Prime Minister Malcolm Turnbull called a double dissolution election because Parliament wouldn’t pass the Coalition’s anti-union corruption legislation. But industrial relations is peculiarly absent from this campaign.
Perhaps that’s to be expected. For a decade Australia’s industrial relations debate has missed the point. What do we want out of the Australian workplace system? Certainly, we want less union corruption. Certainly, we want to increase productivity. But surely, most of all, we want to get the unemployed into work. And it’s here that we need to focus not on union royal commissions or building construction regulators, but on Australia’s minimum wage.
In May, the Fair Work Commission’s annual review lifted the national minimum wage from $17.29 an hour to $17.70 an hour – an increase of 2.4 per cent. It is now illegal to be employed at an hourly rate of less than this. If you are unable to find work at this wage, you have two options: scratching out an unstable living doing contract and cash-in-hand work, or starting your own business.
Or you can go on the dole. The Newstart allowance for a single person with no children is $527.80 per fortnight. Assuming a 38-hour work week (as the Fair Work Commission does when determining the minimum wage), Newstart recipients are on the equivalent of $7 an hour. This is the minimum wage trap – if you can’t find work paying $17.70, you’re pushed into unemployment at $7 an hour. And, of course, once you start receiving Centrelink benefits, you’re treated as a welfare recipient, with all the social opprobrium and paternalistic control that implies. Is there any other way to describe this trap than “cruel” – cruel to exactly the people the minimum wage is designed to help?
It used to be well understood by economists that the minimum wage created unemployment. Looking at evidence from Western Australia in the early 2000s, Andrew Leigh, now Labor’s shadow assistant treasurer, found increases in the minimum wage resulted in a reduction in the demand for labour – that is, the number of jobs available for workers. Leigh found the demand dropped most for young workers. A wage floor disproportionately affects people with poor work histories or prison records, elderly people, or anyone employers see as a risky bet for employment.
In the past decade some economists have started to argue the minimum wage does not harm jobs. In their view, the employment market doesn’t look like a market where employers compete for workers; it looks more like the fabled company town with one employer that holds a monopoly over jobs. The Productivity Commission endorsed parts of this argument in its recent review into workplace relations law. But how plausible is this new theory? If any employment market is competitive, you’d think it was the market for low-skilled, low-wage jobs, where there are lots of employers and lots of employees. By contrast, the new theory seems to describe the market for high-skilled work better. People with expensively acquired niche skills have a much smaller pool of potential job opportunities.
The research underpinning this theory is a controversial work in progress. But, contrary to the Productivity Commission, it has not undercut the basic minimum wage problem. Even when the employment consequences of the minimum wage are accepted, you sometimes hear that small increases in the minimum wage have only small effects on the availability of work. But there are real people behind those numbers. We should care about them.
As one of the world’s foremost experts on the minimum wage, American economist David Neumark, wrote in December: “Let’s not pretend that a higher minimum wage doesn’t come with costs, and let’s not ignore that some of the low-skill workers the policy is intended to help will bear some of these costs.”
The Australian public debate ignores those costs. There are a few topics in Australian politics that are out of bounds – policies that by questioning them is to cast yourself as a dangerous extremist. Compulsory voting is one. The minimum wage is another. Its supporters imply that the minimum wage is a crucial part of our national heritage, never to be challenged or examined. Who is that silence supposed to help? Certainly not Australia’s unemployed, pushed out of the employment market by a minimum wage they are told is for their benefit.