James Pearson, chief executive of the Australian Chamber of Commerce and Industry (ACCI), has penned an article demanding the Fair Work Commission (FWC) reject the ACTU’s push for the minimum wage to be increased by $45 a week, claiming that Australia already boasts one of the highest minimum wage rates in the world and that increasing it too much will deter businesses from hiring additional staff. From The Canberra Times:
Australia has high wages and high living standards. Our minimum wage is one of the highest in the world. To sustain these wages we need many people in jobs and a strong economy, otherwise we will have greater inequality and welfare dependency and risk more social dysfunction.
The people struggling most to secure work are young and first-time job seekers, those with low skill levels and the long-term unemployed.
These vulnerable groups are most harmed by inflated minimum wage increases, such as the extraordinary $45 ambit claim made by the ACTU…
Minimum wages are a safety net. If we make it too expensive to employ people, we will take away the primary pathway to social inclusion for vulnerable people…
The longer a person is unemployed, the more likely they are to remain so. We must not set minimum wages at levels that make it prohibitive for employers to create jobs and offer additional work…
Businesses create jobs, wealth and revenue. Without employment opportunities in business, Australians’ living standards would drop…
Australia does not have to choose between lower-paid wage earners, jobs and SME viability – we can achieve a balance that is good for everyone. That is what the Australian Chamber of Commerce and Industry has done with our proposal for a 1.2 per cent increase in minimum award wages.
I agree with James Pearson that the ACTU’s $45 a week demand is excessive at roughly four times the inflation rate. But then again, so too is the ACCI’s, who wants an increase of just 1.2%, which is well below the rate of inflation (i.e. 2.1%), and would represent a real wages cut. This is especially so given it would come on top of the recent 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:
And this comes despite rising labour productivity:
The FWC needs to strike a fair balance that provides a decent, but not excessive, real lift in the minimum wage.
