Contributed by Joe Montero

At her first public speech at the National Press Club yesterday, new ACTU Secretary Sally McManus, called for the minimum wage to be lifted to almost $19 per hour. This would lift the minimum wage to $672.60 for a 38-hour week and  benefit up to 2.3 million Australians.

In answer to those who suggest this is outrageous, she reminded that the gap between what goes to employers and workers is greater than it has been for 70 years. On top of this, the 679 biggest corporations operating in Australia pay not one cent in tax.

The projected minimum wage sits between the official poverty line for singles ($426.30) and a family of two adults and two children ($895.22), which suggests that even with this rise to the minimum wage, there would still be a long way to go to tackle official poverty in Australia. This currently affects 13.3 percent of the population.Refer to  Poverty in Australia (1016) report for  more information.

However, these numbers underestimate the true extent of the problem. On the one hand, the ridiculously high cost of housing means that a larger number have less to spend on other necessities. On the other, there has been a marked trend by employers to increasingly resort to the use of insecure employment. This needs to be taken on too.  A rise in the hourly rate does not mean much, if the needed number of hours aren’t there.

An article of faith in neoliberal economic policy is that wages are always too high and that any rise will bring about a disaster. A claim repeated  so often and for so long that it has become a mantra, even though the evidence does not back it up.

The argument goes this way. Wages add to the cost of running a business. This is undeniably true. But it is also misleading. It applies more to small business and much less to big business. If looked at as a per unit cost, the more units per hour, the lower the labour cost for each, given that the hourly wage rate remains constant. In other words, the higher the productivity, the lower the impact of wages on the business and Australia has one of the highest rates of productivity in the world.

Australia’s high productivity rate exists, because the economy is highly capital intensive. In other words, fewer people do the work that would otherwise be performed by larger number of workers.

One would suppose that employers should be reasonably satisfied. But they are not, because they are in troubled waters. But this is not because wages are too high.

The problem is on the capital side of the investment equation. There is insufficient space to go into it here. What is important to note is that this is reducing the per unit return on investment and to recover the loss, employers are seeking compensation through raiding the wages share and further tax relief from the government.

Ultimately, this is a self-defeating exercise, for it does not tackle the cause of the problem and undermines the economy on which employers depend.

This also underlines the bankruptcy of neoliberalism.