One of the positive things about the labour market reforms brought in by the Howard government is that considerations regarding the minimum wage will now give regard to the economic situation not just for workers but also for the unemployed. The new Australian Fair Pay Commission states on it’s website that:-
In fulfilling its wage-setting function, the Commission must have regard to:
- The capacity for the unemployed and low paid to obtain and remain in employment;
- Employment and competitiveness across the economy;
- Providing a safety net for the low paid; and
- Providing minimum wages for junior employees, and employees to whom training arrangements apply and employees with disabilities that ensure those employees are competitive in the labour market.
Whilst I believe that the correct rate for the minimum wage is zero, I still regard this new policy as a meaningful improvement. The fact that it now gives consideration to employment across the economy is a good thing. The next logical reform to this setup would be to make a provision where by the Australian Fair Pay Commission could apon request make a determination about the appropriate minimum wage for some smaller subregion within the the Australian economy. For instance is the minimum wage appropriate to the employment and economic conditions in Queensland also appropriate to the employment and economic conditions in Tasmania. And what about economic and employment conditions in Melbourne compared to Alice Springs.
In other places a similar effect is achieved by decentralising decisions about the minimum wage. For instance in Canada there is no minimum wage set within the central government sphere and it is instead set by regional governments. Likewise within the EU minimum wages are set at the national level not the EU level. And in the two tier US system they set minimum wages at the state level with a catch-all minimum set at the Federal level which is generally lower than most states.
In light of recent events this issue should be topical given the extremely high rates of unemployment in many remote aboriginal communities. Clearly a minimum wage set according to the overall national unemployment rate will be quite inappropriate in an economically remote region with a high rate of unemployment.