The Productivity Commission released some issue papers last week in advanced of a promised review into industrial relations. Surprise! Cutting the penalty rates of Australian workers, “reviewing” the minimum wage and workplace “flexibility” are all on the agenda.

This sounds a lot like WorkChoices. You may remember that back in 2005, WorkChoices was championed by then special minister of state, senator Eric Abetz, and was identified as costing the Coalition the 2007 election. Australians, it seems, are plainly not fond of having their take-home wages cut, living in a society that countenances a working poor, or having their hard-won workplace rights removed.

This is no doubt the reason that Tony Abbott announced before the 2013 election that WorkChoices as a Coalition policy was “dead, buried, cremated”. Mind you, before the election, Abbott also promised that there would be “no cuts to education, no cuts to health, no cuts to pensions, the ABC or SBS”.

So now it’s 2015, education, health, pensions, the ABC and SBS have all been cut by the Abbott government. And Abetz, now employment minister, is yet again championing workplace “reform” via the Productivity Commission.

“When we look at the minimum wage for example, we won’t be looking at the minimum wage in isolation, we will be asking questions,” Abetz has said of this review. “Whether or not there is an impact from the minimum wage on employment – we will try and prove up that, or determine if it is a myth.”



Australians might be curious as to why another review is needed into a subject like minimum wage, when the facts are well known.



Minimum wages in Australia are set by the independent arbiter of the Fair Work Commission. The arbiter receives annual submissions from stakeholders including governments, the business lobby, the union movement and the welfare sector to determine how much pay is required for the lowest paid adult Australian workers to meet the basic cost of living.



Unions and welfare groups committed to improving the living standards and economic participation of working people always argue it up. The business lobby, seeking to maximise company profits through wage cuts, always argue it down. As economic inflation causes cost-of-living expenses to grow, the Fair Work Commission typically raises the minimum wage to a point very close to the middle of these claims.



As the party of the business lobby, Abbott’s Coalition government ideologically supports reductions to minimum wage. Abbott’s business lobby allies hand-picked for the “Commission of Audit” unsurprisingly recommended that the current Australian minimum wage – which is only $16.87 an hour – be reduced by 1% a year over the next 10 years.



Reducing wages to increase company profits is a sentiment that does not play well with an electorate of which up to 10% are on minimum wage at any given time.



The habit of conservatives worldwide has therefore been to peddle the more palatable position that increasing the minimum wage costs jobs, on the spurious grounds that if a company’s business is doing so well that they need to hire more people, they, uh, just won’t if they have to pay these workers a set minimum wage.



The argument of conservatives in the US, where workers are only guaranteed US$7.25 (or an outrageous US$2.13 for those in industries where customers are obliged to tip) is that the price of goods and services will increase if employee wages do, and thus decrease consumer demand in the economy.



The problem with this argument is that in US, the example of the Australian minimum wage itself is used to disprove the claim. The Washington Post rightly pointed out that despite paying almost more than double the US rate of minimum wage, Australia has sustained more than 20 years of economic growth and been spared every single one of the recessions that have crippled American prosperity in that time.



The “Fight for 15” campaigners, who are trying raise the US minimum wage to US$15 an hour, use the Big Mac as an example that disproves the claim that high minimum wages raise costs. In Australia, McDonald’s workers earn almost twice that of their American counterparts, but the price of a Big Mac in Australia is not twice as much – it’s between 1% to 17% more expensive.



Economist Ross Gittins reported in Fairfax last year that “more than 600 US economists – including seven Nobel laureates – signed an open letter to Congress advocating a US$10.10 minimum wage. They said that, because of important developments in the academic literature, “the weight of evidence now [shows] that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers”.

Consider also that empirical data concludes that lower-income households devote a greater proportion of their total income to consumer spending, which fuels economic growth – because when the incomes of the lowest wage earners are less than inflation, spending contracts and recessions result. Simply, you get more economic benefit for increasing wages at the bottom than you do at the top.

The Coalition spruiks wage cuts as if they’re some kind of gift to small business. Small businesses might want to ask themselves where they think customers with enough cash to buy their goods and services are going to come from if wages are driven down. As the Coalition is attempting to hike the cost of essential services like health and education, low incomes earners will also have other spending priorities.



And it’s this interrelated policy context that suggests it’s actually the concept of the Australian “fair go” that’s “dead, buried, cremated” within the parliamentary Liberal and National parties. By cutting wages to fatten the margins of corporate profit, Coalition policy seems to be working towards the creation an Australian working poor. Allowing Australian workers to become every bit as exploited and miserable as our American cousins is this government’s most authentic policy agenda.

