Pay hikes could jeopardise jobs

After declaring the upcoming election a “referendum on wages”, Bill Shorten owes it to Australians to spell out the details of Labor’s policy. In wagging the tail of the ACTU’s “living wage’’ dog, he has raised the expectations of hundreds of thousands of workers hoping for a hefty boost to their $18.93 an hour minimum wage rate. The Opposition Leader and his frontbench have not endorsed ACTU secretary Sally McManus’s demand for a minimum wage pegged at 60 per cent of the median wage, which would result in an increase of about 11.5 per cent over two years. But Mr Shorten has promised to “help’’ the Fair Work Commission deliver a “living wage’’ and slammed employers as “fat cats” for criticising Labor’s approach. Rhetorical flourishes aside, it is to be hoped, for the sake of the economy, that if Labor were to win office, pragmatism would prevail and a Shorten government would heed the advice of former ACTU secretary Bill Kelty. On Thursday, Mr Kelty said a living wage would need to be phased in responsibly and linked to productivity gains, avoiding “cost spikes’’ to the economy. Speaking from experience as one of the architects of Labor’s 1980s and 90s Accords, Mr Kelty said Labor and the unions needed to take into account the nation’s economic capacity at a time when the economy was slowing, or growing moderately.

Unfortunately, Australia’s lowest paid workers and their families, especially casual workers who can least afford to be without jobs, would have the most to lose if a Shorten government tampered with workplace relations to force pay hikes beyond the capacity of many businesses to pay. Such an outcome, which would force employers to lay off staff, would be on the cards if Labor in government opted for a two-tiered wages policy. Under a proposal being examined by senior ALP figures, Ewin Hannan reports today, a Shorten government would urge the Fair Work Commission to award larger rises to several hundred thousand workers on the lowest pay and smaller, albeit above-inflation increases to 2.3 million workers on higher award rates. No detail has been provided on how far or how fast Labor would want the minimum wage increased, or what the party would direct the commission to consider. It already takes inflation, living standards, jobs, growth, business viability and economic conditions into account. As Australian Industry Group chief executive Innes Willox said yesterday, there was no point in having an independent tribunal to determine wages if parliament was going to dictate decisions or impose unbalanced criteria to ensure decisions favoured one side.

In its first 100 days, a prospective Labor government has also pledged to reverse cuts to penalty rates. About 700,000 workers, especially in the tourism, retail and hospitality sectors, which often employ workers on the minimum wage, would receive more pay. That is, provided employers with low profit margins would not feel compelled to cut back or abolish shifts.

Mr Shorten has been warned about the potential consequences of his policies. A week ago, Paul Kelly cautioned him against offering the unions so much that his prospects in office would be compromised. And last year, presciently, the Fair Work Commission noted that granting a minimum wage increase to lift all
full-time workers out of poverty immediately would run “a substantial risk of adverse employment effects”.