No, Raising the Minimum Wage Won’t Spur Inflation
With inflation on the rise, Australian unions are calling for a modest pay increase for minimum-wage workers. The government, backed by bosses and bankers, says such a move will increase inflation, but the truth is they just don’t want to pay.
A substantial wage rise would provide a much-needed solution to increasingly pressing economic problems. (Michael Macor / the San Francisco Chronicle via Getty Images)
The Australian Council of Trade Unions (ACTU) recently announced that it will push for a 5.5 percent pay increase for minimum wage–earning workers in the Annual Wage Review. The ACTU’s reasoning is simple: the cost of living is going up, outstripping wage growth. Headline inflation rose by over 5 percent over the last year while nominal wages only grew by a measly 2.3 percent. Real wages actually fell by 0.8 percent.
The future projections aren’t looking good either as the Reserve Bank of Australia (RBA) predicts that nominal wages will only grow by around 3 percent, far below the forecasted inflation rate of 6 percent. When you consider the fact that the RBA has a track record of making overly optimistic wage growth predictions, it’s not unreasonable to think that our wage stagnation problem is even worse than it seems.
Meanwhile, the share of national income going to capital owners through profits and realized capital gains has increased in proportion to the share of income going to workers. The problem is clear: workers are being made to bear the full brunt of inflation and desperately need a pay rise to keep up with the rising cost of living.
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