Thursday, 4 December 2008
Something for you to remember during the negotiations for your next enterprise agreement.
When your employer says that if they are paying more money out in wages they expect increased productivity just remember this is businesses way to get more productivity for what is essentially the same amount of money.
What is involved in the equation is the actual face value of the money used, the spending power or overall value of money and inflation.
The overall value of money is related to the spending power of the money and what inflation does is makes that value less than what it previously was so if increases in wages are tied to increased productivity then the organisation gets more out of the money that they are spending even though they are essentially paying essentially the same price in real terms. While the face value of the whole sum of money they give out is higher than previously the actual spending power of the individual units of money is worth less due to inflation so the extra money in the wage increase just brings the spending power of the whole sum of money to what it was before inflation.
Because prices are going up the businesses are essentially taking in the same monetary value that they were previously taking in before inflation. Overall value wise it's the same even though the face value is more. Since monetary value and face value of money are different things business use both value outlooks interchangeably to suit their own argument. The previously mentioned business argument that if they have to spend more money they should get more for it refers to face value of money, not the actual overall value of the money.
And on the other side of the coin if wages are not increased to match inflation then business gets the same productivity for less money in real terms. The actual face value of the money is the same but the spending power of that money is less and because of inflation the business is taking in more money.
Remember that next time you vote for your next enterprise agreement.
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