Rational economics

CONFLICT can appear the defining element of democratic politics and public policy, but the reality is that participants share far more core values and ideas than they dispute.

Conflict is trumped by compromise. A current and crucial example centres on the stagnant wages of the lowest-paid workers in Australia, one of the most prosperous nations and one which has had more than a quarter-of-a-century of uninterrupted economic growth. Yet living standards in Australia have not improved for the past several years.

Under Australia’s long-standing, painstakingly negotiated industrial relations system, annual adjustments to the minimum wage are debated before the independent arbiter, the Fair Work Commission. Key individuals and institutions are of the view that sluggish growth in real wages is one of the biggest threats to the economy.

Submissions are flooding into the commission. Some appear ambit, but the arguments behind them are shared by most: the economy’s full potential is being held back by low wages; the impact of this on consumer confidence and spending is amplified because household budgets have been hit hard by higher costs for energy, housing, health care and child care.

The commission will adjudicate, as it must, by balancing the arguments in the national interest. But combining a higher-than-usual increase in the minimum wage with the corporate tax cuts would be sensible economics and smart politics. It is reasonable to argue it is in business’ long-term interest to support a higher minimum wage.