In a recent trip to a favourite café for lunch I noticed that the price of a Mexican focaccia had increased from $9.00 to $9.90 - an increase of a neat 10%.
I took particular interest in this change because that morning I had read a number of newspaper and internet reports of employers bemoaning the fact that there had been an increase in Australia’s minimum wage.
The national minimum wage is the legal minimum that must be paid to an adult fulltime employee who is not covered by an award or enterprise agreement. While those on the minimum wage tend to be largely invisible workers, they are many in number, with around 66,000 workers identifying as minimum wage employees in 2016.
Furthermore, today there are still nearly three million Australian workers reliant on awards which provide for minimum wage rates and basic employment conditions. And despite the media hype most people dependent on minimum wages do not fit the low wage stereotype of a teenager with casual employment in their local supermarket.
Many are adults with dependent children who work on a full time basis. It is estimated that around 57% of women workers are reliant upon, and receiving, the minimum wage across a number of industries.
Under the Fair Work Act our national tribunal must review the minimum wage annually. On 6 June 2017 the tribunal ordered a 3.3% increase in the minimum wage which is equal to 0.59 cents extra per hour or $22.20 extra per week. In addition the tribunal ordered that all award weekly rates of pay increase by the 3.3%.
In making the decision to lift minimum wages the Fair Work Commission observed that with low inflation, low employment, high productivity and strong company profits the Australian economy could well absorb an increase for low paid workers slightly above inflation.
The tribunal president, Iain Ross, said the gradual improvement in the Australian economy meant the commission had an opportunity to “improve the relative living standards of the low paid”. He acknowledged the increase would not lift all employees on the minimum wage out of poverty, particularly single parents with children, but stated the increase “means an improvement in the real wages for those employees who are reliant on the minimum wage and an improvement in their relative living standards.”
For its part employer groups were pushing for ‘caution and restraint’ advocating for a much smaller increase of between 21 and 26 cents per hour. Their savage response to the announcement of a 3.3% increase was not unexpected, claiming it would restrict jobs growth, particularly for the young and would increase costs for consumers.
And the evidence to back up these claims? Well, none. In fact there has been lack of evidence to support the argument that small increases in wages for low paid workers have any detrimental impact on the economy.
The opponents of increases to minimum wages fundamentally pursue shallow and often self-serving arguments designed to benefit the well off in our communities. However anyone who has walked into a supermarket, is renting a house, or has recently paid an electricity or gas bill knows that it would be very difficult to live on around $18 per hour as a single person, never mind for someone who is trying to support a family.
The argument that raising minimum wages depresses jobs growth, while basically disproved, simply misses the point. While being unemployed is a difficult economic condition, the whole purpose of a job is for a person to earn enough money to be able to survive in a decent manner. Or, as described by High Court Justice, Henry Higgins in 1904, ‘minimum wages must have as its starting point the cost of living as a civilised being’.
Jobs that do not do that are probably better than nothing, but fall well short of meeting the needs of most people. Arguing against raising minimum wages because it may limit the creation of jobs (ie. jobs that do not pay enough for people to survive) is harsh because it essentially advocates for a greater number of jobs at wage levels that are too low.
There are also sound economic arguments to increase minimum wages where possible. For instance even if a change in the minimum wage did indeed have a marginal negative effect on employment it is worth noting that low income earners spend most if not all of their income.
To get an economic benefit, spending power has to be in the hands of those who actually spend in the real economy; that means regular people, not the wealthy who tend to hoard wealth. Therefore minimum wages along with penalty rates, earned by those on minimum wages and other low paid workers, are effectively returned to the local economy, which in turn increases employer profits and creates employment. And, as a rule, wage earners not only rely less on social security benefits, through their taxes they contribute to the support of others.
The bottom line is that if workers’ real earnings fall because they do not keep pace with inflation, then they have less to spend. When people spend less, demand for goods and services falls, and in turn so does the demand for jobs. This is why those that campaign for minimal or no wage increases for low paid workers are pursuing a policy that will not create jobs, rather it will only reduce living standards for those who can least afford it.
Senior Federal Industrial Officer