Posted: October 26, 2006

FPC - not fair at all!

Readers should realise that under the WorkChoices legislation and regulations any public commentator such as myself who makes comments such that the public might have reduced confidence in the decisions of the Fair Pay Commission (FPC) is liable for 12 months imprisonment. Such is the state of our democracy in 2006.

Well lets get the ball rolling. Today the FPC brought down its first decision. The much-awaited decision is that workers on the lowest pay - the old safety net - gained an increase of $27.36 per week payable from December 1, 2006. The last pay rise they received was on June 7 2006. The lowest weekly wage is now $511.86 up from $484.5. Around 1 million workers will receive changed wages as a result of the decision.

The reaction to the decision today has been interesting. The ACTU's Greg Combet makes the claim that "the decision is a victory for the union movement". Say that again? the decision is a victory for the union movement. He is reported by the ABC as saying: "We put a detailed submission and essentially all of the key elements of the ACTU submission have been accepted by the Fair Pay Commission ... The decision therefore is also a slap in the face for the Government and all of their friends in the business community." The ABC also reports that the AiG is unhappy. Why of-course!

But if I was the ACTU bosses I would be really unhappy about the decision. Some quick back of the envelope (in fact in a Open Office spreadsheet) reveal why I think the decision reinforces all the suspicions I had of the decision to abandon the Safety Net Review under the auspices of the Australian Industrial Relations Commission and place the setting of wages for the most disadvantaged workers into the hands of an unaccountable panel.

The Consumer Price Index was 148.4 in June 2005 and in September it was 155.7, reflecting the inflation that has beset the Australian economy. By December 2006, the CPI will have risen to around 157.3. If you then ask what the nominal rate of pay that would be required on December 1, 2006 if workers at the bottom of the pay heap were to protect their real purchasing power, then the answer is $513.4 (approximately). The qualifications to this statement are many - including the different rates of inflation that are impacting on the different components of the expenditure basket and the proportions of expenditure on these components in the budgets of the low-paid

But it is easy to see that the low-paid are not going to enjoy any real wages growth as a result of this decision. In fact, it is likely that the first of the real wage cuts that we suspected would accompany the publicised (headline) nominal wage increases has been imposed by the FPC. Given the escalation in pay entitlements at the top of the wage structure this is a dismal outcome. What we are seeing is a slow eating away of the low-paid of purchasing power.

We should also be clear that this decision was highly political in that the FPC were on trial so to speak. The decision will lull those like the ACTU into thinking things are fine. Wait for the next real wage cut! It will also accompany rising unemployment. The public should have no confidence that the FPC is in fact FAIR at all!

Blog entry posted by bill