Focus: The erosion of a distinctive system

Abstract

INTERNATIONAL union rights Page 6 Volume 21 Issue 2 2014 Wages must be enough to support the wage earner in reasonable and frugal comfort But in recent decades, a disturbing trend has emerged and persisted. Until 2005, the Australian minimum wage bite (the relationship of minimum wages to average full-time wages or median full-time earnings) was the highest in the OECD. But over the last two decades, this has changed. In that period, our minimum wage bite has fallen sharply (see Figure 1), earnings inequality has grown and the incidence of low pay has risen. While Australia has not experienced a recession since the early 1990’s, the minimum wage bite has declined during both economic booms and times of slower growth. It has declined under each of the three institutions that have had responsibility for adjusting minimum wages over that time. While the real value of minimum wages has grown modestly since the late 1990s, the bite has still continued to fall. Australia is now rapidly converging with other OECD countries. If the trend of a declining minimum wage bite continues , Australia’s distinctive minimum wage system will have been lost. Our wage floor will, in a few short years, be akin to those of Canada or the UK (see Figure 2). This changes our country, for the worse. It means a significant decline in the relative living standards of low- paid workers, and it presents a profound contemporary challenge of the trade union movement. And yet despite this trend, more than a century after Harvester, the decision of Higgins still echoes through our system. His principles, modified and adapted, can still be found in our national labour law which directs the Fair Work Commission (who conduct the annual wage review) to have regard to the relative living standards and needs of the low-paid (Fair Work Act 2009, section 484). Heavily contested at the time, the Higgins view that business has an obligation to pay living wage A ustralia has historically been something of an outlier on minimum wages, even when measured against the rest of the developed world. Australia’s relatively high minimum wage and our essentially unique system of awards arbitrated by workplace tribunals has been a key reason why our country has had a relatively low inequality in earnings. The institutional arrangements adopted at both a State and Federal level ensured that our labour market exhibited a (relative) egalitarianism. Today, around 16 percent of Australian employees are paid exactly at the national minimum wage or an award minimum wage and the Annual Wage Review conducted by our national workplace tribunal indirectly influences the pay of many more. But bit-by-bit, in the current era, the traditional egalitarian character of Australia’s labour market is being eroded and the relative living standards of Australia’s lowest paid workers are declining. Australia adopted a form of minimum wage in November 1907. In the landmark Harvester 1 decision , Justice Higgins of the Commonwealth Court of Conciliation and Arbitration (applying a statue that said wages had to be ‘fair and reasonable’) held that workers were entitled to a living wage. He defined this by reference to ‘the normal needs of an average employee living in a civilised community ’. Higgins, using language that also appears in the famous 1891 Papal Encyclical on the working class Rerum Novarum, said that wages ‘must be enough to support the wage earner in reasonable and frugal comfort’. Harvester established a male basic wage. The intention was to support a minim standard of living for a male breadwinner and his family. But equal pay was not on the agenda. A 1919 case determined that women were entitled to 54 percent of men’s wages, a standard that persisted until World War II, when the standard rose to 75 percent.2 It wasn’t until key tribunal decisions in 1969 and 1972 that the principles of equal pay for equal work and (to more practical effect) equal pay for work of equal value were adopted, ensuring that he minimum wage system did not exacerbate the gender pay-gap. Shamefully, the last race-based differential in our system of minimum wages (in relation to...