estimate of maxing out at 32.1% in 2011 and then falling. These two reports paint very different futures for Canada’s fiscal policy, and I want to explain some of the economic issues that the official report seems to ignore.

The primary economic issue that arises from shifting population demographics is a shifting dependency ratio. In general, the dependency ratio is the ratio of the working age population to children and those over 65. This way of measuring isn’t perfect, as some people over 65 are still employed, and some people of prime working age are not, and are dependent on others, but overall it provides a general approximation of the actual ratio.

According to the PBO report( which uses a dependency ratio that ignores children, which exaggerates the effect somewhat), as of 2008, Canada has a 5 to 1 dependency ratio. This means that there are currently 5 working age Canadians for every Canadian 65 and older. If we assume that working age Canadians and retired Canadians have roughly an equal standard of living (measured in dollars spent by them, or for them, a year), then it logically follows that each working Canadian has to give up 20% of their production in order for each retired Canadian to have an equal standard of living. The PBO report also projects that by 2033 this ratio will be 2.5 to 1. This now means that every working age Canadian will have to give up 40% of their production in order to maintain equal standards of living for retired Canadians.

Assuming we don’t have unexpected technological increases, or higher than usual investment, this will mean that the average standard of living in Canada will stay fairly constant or at the very least grow little. Increases in productivity will be partly offset by a labour market decreasing faster than total population.

On top of this basic economic problem, there is also the political problem of how this will be payed for. If senior care is largely payed for by government then this will mean that the government will have to raise taxes are strongly cut back in other areas. The political ramifications of this will likely be immense, as people don’t generally like rising taxes, especially if the benefits go to other groups. If senior care is largely payed for by savings from seniors themselves (which is likely no longer a possibility, as baby boomers are expecting the government to provide their health care as well as other benefits), then their decreased consumption in the past would have caused increased investment which would increase future productivity. This would help offset the effect of a lower dependency ratio discussed earlier.

The PBO report focuses on the consequences which affect the federal budget, but a large part of social program spending is done by provinces. About 80% of health care costs are payed for by the provinces and territories. Health care costs are also disproportionately high towards those 65 and older. In British Columbia, the cost in care per year is 4 times higher for those 80 and over compared to those aged 1 to 64. As the number of people 65 and older increases, health care costs will rise dramatically.

Whether Canadians like it or not, we will soon be facing large economic issues, and political decisions will decide who pays. Will retired people face lower than expected standards of living so that workers can make more? Or will workers give up some of their consumption in order to better provide for retired Canadians?

CFI Canada Conference: Day One

March 6, 2010 1 comment

Most of the day one activities focused on organizational issues which I won’t talk about here, but I want to give people some information on the different organizations here and some of their important goals.

Centre For Inquiry Canada, the hosting organization, is involved primarily with education related to science, medicine,ethics, and skepticism in general. They promote open and free dialogue on various issues. They are also now a registered charity so you can donate and get a tax receipt! CFI has branches all around the world (although most are in North America) and through these regional groups they host many smaller events such as pub nights for skeptics and presentations and discussions focusing on a wide variety of topics.

The Freethought Association of Canada which is the charity behind the widely reported atheist bus ad campaign, is now working on the Enjoy You Life! campaign. This campaign seeks to encourage non-believers of all types to get involved in worthwhile charitable causes. Some of these issues, such as expanding access to condoms in Africa, might be ignored by religious charities. They also want to break the stereotype that religion is necessary to advance charitable causes.

The Canadian Secular Alliance is the politically oriented secular organization. Their goal is to effect public policy that touches on secular issues, including freedom of expression, non-religious education, and the many different tax breaks for charities that save them well over a billion a year. With the recent announcement by the Harper Government about looking at the wording of the national anthem, the CSA is now focusing on getting a committee to look at whether keeping “god” in the anthem really reflects the diversity of Canadians. If you want to get more politically involved in skeptical and secular political issues, the CSA is a great place to start.

Categories: Skepticism

Austrian Economics vs. Keynesian Economics: A Rap

This catchy rap is also informative! I was going to write a blog article explaining the lyrics but then I found out that I was beat to it by “VA Classical Liberal” at the Daily Kos (and to be honest, he or she probably did a better job than I would have). This debate has never been more important with countries all around the world following Keynesian policies to try and get out of their economic mess and yet very few people have even a basic understanding of the economic arguments against these policies. Most people have some basic idea of Keynes theory, but if their introduction to it was anything like mine, it was treated more like gospel than a theory. I would highly recommend taking 15 minutes and reading over the blog post on Daily Kos and getting a brief taste of Austrian Business Cycle Theory.

Categories: Economics