Why Do NZ Workers Get Higher Wages Than Australians Working For The Same Companies?

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How is it that major Australian companies can agree to a living wage in one country, and try and undermine it in another? Alison Pennington weighs in.

A 19-year-old Kmart employee in Australia helpfully directs a customer to the homewares section during her five-hour weekday shift at $17.50 per hour. Despite holding three years’ experience in the retail industry, she only earns 80 per cent of what her older colleagues earn due to Australia’s minimum wages system that denies equal pay to young workers performing the same roles.

The FWC decision to cut penalty rates for retail and hospitality workers last year reduced her pay by over $60 per week. In fact this year for 2018-19, aggregate income losses for all workers in retail, hospitality and pharmacy will be around $630 million. That loss will double once the Sunday penalty cuts are fully in place next year. $1.25 billion in wages will be lost every year.

Now let’s travel across the Tasman to Kmart in New Zealand where employees just won significant wage increases to a “living wage” of $20.55 per hour. The living wage has been independently calculated by experts, and is designed to cover the explicit costs of managing a household, raising children, and participating in community life in New Zealand. In short, it is a wage sufficient to secure a basic, but decent quality life.

Kmart employees who are members of their union will receive an immediate pay rise to $20.55 per hour after 6 months experience, rising to $21.15 per hour next year. Unlike Australia’s pernicious junior wages system, this will be paid to all workers regardless of age.

Kmart employees can be paid a living wage because unions, communities, faith groups and governments have been working together since 2012 to make the living wage a reality. Through determined campaigning, First Union’s ‘WorthIt’ campaign has now won living wages at Bunnings, Mitre 10, and Kmart, with negotiations ongoing at Cotton On and with the Australian supermarket giant Woolworths (branded as “Countdown” in New Zealand).

The living wage is $4.05 or $162 per week above the latest legislated minimum wage. With around one-third of wage and salary earners (approximately 680,000 workers) earning below the 2018 living wage benchmark, the living wage campaign has bold aims.

But this cross civil-society wages campaign is working to lift thousands of workers out of poverty. More than 100 employers across many industries have committed to paying living wages. The Ardern government has agreed to pay all its own employees at least a living wage. And private sector firms of all sizes are signing on. Crucially, this includes the very same big companies lobbying against stronger minimum wages in Australia.

Big retail reigns in Australia

That Woolworths and Kmart pay living wages to employees in New Zealand but not in Australia requires some examination. Big retailers have been very profitable in Australia. Since Woolworths and Coles hold almost 70 per cent of Australia’s grocery market, they get “first dibs” on Australians’ diminishing disposable income. Through aggressive supply-chain strategies, this “duopoly” now pulls the strings of entire industries like agriculture, transport and logistics.

Australians understand the negative impacts of the overwhelming buyer power retail firms wield in the supply chain for goods and services. That dairy farmers suffer in the supermarket milk price war, for instance, is viewed as wildly unfair.

But what Australians understand less is that as employers, big companies like Woolworths, Coles and Kmart, also wield huge power over millions of Australian workers. As enormous employers, they throw their weight around – both in the labour market, and in the policy arena – whenever an opportunity to reduce wages and increase profit margins arises.

The recent interventions of big retail corporations into employment relations have been staggering. After Coles had its enterprise agreement (EA) terminated by the Fair Work Commission (FWC) in 2016 because it failed the FWC’s “better off overall” test (BOOT), Woolworths threw its hands in the air and declared enterprise bargaining “unworkable”.

 After years of windfalls from compensation practices that often effectively fell below award minimums, large retail (and fast food) firms then held future EA negotiations hostage. Meanwhile, they engaged in furious public lobbying to cut penalty rate cuts during the FWC’s review in 2017, pocketing millions more in dashed wages.

A great deal of lobbying to suppress the earnings of low-wage workers in Australia also goes on behind closed doors. The latest goal of big employers is to purge the BOOT entirely. This was just proposed by the head of the Productivity Commission, to once again allow companies to negotiate collective agreements that undercut legal minimums. And it reeks of big company bidding.

That New Zealand workers are securing much better pay rates in the same firms leading the charge to undermine legal minimums in Australia is a slap in the face for retail workers on this side of the Tasman. But it’s also a wake-up call for Australians about the power we allow large firms to wield over our employment relations system, and hence shape the lives of millions of people.

Making living wages real

The living wage was recently propelled into national debate when the ALP announced it would reinstate living wage principles in minimum wage setting. The ACTU has campaigned to raise the minimum wage to a living wage of 60 per cent of median earnings. But in the wake of election defeat and with a conservative government ready to double down on policies of wage suppression, Australian labour advocates now confront questions of “next steps” for the living wage.

Thankfully, the living wage is not new to Australia. In fact, we created it. In 1907 an industrial relations judge named H.B. Higgins ruled in the “Harvester” case that wages should be sufficient to meet the “normal needs of an average employee, regarded as a human being in a civilized community”. Of course, the standard family has changed a great deal since then; we have less kids, more women are in paid work. But the idea of linking wage demands to the real costs of a decent standard of living is still valid.

More than valid, the living wage is an urgent task. For a generation, Australia’s minimum wage has lagged behind a living wage. This is because we have no protections against working poverty anymore. All our once-established levers for raising wages including unions, collective bargaining, minimum wages, and the Awards system are war-torn and eroded.

To strengthen our wage-setting levers, we need new and inspired leverage.

The living wage movement in New Zealand provides an instructive model that shows a broad push for living wages from community alliances – including unions, anti-poverty groups, communities, faith groups and councils – can win real wage increases.

A cross union and civil-society campaign for the living wage could succeed in Australia. New partnerships between unions and the community can rebuild the social profile and legitimacy of unionism, all the while expanding collective bargaining as the crucial norm-setting mechanism in low-waged jobs.

Some unions are working to build community alliance initiatives already. We need more.

Big companies are not above Australian labour laws. And a cross civil-society campaign that renews the case for the living wage in Australia could ground them.

It’s time for #Harvester 2.0.

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Alison Pennington

Alison Pennington is an economist at the Centre for Future Work, in the Australia Institute. Alison has written on public transit and flexible work arrangements and has a background in public finance, and public sector unions. She is currently researching the evolution of collective bargaining in Australia.

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