Posted by gosfordpip on November 16, 2013 at 6:05 PM


Cutting minimum wage would create US-style working poor, say aid agencies


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Slashing the minimum wage would create a class of working poor similar to that in the United States, where homeless shelters are overflowing with full-time workers.

This is the damning view of aid agencies responding to comments last week by Maurice Newman, the chairman of Tony Abbott's Business Advisory Council, who lamented that Australia's minimum wage was far higher than that of Britain, the US and Canada, a position echoed by economist Ross Garnaut in his latest book, Dog Days: Australia after the Boom, which was launched on Friday.

Mr Garnaut would freeze the wages of the low paid but soften the blow by introducing new tax measures.

"When we're $US33,500 and the US itself is only $US15,080 you can see there's an enormous disparity," Mr Newman said.


He also criticised the Gillard government's commitment to Gonski education reforms and DisabilityCare. Mr Newman characterised the initiatives as good causes the economy couldn't afford.

Brotherhood of St Laurence executive director Tony Nicholson said Mr Newman was "out of touch with the realities of a modern economy and society".

He wondered if "Mr Newman was aware that homeless shelters in the US were overflowing with full-time workers earning the minimum wage [$US7.25 an hour under federal law].''

Mr Nicholson said that Australians on the minimum wage of $622 a week, and paying median rent in Melbourne or Sydney, were left with $44 a day for food, transport and utilities.

"They are living from week to week," he said. "When their car breaks down, they have a choice of either fixing the car, which they rely on to get to work, and fall behind in the rent . . . which is the slippery slope to eviction."

The only choice for low-wage earners in crisis is to turn to aid agencies for emergency relief or "to get in the grip of payday lenders".

St Vincent de Paul Society chief executive Dr John Falzon said his organisation was already assisting an increasing number of working people suffering financial stress.

Lowering the minium wage, he said, would result in a society where significant numbers of people in paid work would rely on charity to make ends meet from week to week.

"We're only able to lend a hand because of the big-heartedness of ordinary people in the community, many of whom are struggling to get by themselves."

Brian Howe, a former deputy prime minister in the Keating government – and honorary professor in social and political sciences at Melbourne University – said it didn't sound as if Maurice Newman "has thought through his ideas".

Mr Howe said research in the US demonstrated that increases in the minimum wage tended to increase employment because they added to consumer demand.

This was counter to the argument that minimum wage increases worked against employment.t

"There is also an argument that paying people well improves motivation and feeds into productivity," he said.

He acknowledged that Australia enjoyed higher wages and welfare benefits relative to the US, and the "make work pay" policy has had the effect of decreasing Newstart below the poverty line.

"Newstart is now so far below the minimum wage that there is no incentive for people to be on benefit and not work".

Seriously cutting wages "would help to create a working poor such as exists in the USA", he said.

According to a report by the National Institute of Labour Studies, commissioned by the Australian Fair Pay Commission in 2006, 10 per cent of adult employees, excluding juniors and workers who are not employees, receive an hourly wage of less than or equal to the federal minimum wage.



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