The fair work Australia minimum wage decision viewed from afar.

• Author: Sloane, P.J.
• Position: Invited Paper

This paper attempts to put the minimum wage increase into an international context and in particular to focus on the special provisions relating to disabled workers. It is suggested that consideration be given to the inter-relationship between the special provisions and other policies directed at the disabled.

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The context of the 2010 minimum wage increase was a situation in which Australia had avoided the recession which had afflicted most of the major world economies with strong growth anticipated in the near future. The $26 per week increase, amounting to 4.8 per cent over the previous minimum, was only $1 less than proposed by the Australian Council of Trade Unions (ACTU) and more than double that proposed by many employer organisations. The expressed desire to provide a fair relative safety net and promote social inclusion, which seems to have motivated the Fair Work Australia decision should, however, be seen in relation to the situation in Australia relative to that in other countries. The Annual Wage Review 2009-10 largely ignored the international dimension, though several submissions provided comparisons of minimum wages in Australia with those in other countries. Thus, the Australian Government submission suggested that the bite of the minimum wage was high compared to other OECD countries, even if it had declined somewhat in recent years. The Australian Business Industrial (ABI) submission suggested that in 2005 Australia ranked fourth among 21 OECD countries in relation to the after tax value of the minimum wage (though from the perspective of the employer it is the pre-tax value which matters as it is this which determines costs).

A relatively up-to-date international comparison of minimum wages is contained in the 2010 report of the UK Low Pay Commission and Table 1 below is drawn from that report. It covers 12 OECD countries for which data are available and in all cases the minimum wage refers to the basic rate for adults. The exchange rate comparisons reflect the costs of goods and services traded internationally and that are therefore most relevant to companies engaged in international trade. The purchasing power parity (PPP) comparisons measure the monetary costs of buying the same representative basket of consumer goods and services in each country and therefore are a more accurate comparison of standards of living across countries. Regardless of the measure used, and despite the fact that most countries...