Thursday, July 05, 2007

Australia's focus-grouped pay rise.

The head of the Fair Pay Commission Ian Harper says he had to strike a balance. On one hand he wanted the wage floor low enough to make it worth employers’ while to take on more low-paid workers. On the other he wanted it high enough to provide a safety-net and keep work competitive with benefits.

To help him, he did something his predecessors setting wages in the Australian Industrial Relations Commission never would have done. He turned to focus groups - 20 of them.

There was a group of young low-paid parents in Whyalla, a low-paid older childless group in Brisbane, a group on unemployed benefits in Burnie, and so on.

What he says they said is all though yesterday’s decision...

Are the jobs created by keeping the wage floor low worth having? Yes, because for many in the groups “low-paid jobs were seen as a stepping-stone. Being able to get your foot in the door and having something on your resume and recent work experience was a motivator.”

Does the after-tax wage matter when it comes to a decision as to whether or not to get off benefits? You bet. “For many people the interaction with the tax/transfer system influences their decision to participate.”

It’s not quite the same as when arguments were presented in open court and each side had the opportunity to cross-examine each other. We have to take the Commission’s word about what happened in the focus groups and we are left in the dark as to the questions that they answered.

The headline result is exactly as predicted – focus groups in Tamworth, Bendigo, Geraldton Cairns and elsewhere notwithstanding.

$10.26 a week on the lowest wage after 10 months works out at 2.4 per cent over 12 months, which happens to be exactly the rate of inflation. Anything less than inflation, and the wage floor would not have kept pace with indexed benefits.

Higher wages will clim by only $5.30 per week, but after tax they will probably keep pace with benefits courtesy of the July tax cuts.

The Commission did do something unexpected – it exempted severely drought affected farmers from the need to pay some of the increases for 12 months or until they are no longer severely affected. It’s as first and opens the door to any industry doing it tough to ask for special treatment.

The Commission has directed that the wage increase be paid on October 1, which happens to be just before the election.

But it would be wrong to expect it to sway votes. The extra 2.4 per cent for Australia's least-advantaged employees looks slight alongside the 6.7 per cent awarded to their representatives. Members of Parliament will get an extra $9,000 from their Remuneration Tribunal this year. The Fair Pay Commission is givng their low-paid constituents $533.