Now that the miracle economy – remember that? – has vanished, old problems are returning that we thought had been left in the 1980s.

In particular, the link between wage growth and inflation. For the past decade, no-one has had to worry too much about the inflationary impact of wage rises. The issue was more a contest between labour and capital over profit share and, in the last few years, the growing dearth of skilled labour.

Now we’re all fixated on preventing a wage-price spiral and the need for restraint. It’s a change Malcolm Turnbull tried to exploit in Question Time this week when he asked the Prime Minister about the Fair Pay Commission’s forthcoming determination for low-paid workers.

Restraint, like public transport, is one of those things that people think is fine for everyone else but themselves. It’s OK to single out executive salaries – even laissez faire liberals can be found whingeing about top-end remuneration packages. But politicians dislike being seen to object to pay rises for anyone else, especially low-income earners.

Back in the 1970s and early 1980s – the years of union agitation that formed John Howard’s implacable hatred of organised labour – the Coalition blamed Australia’s economic woes on union demands for wage rises. It was critical to keep wages low for Australia to prosper, they argued.

But when the Accord actually did minimise real wage increases in the 1980s, the Coalition switched strategies. Increasingly, especially when Howard was leader, they insisted that Labor was depriving workers of real wage rises, and that only labour market deregulation would deliver prosperity. It was goalpost-shifting of the highest order, although it didn’t prevent the Coalition from opposing wage rises granted by the Industrial Relations Commission.

The hypocrisy was repeated under WorkChoices, a package designed with the sole intent of enabling employers to reduce or more easily restrain wages and conditions, but which was being sold as late as September last year by Joe Hockey as leading to “real wage rises”.

Labor was able to address the wage-inflation dilemma in the 1980s through the “social wage” trade-offs of the Accord, minimising wage increases while providing tax cuts, programs like Medicare and superannuation. Now, with deregulation having removed the possibility of any similar mechanism, it’s in the same position as the Coalition, trying to look in favour of pay rises for low-income earners while being tough on inflation.

Rudd’s rhetoric about executive remuneration in Question Time yesterday can’t hide the dilemma. And fact that the Julia Gillard has admitted that the Government will – like its predecessor – decline to nominate a specific figure in its submission to the Commission is a dead giveaway. Instead, the submission is likely to be heavy on weasel words like “appropriate” and “measured”.

Malcolm Turnbull is happily bagging the Government over its lack of compassion, but he too is strangely silent on what sort of pay rise the Coalition would like to see for the low-paid.

But the Accord still provides a model for how to handle the dilemma. It’s only in recent weeks that the Government has started to emphasise that tax cuts will deliver a bonus for all workers that will partially offset the rise in the cost of living.

It might also start emphasising to the unions that its IR reforms will deliver a degree of greater job and wage security, even if they haven’t fully restored the pre-WorkChoices environment.

For most middle- and high-income earners, it may not matter a great deal, but for low-paid employees, who were the ones most likely to suffer under WorkChoices, it’s a significant gain.

Peter Fray

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