In a recent interview on ABC radios's AM program Opposition Leader Tony Abbott said 'low and middle income families with kids are Australia's new poor'.
Abbott is half right. He is right in regard to low income families who are dependent on a safety net wage for their standard of living. They are newly poor because of changes that have occurred in the Australian wages system over the past decade or so; a period which should have delivered better outcomes.
One in six Australian workers is paid no more than the prescribed minimum safety net rate of pay set for their work classification. These workers haven't the capacity to bargain for higher rates and are typically non-union members.
From December 2000 to December 2009, safety net wages declined relative to community wages. In that time Average Weekly Ordinary Time Earnings (AWOTE) increased by 53.2 per cent, to $1,223.30 per week, and the Consumer Price Index (CPI) increased by 29.1 per cent.
Yet over the same period safety net workers who are now paid more than $645.00 had real wage cuts and all safety net workers fell behind average wages. Workers on the Federal Minimum Wage (FMW), now at $543.78 per week, received an increase of 35.8 per cent, and those now on $835.00 per week only received 19.3 per cent.
The position of low income safety net-dependent families has declined relative to better paid working families even after taking into account income tax cuts and increases in family payments.
The disposable income of a single breadwinner FMW-dependent family of four (including two children of primary school age) has increased by 47.6 per cent to $742.75 per week, including family payments of $245.58. A similar family which is dependent on a wage of $645.00 per week has had an increase of 44.7 per cent.
However, the AWOTE-dependent family has had an increase of 62.3 per cent in its disposable income and is now at $1,117.78 per week. Family payments have been pushed into the middle income groups. The loss of safety net-dependent families relative to the AWOTE middle income family has varied; for example, $74.22 per week at the FMW and $103.32 at a wage of $645.00 per week. This shows that Abbott's claim is half wrong.
The standard of living of low income families has even fallen behind that of pensioners. Following the recent pension review, the aged couple pension is now $528.50 per week. The costs of children, plus the costs of working, put our FMW-dependent working family on a lower standard of living than pensioners. Parents cannot raise and educate children on $742.75 per week. Family payments fall well short of providing for the needs of dependants.
Abbott may wish to move to a 'single person' wage, with the Commonwealth supporting families through family payments, but the Commonwealth's budgetary position won't permit any significant progress in this direction. Neither side of politics will commit to the further transfer of family costs to the public purse.
In the AM interview Abbott lamented that 'you can't give what you haven't got' and that his priority is to 'get the deficit and the debt under control'. This cannot be an excuse to do nothing at all. We are in this situation because of the failure of wages policies to protect low paid workers and their families.
The heavy lifting for low paid workers and their families has to be done by the wages system. It has to return to a fairer relationship between safety net wages and community wage levels and it must take into account the needs of workers with family responsibilities.
This will require that major players in the wage-setting debate acknowledge that the safety net wages system has failed low income workers and their families. Abbott has to accept that this largely occurred under the Howard Government.
The Rudd Government must do more: its submissions to this year's national wage review failed to address the needs of low income working families and failed to give any sense of direction as to how the new wages system might respond to those needs.
Fair Work Australia's decision last week to award an increase of $26 per week across all classifications from 1 July 2010 was modest given that there was a freeze of safety net wages in 2009. Despite this increase, the real value of safety net wages has declined since the last decision to increase safety net wages, in July 2008.
In July 2010, the National Minimum Wage (the FMW's new name) will have risen by less than the relevant published CPI increases: 4.8 per cent compared to 5.4 per cent. It is worse for those on higher classifications. A worker on $700.00 per week, for example, will only receive a 3.7 per cent increase, which is a real wage cut of $11.80 per week. By comparison, over a similar period AWOTE has increased by 11.9 per cent, well ahead of the CPI and despite the Global Financial Crisis.
We have a systemic failure which ensures that each year brings a widening gap between safety net wages and community wage levels.
If Abbott concentrates on what is demonstrably right in his AM interview and proposes a fairer wages strategy for low income working families, he will have moved beyond the rhetoric about working families and promised some hope for the working families he rightly calls the 'new poor'.
Brian Lawrence is Chairman of the Australian Catholic Council for Employment Relations. This article draws on material in the Council's submissions to Fair Work Australia's Annual Wage Review 2010.