Leader of the Opposition, Bill Shorten, has indicated that he is willing to consider what is termed a living wage. This is designed to pay people in a full-time job, enough so that they do not live in poverty. He stated that the current minimum wage of $18.93 per hour for a full-time worker is not high enough1. So what has happened in response to this? The lobbyists have started foaming at the mouth. Australian Industry Group (AiG) chief executive, Innes Willox, has stated “to put it simply, forcing higher wages on employers with no return would only serve to push people out of work and lessen the opportunities for young Australians to enter the workforce.”2 It is funny how that never seems to be a concern when the rapidly increasing salaries of CEOs and the upper echelons of members of the AiG come up for negotiations, but only when the minimum wage is under consideration.
Willox represents an employer group who joined the chorus which stated that decreasing penalty rates would increase employment3. It has been found that since the initial penalty rate reduction in July 2017, total employment did not increase in the subsequent 10 months. Indeed, full time employment declined by 50,000 positions, and average weekly hours of work declined by more than a full hour and the underemployment ratio (i.e. the share of workers who want more hours) increased by 2%4. Unsurprisingly, it was the retail and hospitality sector which performed the worst. That is unsurprising because when those on lower wages have their hours, wages or penalty rates cut, they do not buy things nor do they go out as often.
Last century, Henry Ford introduced a $5 day for his workers, which was twice the average wage of the time. He didn’t just increase the productivity of his factories, he converted exploited car workers, who were previously poor, into a thriving middle class who could afford to buy the products they made. Ford realised that an economy is best understood as an ecosystem and is characterised by feedback loops that you find in a natural ecosystem. Raising wages increases demand, which increases the number of jobs, which increases wages and profits and so on5.
In a TED talk, billionaire, Nick Hanauer states that he earns 1,000 time the median American wage but he doesn’t buy 1,000 times as much stuff. As an example, he mentions his business pants. He bought 2 pairs. He could have bought 2,000 pairs, but what would he do with them? How many haircuts can he get? How often can he go out to dinner? No matter how stupendously wealthy the plutocrats become, they can never drive a great national economy. Only a thriving middle class can do that6. It is the middle class which is the source of growth in capitalism, and if you hollow out the middle class, you end up with a sluggish economy as we have now. This is to where the ‘trickle-down’ lie of neoliberal economics has brought us, and if we are to energise the Australian economy, trickle-down must go, and we must ignore economic dinosaurs like Willox.