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HR Nicholls Society

Minimum Wage Increase Reduces Employment Prospects for Low Skilled

3 June 2010

Today’s decision by Fair Work Australia is far from fair. The increase in the minimum wage of 4.8 per cent or $26 per week to $29,640 per annum adds significantly to the cost of employment and will make it much harder for low skilled workers to obtain jobs.

The decision exposes the enormous unfair gap in Australia’s highly regulated wage/employment “system”. Employers are not legally able to offer employment at a wage lower than $29,640 pa and the only alternative for low skilled workers is to go on the dole of around $12,000 pa (for a single person excl any rent assistance).

Particularly when there are labour shortages in some areas employers who can show a capacity to offer additions to employment at a wage lower than the minimum should be exempt from the onerous minimum wage restriction.    

The decision will severely limit the scope for further reducing unemployment at the bottom end of the wage scale and add to the already increasing level of long term unemployed. It will also add further to the already difficult position faced by the more than 700,000 who, although not working, are not classified by the ABS as unemployed even though they want to work and are available to start within four weeks.

Nor do current arrangements offer social fairness. More than half of low wage earners are in the top half of household incomes and they are scarcely “needy”. Equally, as ABS data shows that wages provide only a very small proportion of low income households’ incomes, an increase in the minimum wage is of little benefit to those at the bottom of the social spectrum.

Australia already has the highest minimum wage (relative to the average) in OECD countries and this further reduces our international competitiveness.

Des Moore
HR Nicholls Society Board

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