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Making the case for a living wage

The Fair Work Commission has made headlines for all the wrong reasons lately, from the Morrison Government’s decision to appoint a controversial former Liberal MP to the Commission, or a senior official’s office display of scantily-clad female figurines being labelled a “psychological hazard” by the Commonwealth work, health and safety authority

Behind this, the industrial umpire is still going about its business, making decisions with huge ramifications for Australian workers. For the one in five Australian workers who receive the minimum wage or an award, and almost half of casual employees who rely on FWC’s annual National Minimum Wage Review for any pay rise, its upcoming decision could mean the difference between a wage you can live on, and in-work poverty.

Australian Unions is arguing for a 3.5 per cent increase to the minimum wage and awards—that’s $26.38 per week, for a full-time minimum wage worker.

In the scheme of things, it’s not that big an ask. The Reserve Bank of Australia has repeatedly said that wage increases of three per cent or more are necessary to maintain inflation at a sustainable rate.

Historically, a 3.5 per cent yearly increase is also pretty standard. In the past, Australians took pride in our high minimum wage, understanding that it supported a standard of living among the best in the world. But in the past 20 years, we’ve seen the minimum wage decline as a percentage of the median, full-time adult wage, from 57.6 per cent to 52 per cent today. In 2020, during the Covid-19 pandemic, the differential between wages and profits blew out, with total compensation of employees in real terms rising 1.1 per cent compared with profit growth of 8.9 per cent.

These sorts of changes look small on paper, and the Morrison Government’s submission to the FWC review makes a big deal out of the stability of the “minimum wage bite” in the past 12 years. But they’re big in practice.

More Australians, particularly low paid Australians, were experiencing financial stress well before the Covid-19 pandemic. This means growing numbers who cannot pay electricity, gas, or telephone bills, who are late paying mortgages or rents, who are forced to sell or pawn their possessions for extra income, who seek help from their families, or go without meals. In June 2020 ABS figures showed more than a third of households relying on employee income were experiencing financial stress. This could get worse. We are now being warned that prices for petrol and groceries are set to rise in the coming months (thanks, in part, to the labour shortage in the agricultural industry—something, once again, the Morrison Government has failed to relieve).

When living conditions for vast numbers in Australia are not just bad, but going backwards, there’s something seriously wrong. Minimum wage increases—substantial ones—are part of the solution.

Other governments can see this. At the end of March, New Zealand increased its minimum wage, at the same time increasing its top tax rate for the country’s highest incomes. A conservative government in the UK introduced a ‘living wage’ in 2016. In the USA, the Biden administration is fighting to double the federal minimum wage from $7.25 to $15 an hour, a measure that would lift almost one million people out of poverty, according to estimates.

Our Government, meanwhile, has urged the FWC to take a “cautious approach”, claiming that excessive increases to the minimum wage could harm small businesses and curtail job creation.

Economists and commentators are already dismantling the arguments of Morrison & co. In The Guardian, Alison Pennington writes that the beneficiaries of wage suppression are big market players, while small businesses will suffer from a lack of consumer spending. In The New Daily, Michael Pascoe dug in to the detail of the Government’s submission to the FWC, finding that despite its assertions, last year’s small increase in the minimum wage produced no increase in disposable income. In short, the Morrison Government’s “cautious approach” makes no economic sense.

An increase to the minimum wage—a real, meaningful, 3.5 per cent increase—on the other hand, makes plenty of sense. It’s good economics. It’s also the right thing to do.

It’s time for a living wage

Date Published: 09/04/2021 Category: Minimum wage Opinion Working life

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