Wages decision a ‘kick in the guts’ for the most vulnerable workers

The other day - on July 7 - the final act of Australia’s so-called “Fair Pay Commission” left a bitter aftertaste for many.

The Commission has decided not to raise the minimum wage rate above its current level of just under $544 a week (an hourly rate at $14.31), with a consequence that, due to inflation, the value of wages has fallen in real terms.

According to the ACTU, “the average award worker will lose about $16 a week until the next wage decision is due in July 2010”.

ABC News reported that “around 1.3 million” people will be affected, and that both unions and the government were “disappointed”.

Employers had argued that a “$3-a-week increase in disposable incomes through … proposed tax cut[s]” would compensate workers for the wage freeze. ACTU President Sharan Burrow, responded by labelling such claims "nonsense and insulting".

Continuing, Burrow argued that the shift would “certainly cost jobs if [we] see wage deflation in Australia”.

Burrow, here, is arguing on solid ground. Wage cuts which attack the disposable income of workers are bound to have a negative impact on aggregate demand and consumer confidence. This in turn would certainly cost jobs.

Meanwhile, Frank Quinlan of Catholic Services Australia's has identified the reasoning of the Fair Pay Commission as being inconsistent and hypocritical:

On the one hand they have argued that when there is inflationary pressure, low paid workers wages need to be controlled. On the other hand they have argued that when there is recessionary pressure, low paid workers wages need to be controlled. So it is very difficult for me to understand the circumstances under which this Fair Pay Commission would actually deem it fair to increase low paid workers wages.

Australia’s most vulnerable workers should not be made to “bear the burden” of the response to the recession. Here we refer to cleaners, child care workers, retail workers, hospitality workers, call centre workers and others.

Arguments for suppressing these people’s wages are just another take on the discredited idea that labour markets should always be flexible downwards in order to “clear”.

This idea - to clarify - holds that wages should be driven down by market forces (to reach “equilibrium”) and that the alternative to this is unemployment. Against this it could be argued that there are many areas - for instance cleaning - where demand would hold steady regardless of fair wage standards. Another argument is that fair wage standards would not impact negatively on overall demand but rather on wealth distribution and patterns of consumption.

While wages are frozen, ACTU Secretary Jeff Lawrence has indicated that: “The costs of rent, food, medicines, education and utilities have all risen in the past year and families need a pay rise to keep up."

Unions will be hoping that the new “Fair Work Australia” body will restore some measure of wage justice when it rules on minimum wages in 2010.

A “wait and hope for the best” approach, though, is not sufficient in times such as these. Not only do unions need to campaign in earnest for a restoration in real wages: the times also demand immediate action from the government to support the disadvantaged.

In the interim period between now and the next decision on minimum wages, the Federal Government should provide further stimulus in the form of cash supplements: only this time for the most vulnerable workers.

Such stimulus should compensate these workers in full for the real wage losses that are flowing from this final act of bastardry by the Howard-era “Fair Work Commission”.

But for workers there remains the need to work - in some ways - independently of the government.

Under pressure as a consequence of anti-union populism - beat up for years by the conservatives and their allies in the corporate establishment - Labor has failed to provide for the right of workers to withdraw their labour except under the strictest of conditions.

There is no recognised right for pattern bargaining: and there is no recognised right for political strike action. Further, from the Hawke era, there is no right to “secondary boycott” industrial action in solidarity with workers who may not be as organised or positioned to enjoy bargaining power or leverage in their own right.

If the Australian Labor Party (especially the Federal Government) continually fails to respond sufficiently to the labour movement mobilisation that led to the defeat of the Howard regime, then clearly workers and their representatives need to “keep their options open”. If this means supporting the Greens, and other progressive political forces who are less equivocal in their support for worker’s rights, then at least this may put pressure on a Labor Party which takes the support of workers for granted.

But if Labor values its relationship with the union movement, immediate stimulus payments to compensate the 1.3 million who are suffering as a consequence of this cut in real wages - are a very good way to start.

Such measures could further be enhanced by a restructuring of the broader tax system in favour of low-paid workers.

On these issues the ACTU and organised labour more broadly need to remain on the front foot. Workers must organise in the immediate term to get compensation for this cut in real wages. And over the longer-term we must all stand up for a rise in the real wages of vulnerable workers - not only as tied to productivity - but as a matter of distributive justice.