Two-tier minimum pay rise flagged by Fair Work

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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.

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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”.

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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:

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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.

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

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.