Contributed by Joe Montero

Peak Australian union body, the Australian Council of Trade Unions (ACTU), has called for a 7 percent rise for lower paid workers to keep up with rising living costs due to inflation. Critics, such as the Australian Chamber of Commerce and Industry, are already saying that this will cause a great deal of damage to the economy. They are wrong and the ACTU is in the right.

A long advocated fallacy is that wage rises always cause inflation. The truth is that inflation is a consequence of problems in the system of production and circulation that manifest in a disconnection between what the nation produces and the money supply. It is also influenced by what goes on in the global economy, and especially major trading partners.

Rises in the minimum wage over the last two years have been less than the rate of inflation and therefore still meant a cut in real wages. The proposed rise will help to close the gap but not close it.

Blaming everything on wages turns the focus away from the real problem and puts the burden of the cost on the backs of those who can least afford it. Maintaining wage stagnation and the Reserve Bank’s hiking of the interest rate aim at doing just this. Both are means to channel national income upwards, to service the claim that it will lead to more investment in the economy.

This is a pillar of neoliberalism, and  it must be thrown overboard. Although neoliberalism  has delivered immense wealth to a very few, in practice, it has failed to  generate productive investment and fix the economy. This is obvious. If neoliberalism had worked, the problems we have today would not be here.

Lifting the minimum hourly rate to $22.88 an hour is hardly enough to live a life of luxury, but it would provide some help for the growing proportion of Australia facing real poverty. In addition to the need to ensure justice, this is important for the health of the economy.

The ACTU has put its case through submission to the Fair Work Commission. Their argument is that workers on the minimum wage have suffered the greatest real pay cuts on record over the last two years.

Signals coming from the Albanese government are that it may have shifted from a policy supporting wages keeping up with the cost of living to a less certain position, with Albanese saying his government would not “put a dollar figure on that.”  The response to the ACTU submission will be made public on Friday.

A rather modest increase in the minimum wage of 7 percent would mean increased participation in the economy and a little more discretionary spending, that is, on non-basic essentials, as a potential driver for economic growth.

Be prepared for an escalation of the always present scare campaign from big business and much of the big media. They are already virtually suggesting that the sky will fall down. Why are they doing this? To protect their sectional interest as beneficiaries of keeping wages down.

One point must be made perfectly clear here. Low wages do not hold back the ability to create goods and services. Low wages are used to cover losses rom other causes, and to boost speculation and gluttony by those who pocket the bigger share.

The minimum wage should rise. So should other wages. But this might take more than putting a submission to the Fair Work Commission.