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How to reduce poverty: pay a decent minimum wage

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By Mark Phillips

Editor of Working Life

Wednesday, 16 October, 2013

IN Australia it’s Anti-Poverty Week, and much of the talk is about the growth of insecure work and risk of developing a working poor in this country.

The term “working poor” originates from the US, where low wages and a safety net riddled with holes entraps tens of millions of workers in perpetual poverty.

It is estimated that 10% of the total population of the US are working and living on or below the poverty line. With no decent minimum wage or industrial protections to speak of, the working poor in the US rely on tips and other measures to survive.

This is a state of affairs unions in Australia have fought long and hard to avoid.

Signs of change

Yet, there are signs of change in the US. A little over a fortnight ago, in an event that was overshadowed by the budget impasse between Congress and the White House, the Governor of the most populous state signed into law an increase to the minimum wage from US$8 ($8.40) to US$10 an hour ($10.50).

Although well short of Australia’s $16.37 (US$15.59), the passage of the new law by Governor Jerry Brown means that California will eventually have the highest state minimum wage in the country and will benefit 3 million Californians, half of those in full-time jobs on the minimum wage. Although it will not take effect until 2016, it is the first time the minimum wage anywhere in the United States has reached double-figures and there is now anticipation that the decision will flow onto other states.

“The minimum wage has not kept pace with rising costs,” said Governor Brown as he signed the laws. “This legislation is overdue and will help families that are struggling in this harsh economy.”

In the small city of SeaTac in Washington state, which until the California decision had the highest minimum wage at US$9.19 ($9.65) an hour, voters will next month cast verdict on Proposition 1, which would set a local minimum wage of US$15 an hour, almost achieving parity with Australia.

Earlier this year, President Barack Obama proposed raising the federal minimum wage from US$7.25 to US$9 ($7.62 to $9.45), accompanied by annual adjustments for inflation. The last rise in the federal minimum wage was 2009, and the US rate lags behind most industrialised nations.

“Let’s declare that in the wealthiest nation on earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9 an hour,” Obama said in his State of the Union Address in February.

That met with predictable opposition from business and employer lobbyists and Republican legislators, and Obama’s proposal, while not dead, has since gone nowhere.

WATCH: The Daily Show take on critics of a higher minimum wage

But fast food workers, who are among the lowest paid in the US, have decided not to wait. During the northern summer just finished, fast food workers employed by companies like McDonald’s and Domino’s Pizza in 50 American cities went on strike to demand a minimum wage of $15 an hour, and basic rights at work, including the right to unionise.

Unions have backed the fast food strikes, but say they cannot rely on employers to do the right thing without government intervention.

“By raising the minimum wage, we can reduce income inequality in our country and provide dignity to people who work 40 hours a week and still cannot provide for their families,” the President of the Service Employees International Union, Kay Henry, said recently. “Nobody with a full-time job should live in poverty.”

Movement in Germany

Coincidentally, Germany may also soon introduce a federal minimum wage for the first time, which is a major bargaining chip in negotiations to form a new government between the Christian Democrats and Social Democrats.

Meanwhile, back in Australia, the election of a new Coalition government has revived talk about cutting the minimum wage, which rose to $16.37 an hour following this year’s annual wage review by the Fair Work Commission.

During the election campaign, the Business Council of Australia released a document that called for a review of whether our minimum wage is too high. In his first media interview, the Family First Senator-elect for South Australia, Bob Day, advocated cutting the minimum wage, which he says is “too expensive” for business to employ people.

“There’s a fundamental problem between this gap between zero and the minimum wage which really needs a serious look at, it’s a serious barrier to entry [to employment],” Day, who is a member of the HR Nicholls Society, told the ABC’s Fran Kelly recently.

Employer groups are also vowing to continue their fight over penalty rates, after their latest effort was rejected by the Fair Work Commission last week. For hundreds of thousands of workers, particularly part-time employees, penalty rates are the only difference between a living wage and falling into the status of the working poor.


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Working Life is a forum to share ideas and opinions about work and life, both light-hearted and serious. The opinions presented on Working Life are those of the author, and do not necessarily represent policies or views of the ACTU.

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Comments

  1. Cassandra
    Wednesday, 16 October, 2013 at 11:06 am · Reply

    Family First is a so called Christian political party that many pastors urged their congregations to support in the Federal election.

    Unfortunately it looks like they were conned by Satan as Senator elect Bob Day advocacy of allowing people to work for less than the legally and socially sanctioned minimum wage is certainly not in accord with the founder of Christianity’s philosophy.

    Mind you, as religion thrives on poverty, maybe the pastors did know what they were doing!

    • tobsternator
      Thursday, 17 October, 2013 at 3:49 pm · Reply

      well said Cassandra!

  2. Padi Phillips
    Thursday, 17 October, 2013 at 1:08 am · Reply

    Good to see that Australia has a minimum wage that corresponds to what would be a decent rate for the minimum wage in the UK, which at the moment stands at £6.19 (10.39 AUD) and will increase to £6.31(10.59 AUD) in November. However, the minimum wage is not enough to live on, and those working for the minimum wage rely on tax credits, (basically a wage top up) paid by the government. The present Tory administration is not only gradually restricting access to the tax credit system, but is also open to suggestions from the usual suspects, (big business and the bosses) that the minimum wage is too high, or that it needs abolishing entirely.

    Business leaders will always cry that the minimum wage is too high, no matter what level it is set at. There is the argument that a high mimimum wage deters, or prevents potential employers from creating jobs, but that particualr vacuous argument is an easy one to deal with. If a potential employer can’t afford to pay at least a mimimum wage, then they can’t afford to employ someone, just as if I can’t afford to but the latest tech gadget. It’s simple economics. I don’t see that employing anyone on a wage that isn’t sufficient is doing them that much of a favour.

    In response to the debate about the minumum wage here in the UK there is increasing discussion about the need for a living wage, which would currently be considered to be £8.50 (14.28 AUD) in London, and £7.35 (12.35 AUD) everywhere else – neither of which I consider to be enough to decent, as I don’t think anyone on less than a rate of £10 (16.79 AUD) an hour coudl be considered to be adequately paid. For many low paid workers this would seem a fantastically high sum, but even working full-time for this hourly rate only delivers £19.500 per annum (32,747.45 AUD), which is somewhat less than the national average wage, and whilst enough for a single person to enjoy a basically comfortable life, wouldn’t satisfy the needs of someone with a family, and certainly wouldn’t provide sufficient means to obtain a mortgage on a house, for example.

    Australians would be wise, in my opnion, to oppose with all their will any government proposal to reduce the minimum wage, as it would be an affront to all workers. Whislt the mimum wage you have may provide a basically decent standard of living for a full-time worker, I have few doubts that the world of work has become as casualised as it is in the USA and the UK, (we’re having a national debate over sero hours contracts at the moment, they’ve been around for many years, only now they are increasingly being used for the professions and in the academic world – hence the present debate!) and relatively few will ‘enjoy’ full-time work in the traditional sense.

    It needs to be re-iterated, time and time again, that if you pay rich people more they tend to salt the money away in tax havens like the Cayman Islands where only they and their banks derive any benefit. If you pay poor people more they tend to go and spend it on things they need, and sometimes a few things they want, and everyone benefits, money is circulating in the economy, which creates employment and so on, ad infinitum.


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