John Singleton with Bob HowardRip Van Australia (Stanmore: Cassell Australia, 1977), pp. 251-53, under the heading “Unemployment”.

We have already discussed what happens when prices are fixed. When they are arbitrarily fixed too high, there is a positive incentive for producers to produce, but a negative incentive for consumers to buy. When prices are fixed too low — the reverse happens — production drops, but consumption increases. Therefore, the former situation results in a glut, and the latter in a shortage. The market price is the one where the market clears — supply equals demand.

Labour is a commodity on the market just as much as eggs, shoes and refrigerators are. Wages are the price of labour, and in our economy, most wages are fixed. They are fixed as a result of Union activity and conciliation and arbitration by the government. The laws of economics apply to labour just as they apply to other commodities. When the price is fixed too high, in this case the supply remains relatively unchanged — although some extra people may be coaxed out of retirement, schools, or colleges, or out of the family home to enter the labour market. The demand for labour, however, drops. Staff are laid off, automation is increasingly used, businesses close down. The end result is an unemployment problem.

We believe the main cause of unemployment today is that wages are not free to fluctuate in accordance with variations in the supply and demand for labour. There are, of course, other factors that complicate the picture, but we believe these are secondary. Such things as taxation, inflation, government activity (such as when government reduces tariffs suddenly, or devalues the dollar, or upsets a particular industry with new legislation) — all can produce unemployment. With free, floating wages, the employment demands of the people would force wages down until the unemployed who wanted to work were able to find work. It is only when wages are not allowed to fall that an innocent percentage find themselves in the situation of being part of the “permanently unemployed.”

Union activity that secures wage rises generally only secures a gain for one section of the labour force, at the expense of the jobs of people in another industry; or even within their own. The ability of industries to pay increased wages has all but been forgotten. With business being ravaged by high taxation, inflation, the Prices Justification Tribunal and general economic uncertainty, it is little wonder that one of the main results of recent huge wages increases has been record unemployment.

Once again, we see the results of government meddling in the economy. Government are responsible for taxation, inflation, economic uncertainty (because of arbitrary changes of policy), institutionalised economic dislocations, and fixed wages. Every one of these contributes to unemployment, and fixed wages, and ensure that they remain there.

Wages are paid out of production. Every employee on a free market is paid roughly in accordance with what they contribute to this production. If, through the introduction of better machinery, employee productivity is increased, then an employer can afford to raise that employee’s wages. Thus, a person who digs holes with a bulldozer can be paid more than one who uses a teaspoon. It is not how hard they work, or how long they work that counts. It’s what they produce that determines what they can be paid.

In Great Britain some time ago a Royal Commission was appointed to enquire into the causes of the bankruptcy of the Norton-Villiers-Triumph motorcycle company. One of the things they found was that, whereas in equivalent firms in Japan the motorcycle production was of the order of hundreds of motorcycles per man employed per year, in Norton-Villiers-Triumph they produced eleven per man per year. Such a difference might be acceptable if one is comparing Rolls-Royce with Holden. It is not acceptable when one is comparing Holden with Falcon. It was little wonder that the British company folded. Other factors that contributed to its situation were strikes, Unions resisting the introduction of more modern machinery, demarcation disputes, fixed wages and the inability to fire unnecessary labour — as well as the old favourites of taxation, inflation and red tape. It all has a familiar ring, doesn’t it?

Minimum wage laws, in particular, contribute to unemployment, particularly disadvantaging those who can least afford it: the old, the very young, and the unskilled. When the minimum wage is raised, all those whose productivity is not worth the new wage will lose their jobs. If the economic situation is bad, as it is at present, others lose their jobs as well, as companies trim corners so as to stay in business. The same analysis can be made of all wage legislation enforcing awards.

On a completely free market, wages could be determined by supply and demand. The popular misconception that without legislation, workers would be exploited, is not true. It is in an employer’s best interests to have a happy, positive, highly productive workforce. On a free market, workers would be paid in accordance with their worth: a good fitter and turner would get a higher wage than a bad one. To get the best workforce, an employer would have to offer high wages and good conditions. Ideally, employment would be via a job contract, which could be periodically renegotiated, with new wage rates being agreed upon.

Freely floating wages would also serve to determine the supply of people in various occupations. If there was a shortage of carpenters, for example, their wages would rise in response to demand. This would attract more young people into the trade thus forcing wages down again.

If unemployment benefits are guaranteed and are at an attractive level, they will act to increase and perpetuate unemployment. If, for instance, the unemployment benefit was fifty dollars a week, and the minimum wage was seventy-five dollars a week, someone working on the minimum wage is, in effect, doing a whole week’s work for only twenty-five dollars more than they would get for not working. This may be low enough for the minimum wage worker to decide it’s not worth it, and so toss in his job and go on the dole. It may also discourage others on the dole from bothering to get a job.

If the government refuses to leave the economy alone, experience shows that it can only avert unemployment (temporarily) by spending. This spending usually only adds to inflation, but it does buy the government a short-term respite. The basic causes of the problem have not, however, been attacked so it is not long before it once more rears its head. The longterm effect of government continuing to buy their way out of trouble while at the same time keeping the economy in their sticky grip can only be used as the excuse to impose such Draconian controls on the economy (“in order to get it back on its feet”) that we will have a fully fledged totalitarian State.

It is not possible to produce a healthy economy or full employment by legislation. Production pays for employment. Free enterprise, by maximising production, maximises both employment and wages. There is no other way.