Daily Bulletin


The Conversation

  • Written by Partha Gangopadhyay, Associate Professor of Economics, Western Sydney University

Labor’s calls to raise the minimum wage or other pushes to implement a universal basic income ignore Australia’s system of supporting low-paid workers in other, more important, ways. These are called a “social wage” and includes things like pensions, education, healthcare and housing.

Australia could learn from Fiji in this, even though the countries’ economies are very different. In my experience reviewing the Fijian wage system, I found that a mixture of both minimum wages and social wages significantly reduced the number of those in working poverty.

In Fiji, total government revenues are about 20-30% of GDP, and 28-30% of government expenditures are on social wages.

In trying to reduce the number of Fijian working poor, the government could have cut back on services and benefits in favour of a higher minimum wage. It could also keep services at their present level and only increase the minimum wage by a small amount.

I recommended that social wages be kept at their current levels, and the minimum wage be increased by just 15% (something the unions have criticised).

Read more: Australians support universal health care, so why not a universal basic income?

In 2017, 32% of working Fijians were in poverty, rising to 52% in the informal sector (occupations that aren’t covered by government regulators).

An average urban Fijian household with 4.5 members needs roughly 250 Fijian dollars (A$150) per week to satisfy their basic needs. The poverty line is set amazingly low, at F$186 in 2014 prices.

But the national minimum wage is just F$2.32 per hour, or F$111.36 for a 48-hour week.

As I arrived in Fiji in 2017, negotiations over raising the minimum wage were stalled. At the same time, recent cyclones had damaged food crops, pushing up the price of food.

Together, these two factors put pressure on real wages (adjusted for inflation), leading to severe working poverty.

In Fiji there is an overall national minimum wage rate, as well as ten separate minimum wages that apply to different industries. Together these create a “wage floor” (the minimum that can be earned), while the actual wages can be higher, depending on other factors such as supply and demand.

Read more: Explainer: what exactly is a living wage?

Social wages are provided by the state as a specific bundle of social services. In Fiji I studied just a few services: social development, public education, healthcare, housing and local amenities, and social assistance (such as food vouchers). There are other programs available for vulnerable Fijian households (such as the old age grant, and death and disability benefits) but I wanted to focus on programs mainly used by low-paid workers.

I surveyed workers to find out how much they would be willing to pay for these government programs – in other words, how valuable the services really are to individual Fijians.

Using this data, I recommended to the national wage bargaining team that social wages be kept at their current levels, and the minimum wage be increased by just 15%.

If social wages hadn’t been so effective in supporting the working poor, I would have recommended they reduce social wages and raise minimum wages by more than 15%. I have calculated that by using this mixture of minimum wages and social wages, Fiji could reduce working poverty from 32% to below 10%.

Read more: Australian politics explainer: the Prices and Incomes Accord

For social wages, businesses share their responsibility with other taxpayers. They must give an adequate minimum wage to low-paid workers and must pay adequate taxes to fund social wages of low-paid workers.

Of course, implementing a universal basic income could help fight working poverty in the long run. But there is still some controvery among economists as to whether there a universal basic income is beneficial once the costs of social security and health care are stripped away.

What are the lessons for Australia? The national minimum wage in Australia, at A$18.29 per hour or A$694.90 per 38-hour week, is quite high compared with other OECD countries. At the same time, successive Australian federal governments have seriously whittled away social wages in Australia.

Using both a minimum wage and social wages can help us achieve good labour market outcomes for the working poor without compromising the long-term sustainability of the economy.

Authors: Partha Gangopadhyay, Associate Professor of Economics, Western Sydney University

Read more http://theconversation.com/what-australia-can-learn-from-fiji-in-reducing-the-working-poor-92021

Writers Wanted

Politics with Michelle Grattan: two views on increasing the super contribution

arrow_forward

The Conversation
INTERWEBS DIGITAL AGENCY

Politics

Prime Minister Interview with Ben Fordham, 2GB

BEN FORDHAM: Scott Morrison, good morning to you.    PRIME MINISTER: Good morning, Ben. How are you?    FORDHAM: Good. How many days have you got to go?   PRIME MINISTER: I've got another we...

Scott Morrison - avatar Scott Morrison

Prime Minister Interview with Kieran Gilbert, Sky News

KIERAN GILBERT: Kieran Gilbert here with you and the Prime Minister joins me. Prime Minister, thanks so much for your time.  PRIME MINISTER: G'day Kieran.  GILBERT: An assumption a vaccine is ...

Daily Bulletin - avatar Daily Bulletin

Did BLM Really Change the US Police Work?

The Black Lives Matter (BLM) movement has proven that the power of the state rests in the hands of the people it governs. Following the death of 46-year-old black American George Floyd in a case of ...

a Guest Writer - avatar a Guest Writer

Business News

Buy Instagram Followers And Likes Now

Do you like to buy followers on Instagram? Just give a simple Google search on the internet, and there will be an abounding of seeking outcomes full of businesses offering such services. But, th...

News Co - avatar News Co

Cybersecurity data means nothing to business leaders without context

Top business leaders are starting to realise the widespread impact a cyberattack can have on a business. Unfortunately, according to a study by Forrester Consulting commissioned by Tenable, some...

Scott McKinnel, ANZ Country Manager, Tenable - avatar Scott McKinnel, ANZ Country Manager, Tenable

InteliCare triple winner at prestigious national technology awards

InteliCare triple winner at prestigious national technology awards Intelicare wins each nominated category and takes out overall category at national technology 2020 iAwards. Company wins overal...

Media Release - avatar Media Release



News Co Media Group

Content & Technology Connecting Global Audiences

More Information - Less Opinion