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2008 National Wage Case: An extra $21.66 per week. ACCI shocked

2008 National Wage Case: An extra $21.66 per week. ACCI shocked
by Michael Park

It’s almost delicious. The Australian Chamber of Commerce and Industry is, as I write, undergoing its annual tearing out of the hair and rending asunder of its opulent board room curtaining. Yes, you guessed it: the Australian Fair Pay Commission has ruled on the latest National Wage case. It has awarded an increase of $21.66 per week to those “pay scale reliant” low paid Australian workers.

“Pay scale reliant” is code for those paid at a rate prescribed by an award. Thus a worker engaged under the benchmark Metals, Engineering and Associated Industries Award must be paid a minimum weekly wage of $543.78 or $14.31 per hour. This is now the federal “minimum wage”.

The reaction from The ACCI has been predictable. It is forecasting that this increase will flow into price increases and, obviously, fuel inflation. It had wanted something limited to last year’s ruling at tops and preferably under. Its argument for this is that wages are a function of money paid to workers and tax cuts granted by the government. It claimed that something near to or fewer than ten dollars plus the government’s tax cuts would be sufficient. This is a position it has advocated religiously. No matter that tax cuts are not wages; the government does not “pay” workers via tax cuts.

The ACCI position is:

This minimum wage increase is likely to flow on into price increases. The AFPC has underplayed the impact of recent economic developments, including interest rate increases and fuel price volatility, on the businesses which must apply this wage increase. The AFPC has also overstated the extent to which economic conditions support such an increase.

In other words, prices go up, inflation goes up and the economy will not support it (= loss of jobs). Sound familiar?

2005: Today’s $17 increase is at odds with Australia’s slowing economy and the ongoing challenges of unemployment and underemployment. The economic and labour market material before the Commission did not justify the level of increase awarded.

2006: Employers will be entitled to feel disappointed and concerned at the magnitude of this increase. They will be forced to pay this large increase without any accompanying requirements for increases in productivity in their businesses.

A wage increase of this size has the strong potential to be economically damaging. This decision will not assist jobs growth or the employment prospects of those out of work.

2007:...today’s $10.26 increase to the minimum wage means that employers, mainly small businesses, will have to pay increases of $37.62 per week in the 10 months from last December to this October.

While we welcome the more moderate nature of today’s increase, we remain concerned that the Fair Pay Commission has ordered another increase when the ink is barely dry on the last increase.

However, $10.26 still equates to a 2% increase on the minimum wage. We estimate, based upon official forecasts, 10 months of inflation since the last increase to be 1.65% to October first.

In other words: unaffordable, irresponsible and dangerous to the economy, which will suffer irreparable damage if anything above the ACCI’s recommendation is awarded. In all those years (and those the ACCI opposed prior) the economy sailed on and the jobs market became tighter. Indeed, this has been the case since the early nineties.

That last – the harping about inflation – is another theme run each year (about which more later). The ACCI, though, has another hobbyhorse when it comes to these hearings and this is very close to its corporate wallet: the “safety-net”. You see, the Australian Industrial Relations Commission always saw the minimum wage as the safety net for Australian workers. Well aware that many Australian wage earners had moved into Enterprise Bargaining Agreements (EBAs), it saw its remit as seeing to those pegged to awards. These became the minimum across industries to which those awards applied and where workers were not covered by an EBA. The ACCI has constantly chaffed at this interpretation. A safety net should be, apparently, an absolute minimum and nothing near to a real wage. Anything that might make it a “real wage” should be made up by government in social money. From its submission to the 2007 hearing its schoolmarm disappointment is obvious:

There remains considerable scope for the amended provisions of the Workplace Relations Act 1996 governing minimum wage setting to transform outcomes and processes in Australia. The AFPC retains considerable scope to realise the opportunities for a better system… there remains considerable scope for the AFPC process to realise its intended potential…

Australia continues to have minimum wages which are yet to realise their role as a genuine safety net. Australia continues to have the highest, or amongst the highest, minimum wages in the world and certainly the most pervasive minimum wage system in the world. This continues to have a very real detrimental impact on the considerations the AFPC must advance under the Workplace Relations Act 1996

Evidently our Federal minimum is going far beyond its purview of a "safety-net" and the AFPC is not following the programme. Indeed, it is a most "pervasive" critter and needs to be dealt with. Note the pointed barb to the AFPC's duty to WorkChoices. So, given the pervasive and non-genuine nature of our safety net, what does the ACCI suggest? It suggests that the AFPC "moderate minimum wage increases, to err on the side of caution and on the side of less frequent and less expansive minimum wage uprating". In reality, that schoolmarm little aside to the AFPC regarding what it "must advance under the Workplace Relations Act 1996" is a strong indication that the ACCI wants what it sees as Australia's "pervasive" and "detrimental" safety net gelded before it becomes even more "inflated". If it can't go backwards, the ACCI would love it pegged right where it is now, ever shall be, reviews without end, amen. If not then "any minimum wage increase should apply only to the federal minimum wage. Increases above this level should be by workplace determination and bargaining".

Given the current AFPC decision, it would seem that the ACCI has, again, been sorely disappointed by the child of WorkChoices. With a new and less sympathetic federal government, the tone of the ACCI’s reaction seems one of resignation. This is understandable as, in my opinion, this government will not substantially alter the nature of this federal “umpire” (even if it returns its remit to AIRC), nor the federal IR system that now underpins it: it works well enough. It remains an interesting fact though that only what a federal umpire awards to those paid on minimum award wages feeds directly into prices, inflation, et al but not ever the fat packets of those that populate the boardroom of the ACCI. Those at the bottom of the pecking order are responsible – should they attain a pay rise – for all economic ills. Just as it those same individuals that must bear the brunt of the bluntest of economic levers – interest rates – because they are “spending far too much”.

This brings me to that aforementioned proclivity of the ACCI with inflation. The ACCI constantly compares these pay rises in percentage terms to the rate of CPI. It then, every year, claims that the rises are ahead of inflation and therefore are unaffordable and inflationary. A clue to its logic is in its reaction to the 2006 decision:

It appears that the 5.6% increase completely matches the 5.6% headline inflation rate that occurred over the last 18 months. If the AFPC has used the headline rate of inflation as its benchmark for increases, that is a significant improvement on the old system…

You see the ACCI always uses the underlying inflation rate, not the “headline” rate. That is the rate that either severely discounts or ignores volatiles such as petrol, rent, some foodstuffs and the like. Problem is, when the low paid worker rocks up to the pump to fill his car his petrol price is not discounted or ignored. Nor does his real estate agent discount his rent increase in line with “underlying inflation”. No, these people pay those volatiles at the prices asked.

Yet another gem in that 2006 release is this:

If the magnitude of this rise is based … on the fact that 18 months have passed since the last decision (rather than the usual 12 months), then the AFPC has made a fundamental error. A high wage rise payable in perpetuity cannot be explained…

Meaning one shouldn’t compensate “in perpetuity” for the fact that eighteen months rather than twelve months had passed since the last increase. Presumably it is fine to treat it as twelve months and ignore “in perpetuity” the other six months.

What is delicious though – and which sums up the ACCI’s abject disappointment with this child of WorkChoices – is this appended to the 2005 critique of the last decision by the AIRC:

It is entirely appropriate that this is the final national wage increase under the current law. The government should now move to implement the major workplace relations reforms recently outlined by the Prime Minister.

Employers will call on the proposed Australian Fair Pay Commission (AFPC), supported by appropriate legislation, to deliver more balanced and targeted minimum wages, which take better account of the circumstances and capacities of employers, and better support them in creating and maintaining jobs…

This – the AFPC – was to be the forum where the ACCI would take back the high ground. The AFPC – a creature of Work Choices – would provide the home ground advantage.

The utter surprise at the first decision and the awful disappointment that has settled over the ACCI since is palpable. Howard and Costello’s baby shows a family heritage which owes much to a visiting tradesman or his apprentice.


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Loose terminology

Neither Governments nor business groups decide on the minimum wage -  business does.

You might wish to alter your terminology Paul Morrella. The federal minimum wage is decided by the Australian Fair Par Commission. Business might decide the amount it pays individuals outside the purview of  "pay scales" (awards) according to what it takes keep those staff but it does not "decide" the "minimum wage". 

Father Park

That's markets

Paul Walter: "But from my point of view, I have personally always found it a pain in the neck listening to the bosses, on their incomes, grizzling when we proles get a few bob extra for sandwiches and a milkshake."

That isn't an example of a "good boss". A "good boss" is either willing to pay the extra costs (it makes sense to keep the employee), in which case he/she shouldn't complain (it's not the employee's problem) or he/she isn't will to pay the extra costs (it doesn't make sense to keep the employee), in which case he/she should make the intention known that alternatives are being sought.

Your example of Qantas seems to point in the direction of the latter option being taken.

Minimum wage is a meaningless concept

Neither Governments nor business groups decide on the minimum wage -  business does. The government can legislate maternity leave, a free trip to Disneyland or even a compulsory sing-along day, who knows. Doesn't mean a large number of people will ever enjoy any of these things. Each business ultimately makes a decision on what it is and isn't willing to pay.

looking after self, self interest and selfishness.

Nothing changes?

Not quite, and very slowly when it does: things do change and that's why things still require a certain amount of attention, if you are a working person. "Competition policy" of different types found its way into the firmament because of a sense that people, governments and companies had become complacent and inefficient. As someone lackadaisical who came down with a thud in the wake of the '73 oil shock, I know from experience that there is much worth in the idea that people need to keep or be kept on their toes.

But there has also been a feeling that neoliberal economics has been a shopfront for certain swindles of civil society of its kitchen silver: privatisations and Work(Serf)choices come to mind.

It's a funny world, when you think about it.

The bosses, like Geoff Dixon say, get paid $millions pa. Seemingly to dream up ways to put other people out of work.

Aussie workers get paid $400 or $500 a week heading upwards for doing even mundane jobs, and in turn a virtual serf in Africa might earn that in a year ,while working harder than the rest of us put together – if they are very lucky...

But from my point of view, I have personally always found it a pain in the neck listening to the bosses, on their incomes, grizzling when we proles get a few bob extra for sandwiches and a milkshake. Yet there are times when wages might need to mark time, say during recessions when unemployment is high, while things sort out and jobs develop for those on the heap after the last "structural adjustment".

Yet there is always someone caught with their nose sneakily in the trough at others expense, and the whole consensus, as ever, fails again.

So to some extent, people have to keep an eye on things rather than relax into total "party" mode, otherwise – when you wake up – you are in for the proverbial mother and father of a metaphorical hangover.

Believe me, I know from bitter experience.

It's called running a successful company

Paul Walter: "The bosses, like Geoff Dixon say, get paid $millions pa. Seemingly to dream up ways to put other people out of work."

His job is to make Qantas shows a profit. His job is made a little bit harder by idiots like Sharon Burrows urging the workers to strike for more pay. I suppose when Qantas has its servicing done overseas, thus streamlining the company and saving money, Burrows will whinge on TV for about 10 seconds and that will be that. From my observation, most large companies could shed 10% of their workforce and still operate successfully, but people like Burrows cannot get that through their thick heads. She will finish up with a safe seat in parliament and the workers will be no better off.

A fair day's pay...

Michael, over the years of the Arbitration Court a huge amount of money was spent by the unions on wage cases, wherein they had to justify every claim down to the last cent. Inevitably, after every judgement was handed down the union advocates (eg Bob Hawke) would say it was disappointing, while the Federal Treasurer, if a Liberal (eg John Howard) would say that it (whatever it was, and no matter how miserable) would be the ruin of the economy.

I formed the opinion that all that court time and expense could be saved by adding together the annual salaries of the Prime Minister, Chief Justice of the High Court and the Governor General, averaging them, and setting the minimum wage as a fraction of that average. (It would have been a small fraction.) Same for the age and disability benefits, etc.

However, these days I no longer hold that view. It should be a constant fraction of the average of the packages paid to the highest earning 10 CEOs in the country.

QED. Politically enlightening as well.

Value of service vs remuneration packages

Ian, I have had thoughts along those lines!

While I do not believe that the government ought to be in business of setting wage levels, it would surely offend nobody to insist that the lowest possible wage that a company could pay was a given percentage of the companies CEO’s remuneration package.

Now, is anybody worth ten times more than anybody else? Five? Twenty?

On nurses wages, how can a backbench politician — any politician? — be worth as much to the community as a nurse? In my view politicians are grossly overpaid. Nurses are, of course, grossly underpaid. Now if we were to simply do a switch —

It is true, that the politicians would still be somewhat overpaid, but at least this would be a good beginning in the quest for equity in the system.

Peter Hendy

Was the mouthpiece of the day. You remember Pete skulking behind Peter Reith during the whole children not thrown affair pretending to be as innocent as a new born lamb don't you?

When Reith left he went to Nelson, then to the ACCI, now back to Nelson.

If anyone thinks Nelson is a trifle confused on positions just look at his new advisors. The ersthwile Hendy and the scepitcal Tom Switzer.

No wonder Nelson needs a quick holiday.

Same old story

And they say the same every time - jobs will be lost, prices will go up. The truth is that this $21.66 will go straight back into the economy.

This doom and gloom about pay rises is ideologically driven and not based on reality.

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