Unfair Pay Commissioner cuts real wages

July 14, 2009

July 7 proved to be an excellent day for the Australian business community. Citing the economic downturn as a key factor in his decision, Fair Pay Commissioner Ian Harper announced that there will be no increase the minimum wage.

The minimum wage is currently set at $543.78 a week before tax. Omitting the impact of inflation and rise in living costs, the "wage freeze" imposed by Harper amounts to a pay cut in real terms for workers. The decision affects an estimated 1.3 million low-paid workers who are concentrated in the female-dominated manufacturing, hospitality, cleaning and community sectors.

In his speech, Harper said that his decision not to increase the minimum wage was offset by the significant benefits the federal government's recent economic stimulus packages delivered to low-paid households. He also suggested that higher wages could pose a threat to jobs for people in low-paid work.

"Our concern is that a blanket increase in minimum wages, while affordable to some businesses, may not be sustainable for all businesses and will therefore result in lower employment and even in some business closures", he said.

The Australian Fair Pay Commission (AFPC) goes even further and warns in its executive summary that potential job losses due to bosses' inability to pay higher wages would lead to significant lower living standards for workers. So there you have it.

Harper argues that workers should bear the brunt of the economic crisis they didn't create. A businessman himself, Harper earned a hefty $124,990 in his part-time position as the Fair Pay Commissioner, according to the July 8 Australian. He was appointed by the previous Howard government in 2005 as inaugural chair of the AFPC, a supposedly independent statutory body that determines the minimum wage on an annual basis.

The AFPC was created as part of Howard government's Work Choices industrial relations laws. The main consideration in the commission's decisions on minimum wages has been the impact on corporate profits. Prior to Work Choices, the minimum wage was set by the Australian Industrial Relations Commission (AIRC).

In 2010, the AFPC will be incorporated into Labor's Fair Work Australia (FWA) industrial relations regime.

The decision to delay an increase in the minimum wage should not come as a surprise. Since the economic crisis hit, Australian employers have been pushing for wage restraint and the need to delay wage increases across the board until economic recovery is on the way. The federal government consistently lined up with business in opposing decent wage claims for the sake of the economy and instructed Harper to include the economic handouts and tax cuts in his deliberations on a final figure.

The stimulus packages delivered a couple of one-off cash payments to most working people but the real beneficiaries of the February 13 $42 billion stimulus package will be private developers.

In its submission to the AFPC, the federal government did not advocate an increase in dollar terms but warned that "a higher minimum wage increase is likely to encourage higher wage claims and outcomes in workplace bargaining negotiations, and hence flow-on to a greater number of employees".

The Federal government is referring to a number of large certified agreements due to expire in 2009 in car manufacturing, construction and the retail sector. It is highly likely that a decent minimum wage increase would also incease the bargaining power of these workers and lead to a better wage outcome.

While feigning disappointment at the commissioner's decision, depute PM Julia Gillard said she would accept the outcome and emphasised that the federal government "fundamentally believes that minimum wages should be set by an independent umpire, and the independent umpire, today, has spoken".

Australian Congress of Trade Unions (ACTU) president Sharan Burrow said at a July 7 media conference that the decision was appalling and would only serve to further entrench inequality in Australia. She also rejected the claim that the wage increase delay was good for the economy, because lower wages meant lower purchasing power.

Burrow also said that the ACTU was not able to do anything about the decision and ruled out industrial action. She also claimed that AFPC replacement in 2010 within FWA would deliver a truly independent body even though no information was yet available on its exact brief or who will sit on the board.

Loy and Beverly, two factory workers, told the same media conference that they were shocked at the announcement because they were barely able make ends meet now, with take home pay of only $480 a week. Another worker told Green Left Weekly that it was not uncommon for some workers to earn $12.00 an hour, which is below award rates, bringing them close to the poverty line.

The poverty line for a single person is calculated to be $391.85 a week for the March 2009 quarter.

Industry groups are gloating. Despite initially advocating a completely token increase of $8.00 a week (well below the ACTU's $21.00), Australian Industry Group CEO Heather Ridout called the decision understandable in the current economic climate, according to the July 8 Australian. A Westpac economist told the July Age announced that the AFPC decision would reduce wages across the economy by 0.5% over the next financial year, delivering a windfall for business.

The ACTU's call for a $21-a-week pay rise would have only amounted to a 3.9% increase for those on the lowest wage, compared to 4% in 2008, but was dismissed as excessive. According to the ACTU submission, "92 per cent of minimum wage workers have seen their wages go backwards in real terms over the period June 2005 to October 2008". Had the $21 been granted, the majority of award-only workers would increase their wage in real terms for the first time in four years, but only slightly.

Harper's decision will have negative repercussions way beyond the 1.3 million workers on the minimum award wages. Bosses see the attack on the lowest paid as a positive signal, hoping it will put on the brakes on upcoming wage claims and Enterprise Bargaining Agreements across all industries. With Gillard's tacit acceptance of the outcome and no action proposed by the ACTU, unions will have to go on the political and industrial offensive in their campaigns to secure the pay increases workers need and deserve.

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