Wednesday, July 9, 2008

A Fair Decision

The decision by the Australian Fair Pay Commission to award minimum wage earners an increase of $21.66 a weak was both the least and the most they could do. That figure represents almost exactly the 4.2% inflation rate, but because it is a fixed dollar amount, the increase for workers on awards above the minimum will actually be below inflation. As the pay scale increases, the fixed amount of $21.66 represents a diminishing proportion of the total when expressed as a percentage. When taken together with the recent tax and welfare changes, minimum wage earners will actually come out a little in front. On balance anything less would not have been fair, anything more would have been economically irresponsible.

Now, the representatives of business such as the Australian Chamber of Commerce and Industry and the Australian Industry Group are all criticizing the decision for being too generous and running the risk of being both inflationary and too great a burden on small business. The truth is that the increase is a modest one and certainly won’t be a significant driver of inflation. That particular monster is being driven by global factors including oil prices, the credit crunch and of course the resources bonanza. It has very little to do with the earnings or the spending habits of the ordinary battlers who are nevertheless usually expected to carry the can in the form of wage restraint.

The truly offensive thing about the demands for wage restraint is that in many cases the call is coming from the politicians, the bureaucrats, and the business leaders who have no idea what it’s like to return groceries to the shelf because there’s not enough money in the purse to pay for them all. The very people who are telling us that times are tough are the same ones on six or even seven figure incomes, and who have enjoyed income growth well beyond the level of inflation.

I have always recognized the importance of paying top people top money for doing important work well. But the trouble is that in the same week as minimum wage earners are awarded an extra $21.66 a week, the top public servants in Canberra have been handed an extra $1400 a week. That’s more in one week than minimum wage earners will receive in a whole year!

Criticising that 19% public service payrise is not a matter of greed or envy. It’s a matter of expecting the discomfort of belt tightening to be shared by those at the top as well as the bottom.

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