A $50-a-week increase to the minimum wage would create up to 87,000 jobs in the first two years, unions have claimed in new economic modelling.
The Australian Council of Trade Unions has made the submission to the Fair Work Commission, which is considering its claim for a uniform 7.2% increase to the minimum and award wages to take effect from 1 July.
Unions have argued that low-paid workers spend most of their extra income, meaning an increase to the minimum wage would boost aggregate demand and create jobs.
When the commission asked for an estimate of how many jobs the pay increase could create, the ACTU responded that – using estimates of low-income households’ spending in the government’s submissions – the number would be 50,000 to 57,000 in the first year and 30,000 in the second year.
Using a second method with figures from the Treasury’s budget papers, the model predicted a 40,000-job increase in the first year and 27,000 in the next year.
Both models calculate the total increase in wages for different types of households, find the amount they are likely to spend and uses that to estimate the number of jobs created.
The ACTU secretary, Sally McManus, said the modelling showed “pay rises will create jobs and move our economy forward”.
“The Turnbull government and the business lobby are trying to keep wages down by running a scare campaign against higher wages,” she said. “That’s the same discredited, untruthful, damaging trickle-down economics this government loves to roll out.”
In its 2017 minimum wage decision, the Fair Work Commission concluded, based on international research, that “modest and regular wage increases” do not add to unemployment. As a result, the ACTU modelling assumes there will be no decrease in jobs due to the increased price of labour.
In a negative sign for employer groups who have asked for a minimum wage rise of 1.9% or less, the commission also concluded that those studies suggest “that the panel’s past assessment of what constitutes a ‘modest’ increase may have been overly cautious, in terms of its assessed disemployment effects.
“We are also of the view that minimum and award wage increases would likely lead to some positive, but probably small, effect on consumer demand and this needs to be taken into account.”
In its reply submissions the Australian Industry Group called the ACTU claim for a $50-a-week increase “manifestly excessive and completely unrealistic”.
“Such an increase would inflict significant harm on businesses,” it said. “As a consequence, significant harm would be inflicted on low-paid workers, the unemployed and the underemployed, because their job security and employment prospects would be substantially reduced.”
The Australian Industry Group also disputed the ACTU’s jobs claims, arguing that when businesses have to pay more in wages it reduces spending and investment by employers and subtracts from aggregate demand.
Employers may offer fewer hours to workers as a result of minimum wage rises, another drag on the claimed increased income and spending, it said.
In its reply submissions the Australian Chamber of Commerce and Industry said that aggregated household consumption was best encouraged not by “regulated wage growth” but rather “policies that promote greater workforce participation, employment growth and a low unemployment rate”.
The Turnbull government has made a submission giving evidence about the state of the economy but has not nominated its preferred minimum wage level.
