Editorial: A 'cure' that must be resisted
A 'cure' that must be resisted
@box text intro = John Howard has sharply escalated his blame-the-victim campaign — a predictable response to recent poll results showing that the Coalition is beginning to pay a price for its economic attacks on working people.
Number one among people's concerns is unemployment. While the most recent figures indicate that more people are giving up looking for work, hundreds of workers are still being laid off every week, the number of new jobs is declining, and the official unemployment rate is stuck at over 8%. Unofficial estimates put the real unemployment rate at one in four Australians. Among young people, it is closer to one in two.
Howard now claims to have discovered a solution. "Americans have a much lower minimum wage", he told 2GB radio host Mike Gibson on July 8. The problem with Australia's higher minimum wage, he said, is that it results in higher unemployment.
This argument — that cutting wages will reduce unemployment — is now being promoted strongly by the big business media. It is utterly fallacious.
First, it misrepresents the reality in the US. The official US unemployment rate is 4.9%. That's "only" 6.7 million people. However, when these are added to those who are looking for full-time work but do not meet the official definition of unemployment, plus "illegal" immigrants, plus all those who have given up looking for work, the real unemployment rate in the US jumps to at least 12%. The rate among young people is around 34%.
Secondly, data from just about every country in the world reveal no direct (let alone causal) relationship between lower minimum wages and lower unemployment.
Spain, for example, has the highest official unemployment rate in Europe (22% and more than 50% among youth). Yet its wage levels are 20% lower than most European countries. Norway, on the other hand, has among the best paid workers in Europe, but it also has the lowest unemployment rate.
The underdeveloped countries, with far lower wages, have much higher levels of unemployment.
What Howard has not been so eager to publicise is the social cost of the US's low minimum wage. Around A$6 an hour is not enough to live on — 18% of full-time workers in the US exist below the official poverty line. More than 6 million people in the US escape poverty only by holding down more than one job.
Howard also omits to explain that workers in the US have no choice but to work for poverty wages.
Unemployment benefits in the US are limited to 26 weeks, difficult to obtain and unavailable to everyone who has never had a job. Clinton's 1995 welfare "reforms" limit the minimal food or cash vouchers given to those with no unemployment benefit; they are provided for only a limited period and have to be worked off in community service hours.
This places huge downward pressure on wages as workers compete desperately for whatever jobs, at whatever wages, become available.
This is the future for Australian workers and unemployed people if Howard and his corporate mates get their way.
Like Howard's "concern" for the soon-to-be jobless workers at BHP in Newcastle, this US miracle cure is a cynical lie. It enables the PM to be seen to have an answer to unemployment while softening up workers to lose yet another pound of flesh and laying the groundwork for deeper welfare cuts.
During 13 years in government the Labor Party oversaw a 24% cut in real wages, a rise in unemployment, the reduction of some welfare payments and a plethora of labour market programs. At the same time, Labor handed employers billions of dollars in subsidies which resulted in few real jobs. Kim Beazley and the ACTU's pathetically weak response to Howard's latest claim continues that record.
The only answer to the unemployment crisis is a shorter working week with no loss in pay. The need to raise and campaign for this is becoming more urgent each day.