This is part three in a series on wages. Find part one here and part two here.
Apart from curbing access to cheap foreign labour, another issue on which UK Prime Minister Boris Johnson is expected to go against traditional conservative policy is the expectation he will support an increase in the UK minimum wage of over 5%, to £9.42 an hour.
Johnson has also backed previous large increases in the minimum wage.
In Australia, minimum wage rises are anathema to business, business organs like The Australian Financial Review and the right more generally; the reflexive response is that they cost jobs. There is little evidence that that’s the case, and Australia’s experience of cutting penalty rates showed that reducing low wages certainly doesn’t create jobs. The Productivity Commission struggled to find conclusive evidence that minimum wage rises cost jobs in its 2015 industrial relations report.
The issue is timely give this week’s Nobel prize in economics. It was shared by Canadian-born economist David Card (who received half the prize), Joshua Angrist, an American, and Guido Imbens, from the Netherlands, who received one quarter each. They were cited for their work on natural experiments, which is said to have revolutionised empirical research.
Card’s research on the labour market effects of raising minimum wages back in the early 1990s is still bitterly opposed or ignored by neoliberal economists and both the Coalition and business here. (Ross Gittins is one of the few high-profile economists in this country to understand the importance of the research of Nobel winners — he has often pointed out how economic models used by the RBA, Treasury and others to plot a course of action or a new policy are wrong because they are theoretical and don’t look at what consumers especially often do.)
Card made his name with a controversial paper that studied whether an increase in New Jersey’s minimum wage from US$4.25 to US$5.25 an hour in 1992 cost jobs in the fast-food industry compared with Pennsylvania next door. Contrary to previous research and economic orthodoxy, he and his fellow economist Alan Krueger (who died in 2019) found that employment in New Jersey restaurants increased after the minimum wage was raised.
It’s taken decades but Card and Krueger are slowly being vindicated in the United States, with the push to raise minimum wages accelerating in recent years — some states will see double-digit rises in minimum wage rates this year. After years of pressure, companies like Walmart, Amazon, Target and others have also lifted wages to US$15 an hour to more than US$20 an hour with added benefits.
The most recent jobs data in the US shows both wages rising and employment rising (everywhere bar government education due to seasonal adjustment factors): year-over-year wages rose to 4.6%, the employment-to-population level rose and underemployment fell. The monthly Job Openings and Labor Turnover Survey (JOLTS) report for August showed 10.4 million vacancies and 4.3 million people quitting their jobs — a record after rising from the previous month and a sign of job market confidence.
The contrast between the UK and the US with Australia is remarkable, and not just because of ongoing lockdowns — even when Australia was a world leader in COVID-zero and reopened in 2020, a rapid rise in employment didn’t translate into wages growth, which continues to languish below 2%, far below inflation. That reflects both a business community hostile to reversing the recent shift from incomes to profits, and a government that opposes minimum wage rises, suppresses public sector wages growth and demonises unions.
Card’s other major work was to find that a sharp increase in migration from Cuba to Miami in 1980 — via the Mariel Boatlift — had little impact on wages and employment. Over four months, 125,000 Cubans arrived in Miami, raising the size of the workforce in and around the Florida city by 7%, but Card’s comparison with four other US cities found no negative effects on jobs or wages of low-paid workers.
Since that time, structural factors have moved against workers in the US and other Western economies: unionisation levels in the US have fallen by nearly half, employment precarity has increased, automation has removed both low-paid and, increasingly, middle-income jobs. Some more recent studies have sought to contest Card’s result, though in the view of academics, so far unsuccessfully.
But crucially, inflation expectations have also radically changed since 1980 — the US had inflation over 13% in 1980; now the Federal Reserve’s target is 2%, a level it has struggled to reach most years since 2012.
It’s been a similar experience in the UK, and of course here in Australia where the entire goal of monetary policy is to see wages growth push inflation up.
Whether the current inflationary spike due to Brexit, workforce and logistics disruptions is temporary or longer-term will be a key outcome from the UK’s bold experiment in rejecting neoliberalism and what Australia can learn from it — if it has a government and business community smart enough to learn.
Australia has a business community not smart enough to tie their own shoelaces.
I am so with you there, BA. I’ve seen enough of ‘em, thick as two short planks.
Here is more on how we got to this point, seeing as no one seems to dig into it.
I could go on. It’s just not a topic that seems to interest the mainstream. Minimum wage workers don’t have a voice. They should have a voice because the importation of what is hundreds of thousands of people has huge flow on effects into society. I believe in immigration I just question what the point is when someone moves here to deliver pizza in some newly built crappy outer suburb that only exists to service people who moved here to deliver pizza. What is the value of that.
If I thought that many here would know Nancy Mitford I’d quote her diary, during the 1968 Evenement, on the non necessity of a livable minimum wage “…the wife takes in sewing or cleans, the husband goes out as a waiter at night…” May 21st, Versailles (sic!), reprising the Austrian Queen.
I know the Mitfords.
My argument for a living wage is rational, not emotional. People have to have food, shelter, clothing, transport, water and some basic enjoyment in life. If you don’t a job doesn’t provide these things then welfare has to. Why should the Government subsidise employers?
If no one provides those things you get war, uprisings, disease in slums and all the rest.
It’s not a choice really. So far in the West we go down the road of subsiding employers to keep the peasants from war. Why should the taxpayer pay is my view.
IF business wants the cost of wages to go down then lower the cost of living. Many low income people don’t actually want too much and only push for higher wages when the cost of housing goes up or groceries get too expensive.
As Isaac Hayes said in one of his songs; “Damn straight”
Would that have been ‘Shaft’? Entirely appropriate, given the topic.
Maybe the business heads that are the ersatz rulers of the UK and the USA have figured that the best hope they have of maintaining some vestiges of their neo-capitalist gains, is to loosen, rather than tighten, the leash….at least a bit, and if only for a while.
I imagine if it works in those countries, Oz will fall into line in time.
Isn’t that the history of the world, though? One long push back to loosen the leash. I was just reading about peasant uprisings in 1300 and something. What’s changed? Just another peasant revolt linked to a pandemic, which has happened many times before. Either pandemics push the peasants too hard or they are a handy thing for uprisings, I can’t remember.
We just don’t use the words ‘peasant revolt’ anymore. That’s exactly what has happened in the USA and UK. Same old, same old.
Why you don’t see many peasant uprisings here:
There’s just not that many citizen peasants working for minimum wage on the bottom run of the ladder and surviving alone for a long period of time. They exist, but they are few. Not like in the US or UK.
I honestly think you’re more likely to get a middle class revolt here. The middle class have high expectations that are not being met.
You seem to imagine that grinding peasanthood is a natural state.
I suggest some thing to give your timelines some perspective – James C Scott “Against the Grain”.
My point is that it isn’t a natural state. Repeated peasant uprising have brought us to where we are today where the life of a peasant today is a far cry from the 1300’s. I support improving the lives of peasants. It leads to less crime, less disease, lower benefits costs and more. And it is morally right.
I just point out you may not see a peasant uprising in Australia like UK or USA because we don’t have many real citizen peasants. Even I never hit the bottom of peasantry and have moved up a little. I’d like to see my circumstances improve but I’m far from revolting or the Great Resignation.
The uprisings will come from temporary workers and migrants or the middle class. Temp migrants are treated like crap. The middle class are slipping and not getting what they feel they deserve.
You could say it is a mark of success in this country that we have few ‘normal’ peasants. Peasantry in this country is confined to a group that normally have some unfortunate issues that put them in that place. We don’t have the same kind of working destitute regular people the other countries have. I’ve been there, those locals are few and far between. They exist, but not enough for a big revolt.
Way to miss the point.
No surprise.
I usually agree with most if not all of what you say but I cannot for a moment agree that a peasant uprising (or its modern day equivalent) will come from temporary workers and migrants and I have my doubts about the middle class as well. Temporary workers like your 457s, skilled migrants, business migrants and student class and the migrants of which there are many were brought in precisely to make life harder for the locals, to put downward pressure on wages and worsen conditions. If any of these groups rise up they will be shipped back to from whence they came or they will starve or become homeless. Some already do and move back. Most suck it in a way myself as a local would never do. I see this anecdotally. Parts of the public service are populated not only by earlier “skilled’ migrants who came in the 80s and 90s but recently, within the last 20 years, by skilled migrants or temporary migrants working casual positions at a reduced level. Exploited and a perpetual renter class and most if not all have families. Poverty and exploitation among this cohort will be endemic and possibly hereditary. They are angry and resentful to be sure but they will not rise up and will either accept their fate, move back home or drift into political and religious extremism or forms of criminality.
I agree that one used to receive social security and do cash jobs in agriculture usually but Keating ruined this when in 1989 he made everyone get a tax file number and link this to their work, their income reporting and their identity of employees. It was a ‘Clayton’s’ ID card. Who would work for what you could get doing nothing?
This new coterie of underclass of permanent and temporary migrants will be the norm and not just in the low skilled, seasonal or casualised/part time industries and occupations either. If companies and governments can’t send the work offshore, they will bring the offshore workers here to Australia.
Old time workers like me, though I am officially close to retirement, are treated like crap but this is only in my mind and others in the know. Some others look at me like I am a lucky entitled piece of White crap who doesn’t deserve the job I have had for over 25 years – and this from similar White people to me. The way to solve this is first to get educated especially if you are young. It pays dividends as you age. There will be no revolution or peasant uprising due to the massive reserve army of labour and the fact that unions today ain’t what they used to was.
True. I just wonder how far you can push people? Some migrants have invested a lot in moving here and when we treat them so badly maybe one day there will be consequences for that. While my sympathy is limited sometimes for people who deliberately work for less I do wonder if they might push back in some way. Some can’t just go home, they have too much on the line.
The middle class may be upset because they were promised professional jobs, decent homes, holidays and everything and their power is being eroded. University graduate jobs are trending down.
And yes, older people have been treated terribly!
So many words in 3 parts and nothing on welfare. There is plenty of minimum wage work in this country in urban areas for around 10 – 30 hours a week. There was no short of cleaning, retail, hospitality, warehouse, factory, gig and so on. It’s just not full time.
The reality is that people on welfare would only be marginally better off if they took these jobs (and in select cases, worse off) so why bother. Going to work for 20 hours a week at typical casual rates may leave someone on welfare $400 better off. In some cases $400 is a lot of money to a person.
In many cases where the supposed jobseeker owns a home or has family support $400 to go to a crappy job is not worth it, nor financially necessary. You don’t need to be dead broke to be on Jobseeker, something which particularly applies to older jobseekers who have had time to build assets.
This is how we got to the point where so much migrant labor is filling these roles. It is simply not ‘worth it’ to most of the people on welfare to go and work 20 hours a week as a waiter for $400.
We have a situation in this country where hundreds of thousands in urban areas sit on welfare while there are a lot of jobs going, just not the jobs they want. Instead a migrant workforce filled the jobs which while some of these people are white it feels vaguely racist somehow that the local lords sit on their butts waiting for a good job while foreign labor picks up after them.
Obviously Jobseeker needs to rise and wages need to rise. I am just pointing out why this situation exists in the first place. Welfare makes less the full time minimum wage work unappealing unless you’re in the minority who are literally dead broke.
Do you have any data to support your contention that ‘We have a situation in this country where hundreds of thousands in urban areas sit on welfare while there are a lot of jobs going, just not the jobs they want. Instead a migrant workforce filled the jobs which while some of these people are white it feels vaguely racist somehow that the local lords sit on their butts waiting for a good job while foreign labor picks up after them.’?
I seriously doubt it.
$400 / fortnight not week
In all the discussion on living standards, immigration and multiculturalism it is true that there are many if not most poor migrants – particularly those that immigrated here post-1990 and quite a few before that as well but by 1990, the horse had well and truly bolted on jobs for life, affordable housing and good lifetime superannuation pensions. It was all struggle unless you have a lot of money brought over or skills. Hard work, which was the staple of workers, migrant or otherwise, from the 1940s to the late 1980s, just didn’t cut it any more.
I would say that most migrants who came here pre-1990 were much better off here than had they stayed in Europe or wherever they came from because most of them were unskilled or semi-skilled and would have struggled massively had they remained in Italy, Greece, the former Yugoslavia or other part of eastern Europe and the Middle, Near and Far East. Some old bloke told me in 1984 that the day of the labourer was almost over. Fortunately I got educated and continued in that vein through a succession of shitty jobs and bosses until my current one where I have been for 26 years and it pains me to think that this is the best I can get and don’t know what to do if I chuck it in. Manufacturing is dead or dying and won’t be revived on any large scale. It is in this sector of the economy where most post-war migrants got their start. The service sector is populated by many “personal” services that are irregular, part time and casual, some even contract or piece work. No one can make money driving Ubers, taxis (these days), delivering fast food, cutting hair, painting nails, etc. And these jobs don’t have sick leave, annual leave, superannuation, training and if you put in a workers compensation claim, forget ever working again. Some previous posts on this or other related topics in Crikey say we all love our food delivered and personal services. I don’t. I never use a delivery driver like an Ubereats, Foodora or Deliveroo. If I a hungry I will damn well cook some toast. Make some hard boiled eggs. How hard is that. Who wants cold food.