Two-tier minimum pay rise flagged by Fair Work

With real Australian wages falling to December 2014 levels amid the spike in inflation:

Australian real wage rises

The Fair Work Commission (FWC) has flagged the possibility of awarding a larger increase in the minimum wage for the lowest-paid workers and a smaller rise for people on higher minimum award rates:

At a minimum wage hearing on Wednesday, Fair Work commissioner Peter Hampton, who is part of an expert wage panel deciding this year’s increase, highlighted employer concerns a large wage rise would contribute to the wage-price cycle and further inflation.

He asked employers about the idea of the commission awarding a flat dollar increase rather than a percentage, meaning higher-earners would not get as proportionally high a pay rise.

“One variation might be… a relatively large increase at the bottom while moderating the impact more generally [for those on higher minimum award rates],” he said.

Australian Industry Group (AIG) workplace policy director, Stephen Smith, said “we’re comfortable with 2.5 per cent for the lower levels”, meaning AIG supports significant real wage cuts.

Australian Chamber of Commerce and Industry (ACCI) workplace director, Stephen Barklamb, claimed a 3% was “reasonable and pragmatic”, meaning it also supports significant real wage cuts.

By contrast, ACTU legal and industrial director, Trevor Clarke, argued that shifting the burden of rising business costs to workers would be “the antithesis of fairness”.

Let’s get back to basics here. Profits have boomed over the pandemic, leaving workers in their dust:

Workers vs bosses

And this has driven wages’ share of national income to around its lowest level on record:

Wages share of national income

As noted by former ACCC head Rod Sims this week, the stronger market power of companies has contributed to both higher prices for consumers (i.e. inflation) and lower wages for workers.

Thus, the business lobby is talking its own book in claiming that wage increases in line with CPI would cause a wage-price spiral, when in fact it is price gouging by businesses that are the bigger driver.

The FWC should not fall for the business lobby’s propaganda.

Unconventional Economist

Comments

  1. I wonder if the low unemployment rate is being caused in part by the falling real min wage — because when there’s high inflation and the nominal min wage stays the same, it’s exactly the same as the min wage being cut, which means it’s legal to hire low-end workers for cheaper, and employees that weren’t viable before may become viable, reducing unemployment.

  2. Yes but the minimum wage earners of today don’t have 17% interest rates to contend with!

    • SharmanMEMBER

      John people on minimum wage can’t even afford astronomical rent prices let alone even dream about buying a house????

  3. I can only talk about my experiences on an EBA and what I hear of EBSs in the mining sector, but EP would have a better idea about their clauses.

    The EBA I was under until I retired early this year had a CPI clause in it and no mention of “underlying CPI”. History in that argument would support the view that the headline CPI was the one! So, regardless of the FWA outcome my former work colleagues will be getting a 5% pay rise.

    For those under an EBA without a CPI clause I would have though they will get nothing until their EBA is up for negotiation, though, my understanding is most EBAs have a CPI clause, however, I may be wrong.

    To the last part, if the min wage gets a boost there is a flow on effect to award rates, but if you look at mining and construction no one is really on an award, they’re on EBAs and their rates are way above award rates, and afaik they have no follow on from min wage rises as I doubt anyone would have ever expected this present situation to have come about as it has. CPIs have been around 2% since forever, and “our” EBA has been under negotiation for over 2 yrs! Ah, there is a possible out for my ex employer, not sure what the story is on CPI increases outside of the EBA period, I do understand that backpay isn’t guaranteed for the between period, but in the past it has always occurred.

    So I think the whole flow-on argument may have be exaggerated or deliberately up played.

    I’m appreciate it if anyone has a better understanding or experience on this.