Why not industry based minimum wages?

10th June 2015

The Annual Wage Review Panel at the Fair Work Commission is deluding itself if it believes that industry by industry minimum wage decisions are inimical to the principle of equal remuneration for work of equal value. Far from the finely balanced system of work value based wages claimed by the Panel in the 2015 Annual Wage Review Decision, modern award wages are a hotchpotch of historically compromised rates attached to largely irrelevant job classifications implanted in archaic instruments reflecting a gone-bye industrial age.

In 1989 the Australian Industrial Relations Commission’s attempted to limit the inflationary impact of a series of leap frogging wage claims, by anchoring every award wage to the key tradesman job classification in the Metal trades award. Unfortunately for the Commission, all of the factors required for such a monumental endeavour to succeed were crumbling before it’s eyes. Firstly, there wasn’t a valid or reliable measurement of work value. Next, the once closed Australian economy was increasingly exposed to international competition. Booming non-award salaries were outside it’s control, traditional manufacturing was in decline, interest rates were in double digits and the nature of work was rapidly changing from the command and control model of the industrial age.

Notwithstanding the transformation of the Australian economy, and the clearly dubious relationship of award wages to genuine work value, the Fair Work Commission revived the moribund wage structure of the old system. In each of the past three annual wage reviews it has rejected the notion that modern award wages should be assessed independently of the National Minimum Wage and according to industry specific criteria. The Panel claims the current ‘…legislative framework reveals a preference for consistent variation determinations across all modern awards … the notion of a fair safety net of minimum wages embodies the concepts of uniformity and consistency of treatment.’

What a load of rubbish. If that is true, what is the point of industry based modern awards? It seems the answer is … not much.

The Explanatory Memorandum to the 2008 Fair Work Bill states the purpose of the legislation was to create a national workplace relations system that is fair to working people, flexible for business and promotes productivity and economic growth including ‘modern awards … tailored to the needs of the particular industry or occupation to which the award relates’

Besides the moribund wage classifications transplanted from the pre-Work Choices award system, terms and conditions in modern awards are generally indistinguishable. Absolutely no tailoring of wages to the needs of the particular industries covered by awards has been attempted over the five years of the modern awards. The Fair Work Commission ruled out substantive examination of award wages in the 2012 review. The 4-Yearly review currently underway does not include one serious submission addressing the relationship of modern award wages to employment, productivity or economic growth specific to the industry to which they apply.

Notwithstanding the limitation of the Fair Work Act, is difficult to understand the reason the Commission would hold so stubbornly to the old ways. One would have thought years of consistently variable employment results across regions and industries and substantial differences in economic growth (read two-speed economy due to mining boom) would have provided an impetus for a rethink. It is ridiculous to assert that modern award wages of a retail employee working in a supermarket in Altona, Victoria, and a physiotherapist treating patients at a hospital in Cairns in Far North Queensland reflect genuine work value relativities. All of the economic data considered by the Panel illustrates substantial differences between industries. However, none of that has wetted the appetite of the Commission for a shift to industry based reviews of award wages.

It may be no coincidence that the the President of the Fair Work Commission, Ian Ross, was a key official in the ACTU during the later period of the Wages and Incomes Accord with the the Keating Labor Government. He seems intent on perpetuating the Accord methodology of big government, big business and big unions deciding what is best for the rest of us dressed up in pseudo economic and analysis and legal ceremony.

Of course, all of this would be of little interest if it were not actually inimical to employment, productivity and economic growth. Now that is is ironic.