Unions
Reserve Bank boosts claim for low-paid
Reserve Bank research shows minimum wage rises don’t cause job losses.
There is “no evidence” that small increases in minimum wages cause a loss of jobs or reduction in workers’ hours, a Reserve Bank of Australia (RBA) study has found.
In fact, minimum wage increases may even boost both, according to an RBA research paper.
RBA research economist James Bishop studied the impact of increases in minimum wage rises granted by the Fair Work Commission from 1998 to 2008.
He found that award increases “have no statistically significant effect on hours worked or the job destruction rate”.
If anything, evidence suggests “the job destruction rate actually declines when the award wage is increased,” he said.
The Fair Work Commission is considering a claim by the Australian Council of Trade Unions for a 7.2 per cent increase to minimum and award wages. That would boost the minimum wage by $50 a week.
The Australian Industry Group, a leading employer organisation, wants increases limited to the inflation rate of 1.9 per cent or lower.
The AIG argues the ACTU claim would hurt companies and inflict “significant harm” on low-paid workers, the unemployed and the underemployed, “because their job security and employment prospects would be substantially reduced”.
However, the RBA study found the opposite was true: that “jobs with larger award wage rises had larger increases in hours worked than jobs experiencing a smaller award wage rise”.
Employer arguments discredited
The Guardian newspaper commented that employer claims were now “put in doubt by the RBA research.”
“The study adds to international studies which have found that ‘modest and regular’ wage increases do not result in an increase in unemployment,” The Guardian said.
Whatever pay rise the commission decides to grant will apply from 1 July for 2.3 million workers.
The ACTU told the commission that a $50-a-week increase to the minimum wage would create up
to 87,000 jobs in the first two years.
The ACTU argued that low-paid workers spend most of their extra income, meaning an increase to the minimum wage would boost aggregate demand and create jobs.
It said that based on estimates of low-income households’ spending, the number of jobs created would be 50,000 to 57,000 in the first year and 30,000 in the second year.
ACTU secretary Sally McManus said the modelling showed “pay rises will create jobs and move our economy forward”.
“The Turnbull government and the business lobby are trying to keep wages down by running a scare campaign against higher wages,” she said.
“That’s the same discredited, untruthful, damaging trickle-down economics this government loves to roll out.”
‘Change the Rules’ to lift pay
The ACTU’s “Change the Rules” campaign is aimed at rewriting industrial laws to make it easier for workers to bargain for wage increases.
Sally McManus said Australia was headed down the same path as the United States – insecure work and low wages.
“We have to change the rules so that profits go to the workers who power the Australian economy, not the executives who are ripping them off,” she said.
“The Turnbull government has directly contributed to cutting wages by supporting the slashing of penalty rates.
“Wage growth of 1.9 per cent in the private sector is a disaster for workers. We need change now to allow workers to fight for a pay rise.”