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Living wage case stock-xchng2001 - Living Wage Case - download Word
It is fitting that in this centenary year of Australia’s Federation we recall that the establishment of the minimum wage in Australia’s infancy as a nation was one of the features that marked the new Commonwealth as a social laboratory, drawing the attention of the world. 

Over the years successive Australian Governments have used a variety of processes and institutions aimed at resolving employment issues and ensuring wage justice.  Our tradition of a just wage is something of which all Australians can be proud.

As we celebrate the Feast of St Joseph the Worker this year, we are awaiting the decision of the Australian Industrial Relations Commission (AIRC) in the Living Wage Case.  Over the past few years these cases have become a significant means of promoting a just minimum wage for the lowest paid.

In 1907, just six years after Federation, Justice Henry Bournes Higgins of the then Court of Conciliation and Arbitration, in the landmark Harvester judgement, established the minimum wage, not on the basis of what the free market would supposedly bear, but on the basis of economic and social need. The wages of the lowest paid, in other words, would be determined by an entirely different standard:

I must settle the dispute on terms which seem to me just — on terms which I deem to be ‘fair and reasonable between the parties’ — and I cannot conceive any terms to be fair and reasonable which do not at the very least allow a man to live from his labour, to live as a human being in a civilised community.

There began Australia’s tradition of the just wage. This minimum wage was calculated as an estimate of the income needed to keep a man, his wife, and three children in ‘frugal comfort’. Industry would have to rise to meet this standard.

This judgement reflected the teaching of Pope Leo XIII’s 1891 encyclical Rerum Novarum.   Leo XIII rejected the idea that the determination of a just wage could be left entirely to market forces:

Let workers and employer, therefore, agree freely about wages; nevertheless, there underlies a requirement of natural justice higher and older than any bargain voluntarily struck: the wage ought not to be in any way insufficient for the bodily needs of a temperate and well-behaved worker.  If, having no alternative and fearing a worse evil, a workman is forced to accept harder conditions imposed by an employer or contractor, he is the victim of violence against which justice cries out. (Rerum Novarum, n 34)

For Leo XIII, a living wage was the barest minimum required for a wage bargain between worker and employer to be considered just.  He did not accept the argument that employers may not be able to afford to pay such a wage.

In Australia today there is a growing number of the ‘working poor’ — people who, even though they are in employment, are unable to live at a decent standard from their labour.  Many Australians are rightly offended when they learn that there are more and more people in our community who are earning less than a living wage even though they are working full time.  If Australia allows this to continue, we will be in grave danger of compromising our proud tradition of the just wage.

It is encouraging to note that while differences exist between trade unions, business and Governments on the amount by which minimum wages should be increased in the living wage case at this time, the concept of a fair minimum wage is not contested.  There are, however, differences of opinion about how such a minimum wage should be determined.

In recent years the argument has been advanced that increases in the minimum wage should be determined by macroeconomic indicators, rather than the needs of workers, otherwise they will lead to an increase in unemployment. Business will be unable to pay the higher wage, the argument runs, and will simply have to put people out of work. While some voices in business and Government seem to accept this argument as an unchallengeable fact, it is essentially the same argument which Leo XIII and Justice Higgins rejected.

The Church observes that this is not an argument advanced by every economist, still less every economic school of thought. There is an extensive Australian and international economic literature which directly challenges the view that a higher minimum wage leads to a higher level of unemployment. A number of studies have found that in circumstances of demand deficiency a higher minimum wage can actually produce positive results for employment.

On the other hand, determining a fair minimum wage on the basis of workers’ needs is not simple.  A uniform minimum wage doesn’t result in a uniform standard of living for all workers receiving such a wage.  The circumstances of workers in Australia today vary greatly. For example, a worker may be a single person with or without dependents, the sole income earner in a family with children, or one of two people providing income to a family unit.  It is difficult to make generalisations about the needs of workers in different circumstances, for instance, a family supported by two low paid workers may in fact experience a lower standard of living than a single income family supported by one highly paid worker.  In addition to fair wages, the taxation and social security systems also have a role to play.  This is not to suggest that it is primarily the responsibility of Governments to ensure adequate support for family life.  On the contrary, employers have a moral obligation to pay a just wage and Governments have a duty to provide legal and institutional structures to encourage, support and even enforce this moral responsibility.  Workers should not have to accept as social security payments what they have a right to by virtue of their labour.

The Australian Catholic Commission for Employment Relations (ACCER) has made submissions on behalf of the church to the Living Wage Cases in recent years.  It has advocated increases in the minimum wage, and that it should be a fair minimum wage rather than simply a wage floor.  ACCER has argued that the needs of the low paid should be given priority in determining the amount of a fair minimum wage.  It has suggested to the Australian Industrial Relations Commission that it establish a set of criteria for determining the needs of the low paid, and to provide a context in which the maintenance of minimum wages could be established.  For example, a decent standard of living might be established using a database or itemised list of what people should be able to afford to obtain a standard of living that is acceptable.  Such a list may include dietary requirements, benchmarks for housing, clothing and transport.  Such a database may be used in conjunction with macro-economic measures of the Consumer Price Index and level of employment and Gross Domestic Product.

While accepting that people may, in good faith, differ on how best to determine fair minimum wages, the Church upholds the rights of the low paid as a basic principle of a just society.  A just society organises its economy in such a way that everyone can meet their needs by having access to the goods of creation - which were intended by God for the use of all.  Because payment for work is the main way in which the majority of people gain access to goods and services, a just wage is the hallmark of an ethical socio-economic system.  As Pope John Paul II explained in his encyclical Laborem Exercens:

… a just wage is the concrete means of verifying the justice of the whole socio-economic system and, in any case of checking that it is functioning justly.  It is not the only means of checking, but it is a particularly important one and, in a sense, the key means.  Laborem Exercens, n 19.

In vigorously defending the low paid, the Church takes the view that Australia’s economic and social ills are many, and that their alleviation should be dealt with in a many-faceted and coordinated way. Allowing the lowest paid in our community to bear an unfair share of the burden is both unhelpful and contrary to God’s law.

Bishop William Brennan
Bishop of Wagga Wagga
Chairman, Australian Catholic Social Justice Council