NEWS

Tuesday, 04 April 2017

MRC Executive Director Nick Cater writes in The Australian:

What was Sally McManus banging on about when she told an incurious National Press Club audience that the minimum wage had “fallen to a dangerously low level”?

If by “dangerously low” she means that the third highest minimum wage in the OECD isn’t generous enough, then she has a point. If not, she is treating us like idiots by telling us that black is white, something that happens quite a lot when pious pretenders on the ideological left get on to their pet subject of “fairness”.

A statutory minimum wage has been part of the Australian workplace for more than a century. Its social benefits are seldom contested. The justification for increasing it by 7 per cent, however, when ­average wages are rising at less than 2 per cent is hard to fathom. Centralised wage decisions are blunt instruments for income redistribution; the tax and welfare systems are better suited to that task.

The ACTU secretary’s assertion that the minimum wage has “fallen” is another semantic con job. The 8.1 per cent rise in the statutory minimum wage in the past three years is larger than the average worker’s 5 per cent pay rise across the same period.

In a lengthy report released two years ago the Productivity Commission concluded that large increases in the minimum wage would make lower-skilled, less experienced employees less attractive to employers and would reduce employment hours and headcount.

In other words, the benefit to low-paid workers would be at the expense of the unemployed, thus contravening the Fair Work Act, which is charged with promoting social inclusion through greater workforce participation.

Such niceties mean little to Bill Shorten as he perpetuates the class struggle with phony hard-luck stories like that of Margarita Murray-Stark, the hotel cleaner bussed to Canberra by her union last week to complain about a cut in her wages that won’t be made.

Shorten’s symbolic crusades bear little resemblance to the pragmatic policies of Bob Hawke. Hawke co-operated with business to create a climate in which jobs and wages flourished. Shorten is a sentimentalist who calls press conferences to show he cares.

Solving problems no longer matters; it is enough to pin a coloured ribbon to one’s lapel and connect to the hashtag.

The comfortable assumption in polite company these days is that income inequality is rising in Australia. They’ve read their Thomas Piketty — or, rather, they know people who say they have.

The evils of inequality provide the prism through which the Labor Party views almost every public policy challenge. It is the basis on which it tacitly supports the ACTU’s audacious minimum wage claim and opposes reductions in weekend penalty rates proposed by an independent umpire.

Raising the minimum wage, paradoxically, does little to help the poorest. Those affected are predominantly aged under 25, live in medium-income households and are unlikely to stay on it for long. The poorest 20 per cent are unlikely to benefit since their main income source is welfare.

Back in the harsh world of the real economy, a rise in the minimum wage would be another blow for the small and medium-sized businesses that are the biggest losers from union overreach.

The big boys are able to strike wholesale enterprise bargaining arrangements with the unions that negotiate away awkward penalty rates.

The small independent businesses have to pay full freight. Or else they choose to deal in the off-the-books economy, paying workers through devious means to dodge the punishing combination of the minimum wage and penalty rates.

Few societies do more than Australia to assist the poor. The long-term rise in the Gini coefficient — a broadly agreeable statistical measure of income disparity — is partly accounted for by the increase in pensioners and other welfare recipients that result from the ageing population and high net migration. We also should be cautious about confusing income and wealth.

Income disparity in Australia is less pronounced than in other developed economies. It has one of the world’s most progressive tax systems and generous, targeted welfare. In the trade-off between tax and welfare a third of working households pay no net tax at all.

 

The egalitarian spirit is strong. Australians suffer no ill will by becoming richer than their neighbours through honest means, providing they don’t adopt airs and graces. In Australia, as DH Lawrence once observed, “there is all the difference in the world between feeling better than your fellow man and merely feeling better-off”.

Indeed, income equality is an economic virtue.

The expectation of earning a good living is the motive power for growth in energetic, middle-class societies such as Australia.

 

The rise of the politics of resentment suggests that something has changed. Focus groups report that the appetite for work has not diminished but expectations have been lowered. After three years of flat wages and shrinking opportunities, Australians seem no longer sure that honest toil is enough to get ahead.

The cruelty of envy politics is that the individual is made to feel powerless. Misfortune is visited by outside forces — tax-dodging multinationals, greedy bankers, a broken system — that they cannot control. Economics becomes a form of voodooism; favour relies on the whim of the gods.

A less cynical force than the modern Labor movement would fight this pernicious sentiment. It would restore the belief it once held in the healing powers of a growing economy, one that gives investors confidence and employment to the workers.

Instead it offers fairness, the abstract noun of choice in the foundation-less modern left. It is a quality one cannot see, hear, touch, taste or smell and its presence cannot be measured empirically.

Fairness seldom featured in Hawke’s vocabulary — or indeed that of any Labor leader until the end of the past decade. They argued for the fair go, a sentiment that express parity of opportunity rather than equivalence of outcomes, words that empower rather than enfeeble.

 

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2019 by Menzies Research Centre