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Minimum Wage Too High
letter published in The Australian Financial Review, 9 March 2011

You report that trade unions will push for a minimum wage for about 1.4 million workers, with a flat increase of $30 per week for low-skilled workers and higher-skilled ones a percentage increase (March 8). In support, unions apparently claim that since 1989 the existing minimum has fallen relative to average weekly earnings.

Under the Fair Work Australia arrangements operating since July 2009, the tribunal is given a virtually free hand to determine what it perceives as a fair set of minimum conditions. It has adopted a similar view to its predecessor, theAustralian Industrial Relations Commission. That view has consistently ignored the adverse employment effects due to low-skilled workers' inability to obtain jobs at a minimum wage of about $27,000 a year. The result is that the rate of underutilisation of labour is high and has increased from 10.3 per cent at the last election to 11.9 per cent in November last year.

Yet Julia Gillard claims there is potential to increase the supply of labour by 2 million. If she is serious, she must ensure that the government directs FWA to adopt a minimum that allows low-skilled workers to be offered employment at a wage lower than the existing minimum.

Des Moore
South Yarra Vic

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