Unions and a minimum wage are a bulwark against inequality - ABC 702

With the government announcing a Productivity Commission review which looks set to hack into unions, the minimum wage and unfair dismissal laws, I joined Linda Mottram on Sydney's ABC 702 to talk about why these things are an important protection against growing inequality. Here's the transcript:





SUBJECT/S: Productivity Commission review; minimum wages; inequality

LINDA MOTTRAM: Joining me now is the Shadow Assistant Treasurer Andrew Leigh. Andrew, good morning.

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good morning Linda, how are you?

MOTTRAM: Well thanks. Now, what do you make first of all of the review itself – is it necessary?

LEIGH: I don't believe so, Linda. If we look at the story of the last couple of decades, it's been a period in which we've seen much slower growth in minimum wages than we have in average earnings. We've seen a rise in inequality and we've seen a fall in industrial disputes. Union power is lower now than it was in the past, and the union density rate is the lowest that it's been in my lifetime. So the notion that when we've got the slowest wage growth in a decade, the real problem for Australia is a ‘wages breakout’ just seems to be askew from the fundamental facts of what's going on in the economy. 

MOTTRAM: Ok, but the nature of work is changing. There are all sorts of new forms of work and unions are not part of that landscape. I think that whole work change raises issues about how we pay people, how we deal with some of the complexities there with penalty rates and so forth. But also business does complain that the industrial relations system is prohibitively complex – doesn't that seem to be sufficient cause for a review?

LEIGH: Well if flexibility means a parent being able to pick up a child in the middle of the day and take them from school to after school care and then go back to work, then I'm all for it. But if flexibility is the ability to fire at will as you can in the southern states of the United States, then that doesn't seem like a good development for Australia. The way I think of this in big picture terms, Linda, is that globalisation and technology are hitting developed countries, and they're causing a divergence between what workers take home and their productivity. So in many countries now, productivity is continuing to rise but workers' wages are flat or falling. Australia hasn't suffered that problem as badly because of the collective bargaining system and the minimum conditions we have in place. This is the conclusion of a recent Inclusive Prosperity report that was put out by Larry Summers and Ed Balls. Australia's institutions are more important now than they've ever been because of the twin impacts of technology and globalisation. The risk of offshoring and robotics really do mean that we need those employment protections in order to maintain the Australian standards of life that we aspire to.

MOTTRAM: Andrew Leigh is with us, the Shadow Assistant Treasurer in the federal opposition and an economist as well. Nonetheless, the Productivity Commission review is going ahead and the sacred cows are all on the list: penalty rates, minimum wages, unfair dismissal laws. Is there any room for restructuring any of those things in the dynamic economic environment that you're describing?

LEIGH: Linda, I'm always up for an evidence-based discussion. 

MOTTRAM: Well, that's what they're promising, isn't it? They're saying it will be that.

LEIGH: Let's hope that's what we have. The worst thing we could do though is to go back to the Workchoices system. As a report chaired by Ron McCallum found recently, the Workchoices era was the lousiest period of productivity growth in Australia over recent decades. Workchoices didn't boost productivity, it knocked it for six. Under the Fair Work rules, we've had decent productivity growth; not as good as I'd like but certainly better than under Workchoices. So whether you're focused on productivity, or whether you're focused on egalitarianism – and I certainly believe that we need to look at both – the current rules do seem to be delivering a whole lot better than Workchoices did.

MOTTRAM: Just a couple of specifics: the minimum wage. I know you've been quoted with a view on that in one of the papers this morning – what's your view about the impact of having a minimum wage in the first place? 

LEIGH: The minimum wage pushes up the earnings of many Australians and you don't see a relationship across countries that would suggest that countries with higher minimum wages have more unemployment. Indeed, Australia has managed to have a decent minimum wage and low unemployment for many years now. Our minimum wage hasn't kept pace with average wages, so it's falling further and further down. But I think it is an important floor. I mean, just to give you one number: earnings for the top tenth of the labour force have grown 59 per cent in real terms since the 1970s; earnings for the bottom ten per cent have only grown 15 per cent. So if there's a wages breakout we need to worry about, it's far more in the top tenth where earnings are growing three times as fast as in the bottom tenth.

MOTTRAM: That inequality issue globally is, as you say, quite notable. What about unions, Andrew Leigh? In some ways it does seem like you're looking at a 19th century construct when you watch some of the way that unions interact with companies. As we were discussing earlier, it seems like that's partly due to the architecture of the current system. Do you think there's something in unions, looking at how they operate and how they're structured?

LEIGH: Unions aren't just the organisation that brought us the eight hour day and the weekend. They're also the most important social movement towards egalitarianism. Unions work towards pay equity within workplaces, but also across workplaces. It was unions that put in place the Social and Community Sector case that saw an historic pay equity agreement for people working in the social and community sector. Because that sector was disproportionately feminised, it had been underpaid. These sorts of cases are systematically brought by unions. And if you're working in a dangerous industry – such as construction – you want to be able to know that you can down tools if the scaffolding isn't tight. The notion that Gerard Phillips is suggesting, that you wouldn't be able to withdraw your labour if you didn't feel safe on the worksite, is to me a deeply troubling one which cuts against core Australian values. We want to ensure every worker goes home safe at the end of the day, and we want to make sure that those who are most vulnerable are best looked after. 

MOTTRAM: Well, we'll wait and see how this Productivity Commission review goes. Andrew, thank you for joining us again.

LEIGH: Thank you, Linda.   


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