Remember late last month when the Turnbull Government committed low wages harakiri by warning the Fair Work Commission against a significant rise in the minimum wage, warning that an “excessive” pay rise could imperil job creation and making the idiotic comment that low-paid workers “are often found in high-income households”?
Well it seems that even the Coalition’s own voters believe that Australia’s minimum wage is too low. From The Age:
Nearly 70 per cent of Australians believe the minimum wage is too low, including a strong majority of Coalition voters, a new poll has found.
Only one in five Australians believe the $17.70 an hour minimum wage is “about right” and just four per cent of people think it is too high, according to the polling commissioned by the peak union body, the ACTU.
Conducted last week, the Essential Research online poll of 1015 people found 69 per cent of Australians want a higher minimum wage, with 33 per cent of those respondents saying it should be “much higher”. Nearly 60 per cent of Liberal National voters believe it should be higher, as do 77 per cent of Labor voters.
The ACTU has asked the workplace relations umpire to raise the minimum wage by $45 a week, triple the 2016 $15.80 increase. Such an increase would lift the minimum wage to $37,420 a year.
However many in the business community have asked for a below-inflation increase…
To be fair, I am always skeptical of polling that has been commissioned by a vested interest (in this case the ACTU). But gee whiz, that’s a massive margin of voters supporting a higher minimum wage.
My own view is that the ACTU’s $45 a week demand is too excessive at roughly four times the inflation rate. But then again, so too is the business lobby’s, who wants an increase below the rate of inflation (i.e. a real wages cut). This is especially so given it would come on top of the cut to Sunday penalty rates.
A decent minimum wage is essential for Australia to maintain a civilised society. I suspect few Australians would like to see Australia become like the United States, whose minimum wage is amongst the lowest in the world and where the percentage of low paid workers (i.e. earning less than two-thirds median incomes) is the highest in the OECD. Nor would we like to see the development of large groups of working poor heavily reliant on food stamps and the not-for-profit sector.
It’s not like Australian workers are taking an excessive share of the nation’s production.
Growth in employee compensation has fallen to the lowest level on record:
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:
Besides, if high wages are such a big issue, then restraint must be shown by all and sundry – not just the poorest 20% of the population living on the minimum wage. Executives, politicians, and other elites must also take a haircut and lead by example. After all, where’s the outrage over CEO pay or our many politicians with their faces in the trough?
We should not lose sight that Australia’s minimum wage safety net is a key piece of Australia’s social fabric, and that any adjustment must be carried equitably across income groups, not just by the poor.
The last thing we want to see is an American situation develop in Australia, whereby so much wealth and income is concentrated in the top 1% that there is a persistent demand deficit for the very products that the wealthy produce.
In any event, the minimum wage is a peripheral issue affecting Australia’s competitiveness and job creation. The broader problem in Australia’s case is that our non-mining economy has become uncompetitive, adversely impacted by a wide array of factors from the high Australian dollar, inflated land prices, and overly concentrated market structures.
In other words, 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, pretty much dud everything.
If the Turnbull Government was wise (which it isn’t), it would turn to fixing these fundamental issues – i.e. improving Australian competitiveness post-mining boom – rather than kicking the poor.
A wise government would define competitiveness 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, with politicians taking a pay cut to lead by example. The federal government’s mad immigration program, which is designed to smash worker pricing power (in turn making houses and land impossible to afford, reversing the real exchange rate adjustment, and crush-loading infrastructure), would also be abandoned.
Now watch as the Do-Nothing Turnbull Government does the opposite, panders to its big business rent-seeking mates, and commits low wages electoral suicide.
