A referendum on wages
In a rich country like Australia, paying a living wage is not negotiable
Stagnant wages (and what to do about them) were always likely to feature heavily in this federal election. Opposition Leader Bill Shorten has kicked things along by declaring [$] that Labor, if elected, would rewrite the Fair Work Act and guidelines to force the Fair Work Commission to give greater weight to the needs of the low paid when making its annual minimum wage decision, to ensure that 2.3 million workers are paid a “living wage”. Treasurer Josh Frydenberg criticised Labor’s intervention, saying the minimum wage should be left to the commission as the independent industrial umpire. Sally McManus, today launching the ACTU’s minimum-wage submission, toldRN Breakfast that John Howard had changed the rules for the umpire, which now had to take into account “a whole shopping list of issues” of which the needs of the low paid is just one, and that the system had never really recovered. The ACTU wants the rules tweaked, McManus said, so that the commission “should make a decision, independently, outside of politics, on what that living wage should be”. She said, “At the moment they’re restricted from doing that.”
At a press conference in Melbourne today, McManus said the current minimum wage was far too low at just under $38,000 a year, leaving many full-time workers in poverty. The ACTU submission is calling for a 10 per cent increase over the next two years to more than $41,000, and to ensure that the minimum wage is pegged to 60 per cent of the median wage – the OECD definition of relative poverty – from then on. “That is what’s needed in our country to stop us becoming like America, where full-time workers need a second job, just to make ends meet,” McManus said. “We need to turn around, and not follow the path of America, and restore the fair go. A living wage, a wage that full-time workers can live on, is the basis of a fair go in our country.” Labor has rejected linking the living wage to the median wage, leaving the debate up in the air.
Does a higher minimum wage lead to higher unemployment? The Australian columnist Judith Sloan this week picked up [$] on old research published by Labor’s shadow assistant treasurer, Andrew Leigh, when he was a professor of economics at ANU. This research found that “for every 1 per cent increase in minimum wages, we should expect a decline in employment of between 0.25 per cent and 0.4 per cent”. So for a 5 per cent increase to the minimum wage, Sloan wrote, we might expect 25,000 to 40,000 job losses, and we could presumably double that if minimum wages were to go up by 10 per cent, as the ACTU has urged today. It’s a fair point, if not quite a gotcha moment.
Asked about it, Leigh did not disavow the research paper but told me that he was modest enough to recognise that something he wrote 16 years ago is hardly likely to be definitive nowadays. “It’s one study of many,” he says, adding that more recent research shows that raising the minimum wage is “a good way to go”, and that any so-called disemployment effects are “quite small”.
What’s changed since he wrote that paper? One major factor is that competition in Australia’s economy has weakened, Leigh says, with fewer and larger firms exercising market dominance in sectors like telecommunications and media, energy, retail and manufacturing. “Wages are fundamentally driven by the competition between firms for workers,” Leigh argued in a recent speech. “Less competition means lower wages.”
It is hard to see where the Coalition’s arguments lead: more poverty? Higher reliance on “the tax and transfer system” (i.e,. welfare), as Sloan somewhat surprisingly appears to advocate? Luckily, an economists’ debate about the causes of wage stagnation is one thing. A referendum on wages is quite another, and the good thing is we all get to vote. In a rich country like Australia, paying a living wage should be non-negotiable, and I suspect a lot of voters will make that point at the ballot box.
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Paddy Manning is contributing editor (politics) at The Monthly and has worked for the ABC, Fairfax, Crikey and The Australian. He is also the author of three books, including a recently updated unauthorised biography of Malcolm Turnbull, Born To Rule?
Stagnant wages (and what to do about them) were always likely to feature heavily in this federal election. Opposition Leader Bill Shorten has kicked things along by declaring [$] that Labor, if elected, would rewrite the Fair Work Act and guidelines to force the Fair Work Commission to give greater weight to the needs of the low paid when making its annual minimum wage decision, to ensure that 2.3 million workers are paid a “living wage”. Treasurer Josh Frydenberg criticised Labor’s intervention, saying the minimum wage should be left to the commission as the independent industrial umpire. Sally McManus, today launching the ACTU’s minimum-wage submission,...