The Do-nothing Malcolm government today continues on its mission of low wages harakiri:
The Turnbull government has urged the Fair Work Commission to take a cautious approach to raising the minimum wage, warning an “excessive” pay rise could imperil job creation in a changing economy.
In its submission to the commission’s annual wage review process, the government said increasing the minimum wage was “not an efficient way to address relative living standards or the needs of the low-paid”.
Around 196,300 – or 1.9 per cent of employees as of May 2016 – are paid the national minimum wage rate of $17.70 per hour.
In a contribution that will incense low-paid workers still angry over the commission’s cut to some Sunday penalty rates – a decision Prime Minister Malcolm Turnbull has backed – the Coalition said low-paid workers “are often found in high-income households”.
That’s the dumbest line in Australian politics in recent times. Specufestor Cash took an absolute a hiding on the radio.
Giving Labor a fabulous free kick, from the AFR:
Labor Leader Bill Shorten said he was “gobsmacked” at the government’s “disgraceful” submission.
“They are turning their backs on Australia’s lowest paid workers,” he said.
University of Canberra labour economist Phil Lewis said the increase sought by the Australian Council of Trade Unions was close to 7 per cent, which was “massive” given low rates of inflation.
“The unemployed can’t find a job even at the current minimum wage so increasing that minimum wage simply further blocks their entry into the labour market,” he said.
Coming on top of the recent penalty rates scandal this is appallingly inept stuff. As we know, wages are already in the gutter:
Australian workers’ share of Australia’s Total Factor Income (TFI) has been falling for decades, whereas business’ profits share has been increasing:
In 1974, the share of TFI taken by wages was 62%, whereas as at December 2016 it had fallen to just 53% – a 9% decline. By contrast, the share of TFI taken by profits was 17% in 1974, whereas as at December 2016 it had risen to 26% – a 9% increase.
Moreover, the fall in workers’ share of TFI has nothing to do with productivity. As shown in the next chart, Australian labour productivity (real GDP per hour worked) has risen by just under 80% since 1978, whereas real average compensation per employee has risen by just 28% over the same period:
The problem is in capital efficiency, or lack thereof, as it is mis-allocated en masse into house prices, dud mines, dud LNG exporters, dud power grids, dud bloody everything.
The bottom line is this. It is quite possible and reasonable to make an argument, I’ve made it, that wages discipline is needed to improve Australian competitiveness post-mining boom. We need a real exchange rate adjustment to restore tradable industries and investment.
But to make this process politically viable, a sensible government will define it as a national project in which the burden of adjustment is shared. Wage discipline would be undertaken by everyone, from the top to the bottom, and a good government would take a pay cut to lead by example. Reform would be deployed to boost productivity.
What we have instead is a mad immigration program designed to smash worker pricing power (making houses and land impossible to afford and reversing the real exchange rate adjustment) and a bald-faced class war from the Do-nothing Government and its Business Council allies on the low paid while we get no reform.
They deserve every bit of the political backlash that they are handing themselves.
