Friday, October 27

A fair day’s work for a fair days pay.

I think it’s somewhat refreshing that the newly formed “Australian Fair Pay Commission” decided to increase the minimum wage by 5.65% or $27.36 per week for the 1 million lowest paid employees in Australia, those employees who earn less than $700 per week.

The Australian Fair Pay Commission was recently established to set and maintain a federal minimum wage that will promote the economic prosperity of the people of Australia under the Workplace Relations Amendment (Work Choices) Act 2005.

Chairman Professor Ian Harper came to the Commission with very strong economic credentials, but also possessing equal doses of compassion and integrity. Together with his fellow Commissioners he has presided over a decision in stark contrast to the submissions from Government and Industry groups for a minimal increase. These submissions argued the increase recommended by the Australian Council of Trade Unions of $30 per week would be irresponsible, leading to widespread unemployment and inflation. Whilst the Commission acknowledge a nexus between wage rates and employment it nevertheless on balance rejected theses arguments and granted a $27 increase.
I agree with the Commission. Economic outcomes need to be balanced with principles of fairness and integrity by providing protection to lower paid workers. The idea that such decisions will lead to 300,000 job losses and widespread inflation is a highly fanciful notion based upon flawed economic analysis. It all boils down to common sense, that is to say a fair day’s work for a fair days pay for those of minimal bargaining power in a democracy.


JuBlue said...

Gotta love you Australians. How very decent of you.

Anonymous said...

I've got to ask this, because the discussion of minimum wage always makes me wonder - does it actually make any difference to buying power? I would have thought that everything else would raise in price commensurately when there's an increase to the minimum wage.

Lindsay Lobe said...

Hi Jublu & Madcap

Annual wages increases of around + 5% over the past 10years have not resulted in increased inflation in Australia which has fluctuated between 2-3%.

The correlation between inflation or increased prices and wages increases only occurs in the absence of any productivity. If an economy can sustain productivity increases of 2-3 percentage points each year, prices need not increase as consequence of wage increases as the productivity improvements pay for the increased wages. Productivity does not occur from working harder but from improved design and investment in an open competitive economy. Business does not always like competition as it makes it harder to ensure easy profits and forces companies to invest in improved training and investment.
best wishes

DellaB said...

Hi Lindsay,
Noel was explaining it to me, about how increased wages leads to inflation, therefore the 'supposed' need for another interest rate increase.

But he also said that it was because of increased spending power, that doesn't make sense, if I had more money it would only be catch-up for the way the price of things like food have increased beyond belief lately.

Michael Manning said...

Lindsay: Now if we could only get that smart over here in the States! I've linked U! Good post!!

Wendy A said...

Interesting post. I rememeber when min. Wage was $2.35/hr. I was scooping ice cream for that, 15 yrs old. Couldn't imagine having to support myself on that even in those long ago days. It is good that Aust.unemployment rate is very low. Something is right.

Gary said...

The economy will adjust itself over time. Social justice and giving people a living wage justifies the transitional difficulties. Our minimum wage is $8.00 and should be 12.00.

Lindsay Lobe said...

Hi Dellab Wendy Michael & Gary

Thanks for visiting.

Dellab -The Reserve bank has the responsibility to control inflation, they are restricted to this somewhat narrow objective and hence will act if inflation exceeds the targeted range. As the underlying inflation is above their targeted range and recent housing data suggest that trends will continue, I expect there will be more interest rate increases, another very shortly and possibly even another next year.

The current drought will push up the cost of food and the commodity boom continues to fuel demand in the resource rich states of WA and Qld driving up wages and aggregate demand. Individual circumstances vary; as does the underlying conditions in the non resource based States, which are benign but the Reserve Bank is only concerned with aggregates. The same is true of the Federal Reserve in the USA, where interest rates are on hold because of more benign inflation environment. New housing starts remain strong in Australia, while in the USA they have dropped significantly, but it also varies as in some areas over there as NY real estate remains strong while other areas are weak. If you’re selling building materials in the USA and NSW you are experiencing similar downturns.

A minimum wage does make sense!! I am surprised it’s not included in say a Demmo’s platform of policy initiatives!!

We have benefited from a stable environment and the commodity boom, but also from an open and competitive economy.

Gary -Even at $12 per hour –sounds a tad low!!

Best wishes

grannyfiddler said...

i came across a magazine/organization in the course of doing research papers a few years ago. they give awards (American) nationally for high standards in busines practice, like economic/environmental sustainability, paying a living wage as opposed to the minimum wage, etc. thought you might find them of interest, if you don't already know of them