It has been argued here that reducing joblessness among Australia’s most disadvantaged is not easy and requires a whole range of labour-market, welfare, social and education policies. However, part of any package of measures would be incompatible with the current minimum wage.
The AFPC has replaced the previous means of setting the minimum wage and other award conditions. Importantly, the AFPC is required to take account of the impacts of wage rises on employment and unemployment. The inclusion of the interests of the most disadvantaged, the jobless, rather than simply the interests of the unions and employer groups, has the potential to be a major step forward. Setting a wage that allows everyone who wishes to work to find paid employment must be the core aim of the process. Pricing workers out of jobs should be strenuously avoided.
Market forces, as exemplified by supply-and-demand analysis, should underpin the logic of the decisions. There are many considerations that go into the final determination of the adjustment but primary among these must be the certainty that excessive wage increases will keep many people out of work who otherwise would find jobs
Although some employer groups argued that the old system should be abolished they have found that they have another one very much like it in its place, a major difference being that there is only the opportunity for submission of argument and no opportunity for debate on the relative merits of these submissions.
The suggestion that the minimum wage must be raised to a level that allows wages to compete with the welfare payments that might instead be received is economically unsound and deeply insulting to the unemployed. The decision to work rather than live on welfare is thus taken from the unemployed who would to some extent be in a position to choose whether to work or remain on welfare. Welfare should be seen as an entitlement for those who have no alternative. It was incumbent on the AFPC to point out the problems inherent with setting a minimum wage which maximises employment in the context of a generous social-security system.
There are a number of technical issues in regard to the conduct of the AFPC wage decisions that are important considerations.
There is, primarily, a question of whether the AFPC has stayed within its Terms of Reference. The objective of wage determinations of the AFPC and matters to which it is to have regard is set out in section 23 of the Workplace Relations Act:
…the objective of the AFPC in performing its wage-setting function is to promote the economic prosperity of the people of Australia, having regard to the following:
The capacity for the unemployed and low paid to obtain and remain in employment;
Employment and competitiveness across the economy;
Providing a safety net for the low paid;
Providing minimum wages for junior employees, employees to whom training arrangements apply, and employees with disabilities that ensure that these employees are competitive in the labour market.
Section 24 of the Workplace Relations Act gives the AFPC wide powers to determine its own procedures. The AFPC may determine the timing and frequency of wage reviews; the scope of particular wage reviews; the manner in which wage reviews are to be conducted; and when wage-setting decisions are to come into effect.
The brief the AFPC has made up for itself is a very wide one which seems to go beyond the intent of the Act. The terms of reference of any body which replaces the AFPC should be looked at thoroughly to ensure that they are not being exceeded. It is not clear at the time of writing exactly what will be the approach taken and the terms of reference of the Rudd government’s alternative to the AFPC under the umbrella of the omnibus industrial-relations body Fair Work Australia.
A major fault in the AFPC process is that it is one in which submissions can only be addressed to the issues and not to the submissions of other parties. The AFPC and its successor should welcome the observations of individual parties on the submissions made by others. It will deepen the process.
The relevant decision-making body within Fair Work Australia set the task of determining the minimum wage needs to be more clear cut about its own reasons for a decision. Statements by the Chair of the AFPC outside the process that he was pleased to be able to be told of the financial difficulties faced by those on low incomes suggests that the process is attempting the impossible. Adjusting the minimum wage should not be seen as an aspect of social welfare.
The process should adjust the minimum wage only. Adjustment of all award rates perpetuates the centralised system. Minimum-wage adjustment allows the labour market to adjust, while the maintenance of the award structure prevents relative wage movements in response to changes in the market from taking place.
Hopefully the new Fair Work Australia will take on board the criticisms of the AFPC and introduce a more satisfactory process