Something peculiar happened yesterday after the Fair Pay Commission handed down its decision yesterday to award a $21.66 a week pay rise for workers on minimum wage levels.
Julie Bishop said she thought it was OK.
Employer groups were howling. But Ms Bishop declared that the decision “appears to strike a sensible balance for Australia’s lowest paid workers, taking into account the cost of living, inflation and employment conditions.”
Julie Bishop must know something The Australian doesn’t. The Oz’s coverage emphasised inflation risks and the effect on the unemployed. Brad Norington wondered if Fair Pay Commissioner Ian Harper was influenced by politics. Norington correctly noted that for a “lackey of business”, Ian Harper hadn’t done a particularly good job. When established by the Howard Government, the Fair Pay Commission was savaged by the labour movement and the ALP as a tool of wage suppression under Workchoices. And yet here it is handing out 4+% increases.
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The AFR, too, predictably took the employers’ line.
The reactions of the Oz and the AFR could’ve been written in 1978. It betrays the same sort of thinking that has dominated our approach to minimum wage policy for a generation. Wages need to be kept low to keep unemployment down. Wage increases cost jobs. Unions have never found a counter to this argument, particularly when inflation was low.
Maybe the Fair Pay Commission, which emphasised that its decision would have only a marginal effect on employers’ wage bills, has worked out that that sort of thinking doesn’t apply any more — or, at least, not at the moment. And maybe Julie Bishop has too.
Despite all the talk about economic slowdown and recessions abroad, Australia’s employment growth is still strong, and unemployment is still at historical lows. Employers are still desperate for skilled workers. Keeping minimum wages low isn’t going to attract unemployed or underemployed workers into the workforce. Letting wages fall in real terms will in fact discourage people from seeking work. Until the next recession delivers employers a nice big pool of skilled labour, we need to attract lots of immigrant workers and lure as many people back into the workforces as possible.
This means paying more for them. For all the talk of “working smarter” and “better work-life balance” and mentoring and career management and other clichés intended to make workplaces more attractive, it’s the bucks that will do it.
Even if there’s another recession, we’re on a long-term demographic path toward fewer workers. Employers will have to get used to it. And the way we think about wages policy might need to be updated.