Last week I argued in the Canberra Times against the minimum wage, pointing out that last years minimum wage increase lead to no higher disposable income and 16,000 jobs lost (or not created). I went on to write:
The commission will decide next month by how much it will increase the minimum wage. The economic situation facing the commissioners is very different to last year, but the basic trade-off remains the same. Whatever gains it gives to workers will be substantially reduced through tax and inflation, and will lead to relatively lower employment.
Instead of concentrating on minimum wage, the government could use the tax and transfer system. Tax cuts and transfer payments directly help workers and they don’t destroy jobs.
Today we have the good news that the Fair Pay Commission has decided to freeze the minimum wage at $14.31/hour, thereby giving low-skilled workers a greater chance to find and keep work. In their summary of the decision the Commission explains that:
In the current environment, the ability of employers to offer sufficient work has been curtailed and there is a heightened risk that an increase in regulated minimum wages would reduce employment and working hours
Excellent. Thank you Ian Harper for putting the interests of low-skilled workers ahead of the moral posturing of the latte left. The Commission goes on to note that the next minimum wage review will be done by Rudd’s new “Fair Work Australia”. We can only hope that they will continue the current pro-job approach.