Un-Fair Pay Commission

Savage attack on low paid

Anna Pha

On July 9, the Fair Pay Commission imposed a real wage reduction on more than 1.3 million of Australia’s lowest paid workers. The wage decision directly hits those who rely on minimum award rates of pay. The key consideration in its decision was corporate profits. The Commission opted for what it called “a profit-led recovery”, trotting out the usual employer mythology that wage rises cause unemployment. The reality is that by imposing a real wage reduction, the Commission, and the employers whose bidding it does, will drive the economy deeper into recession at the cost of thousands upon thousands more jobs.

“The decision means ordinary working Australians and their families are bearing the brunt of an economic downturn they did not cause,” said ACTU secretary Jeff Lawrence said.

“Many workers have already lost their jobs, had their hours cut and now more than a million families are facing a pay freeze despite rising living costs,” Mr Lawrence said. “The costs of rent, food, medicines, education and utilities have all risen in the past year and families need a pay rise to keep up.”

The Commission flatly rejected the ACTU’s claim for a modest $21 a week rise (less than 56 cents per hour), and instituted a wage freeze. Trade unions were taken by surprise, and thousands of workers, desperately struggling to make ends meet had their hopes of a few extra dollars to meet rising prices dashed.

Employers on the other hand are jubilant. They got what the asked for: no wage rise.

The Rudd Labor government asked the Commission to make a “considered” minimum wage increase, without specifying any amount. This made it easy for the Commission to do its considering. When the decision was handed down, Workplace Relations Minister Julia Gillard said she was “disappointed” but that the real wage reduction was “a decision we have to accept”.

She then went on to defend the Commission’s decision with the comments, “… I understand and the government understands that the Fair Pay Commission confronted the most difficult minimum wages setting environment for many decades that any industrial authority has had to confront.”

The real wage reduction is not surprising considering the membership of the Howard government’s appointees on the Commission. It includes such leading lights of the New Right as Professor Ian Harper and Judith Sloane. They always have an excuse to oppose wage rises, regardless of the state of the economy.

Profits first

The Commission in its decision raised the question of a “wage-led or profit-led recovery”, and chose the profit-led option.

“For many businesses, the decline in aggregate demand has led to significantly lower profitability and changes in business practices,” the Commission said and then in a blind leap of faith embarked on a course that will reduce demand even further. The failure to deliver a $21 a week wage rise to the lowest paid workers will have the effect of reducing demand by more than $1 billion.

Just this month there have been increases in the price of petrol, electricity, water, gas and health services in a number of states. That leaves less money to pay for everything else, and without a wage rise, fewer goods and services will be purchased.

How many jobs will that cost? Thousands more than any jobs that might have been lost because of a small wage rise.

Employers are sacking workers because people cannot afford to buy the goods and services they produce. More workers will be sacked or have their wages and hours cut as a result of this minimum wage decision.

But the narrow-sighted, economic rationalist Commission cynically argues that freezing wages will protect the jobs of low paid workers!

More job losses

The Commission ignores the reason why aggregate demand for goods and services has declined – the gap between what workers are paid and the value of what they produce. The ACTU in its submission pointed out that the profit share of income had increased to record levels in 2008. The Commission itself admits this and makes the point that company gross operating profits increased by 19 percent in the first half of 2008.

This was at the expense of the share of income being paid in wages. It is the build up of this gap between the income from production siphoned off in profits and what is left for workers’ wages that results in economic crisis and recession.

That gap can be narrowed and the economy stimulated by increasing wages. The reduction of real wages undermines the government’s stimulatory measures as well as causing hardship to the workers and their families affected.

All workers affected

The decision is not just a blow for low paid workers. It creates an environment of wage restraint. Unions will find it more difficult arguing for higher wages in enterprise bargaining, unable to seek an increase in line with the minimum rate.

The decision also means that the unemployed are even less likely to get an increase in unemployment benefits. Over the past two to three decades of economic rationalist policies, successive governments have deliberately sought to widen the gap between unemployment benefits and the minimum wage. In line with this trend, the Rudd government refused to raise unemployment benefits when it recently increased aged and other pensions.

The aim is to keep unemployment benefits as far as possible below the poverty line, to force the jobless in sheer desperation to accept any work, regardless of how appalling the working conditions and wages are. Time and again capitalist economists claim the minimum wage is too high. By freezing it in dollar terms, inflation overtime reduces its real value.

Government subsidy to employers

The minimum wage for adults remains frozen at $543.78 per week, $14.31 per hour. This is not a living wage. A family paying rent or servicing a mortgage, with all the other costs they face, can only survive by government subsidies.

Employers have been let off the hook, not forced to pay a living wage. This government assistance takes such forms as rental assistance, low income tax offsets, family benefits and most recently stimulus package handouts. As important as these various benefits are to workers and their families, they would not be necessary if employers paid a living wage.

The Commission’s argument that low wage workers have already received the equivalent of a $20 a week rise through indexing of family benefits and government’s stimulus packages confirms that these payments are a form of indirect corporate welfare, a means of holding down wages to boost profits.

The Commission even included the tax cuts as a reason for freezing wages, except most of the cuts went to those on middle to high incomes. Some low wage workers did not get a tax cut, and did not get the recent $900 stimulus payment either. Their incomes, below the tax threshold, were too low to qualify!

It shows just how out of touch the Harpers and Sloanes are and how little they care about ordinary hard working Australians who are doing it tough. (Harper got paid $124,900 for his part-time position to deliver that decision.)

Reject the decision

The Un-Fair Pay Commission set July 2010 as the expiry date of its wage freeze, at which time the new Fair Work Australia will be in operation. If by then, there is not a miraculous turn-around in the economic situation, another wage freeze or even a reduction in the rate per hour could be on the cards. With the number of jobless predicted to rise and a profit reporting season of gloom and doom on the horizon, there is no guarantee of a wage rise in 12 months time.

A great deal will depend on how the trade union movement responds to this decision. History shows that ultimately, what is won from commissions depends on the struggle on the ground. Low wage workers, the working poor of Australia, should not have to wait until July 2010 to see what crumbs they are thrown.

The recent ACTU Congress made a commitment to raise the federal minimum wage by $56.22 to $600 per week within the next two years through political, community and workplace campaigning. This campaign cannot wait until July 2010.

The campaign must begin now, with pressure mounted on the new Minimum Wage Panel of Fair Work Australia to deliver an increase in the minimum wage by October at the latest, backdated to July.

A “wages-led recovery” will not only improve the living standards of the low paid, but it will speed-up the process of recovery. This is not “a decision we have to accept”.