Trickle-up effect

The 2.6% tweak received by Australia’s lowest paid workers on Monday is barely commensurate with inflation, but still too generous for Judith Sloane, who would prefer them to fall ever further behind (“Extended freeze would protect the poor”, The Australian, 4/6). She asserts that this is for their own good, citing cherry-picked research linking bottom-of-the-market wage rises with unemployment.

Economists are far from unanimous on that narrow topic, but it is unnecessary to decide whether Sloane’s view is correct. In the bigger picture, the real driver of employment is productivity, which has risen about 85% in the past three decades, while real wages have grown only around 50%. This “trickle-up” effect demonstrates that continuing unemployment, and downward pressure on wages, are due not to labour unaffordability but to employers’ unwillingness to share the increased wealth that their workers have created. Worse, dwindling union membership means fewer are in a position to insist on a fair share.

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