03 Nov

'Higher wages must flow from productivity growth' The Australian

It would be churlish to dismiss ACTU secretary Sally McManus’s call for a “living wage” that ensures all workers can afford a suitable home, a healthy diet, quality education, healthcare, transport, energy, clothing and a contingency for a rainy day. Out of respect for hardworking Australian families struggling to make ends meet, Ms McManus’s clarion call deserves serious scrutiny. It raises questions, one of which is: where would the money come from? Employers, especially small businesses, are not bottomless pits. Nor are taxpayers who fund the wages of public servants, whose pay has risen faster than that of other workers. The trouble with socialism, as Margaret Thatcher noted, “is that eventually you run out of other people’s money”.

In her speech to mark the 110th anniversary of the Harvester judgment, Ms McManus articulated an issue Labor will exploit relentlessly at the next federal election. The opposition does not have the right solutions, however. If inflicted on Australians, its high tax and rigid industrial relations policies and slavish adherence to heavily subsidised renewable energy would make the financial difficulties of many families worse. Malcolm Turnbull, distracted by the citizenship shambles, is doing a poor job selling the economic narrative that should be his strength. The government’s corporate tax cuts are a necessity if companies are to employ more workers and on better pay. As Scott Morrison will tell the Australian British Chamber of Commerce tomorrow, it is no coincidence that after cutting the taxes of 3.2 million small and medium-sized businesses, jobs growth has reached record levels, with 315,000 full-time positions created in the past year. Labor should get on and pass the next phase of the tax cuts, for big business.

The Australian recognises the need for wages growth to boost confidence, retail demand, savings, economic growth and living standards. Ms McManus’s plan for a progressive $80 a week rise in today’s dollars for the lowest paid workers “as soon as possible”, however, would be a jobs killer, beyond the capacity of many businesses. Employment Minister Michaelia Cash rightly has rejected the ACTU’s call for the government to change the Fair Work Act to insist that the Fair Work Commission gives “primacy” to the needs of workers when determining the annual minimum wage increase. Sustainable wages growth arises from productivity increases. Improving the skills and training of low-paid workers is a gateway to higher pay. Yesterday, the review of business investment released by the heads of Treasuries reported many businesses were struggling to find staff with the technical skills they needed. Despite its strength, the jobs market remains unpredictable, as seen in the National Australia Bank’s decision to axe 6000 staff, a fifth of its workforce, over three years. They will be replaced with about 2000 others, mainly with skills in data science, robotics and automation.

The Institute of Public Affairs made a good point on the living costs side of the issue yesterday, pointing out that over-regulation in sectors such as childcare and energy was increasing the burdens on many families. Overlooked by the left and populists is that economic reform, including deregulation, assists low-wage earners. In the Howard years, workplace reform resulted in the bottom 10 per cent of wage earners achieving higher pay rises in percentage terms than the top 10 per cent. Ms McManus has opened a big debate. But the problem she has identified needs more effective answers than what she is proposing.


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