Minimum wage facts and myths

This year's review of minimum wages has generated the usual ambit claims from the union movement.

ACTU secretary Dave Oliver argues that if the Fair Work Commission does not take action to 'turn around the alarming decline in the relative earnings of low-paid workers then Australia will have an entrenched working poor as they do in the United States within 20 years.'

Oliver claims that the statutory minimum wage is just 43.3% of the average full time wage, and that 'if action isn't taken, by around 2035 that figure could languish below 30%.' With comments like these, one could be forgiven for thinking that low income workers in Australia have seen their wages stagnate in recent years.

In reality, minimum wages over the past five years have increased each year by between 2.6% and 3.4% which places them at or higher than the annual rate of inflation.

More importantly, Australia's minimum wage may be 43% of the average wage, but it is 54% of the median wage: The median wage is a more appropriate measure as it picks up workers in the middle of the income distribution. The average wage can be distorted by a small amount of very well-paid workers whose incomes elevate the average.

Furthermore, Australia's statutory minimum wage (in real terms) is one of the highest in the developed world, ranking fourth highest among OECD nations in 2013.

And this is only the statutory minimum. Australia's award system builds tiers upon tiers of minimum wages above the statutory minimum. Many workers are on minimum wages higher than the current $16.38 per hour, and these minimum wages increase each year with the Safety Net Review.

The union movement is campaigning hard on the plight of low income workers. But if we want to have a serious discussion about this issue, we need to debate the facts not the myths about the minimum wage.

Alexander Philipatos is a Policy Analyst at The Centre for Independent Studies.