Labor will deliver Australia's first new living wage

Australian Financial Review Mar 26, 2019 12.01am

Phillip Coorey

Labor will deliver the first living wage as soon as July 1 next year, and the full conversion from the current minimum wage will be phased in over a longer period, taking into account the capacity of business to pay and any effects on the economy.

Labor leader Bill Shorten has also assured that the plan to convert the minimum wage into a higher living wage will not automatically flow into higher award wages.

Only those receiving the minimum wage will be paid the living wage whereas award wages will be determined separately by the annual wage review process. If necessary, Labor will legislate to ensure this.

No full-time worker in poverty

The new wage will be designed to ensure "no person working full-time in Australia need live in poverty".

After first flagging a living wage at The Australian Financial Review Business Summit three weeks ago, Mr Shorten will reveal the details today, which includes a two-step process which takes into account concerns by business, as well as unions and community groups.

Two-phase introduction

The first phase, if Labor is elected, will be to legislate so the Fair Work Commission, which will set the new living wage, takes into account a broader range of criteria than it does now when setting the minimum wage.

"A living wage should make sure people earn enough to make ends meet, and be informed by what it costs to live in Australia today – to pay for housing, for food, for utilities, to pay for a basic phone and data plan,'' Mr Shorten said.

When determining the new wage, the commission will be asked to take into account the amount of tax people pay as well as any family tax benefits and other welfare payments they receive.

The second phase will be for the commission to determine the timeframe over which to fully implement the new living wage, "taking into account the capacity of businesses to pay, and the potential impact on employment, inflation and the broader economy".

"It will be the Fair Work Commission’s responsibility to determine a fair and responsible phasing in of a living wage,'' Mr Shorten said.

Once the legislation passes, the living wage process will  be part of the next  annual wage determination with the plan to introduce the new wage on July 1 thereafter.

The next wage determination is this time next year, making the most likely introduction date July 1, 2020.

Short of the ACTU demand

When Mr Shorten first flagged the living wage, business, especially small and medium business, expressed alarm, warning a sudden wage rise could force them to lay off workers.

Labor's final position is well short of that being pushed by the ACTU, which is to mandate that the minimum wage, currently $18.93 an hour, reaches the OECD definition of a living wage, which is 60 per cent of the median wage, in two years.

It called for the minimum wage to increase this year by 6 per cent to $20.07 an hour and then 5.5 per cent the next, to $21.17 an hour.

The Morrison government argues Labor's plan will hurt business and cost jobs. It believes the best way to increase wages is to boost the economy and productivity and is arguing the extra income tax cuts in next week's federal budget will compensate until the economy picks up. 

Mr Shorten argues higher wages will help drive economic growth because they will boost consumption.