Australia: Low-wage workers’ pay cut

By Mike Head
9 July 2009

Australia’s Fair Pay Commission (FPC) inflicted a real pay cut on 1.3 million low-paid workers when it handed down its annual wage-setting ruling on Tuesday, freezing the minimum wage for the first time in 27 years.

The decision leaves the minimum rate at $543.78 per week ($28,276 a year), or just $14.31 per hour, for another 12 months, despite an official inflation rate of 2.5 percent. It affects the country’s worst-paid workers—including cleaners, child care workers, shop assistants, cafe and restaurant workers, labourers and office staff—and will push many of them deeper into poverty.

The ruling also sets a precedent that will be used against all workers, who are confronting widespread employer demands for pay freezes or cuts, under the threat of job losses or shorter hours. The announcement, which was hailed by big business, underscores the turn by the political and corporate establishment to exploit the global financial crisis as a means of drastically lowering the conditions of the working class as a whole.

Melbourne Age political editor Michelle Grattan noted: “The freeze will send a signal to employers ... If times are bad enough to give nothing to the most needy, it reinforces the message that restraint is vital higher up the wage tree.”

The FPC claimed that because of the recession, a wage increase would result in job losses and company closures. For all the media talk of “green shoots” of economic recovery, the FPC noted that the Rudd government expected unemployment to remain high for about six years, and declared that a pay freeze was necessary to “better support a speedy recovery”. In other words, any so-called “recovery” will be based on slashing labour costs.

Deputy prime minister Julia Gillard claimed that the government was “disappointed” by the outcome, because it would leave workers worse off. But she immediately added that they had to accept the pay cut because it had been handed down by an “independent industrial umpire”.

“I'm not here to criticise the Australian Fair Pay Commission,” Gillard told reporters. “[T]he government understands that the Fair Pay Commission confronted the most difficult minimum wages setting environment for many decades that any industrial authority has had to confront.”

Gillard emphasised that the Labor government had not nominated any pay rise figure in its submission to the FPC, which was established by the previous Howard government, and had deliberately chosen to retain its wage-setting powers until next July, when the task will be handed to the Rudd government’s Fair Work Australia.

Gillard’s comments underscore Labor’s basic agreement with its predecessors, who set up the FPC in 2006 with a brief to hold down wages to ensure “competitiveness”. At the same time, her remarks are a warning that Fair Work Australia will continue from where the FPC’s left off.

The FPC has falsely claimed that its previous three wage-setting decisions had raised real minimum pay rates. Last year, in its first ruling under the Rudd government, the body heeded Labor’s demand for “wage restraint” in the name of combatting inflation, and awarded a rise of 4.14 percent, below the official inflation rate of 4.5 percent.

Its latest ruling highlights the double standard being implemented by the Rudd government, in response to the economic breakdown, with the backing of the trade unions: handing out multi-billion dollar subsidies and tax cuts to the financial and corporate elites while demanding that workers bear the burden. Just last week, the government proceeded with regressive tax cuts giving those earning above $180,000 an extra $41 a week, while those on less than $34,000 receive nothing.

The hostility of low-paid workers was expressed by Brigitte Houldsworth, a childcare worker, who earns just $16.90 an hour. She told the Australian: “I would like to see the Fair Pay Commission's chairman Ian Harper do what childcare professionals do and then go home on that money.” (Harper earned $124,990 a year in his part-time position as the Fair Pay Commissioner, about four times Houldsworth’s full-time wage.)

Beverley Fenton, who recently lost her job at a furniture store and is now living with her husband on his minimum wage, told ABC News Online: “I know people that are taking home $480 a week pay. How can you live on that when you've got children, a mortgage? You may have car payments, you have all the household bills, kids’ education—and you've got to eat at the end of the week.”

By contrast, Australian Council of Trade Unions (ACTU) president Sharan Burrow was more concerned about the pay ruling’s impact on the national economy and business, saying the freeze would reduce consumer spending. “It will not only make things harder in the homes of working Australians—1.3 million Australians—it will be felt in the high streets, in those shops, and in small business, in every main street, in every community or suburb across Australia,” she said.

Burrow sought to deflect workers’ anger from the Rudd government by arguing that the FPC was a soon-to-be abolished remnant of the Howard period. “There is no doubt they were an arm of the Howard government,” she said. “Good riddance to the Fair Pay Commission that has saved the worst to last. This was a Work Choices-era institution.”

In reality, the pay-cutting dovetails with Labor’s replacement of the WorkChoices laws with its Fair Work Australia legislation that commenced on July 1. The new workplace relations regime retains all the essential features of WorkChoices, including the outlawing of all forms of industrial action except during enterprise bargaining periods at individual workplaces.

While Burrow and other union bureaucrats claim to be outraged by the pay freeze, they will oppose any strike or independent struggle by workers to demand higher pay. Since the financial crisis deepened last October, the unions have worked hand-in-glove with the Rudd government and employers to implement cuts to wages, hours and jobs.

Employer groups hailed the FPC ruling. Australian Chamber of Commerce & Industry workplace policy director David Gregory said the wage freeze was a sensible decision, given the economic environment. “Certainly we think that it's the best outcome in that context for Australian businesses,” he said.

The Murdoch media, which has conducted an increasingly vociferous campaign to demand that the Rudd government start slashing social spending and real wages, also welcomed the decision. An Australian editorial declared that, while the freeze was “deeply unpopular among low-paid Australian workers,” it should be emulated by Labor’s new wage fixing body. The editorial castigated Gillard for calling the ruling “disappointing”.

The newspaper’s economics editor Michael Stutchbury went further, indicting the Rudd government for failing to follow the previous Hawke-Keating Labor government by fashioning a “social wage” policy that traded “job-destroying wage rises for non-wage benefits”.

The truth is that the so-called social wage policy, which was at the centre of the ACTU’s price and incomes accord with the Hawke-Keating government, produced no “non-wage benefits”. Rather, it was the means by which real wages were driven down and working conditions torn up in the free market economic restructuring of the 1980s and 1990s, together with wholesale job destruction, privatisation and the running down of essential social services such as public health and education.