Highest stakes for lowest paid

Bill Shorten has said he supports a living wage but has refused to commit to the 60 per cent target championed by the ACTU. Picture: Kym Smith

For the first time in 12 years, workplace relations is set to play a prominent role in a federal election campaign. In 2007, voter discontent over Work Choices con­tributed to John Howard’s defeat. Today, Bill Shorten wants to ­exploit community disquiet over low wages to aid his attempted ­ascension to the Lodge.

The Opposition Leader is raising the expectations of voters that he will end years of wage stagnation and deliver more money into their pay packets if he becomes PM. He says Labor wants the election to be a referendum on wages and that low-paid workers should receive a living wage.

But there remain many ­unanswered questions about how Shorten will deliver if he wins the election, expected in May. Here’s what we do know.

In Labor’s first 100 days, Shorten will attempt to pass legislation reversing cuts to penalty rates. He will overturn the decision of the Fair Work Commission, led by the Labor-appointed president Iain Ross. Based on the highest estimates cited by Labor, up to 700,000 workers engaged on penalty rate shifts will get more money. There will be no back pay.

For all the focus in the past two weeks on Labor promising to lift the minimum wage, the first ­annual minimum wage decision that would be handed down under a Shorten government will occur in early June, just weeks after the election.

This means Labor’s proposal to change the factors the commission takes into account when ­deciding the annual minimum wage rate will not have any ­impact before July 2020. The commission this year will determine the increase based on the ­existing criteria.

The ACTU is seeking a $43-a-week increase while most ­employers want any rise to be in broadly in line with, or slightly above, the inflation rate, a position that translates into an increase of $13 to $14 a week. Restaurant and Catering Australia, representing 45,000 businesses, wants a zero increase, which, if granted, would result in a real wage cut for the low-paid.

Based on recent years, and given the parameters will not change, Ross could be expected to split the difference, awarding an above-inflation rise that will flow through to 2.3 million workers.

The ACTU wants the commission to deliver wage rises equivalent to a living wage by mid-2020. It wants to lift the minimum wage by 6 per cent to $762.20 a week in June and, if successful, by a further 5.5 per cent next year to bring the minimum wage to 60 per cent of median earnings.

But the commission does not have the power to adopt targets that would bind a future expert panel when conducting annual wage reviews.

Moreover, while Shorten says he supports a living wage, he and Labor frontbenchers have refused to commit to the 60 per cent target championed by ACTU secretary Sally McManus. “We are not prepared to come at that, at this stage, the 60 per cent,’’ Labor finance spokesman Jim Chalmers said this week.

Yesterday opposition workplace relations spokesman Brendan O’Con­nor said Labor would urge the commission this year to award a “fair and economically ­responsible real increase”, and ­refused to nominate a desired dollar amount increase.

The position is consistent with Labor’s previous submissions. But yesterday it prompted claims by the government, which all week has been warning of the dire consequences of the ALP approach, that Labor had squibbed it, given the opposition’s heightened rhetoric of the past 10 days. In recent years, the commission has been awarding above-inflation rises — 3.3 per cent and 3.5 per cent ­respectively — under a system that Labor portrays as inadequate.

Shorten is seeking to fuel voter discontent about low wages growth. As University of Adelaide law professor Andrew Stewart says, many workers feel like they are battling more than the formal state of the economy suggests.

“One reason for that is very likely to be the fact that so many Australians are getting wage rises which are at or below the inflation rate, or indeed not getting wage rises at all,’’ Stewart says.

“I have a sense that what Labor is doing is tapping into a genuine concern that many people have right now.”

Stewart says that wage growth has been about 2 per cent since 2013, and “it won’t fix itself, the normal forces of supply and ­demand won’t return wages to previous high levels”.

With the exception of promising to address wage theft around migrant workers, Stewart claims the Coalition does not have an evident agenda to address stagnating wages. “The government either denies there’s a problem or says, ‘It’s OK, wages will go back up again,’ ’’ he says.

Labor is devising a policy that will change the factors that the commission has to weigh up when determining the minimum wage. The commission now takes into account the performance and competitiveness of the economy, including productivity, business competitiveness and viability, inflation and employment growth.

It considers relative living standards and the needs of the low-paid, the promotion of social inclusion through increased workforce participation and the principle of equal pay for work of equal or comparable value.

In a clear signal of what Labor’s proposed new criteria would ­include, its submission says the commission should recognise that no Australian working full-time should be living in poverty. It is no coincidence that this is a chief objective identified by McManus this week.

In last year’s annual wage ­review, the commission said the $24.30-a-week rise granted in 2018 would not lift all national minimum wage and award-­reliant employees out of poverty. It said to grant an increase of the size necessary to lift all full-time workers out of poverty ­immediately would probably run “a substantial risk of adverse ­employment effects”.

“Such adverse effects will ­impact on those groups who are already marginalised in the ­labour market, with a corresponding impact on the vulnerability of households to poverty due to loss of employment or hours of work,’’ the commission said.

Inquirer has been told that senior Labor figures are considering a policy that seeks to lift full-time workers out of poverty while mitigating the impact on business and the economy. There are now several hundred thousand workers on the national minimum wage of $18.93 an hour or an equivalent rate. But the annual percentage rise decision flows through at higher rates to an estimated 2.3 million workers.

Under a proposal being examined by Labor, a Shorten government would urge the commission to essentially take a two-tiered ­approach: award higher pay rises to workers on the lowest rate and smaller, albeit above-inflation ­increases, to workers on higher award rates.

Senior ALP figures say such an approach would address union concerns about full-time workers being in poverty while reassuring employers that the approach would not have a detrimental economic impact. Labor sources stress the detail — dollar amounts, percentage increases, timing — would be left for the commission to determine. They also say the policy was far from locked in and might not ulti­mately be supported.

“The devil is in the detail,” Stewart says. “I am convinced, as a lot of people are now, that it’s possible to have significant wage increases for low-paid workers without harming employment levels, and, indeed, there is a really strong argument that it will boost economic activity, improve government revenue and make life better for businesses, not worse.

“So I am very supportive of that idea but it’s still going to be important to work out how the changes in the minimum wage impact on higher award rates. It seems to me to be highly likely that we won’t, or we shouldn’t, see a flow on of increases to every higher award rate, at least to the same extent.

“The timing of the increases becomes really important. How quickly do we try and get there if the commission is tasked with ­implementing this policy and working out how quickly we can get to the higher rates without ­imposing too much pressure on business by way of adjustments?

“It’s clear a significant increase to the national minimum wage is also going to push up the lowest award rates but the question is by how much and, assuming it’s left to the commission to work out, to what extent does the commission moderate the increase for higher award rates of pay. It’s ­impossible to give a more detailed response until we see what is actually being proposed.”

Australian Industry Group chief executive Innes Willox says any suggestion that the commission is not giving enough weight to the needs of low-paid workers is not supported by the facts.

“There is no point in having an independent tribunal to determine wages and working conditions if parliament is going to dictate what decisions the tribunal must make or is going to ­impose unbalanced criteria to ­ensure that the tribunal’s decisions favour one party over ­another,’’ he says.

“Since the Fair Work Act came into operation, the commission has always awarded the same percentage increase to the national minimum wage and award wages. It has consistently rejected proposals for a higher minimum wage increase to apply to the NMW than higher wage levels.”

Senior Labor figures say they are comfortable with the national political debate being about wages. But having dialled up his rhetoric, Bill Shorten must soon spell out the policy detail and ­expose it to proper scrutiny before the election.