Labor has been arguing for months that the price of everything has been going up, except your wages.
But the debate over the minimum wage really took off on Tuesday when Anthony Albanese endorsed a specific pay rise: 5.1%, to keep up with inflation.
Now the government is accusing Labor of policy on the run and an “unprecedented” intervention in an independent wage-setting process. Is that true?
How is the minimum wage set?
Every year the Fair Work Commission holds the annual wage review, receiving submissions from unions, employers, governments and other stakeholders.
By mid-year, the commission’s minimum wage panel orders an increase in the national minimum wage and the safety net in industrial awards, a decision which more than 2 million workers rely on to set their wage.
What is Labor’s policy?
Labor has promised that, if elected, it will put in a submission to the review backing an increase in the minimum wage.
The Coalition government regularly puts in a submission that takes note of economic conditions but doesn’t advocate for a pay rise of a particular size.
In fact, unions and Labor believe the government tries to hold back pay rises, by submitting, as they did this year, that low-paid work is an important feature of the economy.
How did this become a number?
On Monday the Australian Council of Trade Unions upped their proposed increase from 5% to 5.5%, due to surging inflation.
Albanese was asked on Tuesday morning if he backed the unions’ call for 5.5%, which he declined to do. Later, at a press conference, he was asked if he backed 5.1% to keep up with inflation, and replied: “Absolutely.”
What did the government say?
The government went on the attack.
The financial services minister, Jane Hume, said:
What’s wrong is Anthony Albanese weighing in on the independent Fair Work Commission’s decision as to what it should do with minimum wages. That would be unprecedented. No government should weigh in on the Fair Work Commission’s decision.
Scott Morrison accused Albanese of being a “loose unit” who “just runs off at the mouth” – by answering the question he was asked.
Morrison also argued against 5.1% by claiming that Albanese “pretends to give with one hand, and then he sees interest rates and cost of living rises take it all back from you”.
When pushed, Morrison wouldn’t say how much he’d like to see the minimum wage rise by, or whether it would be inappropriate if the FWC ordered 5.1%, just that it was “not wise” for politicians to have a view.
Is this unprecedented?
No.
Labour law academic, Prof Andrew Stewart, told Guardian Australia that although it has “become the norm” that government submissions are general in nature, the Labor governments of the late 1980s and early 1990s put in agreed submissions as part of the Accord with unions, which all nominated pay rises.
Tim Harcourt, who ran minimum wage cases for the ACTU in the 1990s and went on to serve on the FWC minimum wage panel, told Guardian Australia that in Accord era pay reviews, governments did make submissions that “often had numbers in it” on the preferred size of pay rises.
As parliamentary library archives show, even the Howard government put in submissions with a specific number on their preferred pay rise, often countering union claims for $20 more a week with more modest calls for $8 or $10.
“The government intervenes in the commission all the time to put a view on wages – as they did in the only successful equal remuneration case in the social and community services sector,” Stewart said. “Even in the national wage case, specific numbers were the norm.”
Jim Stanford, the director of the Centre for Future Work, said it was “not at all unprecedented to suggest that the national minimum wage should at least keep up with consumer price inflation”.
“To the contrary, it is rare for the national minimum wage to increase by less than the rate of inflation,” he told Guardian Australia.
“In the last 20 years it has only happened twice that the increase in the national minimum wage was smaller than the inflation in the preceding financial year.”
Is it improper?
Stewart said: “There is nothing improper about it – it is still the decision of the independent umpire.”
RMIT University labour law academic, professor Anthony Forsyth, agreed that it was “unexceptional” for the government or opposition to advocate for a pay rise, and the commission takes a “list of factors” into account when deciding.
Harcourt said “it’s a free country”, and both the government and opposition are entitled to a view. “The commission understands. It’s not the same thing as the treasurer ringing up and saying ‘you must not give them 5%’ – that would be interference.”
Is it irresponsible?
The Reserve Bank has projected that inflation will reach 5.5% by mid-year, 6% by year’s end, before falling to 4.25% by mid-2023.
So, a pay rise of 5.1% would amount to a real pay cut for half the year but be greater than inflation by the middle of next year (hopefully).
Stanford said there was “nothing unprecedented about nominal wages growing at 5.1%”.
“In fact, average weekly earnings grew faster than that three times during the decade from 2000 through 2010 (2003, 2005, and 2010).
“Suggesting that it is unusual for wages to grow 5.1% in a year, especially in a tight labour market, just shows how far the goalposts have shifted during the last decade. Annual wage growth of 4-5% was once typical, and in fact desired. Now it is seen as a portent of doom.”
Verdict
It is neither unprecedented nor an interference with the independence of the commission to propose a minimum wage rise of a particular size, though it hasn’t happened in more recent years.
As to whether 5.1% would be responsible – that will be for the FWC to decide.
Ironically, the Coalition rubbishing 5.1% as a potential cause of further inflation prejudges what is affordable and responsible – which is exactly what they have accused Albanese of having done.
