Minimum – or is that minimal? – wages

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Tony French

You have to hand it the right wing Institute of Public Affairs (IPA) and their ability to grab a headline, the latest being its call for the abolition of the minimum wage. In case you were unaware, the Fair Work Commission (FWC), responsible for setting the threshold minimum employee wage rate in April, was reviewing what if any increase should be made. Doing away with a minimum rate (and by implication the FWC itself) scored more headline and comment than if the IPA had simply recited, which it then did, that the current rate should be left unchanged.

working at night_opt
working at night, Ciro Cattuto, flickr cc

Of course there will be many submissions to the FWC, from unions, employer groups, welfare organisations and the Churches. In particular, there is a well researched and technical submission from the Australian Catholic Council for Employment Relations (ACCER). These submissions have received minor publicity, since, predictably, they advocate for an increase (modest) in the minimum wage. ACCER, though, seeks a $10-a-week increase for those on awards below the lowest paid to a tradesperson – about $724 a week. Maybe this calculation is too complex for a simple headline grab, so in the meantime the myth continues that the minimum wage will keep you and your family from poverty.

When deciding to grant an increase – or not – to the minimum wage (in April $16.32/hour), the FWC has to consider five criteria. The first is the performance and competitiveness of the national economy; in short, can we afford to pay more to the working poor? Straight out, the IPA argues that any increase will act as a ‘reverse tariff’ (our wages will be even less competitive than those in Asian low-wage countries, as though this is a race to the bottom), and locally poor states (such as Tasmania) will be further disadvantaged if their minimum wage rate is the same as that paid in (more expensive) Sydney. So why not pay the poorly paid in poor Tasmania even more poorly?

ACCER reminds us that the past 10 years have been the most prosperous in Australia’s history, yet this unprecedented rise in prosperity has not lifted the living standards of many full-time low-paid workers and their families. Poverty remains persistent among many working families. You might ask how their financial situations would improve if there were no minimum wage settings. The minimum wage is, well, pretty minimal.

This raises issues of social inclusion and whether inclusion is encouraged or discouraged by a wage increase. The IPA argues social inclusion “is at odds with mandatory minimum wages”, since they discourage employment. Intuitively that sounds illogical. We all know money gives not only power but also opportunity. But what opportunity is there if you can’t afford the $100 to take your family to the movies? On the minimum wage, that’s a day’s labouring. Whether regulated or not, low wages mean little power and little opportunity, and logically lead to inevitable social exclusion. Since you can’t afford to participate, you have been priced out.

Anyway, the IPA considers the term social inclusion “vague”, although it’s abundantly clear when it is absent when there is rioting on the streets and widespread property damage. The old expression ‘the haves and have-nots’ has been forgotten, and the IPA is unaware of Catholic and other Christian social teaching on building social inclusion, the Common Good, and all that – not the Good for a select few.

men at work_opt
hard work 2, inaka de luis

ACCER bluntly says that with poverty there can be no social inclusion; to be poor is to be largely excluded from the monetary benefits enjoyed by most of us. Disturbingly it is low-paid employment which contributes to a great number of people being pushed into poverty, and not just into unemployment.

The FWC has to assess the relative living standards and the needs of the low-paid. Controversially, the IPA says increasing the minimum wage will have no effect on reducing poverty; quite the reverse in fact, as any increase will make them too expensive to employ, and will cost them their jobs. Losing the ‘dignity’ of their labour, they will be pushed into the indignity of unemployment. The IPA’s idea of the dignity of labour is tied to the employer’s right to contract and no government interference in setting wage rates. How very nineteenth century.

I thought I would do a straw poll. I asked several low-paid warehouse workers: if there were to be no minimum wage rate, would their employers take on more employees? Their unanimous answer was “no”. They would be expected to work for less and be grateful. Some were receiving $4 an hour above the minimum rate solely as a result of their union having negotiated an EBA (Enterprise Bargaining Agreement) on their behalf. Yet at $20 an hour (casual), they were still the working poor.

I asked some employers: would they put on more people? At this suggestion, they gave me a strange look. We don’t need more labour, they said. We want fewer people but better skilled, and we are prepared to pay above award rates. They had no intention of soaking up readily available low skilled workers just because they were cheap that day. Anyway, such is the flexibility of today’s workplace (call it casualisation or contracting) that when work warranted additional people they were hired, but not permanently.

And if you neo-liberally thought employer prosperity translates into worker wealth, then think again. ACCER says many workers have in recent years experienced real wage cuts. The minimum wage works out at $785/week, but it costs you $838/week just to get by – a shorthand definition of poverty. Employers have been pocketing the profits, and while productivity has increased the benefits of productivity gains have not so far reached the lowest paid workers. Perhaps they are not very productive? Not so. Safety Net wages have fallen below general wage levels; the poor are not moving into higher paid jobs, but remain in poorly paid ones.

Is that because their jobs are crap anyway? The FWC is required to consider the principle of equal remuneration for work of equal or comparable value. What value do you put on someone poorly paid yet looking after your parent in a nursing home, caring for the disabled, cutting your hair, or this morning’s skinny latte? These people have skills, but we have decreed their jobs as menial, so naturally they are underpaid and vulnerable to exploitation. After all, do you really want to pay more than $3 for a cup of coffee? The IPA submission is silent on the principle of equal remuneration, a matter for the market, it seems.

Finally, the FWC has to consider a fair rate for junior and other employees with a disability. Will the market look after them. And if not, who will? The IPA argues government should not be engaged in setting wage levels, so who looks out for the young and for disabled workers? Why, their warmhearted employers, of course. If the vulnerable want work, then they can expect low wages.

Since 1903 we have had the notion of a ‘living wage’, now mocked by the IPA as the fourth highest in the OECD (comparing it to China and Mexico, mind you), yet if it is so generous, how has it failed to prevent glaring growing wage inequality in spite of tax cuts and other government family payments? One in six workers now relies on the minimum wage since they are either un-unionised or in a bad bargaining position. There is poverty in the Lucky Country.

This is a continuing source of frustration for those trying to assist the poor, such as St Vincent de Paul. The answer to poverty is more than (an inadequate) minimum wage setting. The IPA is right to say upping the minimum rate will not eradicate poverty, since we will not increase the rate sufficient to permit an adequate standard of living. Rather, we relish the idea of keeping them working and poor. The ‘minimal’ wage is inadequate, and only marginally better than Newstart, aka poverty.

The result is a growing permanent underclass of employees, just like in the USA. The free market cannot eliminate poverty, and to be fair is not designed to. But it is very effective in entrenching the divide between those doing okay and those struggling to survive.

Is this the growing and hardening social divide we want in Australia? Of course not. And ACCER’s recent publication, Working Australia, 2014, wages, families, & poverty is a well researched, non-polemical warning about where this country is heading; this is accurate social science, and not superficial sloganising. It deserves wide exposure, light of day.



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