Op-Ed: Labor meddling in wages will leave us worse off

It is bad enough that Bill Shorten and the ACTU repeatedly make the false claim that Australia is getting less fair and more unequal.  

The Productivity Commission took a careful look at inequality last year - and found that it had barely changed in thirty years.

The PC report shows incomes have grown for the average Australian household at every income decile, leading to improved living standards. 

Labor is trying to import from the US a political narrative about inequality and lack of growth for those on low incomes - but in Australia the facts are very different. 

As the PC pointed out, two key features of our system help reduce inequality. 

Our tax system is redistributive: people on higher incomes pay a higher percentage of their income in tax.  

Almost two thirds of total personal income tax collected comes from the highest twenty five per cent of income earners. 

Australia’s social security system is also much better targeted than in the US and many European countries.  

On average Australia households in the lowest twenty per cent by income receive $517 a week from our social security system; those in the highest twenty per cent only $28. 

But even worse than Mr Shorten’s false claims is that his proposed response threatens not to help vulnerable Australians but harm them.

Today when the Fair Work Commission sets the minimum wage, its Act requires that it carefully weigh up the likely impact on jobs.

Labor now says it will direct the Fair Work Commission to grant higher increases in the minimum wage than the Commission would otherwise choose.

That’s a big problem for vulnerable Australians - because it would likely mean fewer jobs for lower skilled workers.  

The idea that government can increase wages by decree, with no effect on employment levels, as Mr Shorten likes to imply, is simply fantasy.  

Nine out of ten jobs are in the private sector - and private sector employers need to cover their costs to stay in business.  

If it costs them too much, private sector employers will simply not be able to hire. 

Mr Shorten’s political rhetoric will not overcome this fundamental economic reality.

With Mr Shorten’s proposed changes, the risk is that lower skilled workers will find it harder to get work.

As welfare lobby ACOSS points out in its most recent report on poverty, most people who work are not in poverty - and the majority of people it defines as in poverty are not in work. 

ACOSS found only seven per cent of people in households whose main income is wages fell below a measure of ‘relative poverty’ - defined in the report as income less than fifty per cent of median income.

Of course there is some controversy over the concept of ‘relative poverty’ - which likely overstates the actual extent of poverty.

But there is not much controversy over the importance of getting more people into work as the best way to reduce poverty.

And getting more people into work has been a central focus for our Liberal National Government – with nearly 1.3 million jobs created since we came to government in 2013. 

Creating new jobs is one side of the story.  At the same time we need to help those who find it challenging to go for one of those jobs.  

That is why we are spending $96 million on the Try Test Learn fund - which is supporting innovative projects to help people overcome difficulties keeping them out of the workforce. 

It is why we are investing close to $20 million in grants for projects to support our National Disability Insurance Scheme (NDIS) Participant Employment Taskforce, to help improve employment outcomes for Australians with disability. 

It is why we have introduced the Cashless Debit Card, designed to help Australians on welfare deal with drug and alcohol dependency so they can return to the workforce. 

These measures are working.  

There are 230,000 fewer working age people on the welfare rolls now than in 2014. 

The share of Australians of working age (16 to 64) on welfare is now at 14.3 per cent - its lowest level in 30 years. 

But if Mr Shorten dances to the ACTU’s tune - imposing a $73 a week increase to the minimum wage by political mandate - the progress we have made will very likely be lost.

Those with the most to lose from a Shorten Labor Government are Australians who have recently joined the workforce or who are trying to do so.  

Labor’s policy would put at risk their chances of getting, or staying in, employment.

A policy justified in the name of ‘fairness’ or ‘equality’ is likely to reduce employment and in turn increase poverty - the very opposite of what it is claimed it will do. 

Paul Fletcher is Minister for Families and Social Services in the Morrison Government.

Originally published in The Daily Telegraph on 28 March 2019