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Preserving the real benefits of fair pay

  • 03 June 2008
To the surprise of many, the Rudd Government has followed the lead of the Howard Government in 2006 and 2007 and has not nominated a figure in its submissions to the Australian Fair Pay Commission's review of minimum wages.

More surprisingly, the Commonwealth's principal submissions do not engage in the ongoing debate about tax cuts and the maintenance of real wages. Some may say they contain a 'nod and a wink' for the Fair Pay Commission to discount real wage increases.

About one in ten Australian workers depend on the safety net minimum wages set by the Fair Pay Commission. They are low paid workers who are unable to bargain for higher wage rates. What the Fair Pay Commission decides has a major impact on them and their families. They are the battlers at the needy end of the 'working families' spectrum.

The Fair Pay Commission needs to determine whether the real wages of the most disadvantaged workers in Australia should be increased, reduced or maintained, and whether tax cuts for the low paid should reduce the increase in wage rates.

However before it starts to answer these questions it should remember that for a single-income family of four, including two school-aged children, the federal minimum wage of $522.12 per week yields a disposable income, after tax and transfer payments, of $755 per week. Parents cannot raise and educate children on $755 per week. The maintenance of the real value of the federal minimum wage requires an increase of $21.93 per week.

Despite the fundamental strength of the Australian economy, some organisations have urged the Fair Pay Commission to reduce the real value of safety net wages as a means of controlling inflationary pressures. They have pointed to the tax cuts that will come into effect in July 2008 and argue for an increase of only $10 per week.

These tax cuts are of vital importance to low income workers and their families, but they are modest. Workers on the federal minimum wage will receive a tax cut of $8.65 per week. For workers on $35,000 to $45,000 a year, the tax cut will be $20.19 a week. So a worker on the federal minimum wage will receive proportionately less tax relief than higher paid workers who do not depend on the wages safety net.

Low paid workers did not get any special treatment from the 2008 Budget. They have been relatively disadvantaged by