The illusory wage rise

November 3, 2006

In its first national minimum wage decision on October 26, the Australian Fair Pay Commission (AFPC) handed down an increase of $27.36 for workers earning under $700 per week and $22.04 for those earning more than $700 covered by awards.

The rise represents an increase of 5.6% for workers on the minimum wage of $484.40. It is just under the rate of inflation over the last 18 months since the Australian Industrial Relations Commission (AIRC) brought down its final national wage case decision.

The AFPC's decision was welcomed by the Australian Council of Trade Unions, which had called for a rise of $30 minimum. ACTU secretary Greg Combet said it represented "a slap in the face for the Howard government and business groups like the ACCI [Australian Chamber of Commerce and Industry] who have tried to argue for lower pay rises for award wage workers".

Cynically, the federal government also welcomed the AFPC's decision, with PM John Howard and IR minister Kevin Andrews claiming it disproves the ACTU's claim that the commission was designed to lower wages.

In its submission to the commission, the federal government had argued that every 10 cents-per-hour increase in the minimum wage would cost 32,800 jobs. In its 1996 and 2005 submissions to the AIRC national wage cases, it had argued that increases in the minimum would cause a rise in unemployment by pricing low-paid workers out of the market. At the AIRC's final wage case in 2005, the Howard government argued for an increase of just $10 in the minimum wage; the AIRC granted an increase of $17.

Howard's new-found "concern" for the wages of the low-paid comes as polls, commissioned by the ACTU, suggest that 66% of workers who supported the Coalition in the 2004 federal election were considering voting against it at the next election as a result of Work Choices. Desperate to play down the negative impact of Work Choices on job security and wages, Howard seized on the AFPC's ruling as "evidence" that Work Choices would be good for workers.

But many families on low wages will receive a pittance from the increase as much of it is lost to tax or falling social security payments. The Age on October 30 published research it had commissioned that showed that single-income, two-parent families with two children and one parent on the minimum wage would lose $9 of the $27 increase in tax, and a further $13 per week would be lost in lower welfare benefits. They would end up being only $5 per week better off. The equation was better for single people, dual-income families and single parents.

The argument that the wage increase covers the rise in prices over the last 18 months is also misleading. "The official inflation rate doesn't accurately reflect the increases in the cost of living", Sue Bolton, Socialist Alliance trade union spokesperson told Green Left Weekly. "Workers can't avoid shelling out on items that have incurred the biggest cost rises this year such as petrol, mortgage payments, medical services, home repairs and fruit and vegetables. The price drops being talked about have mostly been for luxury items."

Since 1996, prices for TVs and computers have fallen 68%, small electronic goods 14%, and motor vehicles 19%. However, during the past decade fruit has increased by 11%, vegetables 70%, health care 50%, public transport 49%, bread 48% and child care 91%. These items have all risen more quickly than the overall rate of inflation.

"The ACTU's submission for a $30 increase was just too low", Bolton continued. "And even if it had been granted, it wouldn't have made up for all the extra costs working people have had to contend with over the last 18 months."

John Robertson, Unions NSW secretary, described the increase as a "pre-election pay-rise" designed to "pull wool over the eyes of ordinary hardworking Australians". "While the employers will mock outrage, the reality is they are the winners from ... [the wage] decision and from the ... existence of a government-appointed body with a narrow ideological brief", he said.

Bolton agreed. "The supposedly independent Unfair Pay Commission would have noticed the unpopularity of Howard's IR laws, and included the looming election in its calculations. We'll have a better idea of its attitude to pay rises for minimum-wage workers after the federal elections."

"Before the ALP-ACTU-negotiated Prices and Incomes Accord in 1983 workers in industrially weaker positions received flow-on wage increases from the wage rises won by the better organised", Bolton explained. "A return to the old Industrial Relations Commission setting the minimum wage will not guarantee low-paid workers a better deal. The only solution is for the union movement to take up the fight for a larger share of the economic cake for all workers", she concluded.

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