Wage justice for low-paid workers

March 28, 2009

The federal ALP government, in league with employer organisations and conservative economists, wants workers — in particular the lowest paid and most vulnerable — to pay for the economic downturn.

The latest battle in this war is playing out in the lead-up to the Australian (un)Fair Pay Commission's (AFPC) decision, due in July, on the federal minimum wage.

Prior to 2006, the minimum wage was determined by the Australian Industrial Relations Commission (AIRC), after hearing submissions from all parties.

This changed when the Howard government created the AFPC as part of Work Choices. It was described as an "independent" body and, annually, determined the minimum wage.

But it was staffed by economists whose decision on wage rises were based on their view on how it would impact on the economy.

Draconian measures

Despite "tearing up" Work Choices, Labor has kept the AFPC, along with other draconian measures including restrictions on union's right of entry on to workplaces and secret ballots before industrial action. In 2010, the AFPC will be incorporated into Labor's Fair Work Australia monolith, set to replace the AIRC as a special division.

On March 23, the Australian Council of Trade Unions (ACTU) lodged its submission with the AFPC and launched a campaign for a $21 a week increase in the minimum wage — the same amount as last year. If granted, workers would receive $564 a week, up from $543. This would be a 3.9% increase for those on the lowest wage. In 2008, the increase for the lowest paid was 4%.

However, the majority of workers dependent on the AFPC decision earn slightly more than the absolute minimum. The ACTU submission shows that "92 per cent of minimum wage workers have seen their wages go backwards in real terms over the period June 2005 to October 2008".

An increase in the minimum wage by $21 a week, based on an expected inflation rate of around 2%, would mean the majority of award-only workers would only slightly increase their wage, in real terms, for the first time in four years.

Gillard backs the bosses

The responses from industry associations — particularly the retail industry — have been predictable. Australian Retailers Association executive director Richard Evans said on March 24 that retailers "will shed staff to cope with any increases in labour costs. The ARA has told the [AFPC] the responsible and reasonable approach to safeguarding Australian jobs is to defer any minimum wage increase until economic recovery is evident."

The Australian Chamber of Commerce and Industry CEO Peter Anderson told ABC's Lateline on March 23: "The responsible thing to do in 2009 with the current wage review is to pause, is to recognise this severe economic downturn that Australian industry is facing and to delay making a decision to increase across-the-board wages."

Meanwhile, retail giant Myer posted an increase in profits for the six months ending January 24, thanks to the "Harvey Norman" handouts last December, reported the March 25 Sydney Morning Herald.

While the federal government has argued for a "considered" wage increase for the lowest paid, it has not attached a dollar figure.

Federal treasurer Wayne Swan and deputy PM Julia Gillard, in a joint statement on March 23, said that "an excessive minimum wage increase at this time could have an adverse impact on labour market outcomes, particularly for the low skilled and the low paid".

The government has also asked the AFPC to take into consideration its stimulus package handouts in determining its figure. In other words, before the payments are even determined, let alone made, workers are being told not to expect much, if anything.

Echoing the government on March 23, Australian Industry Group CEO Heather Ridout said, "Jobs need to be the priority and AI Group has strongly argued for the [AFPC] to take a cautious approach this year when considering changes to minimum wages". The AIG asked the AFPC to only give the lowest paid an extra $8 a week.

On March 27, the SMH revealed the AFPC is considering not making a ruling on the minimum wage at all in 2009 and waiting for the establishment of the special department of Fair Work Australia, which will not be in operation until mid-2010.

If the AFPC were to follow through on its threat, this would mean a pay freeze for the lowest paid for two years.

Wages and jobs

The federal government, AFPC commissioner Ian Harper, business groups and pro-business economists insist that increasing the minimum wage will increase unemployment.

This argument, straight out of the conservative economists' handbook, is that minimum-wage workers are unskilled and that increasing their cost to the boss will decrease the demand for their labour, which, in turn, will increase unemployment.

However, there is no agreement among economists; many argue that the already low level of the minimum wage, married with the increasing productivity of labour, means that bosses can absorb increases in the minimum wage without shedding jobs.

Growth in businesses employing large numbers of low-wage workers has also been strong despite increases in the minimum wage over the last few years.

The ACTU argues in its AFPC submission that, "Minimum wages in Australia are not deterring business entry rates into industries in which minimum wage workers are predominantly employed or impacting business survival rates in low-paid industries, when compared to the economy as a whole".

The ACTU submission shows that in many cases "low-paid industries" such as retail, hospitality, health and community services and property business, have had higher start-up and survival rates than other industries.

If the ACTU's request for a paltry $21 a week increase for the lowest paid is granted, some 1.3 million workers will benefit.
While we should support the ACTU's claim against attempts by the government and bosses to freeze wages, we should note that this low amount for the lowest paid workers doesn't come close to delivering wage justice.

As figures provided by the ACTU reveal, the real wages of award workers have slipped far behind those who can collectively bargain with their boss, and this slippage has been going on for years.

Between 1981 and 2007, the minimum wage fell from 80.9% of the average weekly wage to just 56.4%. For real wage justice for low-wage workers, they would have to receive a wage rise of more than $220 a week.

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