Labor’s minimum wage plan to ‘push families into poverty’: Mathias Cormann

Mathias Cormann has issued a warning over Labor’s proposed wage rises, as former ACTU secretary Bill Kelty urges caution.

Opposition Leader Bill Shorten. Picture: AAP

Substantial wage rises demanded by the Labor Party and the unions would push families into poverty, Finance Minister Mathias Cormann says, as former ACTU secretary Bill Kelty cautions that Labor’s proposed living wage must be phased in sensibly and responsibly.

Mr Cormann’s comments come after the long-time union chief warned rises should be linked to productivity gains, or it could risk a wages blowout and a “cost spike” for the economy.

“Anyone who loses their job because we increase the minimum wage by too much will not get a wage, they will get the dole, so what we need to be doing is ensure that the economy grows strongly, that employment growth continues to grow more strongly as it has under our government,” he said.

Mathias Cormann. Picture: Gary Ramage

Senator Cormann accused Labor of wanting to move the country toward a “central command model” which would hit employment growth.

“This sort of approach has pushed families into unemployment and poverty which is of course highly disruptive to push families into unemployment. That is not something that anyone wants.”

Mr Kelty, the architect of the 1980s and 90s ­Accord supported the living wage proposal, saying it would be beneficia­l for the country, provid­ed that it was economically affordable and absorbed into the wages system.

“Labor and the unions need to take into account the economic capacity of the nation and of ­industry to afford a minimum-wage increase,” Mr Kelty said. “The economy is slowing, or growing moderately, and productivity has to lift to afford an increase in the minimum wage.”

Mr Kelty’s comments come as Labor will today urge the Fair Work Commission to award an above-inflation minimum wage increase to low-paid workers from July 1. In a submission to the commissio­n, Labor proposes a “fair and economically respons­ible real increase” in the minimum wage that recognises that no full-time worker should be living in poverty; productivity and profits have risen faster than wages; and “everything is going up except for people’s wages”.

Mr Kelty warned that industry needed time to adjust to big wage increases, “and they can if it is done over a longer period and there is absorption”.

“It is necessary to keep Aust­ralia’s wages system working properly,” he said. “We are a high-growth and high-wage economy.

“If it is not absorbed, the minimum wage goes up and feeds into enterprise bargaining agreements that are already above the minimum wage, and then those agreements will have to go up, and then you can destroy the wages system and inflate the economy through wage increases.”

Scott Morrison hit out at Bill Shorten yesterday over Labor’s push for an above-inflation rise in the minimum wage, saying the Opposition Leader had “no empathy and no clue” about the pressures facing small-business owners. The Prime Minister said they would be forced to “sack workers” if Mr Shorten won the election and drove up the minimum wage.

Former union chief Bill Kelty.

Mr Kelty, who was ACTU secretary from 1983 to 2000, is a mentor to Mr Shorten. He recalled the ACTU’s living wage claim in 1996, which sought an increase in the minimum wage and staged safety net increases for those on enterprise bargaining agreements who had not received pay rises.

“We proposed bigger adjustments but they were phased in over a long period,” he said. “If there is no absorption there can be huge cost implications. It should be done industry by industry, and phased in.”

Mr Kelty said a new living wage would be a “positive” for the economy­ and suggested that Labor could legislate to provide guidance to Fair Work Australia to make a ­determination on a livin­g wage adjustment.

“You can easily manage a living wage adjustment if you do it respon­sibly,’’ Mr Kelty said.

“Wages will be higher in aggregate terms and demand will increas­e. It also makes enterprise bargaining work more effectively.

“When you look at the modern economy, especially given automation, there is a good argument for increasing wages in a sensible way and also lifting superannuation in a sensible way.

“The principled position is quite simple: should people working full-time live in poverty? That is the starting point for a government to outline a philosophical position, and then the commission can then set the right rate.”

Labor has promised to consult on the details of its plan to increase wages but would leave it to the Fair Work Commission to determine.

Manufacturing employers called yesterday for the minimum wage increase to be limited this year to $14.40 a week, arguing that businesses were struggling with higher costs and productivity growth was weak nationally.

Australian Industry Group chief executive Innes Willox said the modest 2 per cent rise was warranted, given the economy had moved back into the slow lane and “looks set to stay there for some time”. The claim is slightly higher than the $12.95 per week rise proposed by the Australian Chamber of Commerce and Industry.

The ACTU, which is seeking a $43-a-week increase, criticised Restaurant and Catering Australia for proposing no increase.

Mr Willox said the ACTU claim, if granted, would inflict harm on businesses and low-paid workers. “Now is not the time for risky movements in minimum wages,’’ he said.

The National Retail Associa­tion, which last year called for no increase, will support a 1.8 per cent increase in line with the inflation rate, following a survey of its ­members.

“We do think there should be some type of increase,’’ said the associatio­n’s chief executive, Dominique Lamb.