Recent debate about the rate of Australia’s minimum wage and how it should be set have led me to an unlikely conclusion: that it should be scrapped altogether.
It is a bold statement, I know. But hear me out.
What is the actual purpose of the minimum wage? According to the Fair Work Commission: “A minimum wage is an employee’s base rate of pay for ordinary hours worked… Employers and employees cannot be paid less than their applicable minimum wage, even if they agree to it.”
However, it’s pretty clear that not all Australians are taking home at least “the minimum wage” each week.
Firstly, as Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell noted recently, many small business owners themselves fail to earn the minimum wage, meaning their employees are taking home higher wages than they do.
Secondly though is the application of the legal minimum wage. In theory, it applies to all employers, regardless of size, industry or persuasion. But the reality is quite different.
Big business, and even most facets of the public service, use EBAs – enterprise bargaining agreements. These agreements dictate the salary levels and annual rates of pay increases, and form a binding contract between the employer and all employees who sign up to it – provided they are given official approval by the Fair Work Commission.
So in essence, the minimum wage imposes a legislated minimum rate of pay on the employers who can least afford it – small business.
“The thing about small business is if you don’t have the money to pay your people, you don’t employ them, because there isn’t a bottomless pit somewhere,” Ms Carnell told My Business.
“In the end, are we better off having a higher minimum wage and more people without jobs, or are we better having the second or third-highest minimum wage in the world with a reasonably low level of unemployment?”
But why not take it further? If the minimum wage in its current form is not actually ensuring ALL working Australians take home a pre-set level of income, why not scrap it altogether and start again?
Why could we not devise a system that provides a true safety net for everyone, regardless of where or how they are employed. Perhaps a system where “earnings” include more than just money – shares options in the business, free stock or services etc.
And what about a sliding scale, where employee wages increase (or decrease) in line with the taxable income of the business, to truly reflect the financial performance of the business and act as an incentive for everyone to work together to drive profitability?
These are just a few very rough ideas from one individual. But surely given how divisive the minimum wage has become, and its apparent ineffectiveness to deliver on its primary aim, means that it is not working. And as the old saying goes, there is no point flogging a dead horse.
So surely to keep Australia competitive in the global commerce race, and ensure that we all share in the country’s economic spoils, it is about time to engage in a meaningful national discussion about how a new minimum wage can be introduced, one which is a much more effective and sustainable tool – for employers and workers alike.
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