Extended Freeze Would Protect the Poor

Judith Sloan has a piece in today’s Australian (paywall protected) echoing many of the points made by the Society in our submission to the FWA minimum wage review.

An extract:

Clearly, they had not read the research undertaken by Professor Andrew Leigh, now Andrew Leigh MP, which concludes minimum wage rises lead to greater earnings and income inequality, on plausible estimates of elasticities. Oops.

The panel does acknowledge that “increases in minimum wages are a blunt instrument for addressing the needs of the low paid”. No kidding. We have known for some time that most minimum wage workers do not live in poor households. Indeed, it is pointed out that “30 per cent of low-paid adult employees live in households in the top four income deciles”…

But here is a further list of suggestions for next year’s review, in addition to reducing drastically the length of the written decision:

 

 Think seriously about freezing minimum wages for some time. The fact that minimum wages have fallen as a proportion of median wages is good, but the ratio needs to fall further. Don’t forget that the most plausible estimate of the negative employment effects of higher minimum wages is about minus 0.3 per cent for every 1 per cent increase in minimum wages.

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