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Patricia Karvelas and Ewin Hannan | March 24, 2009
Article from: The Australian

THE Rudd Government has rebuffed a union push for a $21-a-week minimum wage rise, warning that an excessively large increase would lead to job losses and burden small business during the economic crisis.

Employment Minister Julia Gillard and Treasurer Wayne Swan yesterday declared a big rise now would put vulnerable, low-skilled employees out of work.

Contradicting the ACTU’s argument that a wage rise now would stimulate the economy, the Government said minimum-wage increases were best used to protect the low-paid rather than as a macroeconomic stimulus.

Meanwhile, Remuneration Tribunal president John Conde has written to federal judges warning them not to expect hefty pay increases this year in view of the tough economic times.

While declining to nominate a specific dollar amount in its submission to the Fair Pay Commission, the Government said it supported a “considered rise in the low-income safety net, mindful of significant challenges facing the domestic economy”. It urged the commission to make employment its primary consideration.

The ACTU is seeking to increase the minimum wage from $543.78 a week to $564.78 a week, a rise of 3.86 per cent. According to union costings provided to the commission, the ACTU said awarding its claims would add a “negligible” 0.3 per cent to ordinary-time earnings and have a “barely measurable” CPI impact of 0.16 per cent.

ACTU secretary Jeff Lawrence yesterday attacked the commission chairman Ian Harper, claiming he was “not impartial”.

Professor Harper recently reaffirmed there was a negative relationship between employment and minimum wages, and he would consider the impact of the Government’s cash handouts and tax cuts on the low paid.

Mr Lawrence said his comments were unacceptable and did not give the unions “any confidence the process is balanced”. Mr Lawrence said the “moderate” $21-a-week increase would help low-paid workers suffering from the increased cost of living and would help stimulate the economy during the downturn.

But the Government lent weight to Professor Harper’s comments, cautioning the commission that employment levels could fall further if minimum wage increases were substantial in a slowing economy.

The Government acknowledged that increases in the minimum wage boosted wages for some workers, “which may flow through to increased household spending and thereby support jobs”.

However, “higher wages also raise labour costs for employers, which may result in a reduction in demand for the low-paid and could put upward pressure on consumer prices”.

“As such, minimum wage increases are best targeted as an important means of protecting the low-paid rather than as macroeconomic stimulus,” it said.

Mr Lawrence said tax cuts should be complementary to minimum wage increases, while the commission should not take into account one-off cash bonuses because they were designed to create extra spending to boost economic activity.

But the Government urged the commission to take into account scheduled tax cuts for the low-paid.

The influential Australian Industry Group yesterday split from employers advocating a wage freeze and supported an increase in the minimum wage by $8 a week. It also urged the Government to increase the low-income tax offset from $1200 to $1500 and raise the tax threshold at which the marginal tax rate of 30 per cent cuts in from $34,000 to $37,000.

Heather Ridout, the AIG’s chief executive, warned that the ACTU claim would “hurt the low-paid by reducing their employment security and potentially shutting many unemployed out of the workforce”.

The Australian Chamber of Commerce and Industry called for pay rises for low-paid workers to be delayed, claiming the union demand would cost $1.7 billion.

“Just at the moment, an economy-wide wage rise across 1.3 million employees and 250,000 small and medium businesses is neither the smart thing to do, nor the right thing to do,” the chamber’s chief executive, Peter Anderson, said.

“With the economy not growing, the case for wages to be increased by government regulation is very weak.”

The Australian Retailers Association said awarding the union claim would cost jobs. “The unions are stuck in old world thinking and need to be far more conscious of saving jobs, rather than putting pressure on employers to pay more,” the association’s executive director, Richard Evans, said. “We are in unique financial times and need to show caution.”

In its submission, the Government argues that planned tax cuts and one off payments given out in the stimulus package are already giving low income earners support at a time they need it.

“During a period of relatively weak labour demand, an excessively large minimum wage increase could reduce the capacity of low-skilled workers to maintain and obtain employment,” the submission says.

http://www.theaustralian.news.com.au/story/0,25197,25232848-601,00.html

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