Caution needed in lifting minimum wages

Yet lifting minimum wages can also go too far. Some employers, especially small businesses on tight margins, will be less likely to hire.

Australia has a long tradition of leaving this dilemma to the experts on the FWC but the ALP seems unhappy with the independent umpire’s approach. In addition to changing the rules for the minimum wage, it is also promising to override a recent tribunal decision to cut Sunday penalty rates for some workers. Yet undermining the independence of the FWC comes with risks. It could give a future Coalition government an excuse to intervene on the bosses’ side.

The good news is that the ALP policy is hedged with a few caveats. First, Mr Shorten says it will consult widely and then take a long time to raise the wage to whatever the FWC determines is the new level.

Moreover, the increases to the minimum wage won’t flow automatically through to workers on other higher wage rates which are linked to the minimum wage under enterprise bargaining agreements.

Indeed, despite the new slogan of a “living wage” the new criteria Mr Shorten has proposed are not that different to the sorts of things the FWC already considers.

The fact that business reaction has not been too hostile suggests that the ALP’s policy is more about presentation than substance. It may turn out to result in only fairly minor changes.

If the ALP is serious about fighting for battlers, there are better places to start. The Herald’s investigations have exposed how many workers, including temporary migrants, are being ripped off and paid less than the minimum wage. Ramping up enforcement would help the most vulnerable.

The other obvious place to look is the tax and welfare benefit system which, unlike wages, does not distort employers’ hiring decisions. The ALP should consider the Newstart job search allowance which, unlike the minimum wage, has not been raised in real terms for decades.

Tax cuts targeted at low paid workers are also a good way to boost take home pay. With the Coalition likely to use the federal budget next week to announce further tax cuts, the ALP has a chance to offer a point of difference with a tax package of its own that is skewed more to battlers.


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