Be prepared for something “reckless and dangerous.”
That’s what former Prime Minister Scott Morrison said would be Prime Minister Anthony Albanese if he asked the Fair Labor Commission to grant a salary increase large enough to cover inflation. It would turn Albanese into a “loose unit” of the economy.
However, Albanese and its labor relations spokesman Tony Burke are preparing to do so before the commission’s deadline of June 7, in time for the increase to take effect on July 1.
The increase would amount to $ 1 an hour, raising Australia’s minimum wage from $ 20.33 an hour to $ 21.36. New Zealand has just raised its low from NZ $ 20.00 to NZ $ 21.20.
New Prime Minister Anthony Albanese plans to ask the Fair Labor Commission to grant a salary increase large enough to cover inflation. (ABC News: Matt Roberts)
Despite what Morrison and his team said in the campaign about previous governments that avoided recommending specific recommendations, Morrison’s predecessors Fraser, Hawke, and Howard did so for years, and state governments are still doing so.
In March, when Australia’s official inflation rate was 3.5%, before rising to 5.1%, Victoria recommended 3.5%.
And the government of which Morrison was a part did not shy away from telling employers what to pay.
In 2014, his Employment Minister, Eric Abetz, advised employers “on their knees” not to “give in” to union demands, causing a “wage explosion”.
Of course, there is no guarantee that the Fair Work Commission will heed the new government’s push to raise $ 1 an hour.
The commission is perfectly capable of determining what salary increase should be granted, after taking into account all submissions. In all the last 10 years minus one, it has conceded more than the inflation rate in force at that time.
It remains to be seen if he will do it again next month. But to anticipate this announcement, this is how the commission explained its thinking in its most recent decision in June last year.
Most workers are not in premiums
When deciding on an increase in the minimum wage, what matters most to the commission is the ability of employers to pay (the share of the profits of the national income had increased for five years in which the share of the wage had reduced) and the standard of living of the lowest paid in Australia.
Only 2 percent of lower-wage workers receive the national minimum wage, and an additional 23 percent get the minimum award rates that the commission adjusts at the same time.
Last year, the commission found that some low-wage households had disposable incomes below the poverty line and were reluctant to see them fall even further.
He was also reluctant to grant a flat dollar hike that would boost the position of low-skilled workers relative to higher hikes, saying past flat dollar hikes “compressed the relativity of premiums and reduced earnings from the acquisition of abilities”.
A percentage instead of a flat increase would especially benefit women, as at higher levels women were “substantially more likely than men to receive the minimum award rate” and less likely to be paid by contract. or business negotiation.
In deciding what percentage increase should be allocated, it gave considerable weight to the most recent increase in the consumer price index (CPI). Right now, that’s 5.1 percent.
The Commission rejected the suggestions, again proposed in the context of the latest 5.1% increase in the CPI, to use the separately calculated “employee cost of living” index. located at 3.8%.
The index of the cost of living of employees has risen less than the CPI because it includes mortgage rates, which have been falling, while the CPI has not.
Those with low incomes are not borrowers
The commission noted that low-wage workers were less likely to own a home than higher-paid workers, making the CPI a better measure for them.
But it is not a perfect measure. The Australian Bureau of Statistics has begun dividing the CPI into “discretionary” (non-essential) purchases and other essential purchases.
The commission says low-income households spend more of their income on commodities than higher-income households, making “non-discretionary” inflation especially relevant. Non-discretionary inflation stands at 6.6%.
The commission rejected suggestions that the proposed increase could leave Australians unemployed or make it difficult for young Australians to find work.
Which is not to say that this cannot happen. During the 1970s and 1980s, high wage growth fueled both high inflation and high unemployment, the so-called stagflation.
Wages are not destroying jobs
But in the 1970s and 1980s, wages were rising faster than the combination of price growth and productivity growth, making it difficult for employers to pay the increases. Lately, the share of the profits of the national income has been increasing instead of falling, giving to the employers an increasing capacity of payment.
And while then most workers were paid through the premiums set by the commission, today most are paid through business-to-business negotiated business agreements, meaning premium increases only flow to workers with agreements to the extent that they and employers can agree. about them.
And what the government is proposing is not a noticeably higher-than-inflation rate that fueled stagnation during the 1970s and early 1980s, but an increase in line with prices, even though employers could pay more.
If what the government proposes seems reckless or dangerous to the commission, it will reject it. The increases it has granted so far have not added to unemployment or (especially) to overall wage growth.
Low profits versus homeowners
No doubt the commission will reject any suggestion that ignores the forthcoming increase in compulsory retirement contributions, due to the rise in employer contributions from 10% of salary to 10.5% in July.
Contributions are a cost to employers and a benefit to employees. He has taken them into account in the past.
And it should reject, as disgusting, Morrison’s suggestion that it should curb wage increases for Australia’s lowest payers so that homeowners can continue to enjoy historically unprecedented low mortgage rates.
The owners, almost all of them, are much better than the lowest paid in Australia.
Peter Martin is a Visiting Professor at the Crawford School of Public Policy, Australian National University. This article originally appeared in The Conversation.