When the Fair Pay Commission announced last week its decision to keep Australia’s federal minimum wage at $14.31 per hour or $543.78 per week, there was a chorus of criticism from unions and the left. The decision, amounting to a wage freeze for some of the nation’s lowest-paid workers, was the first time in 17 years that the minimum wage had not been increased.
Acting Prime Minster and Industrial Relations Minister Julia Gillard called the decision "disappointing", while vowing to accept the umpire’s decision. Unions and analysts pointed out that the decision amounts to a wage cut once inflation is taken into account. On the other hand, the business lobby and some of their hardline neoliberal supporters like the Institute for Public Affairs and The Australian‘s Michael Stutchbury were delighted.
The Fair Pay Commission was set up by John Howard to determine minimum wages with the veneer of independence, but in fact with a group of hand-picked commissioners who typically veered to the economic right in their view of wages and labour. Alongside the Commissioner, Professor Ian Harper, who has proved himself to be politically adroit in presenting his essentially pro-business views as being reasonable and even-handed, Howard selected one of his favourite culture warriors from the 1980s, the notoriously anti-union Judith Sloan.
It’s not a bad gig being a Fair Pay Commissioner, by the way. Despite it being a nominally part-time job, Harper received $124,990 a year for his work there, including regular pay rises whenever they came through from the Remuneration Tribunal; other commissioners got $62,500. The irony of a "part-time" commissioner who earns something like twice the average full-time wage has generally been lost on most commentators and journalists, although to his credit, The Australian‘s Ewin Hannan took the opportunity to ask whether Professor Harper will be receiving a pay rise this year. (Harper was able to plead a technicality, as the Tribunal will not assess his pay until after he finishes).
Last week, Commissioner Harper justified the decision on the grounds that it was "primarily intended to protect jobs". In this, he was simply repeating the orthodoxy of many first year economics textbooks. Sadly, that orthodoxy is wrong.
Like other economic myths, the belief that increasing the minimum wage hurts employment for low-paid workers dies hard. In fact, as US economists Alan Krueger and David Card have demonstrated, there is almost no empirical evidence to support the theory that raising the minimum wage hurts employment. When John Quiggin and Steve Dowrick analysed the literature on minimum wages in 2003, they found little relationship between minimum wages and employment levels, but a very strong relationship between low minimum wages and increasing inequality.
Countries like the United States with low minimum wages had much greater levels of inequality than countries with higher minimum wages like Australia and the members of the European Union. The reason appears to be that holding minimum wages low doesn’t destroy many jobs, but it does have a broad impact on inequality by holding the wages of low-paid workers down across the board. "There is little reason to expect strong employment benefits from freezing minimum wages in nominal terms, that is, reducing minimum wages in real terms," Quiggin and Dowrick concluded.
Pay is only one part of the employment equation. Just as important as pay is the kind of work we do, and the conditions under which we do it. In this regard, the minimum wage issue is merely a smokescreen for some of the far more entrenched issues in Australian workplaces. The places where work and the jobs we do can be rewarding and stimulating. But they can also be alienating, dehumanising and dangerous.
A 2007 University of South Australia study looked at the experiences of 121 female low-income workers in the modern Australian workplace — post-WorkChoices. It found profound and widespread job insecurity. Of those 121 women 57 had been dismissed or forced to resign. Many women described arbitrary or unexpected dismissal, sometimes by phone or email, often with no warning. Some were harassed, bullied and discriminated against. As the authors concluded, "arbitrary dismissal has powerful effects in diminishing workers’ expectations and voice in their workplaces."
A 2003 study by the Human Rights and Equal Opportunity Commission found more disturbing evidence. This phone survey of 1006 employees found that "28 per cent of women and 7 per cent of men stated that they have personally experienced sexual harassment in the workplace at some time." Of that, 20 per cent of the sexual harassment experienced involved "sexual assault", 19 per cent involved "sexual coercion" and 62 per cent "included physical harassment".
And while tens of thousands of Australians are losing their jobs in this recession, other Australians are working long and often unhealthy hours. According to the ABS, nearly a third of Australian men are working more than 50 hours a week. At the same time, increasing numbers of younger workers can’t get work at all. According to ANU labour market economist Bob Gregory, the evidence suggests that younger workers, the unwell, the socially marginalised and men in manufacturing industries are suffering the worst unemployment effects of this recession.
Meanwhile, the gender problems of the Australian workplace are legion. The top end of town still has a serious fixation with penises, if the figures are anything to go by. According to the Government’s Equal Opportunity for Women in the Workplace agency, there are only 89 women in board positions throughout the whole of the ASX 200, compared to 1091 men. Just 89! This figure has actually gone backwards since 2006. According to Dr Ian Watson at Macquarie University, female managers are paid $22,000 less than male managers at the same level.
Many now argue that it was the outrageous risks taken by mainly male decision makers that were partly responsible for the current global financial crisis, pointing out that gender balance in our corporate elites is long overdue. Foreign Policy magazine, for instance, is describing the current global recession as "the death of macho".
If a lack of diversity in the workplace can be highly risky to the hiring organisation, what’s needed are not just more women, but many more types of human minds altogether. In his recent book, Create Your Own Economy, US economist Tyler Cowen argues that autistic people should be sought out by business and government, because they possess what he describes as "a source of wisdom that so far has been largely ignored by mainstream intellectual culture". How many other pockets of wisdom do our business and political elites ignore? Given how many have been educated in similar disciplines at the same institutions, the answer is almost certainly "many".
Happily, this was the last decision from the Fair Pay Commission. One of the remaining vestiges of WorkChoices, it is going to be disbanded by Labor and replaced with an arm of Fair Work Australia, a new body which will administer the provisions of Labor’s Fair Work legislation.
Let’s hope the new body has a more enlightened view of the full dimensions of human diversity. Australia can’t afford to continue to waste so much of our nation’s human talent.