Caution on minimum wage increase

by 01 Apr 2008

BUSINESS GROUPS have called on the Australian Fair Pay Commission to exercise significant caution in determining minimum wage outcomes against a backdrop of a volatile global economy combined with accelerating inflation and rising interest rates domestically.

The 2008 Minimum Wage Review is taking place in a climate of increased economic risk and uncertainty, according to Heather Ridout, chief executive of the Australian Industry Group, which recently lodged its minimum wage review submission with the commission.

The Australian Industry Group proposed a minimum wage increase for all classifications of 35 cents per hour (or $13.30 per week) from the first pay period on or after 1 October 2008. This would increase the federal minimum wage, which covers about 1.6 million Australian workers, to $14.09 per hour.

“In both of its minimum wage decisions to date, the Fair Pay Commission has expressed the view that it is appropriate that changes to income tax and income support be taken into account in determining the level of increase in minimum wages,”Ridout said.

“Changes to taxation and income support typically deliver far more cost-effective and less economically risky benefits than increases to wages.”

If the level of wage increase awarded by the commission is too high, she said inflationary pressures will be fuelled and increased pressure will be placed on interest rates. “Such an outcome would harm the very people that the minimum wage review process is intended to benefit – that is, the low paid.”

The ACTU called for a $26 a week pay rise for the low paid, which would raise the current federal minimum wage from $522.12 to $548.12 a week (up to $14.42 an hour).

Unions also went one step further and called for a curb on executive salaries, proposing an end to tax deductibility for salaries over $1 million.

“Many employers simply haven’t got the message from the Australian people and are still trying to make record profits and give excessive bonuses to CEOs at the expense of ordinary workers,” said Jeff Lawrence, secretary of the ACTU.

“It is unacceptable for major employers to propose that low paid workers should not get a pay rise or that casual workers should suffer pay cuts.”


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