prices and income policy (1 Viewer)

[strawberry]

how does price and income policies affect unemployment???

 

[Left-ism]

in australia-
wage reforms such as enterprise bargaining and awas and their impact on unemployement is quite debatable. theres no definate answer. some economists would argue that they have had no effect, others would say that it has maintained low wages and thus decreased unemployment.

the issue is really open to debate. but in my opinion, because price and incomes policy have improved flexibility and producitivity within the labour market, and has thus increased economic growth- they have in turn decreased unemployment.

hope that helped.

 

[timmii]

You'd have to specify *how* prices and incomes policy has improved flexibility and productivity as well though...

Since wages are now tied more to productivity (rather than indexed to inflation as with the accord), there are incentives for workers to improve productivity - wage increases may also then not lead to cost push inflation (which will inhibit future growth). Employers and employees being able to an extent to determine their own contracts of employment create greater and provide flexibility for workers to determine their conditions. Can to an extent be evidenced by the rise or part-time employment...(has decreased unemployment levels, because even if someone is underemployed - i.e wants to work full time but is only working part-time, they are counted as being employed...)

Flexibility is enhanced by diminishing union power and by deregulating the job search industry (not long ago there was no monster, career1, seek etc...only the govt one, CES i think it was called...)

 

[sugamama]

wasn't Prices and Incomes policy used in the past by the Labor gov? Since coalition came to power they changed the whole system.

 

[timmii]

The accord was used by Labor. wages linked to prices in an incessant vicious cycle of inflation and strikes...prices and incomes policy is a bit of a redundant term, true. "microeconomic policy" is more often used to encompass "labour market reforms"...but hey, if they specify prices and incomes policy, u may be able to discuss it.

 

[mr_speedy]

it is supposed to lower unemployment. but it hasnt really as in the 1980s unemployment was 6%, which is roughly what it is now, so it really has not had much affect in lowering unemployment

 

[timmii]

Its not just about unemployment, its about productivity as well. Without improvements in productivity, GDP will stagnate because of diminishing marginal returns. Also, without improvments in productivity, a price-wage spiral may develop (see above posts). The key characteristic of the current economic environment is that there is low unemployment *and* low inflation...usually they're contradictory to a greater degree. Also there *was* very high unemployment, at the moment its basically pretty close to the natural rate. The "high" nominal rate then can be partially attributed to extensive sturctural reforms that have increased structural unemployment - rather than cyclical unemployment.

 

[Littlelease]

Uhm

Prices and income policy if successful -> wages = productivity (kept reasonably low)-> growing economy & more competitive -> economic growth -> higher demand -> requires labour -> lower Unemployment

Unsuccessful-> high wages -> Inflation -> companies lose more profit and may put up prices -> lower demand for goods -> increased unemployment