ALP Living Wage policy would have perverse impacts

“Today’s living wage policy announcement by the Federal Opposition would have perverse impacts on the Australian labour market and it overlooks the significant increases to the National Minimum Wage in recent years. The policy should be taken back to the drawing board,” Ai Group Chief Executive, Innes Willox, said today.

“Most critically, the announcement puts at risk future growth in employment opportunities. The people most exposed to these risks are low-skilled people, part-time employees and young people. It also puts at risk a considerable swathe of Australian businesses that operate on low margins and provide jobs for low-skilled Australians.

“In support of the new policy, the ALP is presenting an excessively negative view of how the economy has performed for Australian households over recent years. Most tellingly, the ALP announcement neglects to mention that for several years on the trot, Australian businesses have been creating jobs at record rates. The total number of people in jobs was 11.3 per cent higher in January 2019 than it was in January 2014. The number of women in the workforce increased by 13.6 per cent over the same five-year period. For both males and females working part-time, the average number of hours worked increased over this period.

“The ALP policy would also have a negative impact on Australian wage relativities. If the National Minimum Wage is moved up to a level equivalent to 60 per cent of median earnings, as proposed by the ACTU, this would knock out the bottom 3 levels in the classification structure of many awards. This would mean that an unskilled labourer would be paid close to the rate of an electrician or fitter, and much higher than existing apprentice wage rates. This would have at least three disturbing impacts: it would further reduce the incentive for people to undertake apprenticeships or other forms of new training; it would most likely lead to many people leaving the trades; and it would reduce employment opportunities for low-skilled people – such as new workforce entrants.

“The problems created by the approach proposed would not be limited to just the lower wage levels in an award; there would be distortions in the relativities between wage levels right up to the top levels in the classification structure.

“The Fair Work Act already includes balanced criteria that must be taken into account by the Fair Work Commission when determining minimum wage increases. The criteria include the needs of low paid workers, relative living standards, employment growth, workforce participation, and the performance and competitiveness of the Australian economy. The last two annual wage reviews have delivered 3.3% and 3.5% minimum wage increases to workers – far in access of inflation and average wage movements. Therefore, any suggestion that the Fair Work Commission is not giving enough weight to the needs of low paid workers in 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 impose unbalanced criteria that would require the Fair Work Commission to give inadequate weight to the impacts of their decisions on businesses, employment and the broader economy.

“I think we all want a prosperous nation and prosperous Australians but this isn’t the way to achieve it,” Mr Willox said.

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