BUS5POE Real-World Policy Application: Interview Analysis and Insights

This essay summarizes and analyzes an interview with Dr. Andrew Leigh, an economist and Member of Parliament, regarding the application of economic principles in Australian policymaking. The analysis covers key issues discussed in the interview, including the relationship between teacher pay and school productivity, the effectiveness of tertiary education student loans, the implications of the baby bonus policy, and the debate surrounding minimum wage. Dr. Leigh advocates for higher teacher pay, education loans, and a higher minimum wage, supported by economic research and evidence. The essay also explores the broader implications of demographic shifts, such as the rise of the "Baby Boomer generation," on social benefits and pension systems. Additionally, the author poses critical questions to Dr. Leigh, reflecting on the challenges of policy implementation and the potential for overgeneralization in economic studies. The essay concludes with a reference to a cartoon illustrating the impact of increased life expectancy on social perceptions.

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Geeta

1. The interview of MP Dr. Andrew Leigh by Jan Libich is a discussion about how economics could
be used in the formulation of various policies in Australia. It covers a variety of topics, most
notably teachers pay and it’s linkages to school productivity, tertiary education student loans.
and the social and private benefits derived from secondary and tertiary education, baby bonus
and shifting of births, . Dr leigh adovates, higher teacher’s pay, education loans, and a higher
minimum wages.
2. Dr. Leigh has linked school productivity to teacher’s pay. Dr. Leigh has co-related teacher pay
and the to the declining aptitude on teaching explaining how lower wages decrease the
incentives for talented people to enter the field of teaching. As evidence, Dr. Leigh cited a study
done by him and Chris Ryan that studied the quality of school teachers in Australia and found
that in 1983, teachers in Australia came , mostly from the top 30 percentile while in 2003, this
cohot has declined to the top 38 percentile. Dr. Leigh noted that school productivity, based on
parameters of numeracy and literacy in middle school, has decline and this conclusion has been
backed by a study conducted by Gretten Institute.
a. Increasing teacher’s pay help increase the productivity in schools. (Leigh A. , 2006
Volume 11)
b. Allowing greater increase in school choice could also be a possible solution. (Hoxby,
2001)
c. Encouragement of private schools could help bridge the parity between private benefits
derived by students and the private costs paid for by the student.
3. The Government is responsible foe the over all well being of the society and sometimes, the
government must provide incentives and disincentives that would encourage or discourage
certain kinds of behavior. According to Gans, et al., 2018, people respond to incentives amd
hence, incentives are important. The baby bonus as a policy therefore made sense. However,
Dr. Leigh has proced that the roll out of the policy raised some concerns. The design of these
policies is at are made by the government and hence, the onus od making these policies should
be on the government. The baby bonus policy was not very effective in it’s execution.
4. The “Baby Boomer generation” was the generation that saw a rise in birth rates in advanced
countries. As a result, approximately five decades later, the number of retires and senior
citizens has grown. In advance countries, life expectancy is , generally, high. As a result, the
spending on care of the older or aged care rises significantly, and so does the burden on health
care system. As a result, fewer social benefits may be available for the generation that succeeds
this generation. Additionally, the burden on the pension system will increase. (Leigh D. A., 2012)
5. A repeal of policies such as “baby bonuses” that would incentivize birth could help combat the
problem. Additionally, mandatory savings in retirement such as gratuity, provident funds etc.
could be placed to ensure that the working population saves enough to pay for the retirement
periods. (Leigh D. A., 2012)
6. The debate surrounding minimum wage has two sides that are both very extreme. There are
those who do not acknowledge the overall benefits to the economy that increased earning
might have (the income effect). There is also, one side that believes that the imposition of
minimum wage could cause dis-employment as firms would be forced to hire fewer people if
the minimum wage salary is highly above the average price decided by supply and demand and

the marginal productivity of labour. (Georgiadis, 2012) The factors that should be considered in
order to increase in minimum wage are the average worker productivity, corporate earnings and
the average disposable of workers below the poverty line.
Personally, I believe that the efficient wages theory has been proven to be effective which
provides a case to increase the minimum wage. Hence, minimum wage policy should be
implemented along with investments in the increase in the productivity of labourers.
7. Some of the ideas that I find interesting is the use of economics to predict outcomes at a
personal level. For example, Dr. Leigh finds that households that may have lower divorce rates
if the household has one girl and one boy as children. This use of economic to preduict very
personal outcomes is interesting. One on hand, it seems like an over generalization while on the
other hand it seems like a very practical use of economic theories in the personal life of people.
Hence, it is very interesting.
8. The three questions that I would like to ask Dr. Leigh are:
 “As a corollary to your research on the ‘baby bonus policy’, the Roll Out of a policy has been
proven to be as important as the formulation of the policy. What are some ways that you would
use to measure the economic effects of the variations in the rollout or implementation of a
policy?”
 Why did you mention, in the interview that the children of baby boomers have smaller
inheritances? Did you mean smaller social inheritances (example, lesser budget spending on
their education due to higher budget spending on aged care) or personal inheritances?
 How do you guard against over generalization and personal bias when you conduct studies such
as (Leigh, 2009 )
9. Cartoon B
a. Old Man: Look honey, it says here that people here of our generation will live longer
than the previous generation.
b. Old Lady: What is the big deal? I told you so in 1966.
Bibliography
Gans, J., Stonecash, R., Byford, M., Mankiw, N. G., King, D. S., & Libich, J. (2018). Principles of Economics,
7th Edition. Melbourne: Cengage Learning Pty Ltd.
Georgiadis, A. (2012, December). Efficiency Wages and the Economic Effects of the Minimum
Wage:Evidence from a Low-Wage Labour Market. Oxford Bulletin of Economics and Statistics,
962-979. Retrieved from
https://pdfs.semanticscholar.org/27ca/f021788ea3b20d3f8a19fa655bc7a82bddb6.pdf
Hoxby, C. M. (2001). School Choice and School Productivity. Could School Choice Be a Tide that Lifts All
Boats? The Economics of School Choice (pp. 287 - 342). University of Chicago Press.

Leigh, A. (2006 Volume 11). Making the Grade. Griffith Review, 122-127.
Leigh, D. A. (2009 ). Does Child Gender Affect Marital Status?: Evidence From Australia. Journal of
Population Economics Volume 22(2), 351–366.
Leigh, D. A. (2012, Spetember 6). Designing Effective Economic Policies: Dr Andrew Leigh, MP,
Interviewed by Dr Jan Libich. (D. D. Libich, Interviewer)
Weiss, A. (1990). Efficiency Wages: Models of Unemployment, Layoffs, and Wage Dispersion. Princeton,
USA: Princeton University Press.