The Australian Minimum Wage and the Needs of a Family

Abstract

The 1907 Harvester decision effectively established a minimum wage in Australia for men based upon the needs of a family. Commencing in the 1940s Australia has progressively introduced transfer payments to provide support for children and for a parent in a caring role. In 2014 the minimum wage was defined as that for a single person. This thesis is concerned with the rationale of the original decision and the transition between these two states. The Harvester decision was embedded in the economic and family structure of the day, and in the contribution domestic production made to both living standards and the capacity of a partner to engage in paid employment. In turn, this was underpinned by the nature of domestic technology. The form of the family wage had weaknesses. It was inefficient in meeting its objective of supporting families and involved lower wages for identifiable groups who were not likely to need to support a family (young men and women). However, alternative approaches to family support had not been developed at that time, nor were there suitable institutional arrangements to enable the payment or funding of such assistance. The transition was slow. Reasons for this include: the speed of permeation of technology for more efficient domestic production; opposition to state financial intervention in families; the need for changes in the structure of employment to encompass part-time work; and at times resistance from organised labour. This resistance was motivated by seeking to protect employment, both of men and single women and because change effectively involved a redistribution of income with losers, as well as winners. In this, the union role can be seen as being representative of the interests of their members. A further challenge related to the interaction of claims for equal pay, and provision for wives without children engaged in domestic production. More generally the institutions involved operated independently with no coordination and change was incremental, building a path determinacy into the development of policies. A number of long-term time series data were developed specifically for this thesis. These data (detailed in appendices) underpin the descriptive and econometric analysis presented and themselves constitute a contribution to the literature. They show that over the period the real value of the minimum wage has increased, although falling relative to other earnings, and with evidence of significant trade-offs of potential gains, in favour of reductions in working time and retirement income. The expansion of family support has significantly boosted household incomes for those with children, and addressed the equity of relative outcomes for families on the minimum wage compared with single workers. Although conceived of in the context of ‘New Protection’, econometric analysis shows a long-term negative (but non-causal) relationship between the wage and manufacturing protection, with the wage rather being driven by improved productivity. A negative relationship is found between the wage and unemployment, with bi-directional causality.