Graham Matthews
An academic appointed to advise the Australian (un)Fair Pay Commission (AFPC) on the link between wages and unemployment has called for the minimum wage to be frozen. According to Professor Phil Lewis in the July 22 Australian, there is evidence that "650,000 more people would now be working if the minimum wage had been frozen for the last decade".
Since the formation of the AFPC, neoliberal academics have been falling over themselves to "prove" that a rising minimum wage costs workers' jobs.
The minimum wage used to be set by the Australian Industrial Relations Commission (AIRC) after hearing submissions from employers, government and unions. Under the federal government's Work Choices legislation, the AFPC will set the minimum wage after only seeking academic advice on whether it should be increased and, if so, by how much.
Lewis, professor of economics at the University of Canberra and director of the National Centre for Social and Economic Modelling, was commissioned by professor Ian Harper, head of the AFPC, to review research on minimum wages "and their role in causing unemployment".
Lewis claims that there is evidence supporting this thesis. Lewis's yet-to-be-published review also suggests that 290,000 extra people would be in the work force now had minimum wage increases only kept up with inflation over the last decade. He claims that this figure would rise to 650,000 had the minimum wage been frozen.
Lewis's conclusions follow the release of a study, in April, by Peter Dixon and Maureen Rimmer from Monash University, which argues that 500,000 more jobs would have been created had the federal government's suggestions for minimum wage increases been adopted by the AIRC since 1996.
In February, Melbourne University professor Mark Wooden went so far as to argue that freezing the minimum wage was not enough. The only way to herd the unemployed and single parents back to work was to cut welfare payments, he said.
The new welfare-to-work legislation, which will shift many disability pensioners and single parents onto Newstart with its lower benefits for parents and lower threshold for extra income, will go some way towards doing what Wooden suggested. It will force many disadvantaged workers into low-wage, casual jobs, or to risk losing their welfare benefits entirely.
Yet as Dr Chris Briggs from the Workplace Research Centre argues in Federal IR Reform: the Shape of Things to Come, published in November 2005, "Put simply, opponents of minimum wage standards and increases have been unable to empirically prove the safety net increases of recent years have cost jobs. Pulling out the 'floor' to the labour market is a leap into the unknown with serious risks."
According to Briggs, while Australia currently has relatively low numbers of very low-paid workers, in most industries the cumulative effect of the Howard government's IR changes will be to increase their numbers, particularly among women workers. "Over time, the incidence of low-paid employment and the working poor in Australia will rise towards the levels found in the UK and the USA under the reforms proposed by the Coalition", Briggs argues.
Briggs writes that forcing workers to accept jobs with a frozen minimum wage will lead to more cuts on welfare. "Clearly, a low wage strategy cannot also work unless the standards of the welfare system are eroded. Entitlements will have to be either withdrawn or lose their purchasing power in order to maintain the incentive to work ... The end product will be to deepen poverty whilst leaving intact disincentives to work for those with some degree of choice.
"So although the effect of welfare reforms will be to prod disability and single parent allowance holders in short-hour, low-pay jobs, the countervailing effect will be a larger group who rely on transfer payments to supplement their incomes."