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									200 6                       Minimum Wage La ws an d Wag e R egu la tion                  1



MINIMUM WAGE LAWS AND WAGE
REGULATION: DO CHANGES TO A MINIMUM
WAGE AFFECT EMPLOYMENT LEVELS?


                                        JOEL BUTLER *
        Minimu m wage laws are about as clear a case as one can find of a
        measure the effects o f wh ich are p recisely the oppos ite of those
        intend ed by the men of good wi ll wh o supp o rt it .1


I          INTRODUCTION
    In th e recent Aust ralian debat e su rro und in g t he Co mmo n wealth gov ern ment ’s
in t rodu ct io n o f chan ges to the fed eral Wo rkp lace Relat ions laws 2 (‘Wo rkCho ices ’),
a g ood deal o f co mmen t cent red o n the issue o f th e min imu m wag e. It was argu ed
by oppo nen ts o f th e chan ges th at t he creat io n o f a n at ion al Aust ralian Fair Pay
Co mmiss ion (‘A FPC’) – wh ich is to s et a federal min imu m wag e (‘FMW ’) – wou ld
lead to gen eral redu ct ions in wages fo r wo rkers. It was fu rth er argu ed by o ppon ents
o f Wo rkCho ices th at there wou ld b e n o o ffsett ing b enefit in th e fo rm o f in creased
emp loy ment th at wou ld resu lt fro m any reduct ion in wag es that occu rred .
    Th is art icle starts by loo king b riefly at the argu ments mad e on th e t wo s id es of
th is d eb ate: b y so me o f the sup po rters o f Wo rkCho ices th at reduct ions in wages
and wage flexib ilit y will lead to increased emp loy ment; and , b y th e op ponents o f
Wo rkCho ices , t hat redu ct ions in wages an d in creas ed (do wn wards ) wage flexib ilit y
will n ot and cann ot lead to increased emp loy ment .
   Second ly , th e art icle rev iews th e vo lu min ous lit eratu re 3 on the issue. It
concludes , cont rary to crit ics o f Wo rkCho ices , that th ere ar e very clear
circu mst ances where th e lo wering o f a min imu m wag e can lead to in creased
emp loy ment and , s imilarly , th ere are instan ces where an increase in a min imu m
wag e can lead to in creased unemp loy ment . The ev iden ce suppo rt ing these
conclus ions is overwhelming.



   The th ird part o f the art icle examin es wheth er the cond it io ns in Aust ralia are such
that any decrease in th e FMW wo u ld b e likely to lead to increased emp lo y ment .

II THE DEBATE
  The debat e in relat ion to WorkCho ices has been b itterly wag ed. Oppos it ion is
vehement . Oppos it ion po lit icians, labour un ion o fficials and indust rial relat ions
academics claim th at v irtually noth ing in th e Workplace Relations Amendment
2                                    UNS W La w Jou rna l                       Vo lume 29( 1)
(Work Choices) Act 2005 (Ct h) d elivers any benefits at all. Th is art icle loo ks at on ly
one o f th e issues in cont ent ion : whether, if Wo rkCho ices resu lts in a reduced FMW ,
this wou ld lead to lo wer un emp loy ment .
   In mo v ing the second read ing speech to the Bill, M in ister Kev in And rews imp lied
that t he mechan is ms in Wo rkCho ices wou ld lead to mo re jobs :
     Work Choices is not simp ly about rais ing the liv ing standards of
     those Australians in jobs. It is also about gett in g mo re
     Australians into jobs .4
  Ho wever, crit ics claimed th at Wo rkCho ices wou ld lead to reduct ions in wo rkers’
wag es generally and s lo wer increases in th e min imu m wage:
     Forcing those who can afford it least to give up part of their wages
     and conditions has been a Howard obsession ever since he entered
     federal parliament and it is only Labor and the unions that have
     prevented him fro m ach iev ing this appalling idea in the past …
     Min imu m wag es will no longer be set by th e indepen dent
     u mp ire, clearing the way fo r them to b e lo wer in the futu re. 5
  Similarly , a lett er writ ten by the leader of th e federal Oppos it ion , Kim Beazley , on
5 November 2005, stated th at :
     [the] Ho ward govern ment’s industrial relations changes will lead
     to lo wer increases in the min imu m wage wh ich will in turn b ring
     down the male total average weekly earn ings …6
Co mments were mad e th at Wo rkCho ices wo u ld ‘take an axe to the min imu m wage’7
and that the intent o f Wo rkCho ices was to allo w wo rkers ‘to go belo w the
min imu ms ’:8
     [The Federal govern ment] wants to be able to lower the minimu m
     wage, wh ich is what its bosses want. The bosses want to be able to
     lower their min imu m wages, so that is what th e govern ment has
     leg is lated.9
   Academics have also crit icised the likely effects of WorkCho ices. In a submission to
the Senate Inqu iry into the Bill, p rior to it passing through the parliament , a group of
academics question ing the ‘imp licit assumpt ion that raising the min imu m wage will
affect employ ment outco mes’ and argu ing that the ‘A FPC is imp licit ly premised on the
controversial notion that a lo wer min imu m wage will assist employ ment gro wth ’ 10
stated that:
     the overseas evid ence suggests the p roposed system o f min imu m
     wage determinat ion is likely to result in lo wer min imu m wage
     increases than wou ld have p revailed under the A IRC, to increase
     inco me inequality and to have little efect on employment.11
  They go on to argue that the lin ks bet ween the changes int ended to be brought about
by WorkCho ices ‘and emp loy ment are asserted not demonstrat ed’ and conclude th at:
     The lin k bet ween real wage cuts and emp loy ment is contested; if
     there is a link, a very substantial real wage cut may be requ ired
     to produce any gains in unemp loy ment, with serious imp lications
     for the relat ive value o f unemp loy ment benefits.12
  These crit icis ms were mirro red in many other sub missions to the Senate Inqu iry.
The Australian Council of Trade Un ions, fo r instance, noted :
200 6                       Minimum Wage La ws an d Wag e R egu la tion                     3

        Reducing real min imu m wages and condit ions, it is asserted, will
        price mo re skilled workers into jobs. In theory, the effect o f
        min imu m wages on emp loy ment levels is ambiguous and cannot
        be deduced fro m theoret ical first princip les. The impact of any
        particu lar level of min imu m wages on emp loy ment is an emp irical
        question. The international ev idence in support of this theory is
        decidedly lacking and in inverse p roportion to the vehemence o f
        advocacy of the proposit ion by its proponents. 13
   As will be demonstrated below, the effects of changes in min imu m wage levels on
emp loy ment are, in fact , far fro m contested or amb iguous and there is a very large
body of emp irical ev idence that demonstrates that reduced min imu m wage increases
wou ld be likely to lead to positive outco mes in emp loy ment – especially fo r young
people, wo men and unskilled workers. Ho wever, prio r to examin ing the ev idence fo r
these claims , it is app ropriat e to examine the ‘theo ret ical first princip les ’ in relat ion to
the effect o f min imu m wages.




V III ‘THEORETICAL FIRST PRINCIPLES’

  Th e s imp lest su pp ly an d deman d mo d el o f t he emp loy ment effects o f the
min i mu m wag e are rep res ent ed in Figu re 1 b elo w. Th is mo d el pos its th at th e
imp o s it io n o f a min i mu m wag e on an eco no my th at p rev ious ly o perat ed on ly in
respo nse to s upp ly and deman d p ress u res will clearly h ave a ‘d is emp loy men t ’
effect .




                                              Fi g ure 1
4                                     UNS W La w Jou rna l                        Vo lume 29( 1)

    In t h is model, if th e wage lev el were set by market fo rces , it wou ld be W 0 and
t he nu mb er o f wo rkers emp loy ed wou ld b e E 0 . If a min imu m wag e were
st at uto rily imp o sed at th e h igh er W m level emp lo y ment wo u ld d ro p t o E m –
resu lt in g in fewer p eo p le emp lo yed (equ al t o E 0 -Em ).
    Res earch ers ind icate th at th e d ecrease in emp l oy men t sug gest ed by th e mo del
abo ve may be app arent in th e fo rm o f lo wer emp lo y ment g ro wt h (rat her t han a
su dden ju mp in unemp lo y ment du e t o layo ffs ) as emp loy ers fail t o rep lace
wo rkers wh o leav e emp lo y ment . 14 Similarly , Bro wn , Gilro y and Coh en 15 not e
t hat , wh ile th is mo d el det ermin es that t here will b e an excess o f lab ou r at th e n ew
min i mu m wag e equ al to Sm - Em , th e excess su pp ly o f labou r will n ot necessarily
co rrespo nd to t he nu mb er o f u nemp lo yed . Instead , S m rep resen ts th e n u mb er o f
p ersons willin g to wo rk at S m but many o f t he Sm - Em who are not emp loyed may
d ecide that p rosp ects o f find in g wo rk are too d im t o make act iv ely s earch ing fo r
wo rk wo rt h wh ile. As we shall s ee later on , research in d icates that h igh er
min i mu m wag es most affect t he emp loy ment p rosp ects o f thos e whos e
relat ionsh ip with t he lab ou r market co u ld be d escrib ed as t he mos t ‘t enu ous ’ –
female u ns killed wo rkers and yo ung wo rkers . Th ese cat ego ries o f wo rkers are
ju st as likely to ‘o pt out ’ o f s earch in g fo r wo rk as they are to b e fo rced in to
u nemp lo y ment . Fo r instance, yo ung p eo p le eng ag ed in st udy may no t bo ther to
seek a casual o r part -t ime job because t hey kn o w that it will b e almost imposs ib le
t o acq u ire on e.

   M o re co mp lex t h eo ret ical mo d els on th e effects o f a min imu m wag e 16 pos it
several variat io ns on th is s imp lest o f mo d els and p ro ject ou tco mes rang ing fro m
in creases in emp lo y ment in certain mod els res u lt ing in in creases in a min i mu m
wag e. Gen erally , wh ere an emp lo yer has mon opso ny po wer o r where th e
p rodu ct iv ity o f wo rkers is lin ked t o th e wag es paid , th is s imp le mo d el will n ot
app ly in such s imp le terms .17

IV RESEARCH ON MINIMUM WAGE EFFECTS
   Th ere have been man y hu nd reds o f emp irical stu d ies co ndu ct ed on t he effects
o f min imu m wag e reg imes in fo rce across a large n u mb er o f cou nt ries a nd ,
p erhaps s u rp ris ing ly , t here is a good deal o f p ract ical research in cou nt ries oth er
th an the US – wh ich is t he ju risd ict io n most Aust ralian co mment ato rs refer to in
respect o f ev id en ce with reg ards t o min i mu m wag e effects . Belo w, th e majo r
research th at h as b een co ndu ct ed in th e v ario us ju ris d ict ions is cons idered in
relat ion t o t he majo r effects examin ed in relat io n to min i mu m wag e syst ems .

A Empirical Evidence – Effect of a Minimum Wage
Increase Generally
    Th ere are a v ery larg e nu mb er o f s tud ies in re lat ion to th e effect o f the
in t rodu ct ion o f a FMW an d increases in a FMW . A v ery s ig n ificant majo rit y o f
t hes e sho w th at a min i mu m wag e has an adv erse effect on lev els o f emp lo y ment
and clearly ind icat e that incr eas es in a min imu m wage will have d isemp loy ment
effects . A nu mb er o f stu d ies sho w a s ign ifican t effect , wh ils t ot hers ind icat e
eit her s mall effects o r amb iv alent resu lts . Ot her s tud ies examin e t he effects o f
min i mu m wag es o n d ifferent s eg ments o f th e wo rkin g pop u lat ion (t hes e are
200 6                      Minimum Wage La ws an d Wag e R egu la tion                       5
exa min ed in d et ail belo w) and h av e foun d mo re p rono un ced negat iv e effects in
relat ion to g ro ups s uch as yo ung and teen ag e wo rkers , wo men an d t he lo w -
s killed .
   A lthoug h stud ies are less amb ivalent regard ing t he effects of an increase in the
min i mu m wag e fo r mo re vu ln erab le seg men ts o f t he pop u lat ion , t hey are mo re
amb ivalen t in relat ion to the effects o f a rise in the min imu m wag e o n adu lt male
wo rkers . Th e g roup o f stud ies examin ed by Bro wn et al find that the effect across
th e econ o my on ad u lt male wo rkers o f an in crease in t h e min imu m wag e is s mall –
g en erally less t han a o ne percent redu ct ion resp ond ing t o an increase in th e
min i mu m wag e o f 10 p ercen t .18 In so me cas es, a few s tud ies h av e foun d th e
n eg at iv e co rrelat io ns t o b e st at is t ically ins ign ifican t . 19 There are a nu mb er o f
stud ies th at have fou nd th at th ere are no negat ive effects aris ing fro m an in crease
in a min imu m wag e. Th ree well-kno wn US econo mists , in part icu lar, undertaking
st ud ies 20 in th e US fast fo od in dust ry hav e made t hes e find ings . Ho wever, ev en
th ese few st ud ies have s ince b een wid ely crit icis ed . 21 Th ere are so me s tud ies th at
sho w pos itiv e emp lo y men t effects o f an increase in th e min imu m wag e (th ese are
als o d iscussed b elo w). Ho wev er, t he ov erwhelmin g nu mb ers of emp irical stud ies
that h ave been conduct ed do show clear negat ive resu lts.22



B Empirical Evidence – Groups Most Adversely
Affected by Minimum Wage

The negat ive impacts o f a FMW are experien ced t he most by wo rkers whose
emp loy ment pos it ion is already ten uous – those on o r close to the min imu m wage, in
declin ing indust ries o r in reg ion al areas. 23 A 1960 study in Florida, fo r instance,
found that , after an increase in the min imu m wage unemp loy ment in creased most in
the areas where wages were lo west and least in areas where wag es were h ighest
befo rehand .24 This research is suppo rted in Australia by the 2005 Co mmon wealth
Treasu ry report t hat stated :




        Internat ional ev iden ce consistently finds that s ignificant
        increases in min imu m wages have a negative effect on
        employ ment. The more closely are wages lin ked to productiv ity,
        the better we are ab le to keep inflat ion steady and allow the
        economy to expand . Th ere is stro ng ev iden ce that ag gregate
        wag es g ro wth is negat ively co rrelated with emp loy ment :
6                                     UNS W La w Jou rna l                       Vo lume 29( 1)
     conservativ ely, a one per cent in crease in wages is correlated
     with a 0.4 per cent fall in emp loy ment. Th is elasticity may be
     higher for peop le o f relat ively lo w s kill o r who are marg inally
     attached to the labour fo rce. 25

   The Treasu ry min ut e went on to st ate that in creas ing t he flexib ilit y o f wo rking
cond it ions and makin g wag es mo re flexib le are key p arts o f th e p o licy menu
n eed ed to ach ieve emp loy men t and econo mic g ro wt h; that s in ce wages are already
fu lly flexib le on th e up -s ide, t h is can o n ly mean th at mo re flexib ility is n eed ed ,
acco rd ing to the Treasu ry , on th e ‘do wn wards s id e’.

C Empirical Evidence – Effect of Minimum Wage on
Young Workers
   There is a v ery large bo dy o f ev iden ce that demonst rates th at th e n egat ive effects
o f a min imu m wag e (o r an increase in a min imu m wag e) is felt most acutely in th e
emp loy ment and emp lo y ment p rospects o f youn g peop le. In a su rvey o f o ver t wo
do zen emp irical st ud ies o f t he effects o f an in crease in t he min imu m wag e on you th
emp loy ment , Bro wn et al foun d that
     on balance, a 10 percent increase in the minimu m wage is
     estimated to result in about a 1-3 percent reduction in total teenage
     employ ment. A ll studies find a negative emp loy ment effect fo r all
     teenagers together and the signs are almost exclu s iv ely n egat ive
     fo r th e various ag e -sex-race sub g roups .26
   It shou ld b e emphas is ed that almo st all th e stu d ies rev iewed b y Bro wn et al
fou nd that t here were on ly s mall ‘u nemp loy men t ’ effects o f a rise in th e min imu m
wage, but s ign ificant ‘d is emp lo y ment ’ effects : in oth er words, althoug h t here were
no t n ecessarily many immed iat e layo ffs cons equent on t he FMW increases ,
emp loy ers s imp ly d id not rep lace any wo rkers who left . Those mo st v u ln erab le
wo rkers wh o were fo rced out o f th e wage -earn ing system b y an increase in th e
min i mu m wage s imp ly withd rew fro m th e labo u r market – th ey ceased loo king fo r
wo rk.27 Fo r youn g ad u lts , th e emp irical st ud ies examin ed by Bro wn et al fou nd
s imilarly cons istent n egat ive emp lo y ment effects (but on ly a one percent neg at iv e
mo v e in rela t ion to a 10 percent increase in th e min imu m wag e) b ut mo re
p ro noun ced u nemp loy men t resu lts (in oth er wo rds , you ng ad u lts were mo re likely
th an t een agers to remain loo king fo r wo rk).


   M ost ot her stu d ies 28 h av e fo und s ignifi cant u n emp lo y ment effects fo r t een age
wo rkers fro m in creases in a min imu m wag e. Sig n ificant ly , research s eems to
in d icate t hat many bus inesses will eng age in cost -cu tt ing measu res to o ff-set th e
requ iremen t t o pay h igh er wag es – su ch as t rain ing o r o vert ime p ay ments to
wo rkers 29 (s ee b elo w). Similarly , o th er st ud ies in d icat e t hat in creases in th e
min i mu m wag e may lead t o th e rep lacement o f labo u r with mach in ery 30 (and th is is
in relat ion t o all jobs , not s imp ly that o f young p ersons ).




  In not ing t he adv erse effects o f min imu m wag es on young wo rkers, the
Org an isat ion fo r Econo mic Co op erat ion and Develop ment (‘OECD’) st ated th at th e
200 6                       Minimum Wage La ws an d Wag e R egu la tion                    7
clear po licy conclus ion was t hat :
        in the cu rrent context of h igh and persistent unemp loy ment in
        many count ries it is suggested that more weight be given to the
        market clearing ro le of wages, wh ile pursuing eq u ity ob ject ives
        th rough o ther inst ru ments . 31


D Empirical Evidence – Other Groups Particularly
Affected by a Minimum wage – Women Workers
    In add it ion to widesp read find ings t hat a FMW has n egat ive effects on youth
emp loy ment , there are a large nu mb er o f st ud ies th at hav e found th at oth er g roups
wit h in a coun t ry ’s labou r fo rce will b e n egat ively affected . Most o f th ese stud ies
h ave found that it is g roups th at wou ld o ften be referred to as marg inal o r
d is advantaged , o r those wh o are in already t enuous emp loy ment t hat will b e most
adversely affect ed – wo men ,32 wo rkers in reg io nal areas, mig rant wo rkers , very lo w
s killed wo rkers an d casu al and part -t ime wo rkers .33
   Int erest ing ly , many o f th e stud ies hav e co ncluded that the adv ers e affect on
th ese g roups co rresponds with an adv antage to wh ite, male, fu ll -t ime, h ig her wag e
earn ing wo rkers. 34 In a 1981 stud y , it was found th at in creases in the min imu m
wage wou ld b enefit few fa milies with in co mes b elo w th e po vert y level wh ile much
of any benefit wou ld accrue to upper inco me famil ies with s econ dar y earn ers , su ch
as wives and ch ild ren . 35 Similarly , a 1995 st udy ind icat ed t hat wo men on welfare
were wo rse o ff after their min imu m wag es were increased .36 Oth er stu d ies hav e
sho wn d isp ropo rt ion at ely neg at ive effects fo r ru ral and remot e reg ion al areas .37




E    Empirical Evidence – Other Groups Particularly
Affected by a Minimum Wage – Low Skilled Workers
   Stu d ies hav e cons isten t ly found that on e o f th e g rou ps most advers ely affected
b y a min imu m wag e is lo w s killed wo rkers . Emp lo y er resp onses t o in creas ed
wage costs in clu de in creas ing t rain ing fo r wo rkers (t o t he det rimen t o f u ns killed
wo rkers who are n ot emp lo yed ), h iring o f mo re fu ll -t ime, q ualified an d t rain ed
wo rkers (t o th e d et ermin ant o f un t rain ed casu al an d p art -t ime wo rkers ) and
att emp ts t o mu lt i-s kill e xis t in g wo rkers .38 Gen erally , if t here are u nemp lo y ment
effects resu lt ing fro m an increase in a FMW , the first wo rkers to b e affected a re
t hose wh o are least p rod uct iv e – g en erally th ose wit h t he least s kills . Thes e
emp lo y ees g ain a g reat deal fro m emp lo y ment as it g ives th em t he exp erien ce and
s kills t hey n eed to increase t heir ‘emp lo yab ility ’ an d are t herefo re d oub ly
affect ed by un emp lo y men t as they are d ep riv ed o f an y ab ilit y to g ain s kills o r
exp erien ce.
   Th e research als o po ints to t he fact t hat d isemp lo y ment effects fo r th e lo w
s killed are magn ified where th e wo rkfo rce is h ig h ly un ion ised as a resu lt o f th e
h igh er b arg ain in g po wer o f incu mb ent wo rkers .39 Generally , t he research also
in d icat es th at the imp os it ion o f a min i mu m wag e d oes n oth in g to decreas e th e
‘n et ’ po verty in an area an d may , in fact , increase it . 40
8                                     UNS W La w Jou rna l                        Vo lume 29( 1)


F    Empirical Evidence – New Entrants and Small
Business
   Th ere is also ev id en ce t hat a FMW h as d isp ropo rt ion at e effects o n new
ent ran ts in to th e market p lace. A 1994 Dan ish st ud y 41 fou nd th at o ne percent o f
n ew jobs are in ‘new firms ’ – firms that d id not exis t a year earlier and that have a
larger n u mber o f lo w p aid wo rkers . Ev idence also ind icat es that new b us inesses
t end to be less p rod uct iv e t han exis t ing b us in esses and as su ch a h igh er wag e cost
will, in so me cas es , p ro h ib it ent ry fo r co mp an ies th at h av e th e po tent ial to
in crease th eir p ro duct iv it y in t he years aft er hav in g b eco me es tab lish ed in th e
market p lace.42



    Emp irical res earch d emo nst rates th at s mall b us in esses are d is p rop o rt ion at ely
affected by in creases in FMWs .43 It is est imated th at , du rin g 2000– 1, th ere were 1
233 200 p riv ate s ecto r s mall b us in esses in Aust ralia wh ich rep resen ted 97 p er
cent o f all p rivat e secto r bus in esses; t hese s mall bus in esses emp loy ed almost 3.6
mi ll io n p eop le, 49 per cen t o f all p riv at e secto r emp loy ment . 44 Th e ev id ence is
t hat s mall b us in esses generally t end t o h av e s maller p ro fit marg ins an d fewer
st rat eg ies availab le to cou nt er in creas es in costs th at are n ot acco mp an ied by
in creases in p rodu ct iv ity . So me co mmen tato rs 45 h av e arg ued th at lo w min i mu m
wages o r ‘leav in g wages to th e market ’ resu lts in mo re cap acity fo r ‘inefficient ’
fir ms t o con t in ue exis t ing , and th at th is is no argu ment fo r imp o s ing
u nn ecessarily lo w wag es o n wo rkers . Ho wev er, there are a nu mb er o f reasons
wh y co mp an ies – esp ecially n ew market ent ran ts – may b e less p rod uct iv e th an
o th er firms . Th ese reaso ns in clude bot h th e h igh inv est ment costs o f st art ing a
bus iness and the n eed to allo w market ing to bu ild u p a co mpany ’s clientele ov er a
few y ears . There is no reason why less efficien t co mp an ies can not p ro v id e
wo rth wh ile jo bs in an int erim p erio d p rio r t o increas es in p ro du ct iv ity b eing
ach ieved .

G Empirical Evidence – Distributional Effects and
Wage Compression
   St ud ies h av e sh o wn th at th ere are s o me inst ances wh ere an increase in the
min i mu m wag e will act u ally see an incr eas e in emp lo y men t . Th is is generally
t hou ght to res u lt fro m an in creased nu mb er o f p rev ious ly ‘n ot emp loy ed ’ (n ot
n ecessarily unemp loy ed ) wo rkers entering the wo rkfo rce as jo bs with no w h igh er
wag es are mo re att ract ive. Ho wever, th ere are, in th ese circu mst ances ,
‘d ist ribu t io nal effects ’ resu lt in g fro m t he in crease in a FMW . In th ese cases ,
h igher s killed o r qualified emp loyees d isp lace lo wer skilled emp loyees . In so me
in st ances , th e nu mb er o f h igh er-q ualified , fu ll-t ime wo rkers will in crease to th e
d et rimen t o f lo w-s killed , p art -t ime o r cas ual emp lo yees .46




    Res earch int o th e effect o f th e in t rod uct io n o f a FMW in t he Un ited Kin gdo m
(t hat o ccu rred in Ap ril 199 9) in d icat ed th at th ere were a n u mb er o f st rat eg ies
200 6                      Minimum Wage La ws an d Wag e R egu la tion                      9
ado pt ed by emp lo yers in respo nse t o t he increased lab ou r costs th ey faced as a
resu lt o f t he int rodu ct ion o f th e FMW – th ese st rateg ies includ ed rep lacing
several part -t ime emp lo y ees wit h a s ing le fu ll-t ime emp lo y ee.47
   So me s tud ies have s ho wn that an in crease in min i mu m wag es will n o t
n ecessarily lead t o unemp lo y ment o r d isemp lo y ment bu t will, in st ead , lead to
wag e co mp ress ion . As a resu lt o f in creases in a FMW , alth oug h t here will b e
mo re wo rkers who were p rev ious ly earn in g less but who will b e earn ing mo re as a
resu lt o f a FMW increase, o ther wo rkers who were p rev io us ly earn in g ab ov e th e
min i mu m wag e will n ot gain in creas es in t heir wages , b ut will mo v e do wn wards
and clos er to the min imu m wag e in th eir earn in gs . Ov er t ime, it can be exp ect ed
t hat t he a verag e wag e o f wo rkers will b e ‘d rag ged do wn ’ to wards th e min i mu m
wag e.48

H Empirical Evidence – Other Employer Strategies in
Response to FMW
   Ot h er st rat eg ies adop ted b y emp loy ers in respo nse to t he in t rod uct io n o f o r
in creases in a nat io nal min i mu m wag e in clu de t hose th at are ‘pos it ive’ in
respo nse to lab ou r managemen t (but n eg at iv e in relat io n to emp lo y ment lev els )
and t hose t hat are n eg at iv e in relat io n to bo th labo u r man ag ement and
emp lo y ment levels . In th e lat ter case, s o me in creases in min i mu m wag es h av e
lead to increas ed cap it alis at ion and mechan isat io n by emp lo yers and to mo v ing
p rodu ct ion o ffs ho re where labo u r is cheap er. 49 On e o f t he pos it ive res pons es to
in creases in min imu m wag es b y emp lo yers is to increase emp loy ee t rain ing . 50
   Ho wever, in creas ed emp has is on t rain ing h as t he in ev itab le effect o f n ot o n ly
lead ing to d isemp lo y ment res u lts fo r the lo w -s killed , but also makin g it ev en
h ard er fo r th em to en ter emp loy men t as th e s kills -gap wid ens , wit h fewer jobs
availab le fo r uns killed and unt rained en t rants in th e jobs market .51 Th is resp onse
b y emp lo yers resu lts in s imilarly n egat iv e d is t rib ut ion al o ut co mes as d is cuss ed
abo ve.
   In creases in a FMW als o lead emp loy ers to adopt oth er means o f at tempt ing to
in crease p ro du ct iv ity – in clud ing in creas ing ov e rs ight and sup erv is io n o f
wo rkers ,52 ‘s imp ly exp ect ing ev eryo ne to wo rk t wice as h ard ’ 53 and redu cing
emp lo y ees ’ wo rk h ou rs (in clud ing imp os ing redu ct ions in ov ert ime). 54 Research
in Can ad a s eems to ind icate t hat t hese responses (so met imes referred to as ‘sho ck
effects ’55 ) mig h t o ffset s o me o f t he d isemp lo y ment effects o f a min imu m wag e
(o r a ris e in t he min imu m wag e) bu t no t all o f thos e effects . 56


I    Empirical Evidence – Where there is Non-
universal Coverage
    W here p art o f t he sect o r is co vered b y a min imu m wag e an d part is not , the
wo rkfo rce as a wh o le reacts t o t he min i mu m wag e as it wou ld if coverage were
u n iv ers al.57 Th is is relev ant in t he A ust ralian cont ext as t here will not b e
h et ero geneous cov erage o f all wo rkers by a s in g le FMW . 58 Ind eed , it can b e
exp ected , b ased on th e cu rrent rheto ric o f st at e go vern ments , t hat th e st at e
min i mu m wag es fo r wo rkers who remain cov ered by th e st at e sys tems will b e
h igh er fo r emp lo yees cov ered b y th e FMW . Th is wou ld su gg est t hat (all o th er
th ings being equ al) demand fo r stat e syst em jobs in any secto r will be h ig her th an
10                                    UNS W La w Jou rna l                       Vo lume 29( 1)
fo r federal system jo bs . The research in d icates t hat th is fact leads to a ‘lev elling -
o ut ’ o f t he sys tem as a wh o le, in wh ich ‘[w]o rkers d is p laced b y t he min i mu m
wag e ‘mig rat e’ to th e un cov ered s ecto r, s h ift in g su pp ly th ere ou t ward . As a
resu lt , wages fall and emp loy ment in creases in t he un cov ered sect o r.’ 59

    In th e Aust ralian cont ext , h o wever, th ere is no ‘un cov ered ’ s ystem; in st ead ,
th ere will be t wo ‘co vered ’ syst ems . Th is wo u ld ten d t o imp ly – in s imp le terms –
th at , if th ere is a larg er supp ly o f wo rkers in the st ate systems (wit h h igh er lo w
wages ), there will b e an imp et us fo r emp loyers to o ffer lo wer wages (closer to th e
state min imu m wag e) and th e nu mb er o f wo rkers in th e state system earn ing ov er
th e min imu m wag e wo u ld be redu ced . That is , th ere will b e mo re wo rkers in th e
st at e syst ems wo rkin g at the s tat e min imu m wag e t han th ere were b efo re th e
in t rodu ct ion o f a lo wer fed eral min i mu m wag e. Th is th eo ret ical mo d el wou ld also
su gges t th at t here wo u ld b e so me imp etus fo r emp loy ers in t he fed eral s ystem t o
o ffer wages abo ve th e federal min i mu m wag e and closer to o r bett er th an th e stat e
min i mu m wag e in o rd er t o att ract (o r ensu re th ey retain ) lo w wage emp lo yees who
are likely to mig rat e t o th e (h igh er -p aid ) st at e syst ems .




V WORK IN AUSTRALIA
   In o rd er to un derstand th e likely effects o f a lo wer FMW in Australia, it is
necessary to hav e so me idea of the n atu re o f th e Aust ralian workfo rce, as well as the
place o f the FMW in Australia, in relat ion to those ov erseas count ries where th e bu lk
of th e research above occu rred . Aust ralia is not alone in t he wo rld in hav ing in p lace
a statuto ry nat ion al min imu m wage. There are mo re than 20 OECD count ries with
statutory nat io nal min imu m wage reg imes in p lace, with th e OECD average
min imu m wag e being app ro xi mately 42 per cent o f th e med ian wage. The ran ge o f
the min imu m wage as a p ercent age o f t he av erage wage varied sign ificant ly , rang ing
fro m 19 per cent in M exico to app ro xi mat ely 60 per cent in Fran ce. Australia h as the
second h ighest min imu m wage as a percen tage o f the med ian wag e at app ro xi mat ely
58 per cent .60 In the 2005 Annual Safety Net Rev iew, the AIRC n oted that A ustralia
had a t rad it ionally h igh min imu m wag e when the wage was e xpressed as a
percentag e of med ian wages :
     So me part ies relied on internat ional material relating t o
     comparisons between the minimu m wage and earn ings. In
     particu lar it was submitted by the Co mmonwealth that " Aus tr alia
     now has the highes t m inim um wage com par ed with m edian
     earnings … in the O ECD ". The Co mmonwealth p roduced OECD
     comparat ive data for the period since 1985. While we have not
     seen any objective validation of the OECD co mparisons, they
     show that for most of the 19-year period Australia has had the
     high est min imu m wage co mpared with med ian earn ings in the
     OECD. Th e suggestion that this is a recent development, on the
     data provided, is wrong. More impo rtant ly, acco rd ing to those
     data … the relat ionship bet ween th e min imu m wage and
     med ian earn ings has b een in decline sin ce 1996. 61
  Th e A IRC’s data is rep rod uced in Tab le 1 b elo w:

      TA BLE 1: M INIM UM W A GE A ND M EDIA N EA RNI N GS M INIM UM
                W A GE (C 14)/ M EDIA N W A GES P ER CENTA GE


                                                           %
                              1996                        60.6
                              1997                        59.9
                              1998                        60.7
                              1999                        59.1
                              2000                        57.9
                              2001                        58.1
                              2002                        57.5
                              2003                        58.2
                              2004                        58.4

   Th e n at ion al, s easo nally -ad just ed , ann ual, weekly , ad u lt , o rd inary -t ime wag e
in Aus t ralia in No vemb er 2005 was $1026 – ran g ing bet ween $996 fo r t h e p riv ate
secto r and $1131 fo r t he pu b lic secto r .62 The st atut o ry nat ion al min imu m wag e in
A ust ralia (wh ich , unt il th e Wo rk Ch o ices chan ges t o th e fed eral in dust rial
relat ions reg ime, was s et in Ann ual Nat ion al W age cases by the Aust ralian
In dust rial Relat ions Co mmis s ion ) is cu rren t ly $484.40 a week (o r $1 2.7 5 p er
h ou r). Th e av erage h ou rly earn ings fo r all fu ll -t ime adu lt no n -managerial
emp lo y ees in 2004 were $23 .20. 6 3
   A cco rd ing t o class ical econ o mic th eo ry , thos e wo rkers whos e aft er -FMW -
in crease -wag es are h ig her t han what wou ld have b een paid to t hem ‘at market ’
will b e affect ed by increases in the FMW . Thos e whos e after -FMW -in crease -
earn ings remain h igh er th an th e new FMW will not b e d irect ly affect ed (although
th ey may be affected by b ro ad changes in th e labou r market ) becaus e emp loy ers
will p resu mab ly s t ill b e willin g t o o ffer th em t he same wag e rate – a rate t hat,
b oth befo re and aft er th e FM W in crease, was h igh er th an t he FMW . The
Aust ralian wo rkers most affected by FM W increases are, therefo re, th ose on the
FMW o r close t o it . It is d ifficu lt to d eter min e h o w many Aust ralian wo rkers are
cu rrent ly paid th e min imu m wag e 64 but s o me con clus ions can be d rawn about
lo w wag e wo rkers generally – lo w paid wo rkers are mo re likely t o b e emp lo yed
in s mall fir ms t h an larg e and are mo re likely t o be wo men o r yo ung w o rkers; 65
lo w p aid wo rk is fo und in so me indus t ries mo re than ot hers; and lo w p aid
wo rkers are mo re likely to b e p art -t ime wo rkers .
A ust ralian s tat ist ics p in po int s o me in dust ry sect o rs where wag es o f wo rkers are
lo w, an d h ig h lig ht th e d ifferences in wages bet ween ju n io r wo rkers and adu lt
wo rkers . The averag e weekly t ot al earn ings fo r fu ll -t ime no n -managerial
emp lo y ees across b ro ad indus t ry s ecto rs are out lin ed in Tab le 2 b elo w.

  As th e tab le sh o ws , altho ugh no cat eg o ry o f ad u lt emp loy ment h as av erage
12                                    UNS W La w Jou rna l                          Vo lume 29( 1)
earn ings b elo w the federal min imu m wage, t here are a larg e nu mber o f cat ego ries
o f jun io r emp loy ment – bot h male and female – where t he av erage weekly
earn ings fall b elo w the FM W – with jun io r females earn ing o n av erag e belo w the
min i mu m wag e in ev er y in dus tr y ca t egor y an d jun io r males earn in g belo w the
min i mu m wag e in 11 o f 16 indust ry catego ries (69 per cen t ) .66 In on e cat ego ry –
‘Person al and Oth er serv ices ’ – th e female jun io r average wag e is 65 p er cent of
t he FMW .
  Of all emp loyees in the A ustralian Bu reau of St at ist ics 2004 su rv ey ,67 fu ll-t ime
emp loy ees account ed fo r 65.7 p er cen t o f all emp loyees an d part -t ime emp loyees
34.3 p er cent , wit h non -man ag erial fu ll-t ime emp lo y ees accou nt ing fo r 55.7 p er
cent o f all emp lo y ees and part -t ime n on man ag erial emp lo yees b eing 33.2 p er
cent .
    Of th e 55.7 per cent o f fu ll-t ime non man agerial emp loy ees , 53.8 per cent were
adu lt emp loy ees and on ly 1.9 per cent jun io r emp loy ees ; wh ereas , in th e p art -
t ime categ o ry , adu lt part -t ime non man agerial emp loy ees acco unt ed fo r 28.6 p er
cent o f all emp loy ees and p art -t ime emp loy ees in th is catego ry acco unt ed fo r 4.6
p er cent .




TA BLE 2 – A VERA GE W EEKLY TOTA L EA RN IN GS, A DU LT A N D JU NIO R
       NON -M A NA GERIA L FU LL-TIM E EM P LO YEES – M A Y 20 04
                                       Female
           Se ctor    Female Adult                   Male Adult       Male Junior          To tal
                                       Junior
M inin g                  1,157 .10             np      1,584 .20            558.60      1,522 .00
M an ufa ctur in g          772.50          529.60           971.50          410.80        913.90
Ut ilities                  928.00              np      1,211 .30            488.40      1,144 .50
Con struction               781.80          366.00      1,025 .40            372.70        960.50
Whole sa le tr a de         769.90          428.40           880.10          439.50        841.10
 Reta in tra de                        647.40         405.60          730.50          393.80      669.00
 Accommo dation,
                                       697.40         403.70          708.60          341.90      673.00
 c afé ’s & r e sta urant s
 T ran sport & stora ge                804.80         419.50          993.10          590.20      931.90
 Comm unication s
                                       857.70                 -     1,079 .90         376.40      996.10
 serv ic e s
 Fin ance & in suran ce                883.60        438.40         1,167 .20         381.20    1,005 .90
 Property & busin ess
                                       834.10        388.80           996.30          424.40      906.70
 serv ic e s
 Govt Admin istration
                                       896.60        401.30           951.30          395.10      924.70
 & defen ce
 E ducation                            961.40        343.20         1,047 .20         408.10      980.40
 Hea lth &
                                       826.20        396.30         1,010 .30         436.90      869.60
 Comm unity services
 Cult ur al an d
                                       845.00        475.30           921.20          488.50      881.30
 r ecr eation al serv ices
 Per sona l & Other
                                       770.60        317.00         1,017 .40         523.00      868.40
 serv ic e s
 All Industries                        828.00        395.00           974.90            410       898.20

 Minimum Wage                          484.40        484.40           484.40          484.40      484.40
                                                np – no t pub l is h ed

   Th ere is a clear d ifferen ce in t he nu mb er o f females in all cat ego ries bet ween
fu ll-t i me an d p art -t ime emp lo y ees as ev id enced b y t he fo llo win g t ab le:

    TA BLE 3 – M A LE A N D F EM A LE F U LL-TIM E A ND PA RT -TIM E N ON
    M A NA GERIA L EM P LO YEES A S A PER C ENTA GE O F A LL P ERS ONS
                                 EM P LO YED

                                Fu ll-t i me         Fu ll-t i me       Part -t ime         Part -t ime
                              A du lt            ju n io r            ad u lt           ju n io r
     M ale                      32. 1%                1.1%              7.7%                 1.8%
     Female                     21. 7%                0.8%              21. 0%               2.8%


As is ap paren t , females are d isp ro po rt io nately rep resen ted in th e p art -t ime
emp lo y ment catego ry .

VI CONSEQUENCES OF INCREASES IN THE
NATIONAL MINIMUM WAGE IN AUSTRALIA
   If t he emp irical ev id ence abov e is app lied to A ust ralia , it clearly demonst rates
t hat t he n at ion al min i mu m wag e in A ust ralia has p ro bab ly res u lt ed in
d isemp lo y ment an d un emp loy ment in t he same way th at it h as in ev ery o ther
cou nt ry in th e wo rld wh ere it h as been stu d ied . There is no reas on to cons ider
14                                     UNS W La w Jou rna l                        Vo lume 29( 1)
t hat Aus t ralia is a s pecial o r d ifferent case.
   Simi larly , it shou ld b e exp ected th at t hese unemp loy ment and d is emp loy ment
effects will be d isp ro po rt io nat ely exp erienced by wo rkers who are you ng , female
o r lo w s killed . At a s imp lis t ic lev el, bas ed on t he fig u res illu st rat ed ab ov e, it
app ears that th is out co me cou ld als o be exp ected to b e rein fo rced b y the
d isp ro po rt io nate nu mb ers o f wo men and yo ung wo rkers (and esp ecially y oung
wo men wo rkers ) who are in lo w in co me emp lo y ment in lo w in co me in dus t ries .
   In class ical econ o mic t heo ry , t he int rodu ct ion o f a min i mu m wag e o r an
in crease in a FMW will o n ly resu lt in th ose un emp loy ment o r d is emp loy ment
effects if the resu lt ant wage is g reater th an t he marg inal p rodu ct o f the wo rker in
q uest io n – t hat is , if, as a resu lt o f th e increase in wag es , th e wo rker cos ts (o r
st arts t o cost ) an emp loy er mo re to emp loy th an t he wo rker creat es in value. As
we h ave s een ab ov e, h o wever, emp lo y ers eng ag e in a nu mb er o f s t rateg ies to
att emp t t o respo nd to in creas es in wag es , includ ing ‘g et t in g emp loy ees to wo rk
h arder’, p assing on costs (where poss ib le) to co nsu mers o f the emp lo yer’s goods or
serv ices , cu tt ing ov ert ime o r a wide rang e o f ot her st rat eg ies that elimin at e the
n eed to redu ce th e nu mb er o f emp lo y ees . Add it ion ally , it is o ft en t he case t hat
emp lo y ers are willin g to s imp ly abso rb so me o f th e ad d it io nal wag e costs an d,
th erefore, accep t lo wer p ro fits p ossib ly becaus e it is d ifficu lt to accu rately p rice
th e value o f any on e emp loyee’s act ual cont ribut ion to p rod uct ion p recisely . Firm
labou r exp ense is v iewed on a co llect ive o r ‘sect io na l’ bas is so , fo r instance, the
‘hu man resou rces o ffice’ is seen as co nt rib ut ing a cert ain value, th e ‘sales st aff’
ano th er an d th e shop floo r emp loy ees ano th er, rath er th an t ry ing to ascert ain
wo rker v alu e on a wo rker-by -wo rker b as is . Emp lo y ment value assu mp t ions
wit h in a firm can lead to so me circu ms tan ces where emp loyees are ret ain ed even
t hou gh t heir marg in al p ro du ct is actu ally less th an t heir lab ou r cost .

    In creas es in th e FMW cou ld on ly be exp ect ed t o affect u nemp lo y ment o r
d is emp loy ment across th e econ o my where th e wag e is set abo ve what emp loy ers
wo u ld o th erwis e o ffer to wo rkers , and ab ove th e level t hat wo rkers wou ld
o th erwis e accept fro m emp lo y ers as a wag e. It is , o f co u rse, v ery d ifficu lt to
evaluat e whether wag es are, in fact , cu rrent ly abov e the market clearing rat e and,
if s o , in wh at indus t ry sect o rs . Ho wev er, o ne can ass u me t hat , g iven Aus t ralia’s
h igh level o f FM W to averag e wag e, th ere are at least so me emp lo yees who
wo u ld b e willin g t o accep t lo wer wages fo r a job , and so me emp lo y ers who
wo u ld b e willin g t o o ffer t hem.


    It sh ou ld not b e assu med th at , if A ust ralia were t o ab o lish t he FMW , th en
wag es wou ld immed iat ely d rop . Oth er th an t here being s t ru ctu ral reaso ns why
t h is wou ld b e d ifficu lt , th ere are many reaso ns why an emp lo yer wou ld o ffer
abov e (o r s ign ificant ly abov e) t he ‘market rat e’ .68 Ind eed, t h is must be th e cas e in
A ust ralia at the mo men t because mos t emp loy ees are cu rrent ly earn ing well
abo ve th e FM W – at least p art ially as a resu lt o f market p r essu res 69 (s ee Tab le 2
abo ve).
   Hav ing assu med , th erefo re, th at t he FMW is at leas t fo r so me s ecto rs abo ve
t he market clearin g rate, it can also b e safely assu med , bas ed on t he very
s ign ifican t emp irical ev id en ce su mmaris ed abov e, t hat t here are cu rren t ly
u nemp lo y ment and d is emp loy ment effects exert ed by the FMW . It can als o be
safely assu med t hat t hes e effects are mos t ly being exp erien ced by uns killed ,
y oun g and female wo rkers .
    It fo llo ws th at , if it were th e case t hat th e op erat io n o f th e new A FPC were to
resu lt in a lo wer FMW o r s lo wer increases in t he FMW , th ere would be positive
efects for employment. Th is fact is u ncont rov ers ial. W hat is cont rov ers ial – and
u nt estab le at th is po int in t ime – is t he extent o f th e effect t hat an y redu ct ion in
t he FMW wou ld h av e.
    Ho wever, a few in fo rmed gu esses can b e mad e and s o me o f t he po licy
cons iderat io ns t hat mig h t be t aken in to accoun t by th e A FPC in its tas k o f
min i mu m wag e s et t in g can also be su gg ested .
    Firs t , s ince th e A ust ralian FMW is cu rren t ly at a very h igh p ro po rt io n o f t he
average wage, any reduct ion is likely to have a larg er pos it ive emp loy ment effect
t han wou ld o therwis e be the cas e. Th is effect wo u ld be exp erien ced most by
t hose who are most d is adv an tag ed in t he labou r market .
    If t h e o perat ions o f t he A FPC resu lts in a lo wer FM W , b ut t h is hap pens on ly
g rad ually and in s mall mo v emen ts , then , as a resu lt o f t he lag effects
d emo nst rat ed in the research ou t lin ed abov e, any pos it ive effect wou ld be
exp ected to o ccu r s lo wly and be ev id ent o n ly after t ime – the A FPC is p recluded
fro m mak in g any immed iat e do wn wards ad jus t ments to t he FMW by the
o perat ion o f t he A ct .70 It is v ery un likely th at th e op erat ions o f th e A FPC will
resu lt in any majo r d eclin e in th e FMW except in th e lon g term an d , th erefo re,
in it ially it is un likely th at t here will b e an y rad ical imp ro v ement fo r large
n u mb ers o f wo rkers p rev io us ly exclu ded fro m labo u r market part icipat ion
b ecaus e o f t he FMW . Ho wever, t h is d oes no t d is cou nt t hat th ere may b e so me
immed iat e pos it iv e emp lo y ment effects, esp ecially in so me in dus t ry s ect o rs .
   Because t he new Act allo ws fo r ju n io r pay rates , d isab led p ay rat es , s pecial
p ay rat es and t rainee p ay rat es t hat are d ifferen t iat ed fro m th e FMW 71 (and will
p resu mab ly always be lo wer t han t he FMW ) th en the negat ive emp loy ment
effects o f t he FMW will b e t emp ered fo r th ose mo st d isadv ant ag ed g roups
b ecaus e ‘t heir’ min i mu m wag e is lo wer then t he FMW .

   The effect of other labour market regulation measures in combination with the
effect of the FMW will help determine whether reductions in the FMW will have
positive employment results. Research has shown that, in countries with low levels
of employment protection and active labour market policies, minimum wage
effects are predominately negative and those with restrictive labour standards will
experience even more marked effects. With countries that have less restrictive
labour standards, the effects are even more marked. The current federal
government is generally accepted as moving from a system that has more
restrictive labour standards to less restrictive ones, and therefore from a system
where the FMW has less of an effect (although still a negative one) to m or e of an
effect.72 This research would tend to support a contention that other labour market
flexibility changes being implemented by the Australian Federal government
would complement any positive results occurring as a reduction in the FMW.
16                                   UNS W La w Jou rna l                       Vo lume 29( 1)
   At times of high employment, it can be assumed that more employees are paid at
rates in excess of a FMW than occurs in times of high unemployment. This is
because in times of high unemployment there are more workers who are seeking
work and there is a high probability that at least some of those at least would be
willing to work for less, resulting in downwards pressure on wages. Currently,
Australia is experiencing relatively high levels of employment 73 and, therefore, one
would expect that, as a general principle, any negative employment effects of a
FMW would be less pronounced than in a time of high unemployment. This
principle, it is suggested, is one that the AFPC needs to take into account: upward
changes in times of high or rising unemployment will have much more significant
unemployment and disemployment effects.
   There is evidence that increases in a FMW will result in inflation as employers
will attempt, where this is feasible, to pass on any increases in labour costs as
higher prices. Lower increases in the FMW will mean slower increases in inflation.
Again, it is difficult to estimate the actual effects of this outcome which may be
quite slight.

VII CONCLUSION
   There is no doubt that the FMW has disemployment and unemployment effects
in Australia and that these effects are largely experienced by the most vulnerable
categories of worker. The actual extent of the effects is difficult to estimate and
there is no extant research on the effects of the FMW on the Australian labour
market. However, despite any clear indication of the extent of the negative effects,
it is beyond dispute that future increases in the FMW would have negative effects
on the likelihood that some Australians will have jobs in the future. If, as some
commentators suggest, the operations of the AFPC will n ecessarily resu lt in lo wer
min i mu m wag es (alt houg h it is d ifficu lt to u nderst and why th is assu mp t io n has
b een made), th is wou ld resu lt in mo re jo bs.



   Th e res earch abov e sho ws that a FM W do es lit t le to allev iat e po verty – if
anyth ing , it so met imes acts to increase it . The main effect o f a FMW is to p rot ect
certain seg ments o f a wo rkfo rce (t hose in jobs ) to th e det riment o f ot hers (t hose
wh o wou ld b e willin g to wo rk fo r less than the FMW ). Those ‘oth ers ’ – g enerally
wo men , mig ran ts , y ou ng p eo p le and th e u ns kille d – are th ereby dep riv ed o f the
exp erien ce, t rain ing and oth er opp o rtu n it ies (in ad d it io n t o a wage) t hat a job
p rov ides . The ev iden ce sh o ws th at in creases in a FM W tends to incr eas e any
d isad vant ag e already s u ffered b y th ese g ro ups as respo nses by emp lo ye rs to
FMW in creases o ft en include wo rker t rain in g and mu lt i -s killing wh ich widen the
emp lo y ab ilit y g ap t hat th ese g ro ups su ffer.
   The research s uppo rts an argu ment that th e FM W is n ot a usefu l social just ice
p o licy t oo l with wh ich to allev iat e po verty . No r is th ere an y ev idence th at it
ach ieves any usefu l lab ou r market o ut co me o th er t han increas in g t he in co me o f
so me at th e exp ens e o f oth ers . It is und oubt ed ly argu ab le that wages po licy is n ot a
p lace where it is app rop riat e, efficien t o r usefu l t o attemp t t o ach iev e leg it imate
so cial just ice p o licy o ut co mes , b ut if it is , th e best so cial just ice o ut co mes are
actually ach iev ed b y r educin g or e lim ina tin g a FM W because ‘[t ]h ere is
wid es p read ag reement amo ngst eco no mis ts th at ho ld ing do wn real wag es wou ld
o ffer g reat hop e fo r s ign ificant ly lo wer un emp loy men t .’ 74
   Co mmen t ato rs h av e assu med th at the A FPC wou ld act to lo wer the FMW and ,
b ased o n th e emp irical ev id en ce p resent ed abo ve, th is is an en t irely ap p ro p riate
and des irab le out co me.




Endnotes
*   Postgraduate Fellow, Faculty of Law, Bond University. My thanks to Sam Cochrane for his assistance with
    this article.
1   Quoted in Albert Hirschman, The Rhetoric of Reaction: Perversity, Futility, Jeopardy (1991) 27-8 .
2   Effected by the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) that was given Royal
    Assent by the Governor-General on 14 December 2005 and came into operation on 27 March 2006. The
    outcome of a constitutional challenge to the validity of the Act in the High Court of Australia by the states is
    pending.
3   This article is comprehensively referenced in order to allow readers to easily access the large amount of
    literature in relation to this area.
4   Commonwealth, Parliamentary Debates, House of Representatives, 2 November 2005, 17 (Kevin Andrews,
    Minister for Workplace Relations).
5   Commonwealth, Parliamentary Debates, House of Representatives, 7 November 2005, 142 (Steve
    Gibbons).
6   See Commonwealth, Parliamentary Debates, House of Representatives, 8 February 2006, 54 (Kevin
    Andrews, Minister for Workplace Relations).
7   Commonwealth, Parliamentary Debates, Senate, 2 December 2005, 3 (Penny Wong).
8   Commonwealth, Parliamentary Debates, Senate, 2 December 2005, 3 (Chris Evans).
9   Commonwealth, P a r lia m e n ta r y D e b a te s , Senate, 2 December 2005, 3 (Rachel Siewert). These are just a
    selection of the many statements made by Opposition, Democrat and Green Members and Senators in the
    Parliament and elsewhere that the effect of WorkChoices would not only be to decrease wages generally, but
    to decrease the minimum wage.
18                                          UNS W La w Jou rna l                            Vo lume 29( 1)
10   Submission to the Senate Employment, Workplace Relations and Education Legislation Committee,
     Parliament of Australia, Canberra, 16 November 2005, 14 (A Group of 151 Australian Industrial Relations,
     Labour Market and Legal Academics).
11   Ibid 15 (emphasis added).
12   Ibid 27.
13   Submission to Senate Employment, Workplace Relations and Education Legislation Committee, Parliament
     of Australia, 11 November 2005, 22 (Australian Council of Trade Unions) (emphasis added).
14 Muriel Converse et al, ‘The Minimum Wage: An Employer Survey’ in Minimum Wage Study Commission,
     Report of the Minimum Wage Study Commission (1981) 241, 282.
15 Charles Brown, Curtis Gilroy and Andrew Cohen, ‘The Effect of the Minimum Wage on Employment and
     Unemployment’ (1982) 20 Journal of Economic Literature 488. See also Finis Welch, ‘Minimum Wage
     Legislation in the United States’ in Orley Ashenfelter and James Blum (eds), Evaluating the
     Labour Market Efects of Social Programs (1976) 8.
16    For a comprehensive discussion on research up to 1982, see Brown et al, above n 15, 488ff.
17 For an excellent discussion of some more complex theoretical models, see Raja Junankar, ‘Are Wage Cuts the
      Answer? Theory and Evidence’ in Stephen Bell (ed), The Unemployment Crisis in Australia: Which Way
      Out? (2000) 21.
18    See Brown et al, above n 15, 512.
19 Edward Gramlich, ‘Impact of Minimum Wages on Other Wages, Employment and Family Incomes’ (1976) 2
      Brookings Papers on Economic Activity 409, 438; See also Gerard Adams, ‘Increasing the Minimum
      Wage: The Macroeconomic Impacts’ in Economic Policy Institute, Briefing Paper (1987) which found that
      an increase in the minimum wage from $3.35 to $4.65 over three years would increase the unemployment
      rate by less than 0.1 percent.
20 David Card and Alan Krueger, ‘Minimum Wages and Employment: A Case Study of the Fast-Food Industry in
      New Jersey and Pennsylvania’ (1994) 84 American Law Review 772; Lawrence Katz and Alan Krueger,
      ‘The Effect of the Minimum Wage on the Fast -Food Industry’ (1992) 46 Industrial and Labor Relations
      Review 6; David Card, ‘Do Minimum Wages Reduce Employment? A Case Study of California, 1987-89’
      (1994) 46 Industrial and Labour Relations Review 38. But see Clair Brown, ‘Minimum Wages,
      Employment and the Distribution of Income’ in Orley Ashenfelter and David Card (eds), Handbook of
      Labour Economics (3 rd ed, 1999); Richard Dickens, ‘The Effects of Minimum Wages on Employment:
      Theory and Evidence from Britain’ (2000) 17 Journal of Labor Economics, 1; Mark Stewart, ‘The
      Employment Effect of the National Minimum Wage’ (2004) 114 The Economic Journal C110; Mark
      Stewart, ‘The Impact of the Introduction of the U.K. Minimum Wage o n the Employment Probabilities of
      Low-Wage Workers’ (2004) 2 Journal of the European Economic Association 67.

21 Given the fact that these studies came to conclusions quite different to most studies ever conducted previously,
      there was extensive examination of the methodology and conclusions in a large number of studies since.
      This led to the conclusion by the Nobel winning economist Gary Becker of the University of Chicago that
      ‘Card-Krueger studies are flawed and cannot justify going against the accumulated evidence from many
      past and present studies that find sizeable negative effects of higher minimums on employment’: quoted in
      testimony by Bruce Bartlett (Senior Fellow, National Centre for Policy Analysis) before the US House of
      Representatives Committee on Small Business. For criticisms of the Card/Kreuger research, see Lowell
      Taylor, The Employment Efect in Retail Trade of a Minimum Wage: Evidence from California (1993);
      David Neumark and William Wascher, ‘Employment Effects of Minimum and Subminimum W ages: Panel
      Data on State Minimum Wage Laws’ (1992) 46 Industrial and Labour Relations Review 55; Richard
      Burkhauser, Kenneth Couch and David Wittenberg, ‘‘Who Gets What’ from Minimum Wage Hikes: A Re-
      estimation of Card and Krueger’s Distributional Analysis in Myth and Measurement: The New Economics
      of the Minimum Wage’ (1996) 49 Industrial and Labour Relations Review 547.
22 See, eg, James Cox and Ronald Oaxaca, ‘Minimum Wage Effects with Output Stabilization’ (1986) 24
    Economic Inquiry 443. Cox and Oaxaca argue that the minimum wage in the labour market segment under
    review causes unskilled wages to be 15.7 per cent higher than they otherwise would be, resulting in
    employment being 11.2 per cent lower than it otherwise would be. See also Janet Currie and Bruce Fallick,
    ‘A Note on the New Minimum Wage Research’ (Working Paper No 4348, National Bureau of Economic
    Research, 1993), which found that employed individuals affected by the increases in the minimum wage in
    1979 and 1980 were three to four percent less likely to be employed a year later; Harry Douty, ‘Some
    Effects of the $1.00 Minimum Wage in the United States’ (1960) 27 Economica 137; H F Gallasch Jnr,
    ‘Minimum Wages and the Farm Labour Market’ (1975) 41 Southern Economic Journal 480; Richard
     Burkhauser, Kenneth Couch and David Wittenburg, ‘A Reassessment of the New Economics of the
     Minimum Wage Literature with Monthly Data from the Current Population Survey’ (2000) 18 Journal of
     Labor Economics 653; T aeil Kim and Lowell Taylor, ‘The Employment Effect in Retail T rade of
     California’s 1988 Minimum Wage Increase’ (1995) 13 Journal of Business and Economic Statistics 175;
     Stephen Machin, Lupin Rahman and Alan Manning, ‘Care Home Workers and the Introduction of the UK
     Minimum Wage’ (2003) 1 Journal of the European Economic Association 154; Peter Orazem and Peter
     Mattila, ‘Minimum Wage Effects on Hours, Employment, and Number of Firms: The Iowa Case’ (2002) 23
     Journal of Labour Research 3. These results are not just found in the US and Canada. See Vittorio Corbo,
     ‘The Impact of Minimum Wages on Industrial Employment in Chile’ in Simon Rottenberg (ed), The
     Economics of Legal Minimum Wages (1981), 340 for Chile; Alida Freeman and Richard Freeman,
     ‘Minimum Wages in Puerto Rico: Textbook Case of a Wage Floor?’ (Working Paper No 3759, National
     Bureau of Economic Research, 1991) for Puerto Rico (see also the chapter by Rottenberg in this collection);
     William Maloney and Jairo Nunez, ‘Measuring the Impact of Minimum Wages: Evidence from Latin
     America’ (Working Paper No 2597, World Bank, 2001) for eight Latin American Countries; Jean-Jacques
     Rosa, ‘The Effect of Minimum Wage Regulation in France’ in Simon Rottenberg (ed), The Economics of
     Legal Minimum Wages (1981) 357 and John Abowd, Francis Kramarz and David Margolis, ‘Minimum
     Wages and Employment in France and the United States’ (NBER Working Paper No W6996, CREST,
     2000) for France; Tor Eriksson and Mariola Pytlikova, ‘Firm-level Consequences of Large Minimum Wage
     Increases in the Czech and Slovak Republics’ (2004) 18 LABOUR 75 for the Czech and Slovak Republics;
     Martin Rama, ‘The Consequences of Doubling the Minimum Wage: The Case of Indonesia’ (2001) 54
     Industrial and Labour Relations Review 864 and Asep Suryahadi et al, ‘Minimum Wage Policy and its
     Impact on Employment in the Urban Formal Sector’ (2003) 39 Bulletin of Indonesian Economic Studies 29
     for Indonesia; Linda Bell, ‘The Impact of Minimum Wages in Mexico and Colombia,’ (1997) 15 Journal of
     Labour Economics S102 for Mexico and Colombia.

23 Ronald Krumm, The Impact of the Minimum Wage on Regional Labour Markets (1981).


24 Marshall Colberg, ‘Minimum Wage Effects on Florida’s Economic Development’ (1960) 3 Journal of Law
and Economics 106.




25 Commonwealth of Australia T reasury, Treasury Executive Minute: Workplace Relations Policy
Announcement, 6 October 2005.
20                                          UNS W La w Jou rna l                              Vo lume 29( 1)
26        Brown et al, above n 15, 505.




27 Other studies have found similar results – that increases in minimum wages are likely to lead to increases in
structural unemployment – see Yale Brozen, ‘Minimum Wage Rates and Household Workers’ (1962) 5 Journal of
Law and Economics 103.




28 Douglas Adie, ‘T een-Age Unemployment and Real Federal Minimum Wages’ (1973) 81 Journal of Political
    Economy 435; Nabeel Al-Salam, Alene Quester and Finis Welch, ‘Some Determinants of the Level and
    Racial Composition of T eenage Employment’ in Simon Rottenberg (ed), The Economics of Legal Minimum
    Wages (1981) 435; OECD, Employment Outlook 1998 (1998); Donna Vandenbrink, ‘The Minimum Wage:
    No Minor Matter for T eens’ (1987) 11 Economic Perspectives 19; Charles Brown, Curtis Gilroy and
    Andrew Cohen, ‘Time-Series Evidence of the Effect of the Minimum Wage on Teenage Employment and
    Unemployment’ (1981) 5 Minimum Wage Study Commission 103; Yale Brozen, ‘The Effect of Statutory
    Minimum Wage Increases on Teen-age Employment’ (1969) 12 Journal of Law and Economics 109. This
    research found that increases in the minimum wage only sped up wage increases that would have occurred
    over time. In the interval between an increase and the time when productivity catches up to it, higher
    unemployment and business failures occur. In the case of young workers, many are barred from jobs and
    suffer long-term effects from the failure to gain job skills: David Forrest, ‘Minimum Wages and Youth
    Unemployment: Will Britain Learn from Canada?’ (1982) 2 Journal of Economic Afairs 247; Daniel
    Hammermesh, ‘Minimum Wages and the Demand for Labour’ (1982) 20 Economic Inquiry 365; Marvin
    Kosters and Finis Welch, ‘The Effects of Minimum Wages on the Distribution of Changes in Aggregate
    Employment’ (1972) 62 American Economic Review 323; Robert Meyer and David Wise, ‘Discontinuous
    Distributions and Missing Persons: The Minimum Wage and Unemployed Youth’ (1981) 5 Minimum Wage
    Study Commission 175; Robert Meyer and David Wise, ‘The Effects of the Minimum Wage on the
    Employment and Earnings of Youth’ (1983) 1 Journal of Labour Economics 66; Jacob Mincer,
    ‘Unemployment Effects of Minimum Wages’ (1976) 84 Journal of Political Economy S87; Ronald Mincy,
    ‘Raising the Minimum Wage: Effects on Family Poverty’ (1990) 113 Monthly Labour Review 18; Thomas
    Moore, ‘The Effect of Minimum Wages on Teenage Unemployment Rates’ (1971) 79 Journal of Political
    Economy 897; David Neumark and William Wascher, ‘Employment Effects of Minimum and Subminimum
    Wages: Panel Data on State Minimum Wage Laws’ (1992) 46 Industrial and Labour Relations Review 55;
     James Ragan, ‘Minimum Wages and the Youth Labour Market’ (1977) 59 Review of Economics and
     Statistics 129; Finis Welch and James Cunningham, ‘Effects of Minimum Wages on the Level and Age
     Composition of Youth Employment’ (1978) 60 Review of Economics and Statistics 140; Stephen Brazen and
     John Martin, ‘The Impact of the Minimum Wage on Earnings and Employment in France’ (1991) 16 OECD
     Economic Studies 199; Stephen Bazen and Nicolas Skourias, ‘Is There a Negative Effect of Minimum
     Wages in France?’ (1997) 41 European Economic Review 723; Michael Baker, Dwayne Benjamin and
     Shuchita Stanger, ‘The Highs and Lows of the Minimum Wage Effect: A T ime Series-Cross Section Study
     of the Canadian Law’ (1999) 17 Journal of Labor Economics 318; John Abowd et al, ‘Minimum Wages and
     Youth Employment in France and the United States’ in David Blanchflower and Richard Freeman (eds),
     Youth Employment and Joblessness in Advanced Countries (2000) 427; Juan Dolado, Florentino Felgueroso
     and Juan Jimeno, ‘The Effects of Minimum Bargained Wages on Earnings: Evidence from Spain’ (1997) 41
     European Economic Review 713; Juan Dolado et al, ‘The Economic Impact of Minimum Wages in Europe’
     (1996) 23 Economic Policy 319; Janet Currie and Bruce Fallick, ‘The Minimum Wage and the Employment
     of Youth: Evidence from the NLSY’ (1993) 31 Journal of Human Resources 404; Robert Swidinsky,
     ‘Minimum Wages and T eenage Unemployment’ (1980) 13 Canadian Journal of Economics’ 158; Terence
     Yuen, ‘The Effect of Minimum Wages on Youth Unemployment in Canada: A Panel Study’ (2003) 38 The
     Journal of Human Resources 647; Nicolas Williams and Jeffrey Mills, ‘The Minimum Wage and T eenage
     Employment: evidence from Time Series’ (2001) 33 Applied Economics 285.


29 See, eg, Belton Fleisher, Minimum Wage Regulation in Retail Trade (1981); Masanori Hashimoto, ‘Minimum
     Wage Effects on T raining on the Job’ (1982) 72 American Economic Review 1070; Linda Leighton and
     Jacob Mincer, ‘The Effects of Minimum Wages on Human Capital Formation’ in Rottenberg, above n 22,
     155.
30 See John Trapani and John Moroney, ‘The Impact of Federal Minimum Wage Laws on Employment of
     Seasonal Cotton Farm Workers’ in Simon Rottenberg (ed), The Economics of Legal Minimum Wages (1981)
     233.
31 OECD, ‘Submission to the Irish National Wage Commission’ (Working Paper No 186, OECD Economics
     Department, 1997) 13.
32 For women, see Horst Feldmann, ‘Labour Market regulation and Labour Market Performance: Evidence Based
     on Surveys among Senior Business Executives’ (2003) 56 KYKLOS 509, 531; Orazem and Mattila, ‘The
     Iowa Case’, above n 22, 18.
33 It should also be noted that many of the first groups mentioned in this list are also disproportionately
     represented in the part -time, casual and low skilled categories of work; that is, there are more young people
     and women who are also casual or part -time workers.
34 See, eg, Jere Behrman, Robin Sickles and Paul T aubman, ‘The Impact of Minimum Wages on the
     Distributions of Earnings for Major Race-Sex Groups: A Dynamic Analysis’ (1983) 73 American Economic
     Review 766 for the adverse effects on black males and females. See also Linda Datcher and Glenn Loury,
     ‘The Effect of Minimum Wage Legislation on the Distribution of Family Earnings among Blacks and
     Whites’ (1981) 7 Minimum Wage Study Commission 125.
35 See Carolyn Bell, ‘Minimum Wages and Personal Income’ in Rottenberg (ed), The Economics of Legal
     Minimum Wage, above n 22. For an identical finding, see William Johnson and Edgar Browning, ‘Minimum
     Wages and the Distribution of Income’ (1981) 7 Minimum Wage Study Commission 31.
36 Peter Brandon, Jobs Taken by Mothers Moving from Welfare to Work and the Efects of Minimum Wages on
     this Transition (1995); George Iden, ‘The Labour Force Experience of Black Youth: A Review’ (1980) 103
     Monthly Labour Review 10. See also Peter Linneman, ‘The Economic Impacts of Minimum Wage Laws: A
     New Look at an Old Question’ (1982) 90 Journal of Political Economy 443.
37 Alana Gilbert, Euan Phimister and Ioannis Theodossiou, ‘The Potential Impact of the Minimum Wage in Rural
     Areas’ (2001) 35 Regional Studies 765; Marvin E Dodson III, ‘The Impact of the Minimum Wage in West
     Virginia: A Test of the Low-Wage-Area Theory’ (2002) 23 Journal of Labor Research 25.
38 See David Neumark and Scott Adams, ‘Detecting Effects of Living Wage Laws’ (2003) 42 Industrial
     Relations 531, 562; Feldmann, above n 32, 531; Kenneth Couch and David Wittenberg, ‘The Response of
     Hours of Work to Increases in the Minimum Wage’ (2001) 68 Southern Economic Journal 171, 175-176.
39 See Neumark and Wascher, ‘Panel Data on State Minimum Wage Laws’, above n 21, 241; David Coe and
     Dennis Snower, ‘Policy Complementarities: The Case for Fundamental Labour Market Reform’ (1997) 44
     IMF Staf papers 1.
40 See, eg, Richard Vedder and Lowell Gallaway, ‘The Minimum Wage and Poverty among Full-Time Workers’
     (2002) 23 Journal of Labour Research 41; Paul Johnson and Graham Stark, ‘The Effects of a Minimum
22                                         UNS W La w Jou rna l                         Vo lume 29( 1)
    Wage on Family Incomes’ (1991) 12 Fiscal Studies 88; Sue Richardson and Ann Harding, ‘Poor Workers?
    The Link between Low Wages, Low Family Income and the Tax and T ransfer Systems’ in Sue Richardson
    et al (eds), Reshaping the Labour Market: Regulation Eficiency and Equality in Australia (1998); Guy
    Standing, Global Labour Flexibility: Seeking Distributive Justice (1999).
41 Quoted in OECD, above n 31.
42 See also Martin Bailey et al, ‘Productivity Dynamics in Manufacturing Plants’ (1981) 1 Brookings Papers on
     Economic Activity: Microeconomics 187; John Baldwin, The Dynamics of Industrial Competition: A North
     American Perspective (1995); Zvi Griliches and Haim Regev, ‘Firm Productivity In Israeli Industry, 1979 -
     1988’ (1995) 65 Journal of Econometrics 175.
43 James Arrowsmith, Mark Gilman, Paul Edwards and Monder Ram, ‘The Impact of the National Minimum
     Wage in Small Firms’ (2003) 41(3) British Journal of Industrial Relations 435, 441ff.
44 Australian Bureau of Statistics, Small Business in Australia 2001, Catalogue 1321.0. Small businesses are
     defined by the ABS as ‘a business employing less than 20 people’. Categories of small businesses include;
     (1) non-employing businesses - sole proprietorships and partnerships without employees; (2) micro
     businesses - businesses employing less than five people, including non-employing businesses; (3) other
     small businesses - businesses employing five or more people, but less than 20 people. Small businesses tend
     to have the following management or organisational characteristics: (1) independent o wnership and
     operations; (2) close control by owners/managers who also contribute most, if not all the operating capital;
     and (3) principal decision-making by the owners/managers.
45 See, eg, Peter Brosnan, Can Australia Aford Low Pay? (Unpublished article, University of Sydney, 2005).
46 See OECD, above n 31.
     47 Rosemary Lucas and Michele Langlois, ‘Anticipating and Adjusting to the Intro duction of the National
           Minimum Wage in the Hospitality and Clothing Industries’ (2003) 24 Policy Studies 33, 44.
     48 Dickens, ‘The Effect of Minimum Wage on Employment’, above n 20; Dolado, ‘Evidence from
           Spain’, above n 28; Stephen Machin, Lupin Rahman and Alan Manning, ‘Where the Minimum Wage
           Bites Hard: Introduction of Minimum Wages to a Low Wage Sector’ (2003) 1 Journal of the European
           Economic Association 154, 157.
     49 See Lucas and Langlois, above n 47, 45-6.
     50 Ibid 43-4. See also Arrowsmith et al, above n 43, 445; David Metcalf, ‘The Impact of the National
           Minimum Wage on the Pay Distribution, Employment and Training’ (2004) 114 The Economic
           Journal C84.
     51 See also Neumark and Wascher, ‘Panel Data on State Minimum Wage Laws’, above n 21, 557ff.
     52 See Arrowsmith et al, above n 43, 446. However, classical economic theory would suggest that lower
           wages also increase the need for supervision of employees as they are more indifferent to whether or
           not they retain their job and therefore are less willing to expend effort ensuring that they do so. See
           Andrew Weiss, Eficiency Wages: Models of Unemployment, Layofs and Wage Dispersion (1991) 5.
53    See Arrowsmith et al, above n 43, 447.
54 See Machin et al, above n 48, 175; Eriksson and Pytlikova, ‘Minimum Wage Increases in the Czech and
      Slovak Republics’, above n 22, 95; Jason Heyes and Alex Gray, ‘The Impact of the National Minimum
      Wage on the Textiles and Clothing Industry’ (2001) 22 Policy Studies 83, who found that overtime was cut
      and the number of tasks undertaken by workers increased after an increase in the FMW.
55    See Brown et al, above n 15, 489-90.
56 Edwin West and Michael McKee, Minimum Wages: The New Issues in Theory, Evidence, Policy and Politics
      (1980).
57    Brown et al, above n 15, 490-493.
58 The federal workplace relations regime will cover only those employers that are engaged in interstate trade,
      that are Commonwealth public sector employers, that are constitutional corporations or are employers in a
      few other limited categories. All in all, it is expected that coverage will amount to more than three quarters
      of all employers within three years.
59    Brown et al, above n 15, 490.
60 2003 figures: OECD, Economic Policy Reforms; Going for Growth (2006) Annex A. For a comparison of
     other countries, see also David Neumark and William Wascher, ‘Minimum Wages, Labour Market
     Institutions and Youth Employment: A Cross-national Analysis’ (2004) 57 Industrial and Labour Relations
     Review 223, 227-23 0. Australia had the highest FMW as a percentage of minimum wage in 1998, being just
     a percentage point above France at 60 per cent. The ACT U states that the minimum wage is currently 65
     percent of Australian average earnings.
61 Australian Industrial Relations Commission, Safety Net Review – Wages (2005) [404].
62 Australian Bureau of Statistics, Average Weekly Earnings, Australia, November 2005 (2005) 1.
63 Australian Bureau of Statistics, Employee Earnings and Hours, May 2004 (2005).
64    A similar difficulty exists internationally See OECD, above n 31.
65 Alistair Rainnie and Michael Scott, ‘Industrial Relations in the Small Firm’ in James Curran, John Stanworth
      and David Watkins (eds), The Survival of the Small Firm Volume 2: Employment, Growth, Technology and
      Politics (1986) 42, 52.
66 The national wage setting procedures allow for junior rates of pay to be inserted into federal awards. Usually
     an award will allow junior pay rates as a percentage of full adult wages based on the number of years in age
     an employee is below 20. The A wa r d S im p l ific a tio n D e c is io n in December of 1997 (Print P7500) allowed for
     non-office juniors to be paid at: 17 years of age and under – 70 per cent of the adult wage; 18 years of age –
     80 per cent of the adult wage; 19 years of age – 90 per cent of the adult wage and 20 years of age – full adult
     rate. Applying this typical pattern (junior wages were generally to be determined on an award-by-award
     basis) to the current federal minimum wage would result in ‘youth minimums’ of: 17 yrs - $339.08; 18 yrs –
     $387.50; 19 yrs – $435.96.
67 Australian Bureau of Statistics, above n 63.
68     See Junankar, above n 17, 93-94.
69     Although it is also clearly the case that collective wage bargaining structures and award setting
       mechanisms have also contributed to wages possibly above what would also be ‘offered at market’.
70     See Workplace Relations Act 1996 (Cth) ss 190-193.
71     See Workplace Relations Act 1996 (Cth) pt 7, div 2, subdiv B.
72 See Neumark and Wascher, above n 60, 243.
73    Unemployment is currently at 5.2 per cent. See Australian Bureau of Statistics, La b o u r   F o r c e A u s tr a lia –
      F e b r u a r y 2 0 0 6 (2006).

74 Peter Dawkins, ‘Solutions to Unemployment and Avoiding the ‘Diabolical Trade-off’: A Discussion’ in Guy
     Debelle and Jeff Borland (eds), U n e m p lo y m e n t a n d th e A u s t r a l ia n La b o u r M a r k e t (1998).

								
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