Wage wars across the Atlantic

Australia and the United States have opposing ‘minimum wage’ movements. Thousands of Americans are fighting for theirs to be significantly increased, while Australia’s conservative politicians and lobby groups are pushing hard to reduce the minimum wage. What’s at stake in both countries is their way of life.

2012 was an important year for both movements. At the time the world’s richest woman, Australian miner Gina Rinehart gained international attention for comments she made attacking the minimum wage.  ‘The evidence is inarguable that Australia is becoming too expensive and too uncompetitive to do export-oriented business,’ she claimed. ‘Africans want to work, and its workers are willing to work for less than $2 per day.’  A week earlier, Rinehart had advice for Australians wanting to become millionaires: ‘Spend less time drinking, smoking and socialising and more time working.’

Many Australians felt this to be a slap in the face, pointing out that much of Rinehart’s wealth was inherited. Still, there was no denying she had political influence over future Prime Minister and minimum wage reduction advocate, Tony Abbott. Donations from mining companies influence both major parties, but following Abbott’s support against the mining tax, donations from the industry began leaning strongly towards the conservative coalition. Abbott’s relationship with Australia’s wealthiest miner was especially close. Labor’s ex-Prime Minister Julia Gillard mockingly referred to him as being akin to ‘Gina Rinehart’s butler.’

Around the same time on the other side of the Atlantic, a grassroots movement to increase wages was beginning in the United States. When a union official arrived in New York to organise workers, a community group was endeavoring to start discussion about affordable housing. However the organiser found ‘they couldn’t talk about affordable housing because they were making $7.25 on the minimum wage (while) couch surfing and living in homeless shelters.’ This led to 200 fast food workers in New York City walking out of workplaces like McDonald’s and Taco Bell to protest low wages.

A minimum wage is the lowest wage payable to employees in general, or to designated employees fixed by law. There are two major schools of thought on the minimum wage. Supporters say it reduces poverty by lifting the incomes of lower paid workers, and encourages low-skilled workers to hunt for a job. It also creates a greater tax base for government to spend on other important areas of the economy. Its opponents argue, however, that instituting a minimum wage – or raising an existing minimum – will damage the economy, kill jobs, and harm the very people that it is meant to help (unskilled labor) because employers have less money to hire.

In 2014, the European Commission undertook an analysis of research on the impact of national minimum wages on employment across European countries. They found:

In terms of empirical studies of the effects of minimum wages in practice, the impact of a minimum wage in overall labour costs is on the lower paid end of the labour market, and research tends to support the view that . . . minimum wages have only a small negative effect on employment, not usually found to be statistically significant.

They argued that businesses have a variety of ways of maintaining competitiveness and profitability in the face of minimum wages which allows employment to be maintained[ii]. But they also went further, explaining that ‘a body of research evidence is building . . . that increases in minimum wages tend to foster increases in productivity.’

Still, employers in Australia weren’t happy when, in June 2014, the Fair Work Commission lifted the minimum wage by a meagre $18.70 a week, despite the President of the Fair Work Commission saying it was a ‘modest improvement’ in the real value of wages contained in modern awards.’ Abbott’s right hand man, Treasurer Joe Hockey, didn’t miss the chance to stoke hysteria, saying that the move would ‘no doubt’ cost jobs.

For the conservative arm of Australian politics, increases in the minimum wage are viewed as a way of painting Australia as a high wage and low competition economy. But while Australia’s minimum wage is certainly among the highest in the OECD, it’s important to understand that relative to median Australian wages, the minimum wage has been declining over the past three decades. Now Australia’s minimum wage is about 52 per cent of the median wage, which makes it the 8th highest in the OECD.

After being elected, the Coalition government wasted no time pushing its agenda, creating the National Commission of Audit (NCA) to look into ways they could spend ‘in an efficient manner’. They immediately appointed the President of the right wing Business Council of Australia and chair of Transfield Services, Tony Shepherd, as its first chair. The NCA’s recommendations were published in 2014 and included a cut to the minimum wage to 44 per cent of average weekly earnings, or about $480 a week over 10 years ($12 an hour). This would entrench a US-style of ‘working poor’, the ACTU said. The NCA recommendations were followed up earlier this year by the Abbott government ordering the Productivity Commission to include the minimum wage as part of its review of Australia’s industrial relations system. This is the same commission that Labor senator Doug Cameron once said ‘just ignore[s] the reality of industrial relations that is about human beings.’

Meanwhile, in the United States, the call to increase wages in New York that began two years ago has grown into a national and international movement, known as ‘Fight for 15’, calling for a minimum wage of $15 – a little more than twice the current federal minimum wage. The campaign has attracted workers such as home-care assistants, Walmart workers, childcare aides, airport workers, adjunct professors and other low-wage employees. On 15 April this year, workers in Atlanta, Boston, New York, Los Angeles, and more than 200 other cities across the US walked out on their jobs or joined protests. Organisers claimed it was the largest protest by low-wage workers in US history.

People in the US don’t take to the streets easy, but people are desperate – tired of suffering and living precariously. For example, in Brooklyn, New York, the hourly average necessary for a two bedroom apartment is $25.67. It means if both parents are on minimum wage, both need to be working two jobs. If there’s an increase in local market rental rates or a parent loses a job, families can be kicked out of their homes. Often these same families end up in one of the notorious public shelters. There are those who benefit from this misery: self-storage units are scattered around working-class areas of Brooklyn, while others are in the process of being built. The owners of these units profit directly from those with nowhere to go.

Ultimately, it is the public that takes up the slack of a low minimum wage. A report from the Centre for Labor Research and Education found low wages paid by businesses are costing taxpayers in the United States nearly $153 billion a year. After decades of wage cuts and health benefit rollbacks, more than half of all state and federal spending on public assistance programs is going to working families to meet basic needs.

Joe Hockey argued that any significant changes to minimum wage earners’ conditions, recommended by the Productivity Commission, need to be taken to Australian voters at the next election. The Australian movement to fight the conservative push to reduce the minimum wage can learn from the current US campaign. The Fight for $15 movement has called the corporate bluff about job losses and ballooning prices, while articulating effectively that reduced minimum wages come at the public’s expense. The movement has shifted public consciousness, making visible the production of poverty and its consequences. The results have been impressive. Cities like Seattle, San Francisco and LA have recently agreed to raise their minimum wages to $15, and companies like McDonald’s and Walmart have reluctantly raised their pitiful wages. Furthermore, Democratic Presidential candidates have no choice but to jump on the bandwagon of public support. O’Malley, Sanders and Hillary Clinton have all made clear their support for a minimum wage of $15.

Economic research shows a minimum wage with gradual increases is not harmful to the economy. The United States teaches Australia it’s the taxpayers and the poor themselves who bear the burden of low minimum wages. The Australian Liberal Party and its masters, Australian employer groups, are trying to reduce minimum wages to increase profits at the expense of the average Australian. Or put more succinctly, increasing employer profits while socialising the pain. In Australia, articulating the real consequences of a reduced minimum wage could be what puts the Union movement into public consciousness, wins the Labor Party the next election, and protects the Australian way of life for generations to come.


Image: Light Brigading / flickr

Gerard May

In Australia, Gerard May was a union official. Since arriving in New York City nine months ago he has been published widely. He can be followed on Twitter @GerardMay5

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