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Wage Justice can be delivered while also containing inflation

Anthony Albanese stands besieged for suggesting a minimum wage increase which keeps pace with inflation. Specifically, that is 5.1% This would raise full time wages by just $39.40 a week – less than a dollar an hour. Businesses are claiming such a move would drive them to the wall and fuel inflation. But since the 1970s labour’s share of the economy has fallen by over 10 per cent, from 58.4 per cent to 47.1 per cent: or $16,800 a year for the average worker. Especially; why is it that the Conservatives believe it is the job of the country’s lowest paid to pay the price for inflation when many businesses are experiencing spiralling profits? If wages cannot even keep pace with inflation, at what point can the structural inequities in the country’s labour market be addressed?

It is true that higher wages may have some impact on inflation. There are areas where increased costs will at least in part be passed on to consumers. But this is a false economy based on the exploitation of the poorest workers. It suggests a policy of drifting towards a US style labour market where there is a large class of working poor who can barely keep their heads above water. Fear of falling into the working poor disciplines the so-called ‘middle class’. And threat of homelessness and destitution disciplines the working poor themselves. This is the trajectory the Conservatives would take us down.

But arguably in the name of fairness there must be a ‘structural correction’ for low-paid workers at some time or another. This may have a small, temporary impact on inflation; but it is necessary if the most exploited are to survive in dignity and make ends meet. The prosperity of high and middle income earners cannot be based upon the exploitation of a class of working poor.

Also there are other ways of dealing with inflation. Raising taxation (for those who can afford it) could take the heat out of the economy without depending on the working poor to pay the price. This is a better, fairer way of dealing with inflation. But some inflation is inevitable on account of international factors; and we should share the burden of dealing with this across society and economy.

At the end of the day an even larger correction is justified. That is: to restore labour’s share of the economy, and the grow the social wage and welfare state to support all Australians. This is necessary as some problems are best faced collectively; and also the labour market will never deliver full distributive justice to all workers. All workers deserve support; including those who find it hard to organise; or who face structural constraints to wage increases. Because of the way the Australian economy is now structured all this is no easy task. The process could begin with claims for collective capital share in lieu of greatly increased wage levels. This is a process that could be led by unions; who could target areas that are not overly susceptible to capital flight. Also low-paid workers could be assisted by a rescission of secondary boycott bans where secondary boycotts are taken by well-organised workers in support of workers with little bargaining power; and where such action can be shown to be being taken in good faith.

Albanese has promised action on wages. But even committing to matching inflation does not compensate for falling wages over the course of the last decade and more. Though Labor’s housing policy – which involves the government taking up to 40 per cent equity in families’ houses – will put home ownership within reach for many who may otherwise have felt the situation hopeless. As interest rates increase the price of properties will probably fall – a ‘double edged sword’ that – while perhaps necessary – will leave many Australians looking poorer on paper.

One area where Albanese has been unequivocal has been his support for a 25 per cent rise in the wages of Aged Care workers. This is one of many areas requiring a ‘structural correction’; both to deliver wage justice; and also to improve care, and retain workers in the industry. Given the taxing and skilled nature of the work there should be a minimum wage of at least $30/hour here. This is more than the existing claim.

In the final analysis the economy makes so much wealth; and the question is one of distribution, as well as higher productivity; and industry policy encouraging high wage industries. Increasing the size of the cake is good – but does not solve all problems. At some point we need to confront the question of who gets what share of the cake; and this will require redistribution. Sometimes it’s possible to have ‘win-win’ – but not always. We cannot become a US style economy where workers are disciplined by fear of destitution; and where the living standards of a so-called ‘middle-class’ depend on the exploitation of the working poor.

 

This article was originally published on ALP Socialist Left Forum.

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8 comments

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  1. Albos Elbow

    Let’s clear up a few more Scummo lies about inflation.
    Wage increases has nothing to do with the current 5.1% inflation rate, because wages have been holding steady for nearly a decade.

    The main causes of inflation under Scummo have been:
    Reckless spending, lump sum cash handouts, early access to Super funds and tax cuts made by COAL-NP all contributing to increased demand and price increases.
    No government policy to try and slow down rampant increases in housing and rent costs.
    Corporate greed raising prices and profits quicker than the costs of goods have gone up, putting upward pressure on inflation,
    An RBA board, which is heavily biased in favour of COAL-NP, not raising interest rates soon enough to help control inflation.
    A biased media incorrectly putting the blame for cost of living increases and inflation on everything and everyone but but the COAL-NP government, so COAL-NP have done nothing about it.
    Increased supply of money. COAL-NP is printing money and issuing bonds to pay for their reckless spending and pork barrelling, which is putting great pressure on prices and demand.
    COAL-NP artificially keeping retail energy costs high, to save coal, oil and gas fired power generators from the threat of increased competition from renewable energy, which is much cheaper.
    The fall of the Australian dollar under COAL-NP and the biased RBA, because of their expansionary monetary policy and tight hold on interest rates and wages, while other economies in the world are doing the opposite.

    If raising the minimum wage by just $1 an hour is going to break the Australian economy, then the Australian economy is in a very poor state indeed and under very seriously bad economic management.

    Inflation is a lagging indicator, which means that it provides information on something that has already occurred, so the blame rests squarely on the incompetent shoulders of those in power in Australia for the last 9 years.

    During that period, inflation, generally has been running at around 2% per year, or about 20% increase over the 9 years that COAL-NP have been in power. It is a normal part of our economic system which means that your money is worth increasingly less each year unless it is compensated by productivity increases, interest rate increases and/or wage increases.

    To ensure that your money and general standard of living is keeping pace with inflation, requires constant adjustments to the interest rates and wages in line with those movements in inflation. COAL-NP have deliberately kept interest rates and wage increases very low to appease their billionaire political donors and help them make record profits at the rest of Australia’s expense.

  2. Terence Mills

    If as the government insists, the unemployment rate at 3.95% is the lowest in forty years then it would seem that an increase in the minimum wage is a question of if not now, then when

    But, ultimately the decision will be that of the Fairwork Commission not politicians.

    Morrison’s scare campaign has already run out of puff and he knows it.

  3. Andrew J. Smith

    Agree with the analysis and using another metric i.e. population demographics, not UNPD derived ABS data e.g. the NOM Net Overseas Migration snapshots for media headlines/dog whistling, but OECD data showing long term trends; they are stark and suggest there is a need for increase in salaries/wages, hence contributing to budgets via PAYE taxes.

    Working age cohort of 15-64, includes peak persona/household investment and consumption, passed the ‘demographic sweet spot’ pre Covid according to OECD 2020. Further, all other cohorts are in decline i.e. fertility and young people while retirees/pensioners and old age dependency are on the rise.

    Working age trends and comparisons see here https://data.oecd.org/chart/6I9a

  4. andy56

    i think everyone has got the wrong end of the tail here. Wage increases are needed to maintain ones purchasing power. But the cost blowouts are beyond what anyone can afford . The wage increases required are far beyond the 5.1%. I venture to say, the economy is in no position to absorb such high wage demands. So as a smart person, i would look at getting prices to drop anywhere I can. The lowest fruit is realestate prices. I would also suggest, living standards have been steadily eroded for nigh on 40yrs. One salary supported 2 children, a car, a mortgage and a stay at home wife. Try that now. Australia is screwed well and truly. We have been done over slowly.

  5. calculus witherspoon.

    Good read, I enjoyed the comments too.

    Let’s take andy 56’s at face.

    I HAVE read most of the comments above, so some things turn up for proportion and context. You have to take the equity component seriously. To say a wage increase for galley-slave proles (“small” business as a signifier scapegoat for more obscured factors) is an idea that has seemed not to have washed with quite a few economists.

    But if the downturn load is shared by the working poor, it still doesn’t obviate an ethical imperative that fairly asks is this right, that others possibly momentously more culpable for a downturn in the wasteful economic homogenised amoeba comprised of humanity during this primitive capitalist epoch, walk off Scott-free (no pun)..

    I can’t bring myself to accept the reason for not allowing a small wage increase as somehow dangerous as tangible so it mustn’t be conflated but related as to an ethical argument that relates practically to numerous species of scams and a deep bleed on the real economy, ignorant.squander that seemed ok for the economy on that basis.

    Gee, We’re not androids. But the cultural cosmic noise is not recognised and it would be interesting how much of potential waste goes with consumer capitalism and proction of all kinds

    Tired of the old idea even modest wages cause unemployment because it would mean all the money rorted from the economy should have caused a recession but it didnt.

    Wage peril is just another nasty repressive very aged meme to keep certain things opened to the light and others obscured.

    Any way, Tristan has already said it all much more clearly, all else will be superfluous.

  6. Albos Elbow

    Since 2009, for the period that Scummo the Liar PM and COAL-NP has been in office, POLITICIANS WAGES have increased an average of 5% per year.
    https://www.actu.org.au/actu-media/media-releases/2019/politicians-pay-rises-almost-double-wpi-for-the-last-decade

    Yet a $1 an hour pay increase for the poorest workers in our communities is going to cause a great economic disaster bigger than Keating’s recession we had to have.

    Don’t believe a word that Scummo the Liar PM says, in his pentecostal desperation to get re-elected and get his hands on more corrupt Mining and Fossil Fuel money.

  7. Albos Elbow

    Further, I contend that there are more important issues our leaders should be focused on and us voting on, rather than gender identity or $1 an hour wage rises.
    https://www.smh.com.au/politics/federal/the-reef-wants-you-to-think-about-climate-policy-when-you-vote-20220512-p5akt7.html

    Global warming and climate change is real and here and now, the biggest issue that the world is facing.
    Inaction on global warming is the greatest financial risk the world will stumble on.
    https://www.smh.com.au/business/the-economy/in-this-election-one-critical-issue-stands-above-all-others-20220510-p5ajwd.html

  8. pierre wilkinson

    something that has not been addressed in Albanese’s mooted wage increase for the country’s poorest workers is that giving low income workers a pay rise will boost the economy and actually help small businesses, as the money will not be spent offshore, tucked away in bank accounts or used to pay for luxury items, but will be spent locally and immediately
    and on the so called unemployment figures…. what a joke! work 1 hour a week and you are considered employed
    the government claims to have created lots of jobs but some of us have to work three of them to strive to make ends meet
    so much fudging the figures from this “open and transparent” administration and its’ complicit propaganda team the MSM

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