Minimum Wage, Minimum Clarity

Most people are neither employers nor low wage employees so they probably have not paid much attention to the detail of the minimum wage discussions.

But the events of the last few weeks should have forced a rapid revision of that rather laid back stance. Because the pickle the government has gotten itself into has now run out of control and is threatening other important areas of public policy.

(For the record, I accepted in this column a year ago that irrespective of the rights and wrongs in principle, a minimum wage was now inevitable. Just two months ago I indicated my personal preference for income support for the working poor by means of negative income tax.)

Be that as it may, the debate during the past twelve months seemed to be about ending the disgrace of full time jobs drawing income below $4000 per month, and setting a floor in the region of $6000.

Subsequently representatives of all sides settled on a figure of $28 per hour in order to achieve that target. It is common ground accepted by both employer representatives and trade unionists that the calculations that resulted in the $28 figure did not include payment for rest days and meal breaks. If those periods are included, then the relevant monthly income becomes something in the region of $7500.

Please note that we are not arguing here about which figure is more reasonable or more socially just, we are simply stating for the record the common understanding upon which the $28 figure was derived.

As the date approached for the minimum wage to become effective, the twin issues of rest days and meal breaks suddenly reared their ugly head.

As the implementation hour neared it became apparent that the most logical thing for some employers to do would have been to lay off their low-income monthly paid staff and re-employ the same people on an hourly paid basis. So actual earnings would move up, on a monthly basis, to the new higher figure but the terms of employment would be different.

But while such a move might be technically correct, and lawful, and still achieve the avowed objective of a monthly wage in the region of $6000, it would be controversial. At that point, as we have come sadly to expect these days, the government fell strangely silent.

So now, in the absence of leadership, individual employers and employees have been left to find their own way. Some employers will no doubt bite the bullet and move to the new de facto $7500 minimum. Good luck to them and their employees. Other employers face a Hobson's Choice of either courting the stigma of mass dismissal/re-engagement, or going out of business. While some loss of jobs was always going to arise, the number is bound to be greater under the scenario we now face.

Nor is that the end of the story. Because the government has now turned round to its contractors and said it will give them extra money to allow them to pay for rest days (but not meal breaks. Why not, one wonders, or are we saving this for the next retreat?).

There are two things wrong with this proposal. First, these workers are not employed by the government, they are employed by companies that happen to have secured a contract from the government to provide certain services. It is for those companies to comply with the minimum wage law at their own expense, not for the government to throw taxpayers money at them to cover the extra cost. (What will be the effect on the other contracts the same companies secured from other parties, one wonders, or is that another consequence no one seems to have thought through?)

And secondly, those public contracts were secured by competitive tender. Other companies, perhaps including some who budgeted more prudently and allowed for the extra expense of complying with the imminent minimum wage legislation in their tender price, have good grounds to complain that the goalposts have been moved. They failed to win the contract because they were sensible, while the imprudent have been rewarded with the original contract and the big new top up. Is this how to maintain a level playing field for awarding government contracts?

And if you think things could not possible get worse - they just have. For now the same contracting companies have claimed that the new minimum wage legislation has pushed up their costs in other areas, such as insurance, and as these could not have been foreseen (why on earth not?) they want the government to cover these extra costs too.

In the present political environment, who could blame them for trying it on?