The Living Wage is viewed by the union movement as one strategy for securing the advancement in living standards for the people we represent says ACTU Research Officer, Suzie Jones.

1. Introduction

I want to begin by summarising what are the imperatives facing the ACTU and why the Living Wage is viewed by the union movement as one strategy for securing the advancement in living standards for the people we represent.

1.1 Wage Fixation Criteria

You will have been distributed a background paper setting out the various manifestations of Australia’s wage fixing system as implemented by the Industrial Relations Commission. These manifestations include:



  • The Living Wage concept flowing from the Harvester decision of 1907, which rested fundamentally on a needs based criteria. This became the basic wage;




  • The total wage concept (combining the basic wage and secondary margins) which marked a period in which economic criteria (cost of living, productivity growth, capacity of the economy) were given increasing weight. A new minimum wage clause (separate from the wage structure) was introduced to deal with equity issues of needs;




  • The development of skill based classification structures as part of award restructuring (which concerned economic criteria) and the minimum rates adjustment process involving the use of supplementary payments to address equity criteria (reducing the dispersion of earnings through overaward payments);




  • Finally, the emphasis on workplace productivity and enterprise bargaining accompanied by safety net adjustments (designed to reduce the dispersion in earnings through access to enterprise based wage increases);




  • Over these latter two periods the Prices and Income Accord partners (the Labor Government and the union movement) adopted a strategy which integrated wages, employment growth, taxation and income support policies at the micro level of income distribution. Claims for money wage increases were adopted to secure macro based improvements grounded upon equity considerations: generating employment growth, improved levels and better targeted transfer payments, superannuation etc.



The point is that equity criteria have always been part of Australia’s system of industrial regulation as has been the objective of securing improvement in living standards. What has varied is the means by which these are expressed and the weight given to economic, social and equity considerations. This has largely been dictated by the political and legislative environment, the economic circumstances, strength of the union movement in the sense of both its capacity to secure decent market rates of pay, and its capacity to articulate strategies which resonate with community standards and which focus on the particular circumstances of disadvantaged groups within the labour force.


The effect these equity considerations have had in ameliorating earnings inequality in Australia have been overwhelmingly accepted.


For example, the Brotherhood of St Lawrence paper, ‘The Way Forward’, stated:


“Whilst earnings in Australia have become more unequal they remain less unequal than in most other OECD countries and the extent of low pay, while increasing is also lower than elsewhere (Whiteford 1996). Australia’s unique centralised wage fixing system thus appears to have limited the trend to growing wage differentials evident in most industrially advanced countries”.

1.2 Living Standards And Wage Fixation: The Context

“All Australians should have access to an income which allows them to maintain an adequate standard of living commensurate with community standards”.

[“The Way Forward”, p.25]


While we accept that the level of the Standard of Living will ultimately depend on the combination of labour market income and social transfer income (Cass and Cappo), our premise is that, fundamentally, living standards are contingent upon the existence of adequate and effective minimum wages. Similarly, the distribution of national income or equity and access to improved living standards must begin with a wage fixing system which provides adequate and effective minimum rates of pay, for low paid workers.


Many of the industrial labour market economic and social imperatives which we face and against which we have developed our claim have been canvassed by various speakers including myself at the recent ACOSS/Brotherhood of St Lawrence Conference ‘Making it Work’.


In summary they are:



  • Fundamental changes in labour force participation – the collapse of the youth and aged labour markets;




  • Significant changes in the pattern of working hours: full-time workers working longer hours accompanied by increased casualisation, part-time work and the secondary labour market;




  • Changes in industry composition of the workforce – the shift from manufacturing to service sector;
  • Increasing gap between market rates and award rates of pay for entry level occupations (gross incomes of approximately $22,000-$25,000 or less) despite introduction of supplementary payments and minimum rates adjustments;




  • Increased dispersion in earnings between the lowest and highest deciles;




  • Increased inequality in private household incomes offset (to some extent) by taxation and social transfer payments;




  • Significant changes in the weighting of various household types – shift from sole breadwinner to a couple with children;




  • No guarantees by a Coalition Government that the level and content of the social wage will be determined on a consensual basis and be properly integrated with wage fixing to secure improved living standards. In fact, every action of the Coalition to date vindicates the ACTU view that the “social wage” would not be sustained and improved as with the Accord;




  • The commitment by a Coalition Government to ensuring workers access increased money wages is limited to:



– enterprise based productivity;

– marginal safety net adjustments (their definition of lower paid workers is yet to be clarified).



  • Deregulation of wage fixing by the promotion of Australian Workplace Agreements (AWA’s); in reality a fancy (but misleading) title for promoting and legitimising individual contracts of employment within our collective system of industrial regulation;




  • Emasculation of awards and the powers and function of the Commission.



In summary:



  • The labour market and industry changes mean that the system of wage fixing premised on the notion of a standard full-time working week needs review;




  • The labour market and forthcoming legislative changes require a re-assessment of how the equity functions of wage fixing can be best achieved.


2. Elements Of Claim

2.1 Elements of Claim

The ACTU’s claim will be in two parts:


– First, a claim for substantial increases in minimum award rates of pay which will secure effective minimum rates of pay. The objective is to strike a rate which is consistent with the notion of a Living Wage.


The concept of a Living Wage will draw on the standard enunciated by Higgins J in the Harvester Judgement 1907:


“the normal needs of the average employee, regarded as a human being living in a civilised community” (2CAR1, 3),


The Living Wage concept in 1996 will, however, reflect the contemporary realities facing Australian workers in the 1990’s.


The Living Wage 1996 must provide a standard that is:


  • sufficient for a worker to participate in and belong to the community as an active citizen.



The standard will not be constrained by the 1907 stereotype of a male breadwinner, nor will the wage be depressed by reference to a limited range of items comprising the cost of living. The standard will be inclusive and comprehensive.


– Second, a claim for substantial safety net adjustments.


The claims are distinct but related:



  • The Living Wage claim is intended to ensure that those workers who are dependent on minimum award rates for their wage are not in fact the working poor; it is intended to ensure that any improvements in living standards through the market wage are distributed equitably; and it is intended to ensure that increased flexibility and productivity are not achieved at the expense of disadvantaged groups within the labour market.



The objective is to reduce the gap between award rates and market rates; to increase money wages of workers at the lowest deciles relative to the highest deciles; and to secure viable working arrangements for those groups who comprise the casual, part-time labour market.


The effect of the Living Wage claim will be to secure actual increases in earnings for all workers whose earnings are less than the new rate of pay.



  • The Safety Net Adjustment claim is directed to increasing earnings of those workers who have not benefited from enterprise based agreements.



It is directed to reduce the inequities which arise from differential access by workers to enterprise based wage increases. The effect of Safety Net Adjustments’s is to increase the actual rate of pay to the extent that they have not increased because of enterprise agreements.

2.3 The Living Wage Concept

The objective will be to raise entry level rates of pay in federal awards to a level which can be regarded in 1996, and the immediate future, as a living wage in our civilised community.


The standard, enunciated in the 1907 Harvester judgement, will be based on the objectives of:



  • equity;




  • sharing family opportunities and responsibilities;




  • ameliorating poverty levels of those at work.



The Living Wage 1996 will therefore take account of:



  • Varying household/family structures/types and their demographic composition amongst the workforce.




  • Changes in household/family circumstances over the working life time or life cycle.




  • The desirability of viable Flexible Work Arrangements.




  • The desirability of skill-based career paths in awards.




  • Cost of living associated with needs – varying (between) household types determined by reference to comprehensive list of expenditure requirements of workers as civilised beings in the community.




  • Catch-up – cost of living changes and movements in the market since 1990/1991 which have not been reflected in award entry level rates of pay.




  • Prospective inflation.




  • Social wage – the Living Wage will both acknowledge contributions made by the social wage over the life of the ACTU/Labor Government Accord but will, similarly, take account of any reductions in the social wage which are anticipated to and which do occur under a Coalition Government.




  • Australia’s international obligations.


3. Living Wage And Community Based Organisations

The Living Wage claim will provide the foundation for the determination and fixing of award rates for the long-term future.


The Living Wage will not be, as have minimum wage clauses, marginalised – it will be part of the mainstream wage structure.


The Living Wage claim is intended to ensure that equity is a fundamental component of minimum award wage fixing, and is accepted by the IRC as an essential criteria for the setting of rates of pay. Our hope is that, in the context where the Government legislative framework is directed to the use of economic criteria for the adjustment of wages through enterprise negotiations, the IRC (whose remaining functions will include protection of low-paid) will be moved (in the same way as Justice Higgins was moved in 1907) to embrace standards for wage fixing which are based on needs, ameliation of wage and income inequality as well as poverty traps.


In order to convince the Commission to take up this challenge and to ensure that the development of our claim and our submissions in support are properly informed of the myriad of research, and the practical issues with which you as representatives of the community group are familiar, we need your support and co-operation.


We need to confront the Commission with a convincing picture as to:



  • the inequality which exists and which will continue to accelerate;




  • the inadequacy of wages to sustain decent living standards (even taking into account social transfer payments);




  • the economic and social desirability of a system of wage fixing which provides viable rates of pay to low paid workers.



The ACTU sees this process as commencing in a formal sense with this Conference.


Suzie Jones, Research Officer, ACTU. May 1996.