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The minimum wage is the most important component of Australia’s regulatory system – and the least justified. The key point is that, if a worker cannot get a job at the minimum wage (Australia has the highest among OECD countries), employers cannot (legally) accept their services at a lower wage. This means that there is an enormous “gap” for the relatively unskilled – the only alternative to a minimum wage of about $33,000pa is to go on the dole of about $12,000 pa.

Why, in fairness, cannot a worker agree to work at ,say, $20,000pa? Inexperienced workers who perform normally work their way up the wage scale over time.

One answer is our powerful trade unions and their friends at the Fair Work Commission like to give the appearance that the minimum helps people at the bottom. It does the opposite.

The HR Nicholls submission to the Fair Work Commission, which I  played a major hand in drafting, dealt with a range of issues in support of having no increases. That is available on the HR Nicholls web site.

One other point. Tony Abbott has issued a workplace relations policy which includes the retention of the Fair Work Commission and the minimum wage. But retention of a body that is staffed with persons who, for the most part, believe in detailed regulation would be a major error and would have significant adverse effects on Australia’s growth capacity. I have suggested in my letter that it be replaced by a regulatory body charged with prioritising productivity growth.

Des Moore

Replace commission and boost productivity
(Letter published in the Australian Financial Review, 6 June 2013.)
[Square bracketed bits deleted by Ed]

Two things stand out from the Fair Work Commission’s decision to increase the so-called minimum wage by 2.6 per cent (“World’s highest low-paid workers”, June 4).

First, the decision to cover 1.5 million employees means there is an unnecessary increase to the many earning well above the lowest award rate who do not need social protection. Indeed, the Commission acknowledges that “a significant proportion live in middle to low income households” and that the tax-transfer system can provide (it does) more targeted assistance. It is obvious that the coverage is grossly excessive. 

Second, the Commission also acknowledges that its decision “may reduce the capacity to employ the marginalised”. In reality there is no “may” about it: [it means that employers are unable to employ low-skilled workers at an annual rate of less than about $32,000. The union leader who winged on television about the supposed financial difficulties of those on the minimum (apparently she also owns a house and a car) should spare a thought for the many who cannot be employed at a lower wage. ]

More generally, the decision illustrates the need to replace the Commission with a regulatory body which gives priority to increasing national productivity.

Des Moore
Institute for Private Enterprise
South Yarra Vic 

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