COMMON Wealth No. 2 of Volume 5

The purpose of this document is three-fold:

First, to state clearly a set of principles from Catholic Social Teachings which bring to public conversation the Church's historical position on a variety of issues pertaining to the relationship between employers and workers including the setting of just wages. The message of these teachings is that labour is not simply another commodity that can be priced according to the unrestrained forces of supply and demand.

Secondly, to trace the evolution of how the concept of the living wage has been applied in practice in Australia. The increasingly important role of the 'social wage' for providing citizens with an adequate income will be highlighted as a positive development. The future relationship between market wages and the social wage is identified as a highly contested arena of economic and social policy requiring further public debate.

And thirdly, to assert the continuing relevance and importance of the concept of a living wage in the current environment of rapid economic and social change, in which both market wages and the social wage will be key determinants of the future well-being of the nation. This section will deal with the ACTU's Living Wage claim currently before the Australian Industrial Relations Commission within the context of changes to Commonwealth industrial relations legislation.

The Australian Catholic Social Welfare Commission is concerned with the common good of all Australians particularly the most disadvantaged members of our community. Throughout the 1990s the Commission has sought to actively engage with Australian governments in the development of major national social policy initiatives which have aimed to ameliorate the full impact of recessions and economic restructuring. The full spectrum of major social policy issues has been addressed by the Commission with an emphasis on linking social policy with economic policy during this period.

The espoused commitment of the Commonwealth Government to reform and to restructure Australia's labour market is welcomed by the Commission on the grounds it represents a response to the inevitable need for Australia to reposition itself in a globalised market economy. In any policy reform package seeking to improve Australia's industrial relations environment there is a unique opportunity for the Government to make a steadfast commitment to the well-being of those citizens who have been most disadvantaged by the impact of globalisation over the past 20 years. If any point has emerged during the debate on the Government's plans to restructure the Australian work force it has been that good industrial relations arrangements are as much an issue of welfare and distributive justice as they are of national economic prosperity.

The living wage is that benchmark established and developed throughout this century by the Australian community to ensure adequacy of incomes in order to meet the costs of living for individuals and families. It represents the nexus between strong labour market and social wage systems. Together these systems interact to guarantee an adequate wage supplemented by income support arrangements; a range of opportunities and resources which ensure a 'fair go' and a standard of living all Australians have come to expect; and, where needed, a helping hand to all Australians in need. As such, the living wage is integral to the success of the present workplace reform agenda.

Part One: Catholic Social Teaching on a 'Just Wage'

This section articulates the principles that the Catholic Church, through a particular body of documents and doctrines known as Catholic Social Teachings, seeks to express in the public sphere with regard to the relationship between employers and workers and specifically addresses the issue of wages.

The Responsibilities of Labour, Capital and the State

At a time of great social division and economic depression in many Western economies, including Australia, Leo XIII's ground-breaking encyclical, Rerum Novarum (On the Condition of the Working Classes) was issued in May, 1891. It was the expression of almost a century of reflection by Catholic thinkers on the social and moral consequences of industrial capitalism and the dominance of laissez-faire economic liberalism.

However, Rerum Novarum was no socialist tract and inter alia staunchly defended the right to private property (n.8). Nevertheless, far from this defence being a comfort to the wealthy, the document argued for a just distribution among the workers of a community's wealth on the grounds that workers had a duty to care for their families, and without property they could not do this adequately (n.20). However the mechanism for this distributive justice ought not be the welfare state. The encyclical was critical of excessive government intervention, arguing that public authorities must only intervene to ensure that those in extreme need are cared for when their access to an adequate income is denied (n.21).

In other words, the responsibility of ensuring an adequate income to workers falls in the first place not to the state, but to employers. The central message of Rerum Novarum is that the solution to poverty and class antagonisms is the mutual recognition of the duties owed by capital and labour to one another. This recognition is nothing more that the realisation of the fact of interdependence between employers and employees: Each needs the other completely: capital cannot do without labour, nor labour without capital (n.28) The encyclical clearly emphasises the primacy of duties each group has toward the other rather than the rights each claims against the other.

According to Pope Leo, the most important duty of the worker is to perform the labour he or she agreed upon in justice (n.30). But what is justice? Simply paying the wage agreed upon does not suffice to satisfy the requirement of justice, since that wage may have been agreed upon under duress. Employers have a duty, in justice, to pay a living wage:

Workers have the right to join together in unions to exert pressure for wage-justice, as well as for other changes for the common good. Thus the Church supports the formation and activity of unions as an essential voice to the collective concerns of workers when pursuing social justice. Defending the rights of workers is an essential part of this, but seeking to exploit their strengthened bargaining power in the pursuit of wages and conditions that go beyond what would be considered fair, is not. Ideally, unions and employers should work together to improve the productivity of an enterprise and the wages and conditions of workers.

In 1931 Pius XI wrote Quadrigesimo Anno (On the Reconstruction of the Social Order) which added two further criteria for a just wage to the criteria of need. Firstly, the condition of the business needed to be taken into account, so that unions could not extract excessive wages that could ruin the enterprise and ultimately the well-being of the workers. However this capacity to pay principle was not to be used to justify paying a wage that was below that determined by need. Pius XI made it clear that business that could not pay a living wage should not be operating and that poor business practices should be no excuse for paying unjust wages.

The second additional criterion articulated by Pius XI, and repeatedly echoed by later popes, was that wages should take account of the public economic good. Excessively high and low wages generate unemployment and inflation. Just wages contribute to individual security and the well- being of the whole society (nn. 71-74). The regulation of wages in the interests of the common good means that there is an important role for the state in the wages arena.

The Church has always been concerned that the state ought not to exercise undue interference in the lives of citizens, but by the same token rejects unequivocally the laissez-faire doctrine of non- interference. Pope John Paul II developed the idea of the 'indirect employer', which refers to other social and economic factors that influence employment and its conditions, such as labour legislation, industry policy, training and education, housing and transport. The concept of the indirect employer is applicable in every society, and in the first place to the State (Laborem Exercens n.17). In particular, the state should exercise its legislative power to protect workers and to promote just and harmonious industrial relations.

The Nature of Work and its Importance for Human Dignity

The principle that workers ought not be treated simply as a dispensable means to an profitable end by employers is central to the whole body of Catholic Social Teaching as it relates to the relationship between workers and their employers. Human dignity is what must be protected and enhanced through both the industrial relations system and the broader economic system.

In his 1981 encyclical letter, Laborem Exercens, Pope John Paul II asserted capital is merely the accumulated wealth that has been created by the repeated exercise of human labour. Since capital is the product of labour, labour has a moral 'priority' over capital in terms of how it is conceptualised in the production process. Human work is the means through which men and women express their human potential and fulfil their human dignity. Through applying our minds and bodies to some productive task, we can either achieve a measure of self-realisation, that is, become more fully human, or gain access to a level of resources that permits them to fulfil their human potential in other ways, outside the market. This, ultimately, is the purpose of work, and the reason why a living wage is necessary. Labour is not just another factor of production, a commodity whose price is entirely determined by the forces of supply and demand in the market.

Message from Bishop Patrick Power, Chairman of the Bishops' Committee for Social Welfare This year has been declared as The International Year for the Eradication of Poverty by the United Nations. Australia, like many other countries, is currently experiencing a period of economic growth. Yet unemployment, the major cause of poverty, remains unacceptably high and is unlikely to fall significantly in the foreseeable future. In such a context, what sense does it make to speak of the rights of the workers, those who are employed, to a 'living wage'? Surely, some argue, the rights of those excluded from work ought to take precedence over the rights of those in jobs to a certain level of remuneration. Many contemporary economists argue that in order for the employment rate to increase, the cost of labour must fall, ie. wages must be driven down. Is it a case now of the employed marginalising the unemployed, rather than the traditional battle between the employed and their employers? And what of those people who are underemployed or unemployed? In response to such questions, the Church is adamant that policies which ensure a living wage through a combination of the market and supported by Australia's social wage system must not be jeopardised by any ideology driven by individualism or likely to pit one section of the community against another. This document sets out Catholic Social Teachings on employment, the rights and responsibilities of both employers and employees and, the place of a 'living wage' in the social and economic structures of contemporary society. It lends support to calls for a more wide ranging discussion and consultation by Government with all sections of the community on the interaction and interrelatedness of all these issues. The resolution of these complex issues is of fundamental importance to the life of the community.

Part Two: The Evolution of a 'Living Wage' in Australia

Centralised Wage Fixing in a Closed Economy

The introduction by Justice Higgins of the concept of a fair and reasonable wage into national awards in the 1907 Harvester decision embodied a clear repudiation of the exposure of labour to valuation by forces of supply and demand in the labour market. The 'family wage', set at 7 shillings per day for a six day week, represented a 'living wage' for a worker, his wife and three children. The living wage concept went beyond the consideration of daily household needs for food, shelter and clothing. It took into account longer-term needs and sought to protect the buying power of market incomes for life-cycle investments such as family formation and home purchase.

J. Higgins' decision established a cause for intervening in the unequal dynamics of workplace relations to protect wage levels and standards of work. The living wage would protect unskilled rates of pay from the 'unequal contest of the market' and secure a level of pay and conditions which were out of the reach of employees through the ordinary system of individual bargaining with employers. (Thompson, 1994; Jamrozik, 1994)

The living wage decision also established the foundations of a more consensual tripartite framework within which competing claims of capital and labour could be heard based on the principles of need, capacity to pay, and comparative wage justice and with regard to the collective concern of parties and the well-being of the whole community (ACSWC, 1995; Creighton & Stewart, 1994). However, in the determination of a living wage, consideration of a needs-based minimum of market income took precedence over that of the profitability of an enterprise (Castles, 1994; Buchanan, 1992). In 1909 J. Higgins highlighted the risk of a low-wage sector emerging whereby substandard wages would in effect amount to the subsidisation by employees of inefficient employers.

The living wage has displayed limitations in terms of the periodic decline in its real value and deficiencies in its coverage of the workforce. Since 1907 the Federal award system and the process of wage fixation has become an important means of controlling wages in the interests of the nation's economic performance, eg. through wage restraint to dampen the effects of inflation and on linking pay increases to the productivity of workers. The living wage and the development of its subsequent forms, with additional mechanisms instituted to protect the interests of low-paid workers such as indexation and safety net adjustments underpinned by a 'no disadvantage test', have been used to address the hardship experienced by low paid, vulnerable and industrially weak workers following major economic shocks, labour market restructuring as well as the more gradual erosion of wage levels over time. (ACSWC, 1995; Evatt Foundation, 1995)

However, the updating of needs-based rates of pay to make them more relevant to the costs of living has often been opposed by employers countering wage claims with the principle of 'capacity to pay', which gives regard to industry or national economic conditions. Often the low paid worker endured economic hardship when the value of the basic wage was eroded by inflation, as was the case in 1920 when it was found to be 36 percent lower than the standard of the Harvester decision. At other periods when low paid workers were exposed to the threat of poverty through inadequate wage rates or unemployment, decisions applying the capacity to pay principle could be used to cut them, as was the case in 1931 when basic wages were reduced by 10 percent in response to depressed economy or freeze wages, as occurred under the 1982 wage pause policy.

Over time, and despite wage indexation, the living wage established under the Harvester decision became insufficient to support a man, woman and more than one child. To rectify these problems, a national Child Endowment Scheme was introduced by Prime Minister Menzies in 1941. The introduction of child endowment formalised family income support as a distinct area of social policy and ensured that responsibility to families undertaking child care and nurturing activities extended beyond the wage system and was borne as a shared community response through the tax-transfer system (Cass, 1993). It also established a precedent for building, upon the foundations of the living wage, a growing range of non- contributory and means-tested social security payments and social wage benefits which would support or temporarily replace market income.

The limited protection afforded to unskilled, low-paid and vulnerable workers through the living wage was not extended to all people in the community. The living wage as it applied through awards was advanced through union representation, largely protected full- time full year unionised males. A fair and reasonable wage was not achieved for many vulnerable workers who were unrepresented or at the periphery of the labour market in casual and part-time work. While the living wage maintained and at times improved the living standards of anglo-Celtic males and the male breadwinner model of family, the very structure of the wages system often excluded newly arrived immigrants, Aboriginals, women, and a range of other groups, from its protection.

The living wage was discriminatory against female employees, and especially inadequate where women were the main breadwinner, given unequal gender-based wage rates. From its beginnings, the living wage determined by J. Higgins recognised the male head of a household as the primary breadwinner and accordingly set the female rate of pay at around only 50 percent of the male rate. This rate was increased to 75 percent of the basic wage in 1949. In 1974, following the Equal Pay decisions initiated in the late 1960s, the male minimum wage was extended to women (ACSWC, 1995). Female rates of pay and basic award conditions could not be guaranteed for unrepresented women workers in marginal part-time, casual and out work.

In addition to increasing numbers of those groups that have not in the past been afforded the protection of a fair and reasonable market wage income, other significant groupings have emerged in recent decades - including youth, unskilled and older males, and single parents - who have had to resort to the social wage system for prolonged periods as the primary source of income support in meeting the basic costs of living and ameliorating the disadvantage caused by the natural operation of the market. These groups are at high risk of poverty.

Technology changes that have made capital less and less reliant on labour, the emergence of mass unemployment and the increase in part-time and casual work have represented an irreversible challenge to traditional work arrangements of permanent full-time waged work. This has led to an increase in the volume and duration of reliance upon tax-transfer payments as a primary source of income for people who are unemployed and underemployed. Similarly, diversifying labour market participation patterns of women have seen an increased demand for child care and other community services as integral support mechanisms within the labour market and consequently help to secure an adequate market income for an increasing number of workers. Active employment assistance and relaxation of income test criteria on social security allowances were also introduced as part of Working Nation in 1994 to encourage the combination of part-time and casual work with unpaid caring work. (Commission for the Future of Work, 1996; Freeland, 1994)

Other improvements in the social wage including universal access to health, superannuation, more widely available child care, higher family payments and a Maternity Allowance have increased the role of social policy in addressing the community's social needs. Initiatives in housing, regional development and employment, education and training support are part of a broader concept of the social wage which has become decidedly more important in supporting the purchasing power of market incomes and in alleviating the economic hardship experienced by those denied access to a wage or foregoing market income where engaged in unpaid work. These improvements have served to ameliorate the hardship associated with lack of market wage income. However, prolonged reliance on income support as the main source of income has not sufficiently proved to be an adequate protection for the majority of its recipients from the experience or threat of poverty.

It is therefore important, in the context of the current Living Wage claim brought before the Australian Industrial Relations Commission by the ACTU, that the concept of a living wage is necessarily linked with the social wage as part of an integrated national income system. The future shape of this relationship is highly contested. The model that had been developed over the last decade through the Accord process, which was aimed at facilitating the growth of a more flexible and responsive labour market, has now been abandoned. Its strengths and weaknesses need to be understood in order to appreciate the potential benefits and dangers of substantial reform to the way industrial relations are conducted and wages are determined in this country.

Enterprise Bargaining in a Global Economy

As a response to the cumulative impact of recessions and the need to make the economy more efficient as a trading force in the international arena, the Hawke-Keating Governments negotiated a number of Prices and Incomes Accord Agreements between 1983 and 1996 with the ACTU and major business and employer groups. Increased economic competitiveness and efficiency and the restructuring of industry was made possible largely through a flexible wages policy linked with developments in the social wage which ensured a basic level of income security for workers in the reform process. The Accords provided a significantly more stable policy context to previous industrial relations arrangements and provided business and unions a tripartite framework in which mutually agreeable strategies for sustainable increases in national productivity could be negotiated (Norris & Wooden, 1996). From 1983 to 1989, industrial harmony was restored, with working days lost due to strikes in previous years being at least halved and remaining low throughout the decade, wage inflation was reduced by three percent per annum, the real value of wages fell by 10 percent as a result of voluntary wage restraint and 1.5 million jobs were created (Whiteford, 1994).

The introduction of enterprise bargaining in 1991 gave greater scope for the negotiation of wages and conditions of employment outside the award system, at the workplace level and based on functional flexibility and productivity increases of workers. Legislative amendments of the Industrial Relations Reform Act (1993) promoted enterprise bargaining while protecting minimum wages through an award-based safety net subject to regular increases by the AIRC. The application of a 'no disadvantage' test maintained overall award rates and conditions for those entering agreements. Union involvement in the negotiation and certification of agreements and legislative safeguards protected workers to some degree from the impact of economic adjustment.

Social policy was developed to take on an increasing role in reducing the effects of economic hardship for those who had felt the full impact of the recessions and structural adjustment. Improvements in the progressivity of the tax system with the introduction in 1983 of Capital Gains Tax and Fringe Benefits Tax, coupled with the expansion of social wage provisions, acted to partially offset the costs of wage restraint for workers and of earning foregone for those outside the labour force. The growth in the range and coverage of social wage benefits to include universal health care, extended occupational superannuation, child care, family payments and a maternity allowance supported the disposable incomes of families. Other social security reforms increased vertical equity in the tax-transfer system through the targeting of more generous benefit levels to low income groups in a period marked by fiscal stringency.

However, the outcomes achieved under a consensual model were not all positive. Weaknesses in the macro-economic framework of the Accords became apparent in both the failure of Australia's business community during the late 1980s to participate as equal partners with labour in the reform process, and in the increasing risk of industrially weak workers at the margins of the labour market being exposed to lower wages and conditions.

In the late 1980s, the corporate sector failed to adequately reciprocate the responsible efforts of workers for long-term productivity increases. While the average worker restrained wages and provided industrial and economic conditions that were conducive to business investment through the successive Accord agreements, productive investment with long-term benefits in the form of higher wages and the generation of sustainable employment did not eventuate. With higher operating profits as a result of both the restraint of a co-operative workforce and the deregulation of financial markets, the corporate sector had the opportunity to make substantial medium-to long-term investments in ventures which would enhance the productivity of the economy and be of benefit to the whole community.

However, while productive investment did increase, an inordinate share of the productivity gains delivered by workers was directed by corporate Australia into other areas. Higher dividends increased capital's share of national income from 26 to 36 percent over the decade. Huge increases in executive salaries outpaced wages by around five percent per annum from the mid-1980s to the end of the decade (EPAC, 1996; Stilwell, 1993). Irresponsible speculative trading added nothing to the productive capability of the economy and made a substantial contribution to the 1000 percent increase in Australia's overseas debt between 1982 and 1995 (Commission for the Future of Work, 1996; Clark, 1996).

In reaction to this trend, which had partially led to 'the recession we had to have', the trade union movement abandoned voluntary wage restraint in the early 1990s. The Accord process no longer had any of the hallmarks of a consensual tripartite agreement, but became a mechanism for the ACTU to apply pressure on the Government to deliver wage rises to compensate for the fruitless restraint workers had shown in the previous decade. The social costs of the failure of the Accord continued to be passed on to less well-off Australians through low economic and job growth, and limitations on social wage expenditures. While the country continues to pay for the national wealth foregone due to the waste of investment potential by the corporate sector and workers continue to work harder and achieve higher rates of productivity, there remains a need for the business community's natural focus on profit maximisation to be informed by a concern for the achievement of wider national goals in terms of employment growth and distributive justice. Employers need encouragement and assistance to pursue socially beneficial alternatives to radical short-term labour-shedding and wage reduction strategies as responses to the pressure of global competition.

Enterprise bargaining is seen as one such alternative, but it is clear that the results of the spread of enterprise bargaining to date have been mixed. For workers in full-time full year secure and skilled positions, wage flexibility offers great potential for increasing earnings through direct bargaining of wages and conditions with the employer at the workplace level. For these workers, the possibility of a greater proportion of their income being a negotiable skills-based rate of pay is an incentive to increase productivity which has certainly delivered benefits. During the second quarter of 1996, new enterprise agreements formalised under the Federal system involved annual pay rises averaging 5.6 percent per employee. Given that inflation is currently around 2.5 percent, the wages of workers covered by enterprise bargaining are growing strongly in real terms (DIR 1996).

However, the same benefits cannot be said to have applied to all Australia's workforce. While the previous enterprise bargaining system attempted to ensure the protection of minimum wages and conditions of industrially weak workers through award-based safety net wage increases, it has become clear that for many of those workers occupying a peripheral position in the labour market, enterprise bargaining has provided little in the way of wage increases, improved working conditions, an acceptable level of job security, or opportunities for training or career development. Vulnerability to low wages and poor conditions has been intensified in industries characterised by low-skilled part-time and casual work, undemocratic workplaces, low trade union representation, poor negotiation and self-representation skills of workers, and exposure to negotiations and agreements which are informal and occurring outside the award-based enterprise bargaining streams. For such workers, unable to win pay rises through enterprise bargaining, a safety-net wage increase of $8 a week is equivalent to 1.2 percent, which, since inflation is at 2.5 percent, represents a fall in the real wage. (ACSWC, 1995; DIR, 1995)

Until the passing of the Workplace Relations and Other Legislation Amendments Act (1996), the decentralisation of the industrial relations system through enterprise bargaining has not threatened those regulatory features which protected minimum levels and prevented wage breakouts. The history of the industrial relations system provides solid ground on which to argue for the maintenance of strong institutional controls and the vital roles of tribunals and trade unions in representing the interests of low income, vulnerable or industrially weak workers.

The Emerging Low-Wage Agenda

Some economists, particularly those advising the Federal Government, strongly argue that the wages paid by employers must be able to fall if Australia is to become more competitive in the global economy. The Interim Productivity Commission's Stocktake on Microeconomic Reform (1996) included the following sentences that clearly hint that downward movement in wages is seen as necessary for job growth:

At the same time the Productivity Commission recognises that these lower wages may not be sufficient to meet the needs of an individual, let alone their families. Hence it advocates that the 'welfare' component of a market wage be transferred to the state in the form of an income supplement, such as a negative income tax.

This is the opposite of privatisation; the welfare of workers is increasingly transferred from the market wage to the social wage, the aim being to reduce costs to business. In this model, employers no longer have any responsibility to ensure they pay their workers a wage that allows them to live in dignity. That responsibility becomes the province of the state. In a perverse reversal of the rhetoric of self-reliance and civic responsibility, economic rationalism advocates that the state take over the social responsibilities of business to workers. At the same time, however, the Commonwealth Government advocates a position that workers themselves, both employed and unemployed, should take greater responsibility for meeting their needs and those of their families through participation in the paid labour force, with reduced assistance from the state. Recent changes to the Social Security system and the introduction of greater user-pays approaches to funding publicly provided services signals a gradual shrinking by the Government of the social wage. Thus both government, in terms of the social wage, and business, in terms of the market wage, are seeking to minimise their responsibilities towards workers who are, at the end of the day, the people who add value to capital and create wealth.

The growth in reliance upon the social wage by a growing number of people for increasing periods of time is forcing the need for policy makers to more fully recognise the interdependencies of market participation and the welfare system. Ensuring access to adequate disposable incomes through these two avenues of resource distribution which are effective in meeting the costs of living must be a major priority for the community. This is the fundamental issue that the current ACTU Living Wage Claim seeks to address.

Part Three: Maintaining the 'Living Wage' in a Deregulated Labour Market

The Living Wage Claim brought before the AIRC by the Australian Council of Trade Unions seeks three annual $20 per week increases in the wages of those workers who have only received a $24 safety net increase since 1991. Further the claim seeks to raise the current minimum award rate in the Metal Trades Industry (usually regarded as the benchmark for other awards) from $9.19 an hour to $12 an hour over the next three years. This equates to a 30 percent increase (over three years) in all minimum award rates to benefit those missing out on pay rises under enterprise bargaining. Percentage increases across all awards would deliver higher wage increases to workers further up the income scale, and thus, from one perspective, would increase wage inequality. On the other hand, the claim would ensure that wage relativities are maintained, and that workers real wages do not fall. This, in effect, means that the ACTU claim is not only an anti-poverty measure, but seeks to ensure that the dispersion of earnings in Australia is contained and comparative wage justice is maintained.

The Commonwealth Government's submission to the AIRC in respect of the ACTU's claim aims to address precisely the issue of a needs-based rate of pay for those workers at the low end of the market. It has proposed that all workers who do not win pay rises from enterprise bargaining be given three $8 a week pay increases over the next three years. The first of these increases would go only to those workers earning less than average weekly ordinary time earnings. While it is debatable that this increase would be enough to maintain the real living standards of low paid workers, given reductions in the social wage announced in the budget, the Howard Government is on solid ground in its insistence that vulnerable and low-paid workers should receive a regulated minimum wage from their employers that is sufficient for them to live in dignity. However, since the Commonwealth's submission limits the safety net increases to the low-paid, and is a fixed dollar amount rather than a percentage increase across all awards, it is strictly an anti-poverty measure, as opposed to an anti-inequality measure. Furthermore, the Government claims that the relatively meagre amount of $8 is designed to keep inflation low, in the hope that this will flow through to lower interest rates and hence higher economic growth and higher after-housing incomes for those workers with mortgages.

The Commonwealth Government's position has been criticised by both the ACTU and some employer groups. The ACTU argues that the proposal will not maintain real wages for workers who are not in the very low paid category. This is true. The ACTU further argues that just maintaining the real wages of the low-paid will probably leave them worse off after social wage cuts announced in the budget take effect. This is not certain, but it is a most probable outcome. By comparison, claims by some employers that they do not have the capacity to pay such increases, which will also increase inflation and unemployment, seem debatable at best.

While the Commonwealth's position may appear as a sensible compromise which goes some way to addressing the ACTU's core objective of ensuring that the low-paid continue to have their pay levels regulated by the AIRC and linked to living standards, the ACTU claim should be considered in light of the fact that the industrial relations system and wages policy is in the process of deregulation and, the social wage system is being undermined consistent with an emerging emphasis on individual self-reliance. Public discussion of the ACTU Living Wage claim has given little attention to how these changes will affect the unemployed, underemployed and disadvantaged workers. There has been little appreciation of the fact that the Living Wage claim is in part a response to the gradual and threatened removal of institutional protections of both market wages and the social wage for low-income workers.

The Australian Catholic Social Welfare Commission remains concerned, according to the principles articulated in Catholic Social Teachings, that those workers who are at the bottom of the earnings scale, those workers most vulnerable to exploitation, and those workers who are currently denied a living wage, have their right to a needs-based rate of pay met. The Living Wage Claim warrants support with regard to its core objective to establish effective and consistent minimum award rates of pay sufficient for a worker to participate in the life of the community as active citizens and to establish a standard of wage fixation which ensures equal regard is given to wage justice as to economic criteria.

Workplace Relations Act : Weakening the Institutional Protection of Market Wages?

The Workplace Relations and Other Legislation Amendments Act (1996) is seen by the Commonwealth Government with business and employer groups to be the necessary step to addressing the national economy's sluggish performance by providing the increased flexibility in workplace relations to make Australia more productive and more competitive. However, it remains unclear as to whether the Act can provide assurances of two necessary foundations to sustainable increases in national productivity; namely, medium to long-term human and capital investment and, consensual relations between labour and capital. Both of these elements are essential to ensure the level of industrial harmony necessary for long-term productivity increases.

Subsequent to the introduction of the Workplace Relations and Other Legislation Amendments Bill (1996), the Australian Democrats negotiated 171 amendments to the Bill which have guaranteed its passage through the Senate. These amendments moderated some of the more radical deregulatory measures originally contained in the Bill which would have resulted in far more damage to important mechanisms for wage protection and the collective representation of workers. The Government is to be congratulated for the concessions it has made to its reform agenda in respect to number of award-based minimum conditions, the no disadvantage test, AIRC powers, the scrutiny of workplace agreements, and union right of entry to enterprises.

However, the important concessions made in the agreement with the Australian Democrats, while softening the deregulatory impact of the Act, do not counter the strong prevailing trend towards the restraint and reduction of real wages without reference to counterbalancing social wage measures in a broader wages policy framework. Now that the Act has provided a beach- head for further deregulation, it is more than likely that there will be strong pressure for increased wage flexibility.

At the core of the Act are a number of underlying assumptions about the dynamics of individual bargaining, the nature of the workplace, and the role of third party interventions protecting wages and conditions that need to be questioned. The neo-liberalism which informs the deregulatory reform agenda conceptualises the ideal society as being comprised of atomised individuals predisposed to maximising economic gain through market transactions that are self-centred and unencumbered by government intervention. Freedom is conceptualised as the individual's freedom to bargain with whatever resources they have, not freedom from need or disadvantage or a lack of adequate bargaining power and resources in the first instance. Accordingly, the social context in which economic freedom is afforded or denied the individual is given less emphasis in the consideration of the bargaining process and concern for the welfare of individuals, families and local communities who are disadvantaged in the process is relegated to the dubious and delayed market process of 'trickle down' economics.

The philosophy of freedom and independence as it is applied in the Act seeks to shift the venue of negotiations over wages and conditions increasingly from a forum in which the national well- being is considered to the individual workplace, with direct negotiations between employers and employees as the basis for individual employment contracts without the necessary involvement of third parties such as the AIRC or trade unions in the bargaining process. Under this free market approach, the role of labour law is reduced to the facilitation of individual agreements with less regulation of outcomes of bargaining processes. Any circumstance in which a worker agrees to unfavourable rates of pay or conditions is more likely to be regarded as a right and proper outcome of exercised freedom of choice subject to the forces of demand and supply (Reith, 1996a; Creighton & Stewart, 1994). While some important institutional protections remain for workers, this is largely the result of the changes to the original Bill forced by the Democrats, and are significantly less than what was in place prior to the passing of the Act.

A related assumption underpinning the Act is a 'unitary' view of industrial relations. The nature of the workplace is promoted as 'mutual' and 'consensual', with labour and capital joined together in the sole pursuit of the successful operation of the particular enterprise. The package of legislative change is directed towards a the development of a more productive, co-operative relationship between employers and employees and greater labour market flexibility promising benefits for both parties but with a reduction in wages and industrial relations policy protections for many workers. Arrangements in place until the passing of the Act, including the substantive roles of the AIRC, the ACTU and member trade unions, have been presented as unnecessarily grounded in a conflictual and adversarial understanding of the workplace. Worker loyalty and compliance as well as the benevolence and adequate human resource management skills of employers have been taken as given (Reith, 1996a). Any divergence of interests is more likely to be regarded as appropriately regulated through the assertion of managerial authority or by resorting to the application of more punitive sanctions when either party has breached legal duties established in employment contracts. (Creighton & Stewart, 1994)

Just as the level of 'consensus' achieved by the Accord framework eventually turned out to be largely illusory, so too the Act's view of the modern workplace as intrinsically consensual is overly optimistic. For those at the margins of the labour market it is likely that more flexible work practices resulting in higher productivity will not be on the grounds of consensual agreement and that the benefits of productivity will not flow through to workers as increased wages or improved conditions. A stronger deregulatory trend to industrial relations has now been initiated in the Act through reductions to centralised wage protection and collective worker representation in the workplace. It is less likely that the Government's model of employer-employee relations will, over time, effectively acknowledge the collective nature of dispute or unrest, adequately recognise the unequal dynamics of power existing between the employer and employee, or have powers to adopt a preventative and proactive approach to industrial issues which are likely to exist beyond the terms and conditions of a particular contract. This approach is less likely to recognise a natural inequality in the relative bargaining power of capital and labour in workplaces when the intervening roles of trade unions, arbitral tribunals and other safeguards are narrowed, and it regards as negotiable the employer's duty to ensure adequate pay and conditions. (Reith, 1996a; Creighton & Stewart, 1994; Buchanan, 1992; Phillimore, 1992)

It is feared that the unitary view of the workplace will be less likely than preceding arrangements to recognise the historically proven and inevitably contested relations between labour and capital during periods of economic uncertainty and social change. The industrial harmony that results from the mutual respect between parties who have parity of bargaining power is at risk where there is a gradual removal of protections from the reach of the ordinary individual worker. It is a serious concern that unrepresented and industrially weak workers will find it increasingly difficult to gain access to even indirect trade union support under the enterprise bargaining system and may be exposed to greater pressure of having to bargain off working conditions in order to maintain wages.

The decreased access to representation for these workers is the result of particular changes introduced by the Act, in particular, the disamalgamation of unions, the deregulation of the union system, restricting trade unions' rights of entry to workplaces, limitation of the union movement's influence on the overall economy by the disintegration of the Accord framework, and the prevention of gains in individual employment contracts flowing-on through a centralised awards system to other workers in comparable positions, occupations or industries.

To partially compensate for the likely reduction in the influence and ability of unions in respect of protecting the wages and conditions of vulnerable workers, a number of amendments have been agreed to by the Government and the Democrats. These include:

A more proactive role for the Employment Advocate to vet Australian Workplace Agreements to ensure they meet the minimum requirements of a 'No Disadvantage' test and to refer disputed negotiations back to the AIRC for consideration;

• The restoration of AIRC power to enforce equal remuneration for work of equal value;
• Both the AIRC and the Employment Advocate to show a special consideration for the needs of vulnerable and disadvantaged workers in the negotiation of agreements;
• The inclusion in allowable award matters on which the AIRC can make an order to include superannuation, rest periods and variations in working hours, skills-based career paths and protections for outworkers; and
• The strengthening of the AIRC's role in reviewing the award safety net and providing for safety net adjustments.

It is interesting to note that those amendments which were made to the Bill before its enactment with a view to maintaining some minimum wage protection for vulnerable workers have effectively transferred the watchdog role of unions (non-government institutions of civil society) to instrumentalities of the state. This is inconsistent with the neo-liberal ideal of the minimalist state as well as the principle of subsidiarity.

While the Act preserves minimum rates and conditions which for the moment ensure workers will not be disadvantaged in transferring from awards to workplace agreements, calls from some business groups and certain 'rational' labour economists and financial market commentators for increased focus on wage flexibility will be renewed when it becomes clear that the implementation of the Act will not result in a substantial increase in economic growth or employment, since even an eroded safety net of wages and conditions would come to be regarded as impeding the commercial viability of enterprises and as requiring significant reduction or removal.

In the emerging context of globalised competitive markets, business and employer groups have argued that they are less able to pass any increases in the cost of labour to consumer prices and, on the contrary, that the intervention of the ACTU and trade unions in the wage setting process should be removed to allow optimum wage flexibility. These intervening mechanisms which have protected minimum wages (i.e. a non-negotiable needs-based rate of pay) from the full impact of the downward pressure of market forces are regarded as perverting the consensual relationship between labour and capital at the workplace level and hindering the normal clearing role of market operation which maximises national employment.

This 'downward' or 'low wage' approach to achieving flexibility in the interests of competitiveness has been seriously questioned as a basis for any labour market reform which seeks to ensure long- term productivity increases, industrial harmony and the expansion of the economy's employment capacity. Over the last decade, higher labour productivity has been pursued by a variety of means. Investment in labour-saving technology and down-sizing has led to the evolution of the dual workforce, in which core full-time employees work harder and longer ('work intensification') and supplemented by a fluctuating group of casual workers. The consequence has been a rapid increase in retrenchments and reduced quality of employment for many workers, especially for the low-skilled in terms of pay, conditions, career development, job security and employment opportunities. Over-employment and under-employment, rather than more employment overall, are the order of the day. There are clear indications that a focus on reducing labour costs as the pathway to higher productivity will only result in productivity gains that are one-off, short-lived and are likely to result in the growth of a low-wage and low-productivity sector which would impede workplace and national economic performance and close off avenues for higher wages (Kilmartin, 1996; Norris & Wooden, 1996; Kitay & Lansbury, 1995; EPAC, 1993; Buchanan, 1992).

It is unlikely that lower labour costs, pursued either directly or by stealth as a central tenet of labour market reform, will achieve sustained progress in national economic performance, workplace reform or employment levels. The experience of comparative OECD nations such as the U.S., U.K. and New Zealand, in vigorously deregulating labour markets has been a mix of long-term social and economic consequences including jobless growth, higher unemployment, reduced wages and conditions for unskilled workers, higher rates of poverty among workers, the increased polarisation of market wage earning, diminished worker loyalty, and the proliferation of short-termism in business investment practices and performance (Cass, 1996; Argy, Gruen & Cass, 1996; Kelsey & O'Brien, 1995; Botsman, 1995; Watson, 1993; Saunders, 1993).

The experience both of Australia, through its restructuring of the economy over recent decades, and of overseas nations who have implemented neo-classical economic and neo-liberal social reform agendas, suggests that the reduction of labour costs does not guarantee long-term and sustainable productivity gains, does not usually result in a flow-on of improved wages and conditions to unskilled and vulnerable workers following increases in productivity, and does not prevent the erosion or elimination of minimum wage protections. With regard to the demand for labour, the trade-off of wages and conditions has been shown to be a dubious employment strategy that cannot and does not ensure adequate increases in small business demand, decreases in the labour-shedding practices of large business, nor the provision of wages and conditions sufficient to meet the basic costs of living or to ensure security of income once employment has been gained (Wooden, 1996; Labour and Industry Research Unit, 1993; Gregory, 1993).

The inability of the Workplace Relations and Other Legislation Amendments Act to ensure a living wage is borne out by the fact that training wage rates can be reduced below minimum award levels. The introduction of a special government 'top-up' payment which will lessen the impact of such wage reductions is no cause for celebration, as it foreshadows the possibility that future deregulation will result in a more aggressive undermining of wage protections for the most vulnerable workers, with the social security system being used to subsidise inefficient employers and absolve them of their responsibility to pay a living wage. While the current structure of social security payments is designed to ensure that a living wage can be provided by a combination of market wage and social wage sources, particularly for those engaged in part-time or casual work, this should not be interpreted as meaning that the social wage bears responsibility for ensuring adequate incomes for those employed in full-time work. That is a moral responsibility that lies squarely with employers.

Even though the Productivity Commission advocates the responsibility for the 'welfare' component of wages be shifted from employers to the state, the Government's current economic framework and social ideology would prevent it from adopting any policy which would increase public spending and send a message to workers, both employed and unemployed, that the state will ultimately rescue them from poverty. Some sectors in the community are already expressing concern that the likely government response to a fall in wages as a result of future labour market deregulation will be a further reduction in the level of social security benefits in order to maintain 'work incentives'.

With both business and government less willing to accept any moral obligation or duty to ensure families have an adequate income, the responsibility for the alleviation of poverty would then be shifted onto the non-government charitable sector and individual philanthropy. This is not how a 'just economy' should operate. In the words of Pope Pius XI, the wage-earner is not to receive as alms what is due to him in justice (Divini Redemptoris, n.46). The proliferation of food bins for the poor in New Zealand supermarkets is grounds enough for giving in principle support to the ACTU's Living Wage claim insofar as it represents an attempt to strengthen the award-based safety net which is relevant to the basic needs and living costs of workers. Moves by the Commonwealth Government to withdraw from 'social wage' provision are thus also integral to the context in which this claim is being made.

Federal Budget 1996 and the Social Wage

The 1996 Federal Budget contained the Family Tax Initiative (FTI) which will deliver a welcome increase in the income of most households with dependent children of $4/week per child and a further $10/week increase for those eligible households in which one parent cared full-time for children under the age of six, from January 1997. The increase in take-home pay for low-paid parents and in social security benefit levels for the unemployed and single parents not engaged in labour market activity represents, at first sight, an effective increase in the living wage through both the market and social wage systems.

However, such an interpretation of this initiative is inaccurate for a number of reasons. First, the FTI does not benefit single workers with no dependent children. Second, since the benefit goes to families on relatively high incomes, the increase does not represent any increase in the needs- based rate of pay for an individual adult worker, but rather is a recognition of the increased costs of children. Third, while the benefits of the FTI go to families on a wide range of incomes, the loss of taxation revenue means that there is a reduced capacity for the government to deliver a range of social wage measures which primarily benefit low income people.

The introduction and increasing of user fees for a number of public services also contributes to undermining the spending power of the incomes of low wage workers and social security beneficiaries. There are higher costs for pharmaceuticals and in Medicare payments; the Dental Health Program has be abolished except for Health Card holders; subsidies to community-based long day care centres have been reduced; and, entry payments for nursing homes and higher fees for residential aged care and Home and Community Care services have recently been introduced. A range of publicly subsidised or provided services which have traditionally been seen as universally accessible, and have thus served as a means of strengthening social solidarity between all members of society, are now in the process of being increasingly targeted to low-income people only. Public sector service provision, a central element of the social wage, is being transformed into a residualist safety net, with the consequence that those excluded from access to those services because they are not deemed 'genuinely needy' will become increasingly parsimonious in their attitude towards those who are seen to be 'living off the public purse'.

Nowhere is this tendency more obvious than in the treatment of unemployed people in the 1996 Federal Budget. Cuts to labour market programs and training programs have narrowed opportunities for them to become job-ready. At the same time the eligibility criteria and activity tests for unemployment benefits have been toughened. Rent assistance for singles living in a shared household has been cut. The earnings credit scheme, which allowed unemployed people to in casual jobs while looking for something more permanent, could be abolished. Waiting periods for income support for newly arrived migrants have been extended. Single unemployed people will have to run down whatever meagre savings they may have to $3000 before they are eligible for support. Unemployed people are bearing around 15 percent of the Budget savings load (ACOSS, 1996).

It is ironic that in the International Year for the Eradication of Poverty, these Budget initiatives will increase the incidence of poverty among such a sizeable group in our community experiencing entrenched disadvantage. Nevertheless, the Government insists that such measures are necessary to ensure that only those who truly deserve income support, and only those judged having a 'capacity to benefit' from employment assistance (regardless of how deserving they may be in terms of need), actually receive support from the rest of the community (ACSWC, 1996; Vanstone, 1996; DSS, 1996). The aim seems to be to 'incentivise' the social security system by making the levels and conditions of social assistance considerably more unpalatable than any job, no matter how unreasonable the wage, conditions, security or career prospects may be.

Substantial budget cuts to support for the unemployed and to a range of social wage measures can thus be seen as part of a strategy to pursue a low-wage path to international competitiveness and employment growth via further industrial relations reform at a later date. In other countries initiating this kind of radical labour market deregulation, social wages systems and specific social assistance measures supporting the unemployed have been significantly reduced. At the same time, the deregulation of the labour market is designed to 'incentivise' the labour market by increasing the earnings gap between those workers who can win wage rises through enterprise bargaining and those workers - predominantly at the low-wage end of the market - who cannot. These two methods of enhancing competitiveness in the supply side the labour market - the creation of destitution as the alternative to labour market participation, and the generation of greater inequality of market incomes, including the growth of the 'working poor' - are morally unacceptable, however attractive they may be to so-called 'rational' economists. Their mutually reinforcing nature also represents a departure from past social policy, in which social wage measures were designed to prevent growing market income inequality resulting in an increase in poverty, and thus could be seen as moving in opposite directions: labour market and economic policy serving to increase inequality, and social policy serving to contain it (Cass, 1996). Instead of poverty being seen as a social evil, it is possible that it is now being considered a necessary evil. Worse still, poverty may even be regarded as that aspect of the economic system which ensures a highly competitive labour market.

Analysis of poverty in Australia in 1994 suggests that the phenomenon of poverty being experienced by individuals and their families when the breadwinner/s are in full-time paid employment is not insubstantial: about 15 percent of couples with children living in poverty had a family member in full-time work, and 14 percent of working age single people in poverty were employed full-time (Cass, 1996: citing Harding, 1994). Fortunately, Australia's industrial relations system has to date prevented the high incidence of low rates of pay that have caused the emergence to a much greater degree in the U.K. and the U.S. of the phenomenon 'the working poor'. However, there is a clear possibility that Australia may not be able to prevent this trend from gathering pace if market inequalities were to increase and social benefits were reduced. As Cass concludes:

In a political environment which is geared strongly towards increased market performance through deregulatory economic policy and a residualised social policy characterised by fiscal restraint, it is becoming progressively unlikely that a settlement will be found between the major social partners of government, capital and labour as it has in the past for an overarching policy framework ensuring a high level of economic reform and growth and the equitable redistribution of wealth and the protection of incomes of disadvantaged and at risk Australians through a market-based award safety net of minimum wages and a strong income support safety net. The integration of the industrial relations and social wage systems has slowly evolved over time to display potential as mutually supportive income streams providing a floor of income maintenance amounting to a living wage but which nevertheless ensures the prime responsibility for meeting workers' costs of living remain with the market. This integrated wages policy framework is now under threat.

In this current environment, any proposal for the integration and development of the two income streams to provide a 'participation' or 'guaranteed minimum income' securing Australians a living wage while supporting emerging life course transitions and various forms of market and non- market work is less likely to gain a favourable hearing. Worse still, there is the risk that such a proposal which advocates increased interaction between market and social wage systems could be used in the foreseeable future to justify the removal of industrial relations and wage protection precipitating a significant fall in wages at the lower end of the earnings distribution; this in addition to public expenditure reductions in the social wage reducing the disposable incomes of a significant proportion of low-income earners. It is conceivable that a government pursuing such a strategy could seek to justify lower wages on a very selective interpretation of the notion of a fair go for low-income Australians. Such a development would be of considerable concern given that, comparative to other industrialised nations, the evolution of Australia's incomes system has placed the greatest emphasis on the adequacy of market income as the prominent influence on the economic well-being of individuals and families (Saunders, 1996).

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