Australia's other two-speed economy gender, employment and earnings in the slow lane.

• Author: Jefferson, Therese
• Position: Invited Paper

Talk of a 'two-speed economy' was prevalent in Australia in the first half of 2010. The Australian Chamber of Commerce and Industry argued against a significant increase in the minimum wage on the basis that most minimum wage earners were employed in the 'slower' sectors of the Australian economy, where employers could not afford increased employment costs. This article considers the recent Fair Work Australia wage decision in the context of the argument that Australia has a two-speed economy. Using earnings and employment data from the Australian Bureau of Statistics, we find that it is possible to identify significantly different patterns to the earnings outcomes experienced within specific sections of the Australian economy. There are some clear 'tracks', particularly between men and women in the private sector. The data suggest that the recent minimum wage decision will play an important role in countering labour market inequities, particularly those that are evident in Australia's gender pay gap. Further work remains to be done, however, and the forthcoming equal remuneration case will provide a further opportunity for Fair Work Australia to contribute to gender pay equity in Australia.

Introduction

The first National Wage Decision under the newly constituted Minimum Wage Panel of Fair Work Australia (the Panel) offered an opportunity to gain insights into the interpretation and application of the new minimum wage objectives (Section 284 of the Fair Work Act). Additional interest was added by the global and national economic contexts in which the decision was given. Globally, the context was one of economic uncertainty. Australia's relatively favourable economic outcomes during this period were tempered by rhetoric that we have a 'two-speed economy' and that wage increases among those on lower pay would result in losses of employment.

Our analysis suggests that while Australia may be described as having a two-speed economy, for wage and salary earners, the two speeds appear to be defined by the contrasting outcomes experienced by men and women in private sector employment. In this context, we find that Fair Work Australia's focus on key issues such as the definition of low pay and social inclusion indicate a recognition that National Minimum Wage decisions will continue to play a pivotal role in wage equity within Australia.

Background

In the immediate aftermath of the 2008-09 financial crisis, the last national wage decision given in July 2009 by the Australian Fair Pay Commission (AFPC) was to freeze Australia's Federal Minimum Wage. The key argument was that an increase in the Federal Minimum Wage would come at the expense of jobs of low paid workers. The decision was based on relatively pessimistic forecasts of rising unemployment:

While opinions vary, most analysts expect employment to continue to fall through 2009-10, with unemployment rising towards 8.5 per cent of the labour force. In previous downturns, the increases in unemployment have taken many years to reverse, and the Australian Government now projects that unemployment will not return to current levels for approximately six years (AFPC...