How Bill Shorten’s “living wage” will turn Australia into a living hell

A Labor government would radically overhaul workplace laws to give Australia’s lowest-paid workers a 10 per cent wage increase under Bill Shorten’s ‘living wage’ policy. Labor wants to give the Fair Work Commission the power to increase the minimum wage to 60 per cent of median full-time earnings.

Source: Daily Mail Online

Shorten is hopeless at Economics. His speeches typically employ emotive terms like ‘battler’ and ‘living wage’ but seldom, if ever does he cite numbers.

Effect #1: Higher Minimum Wages Will Substantially Raise Prices

Economic research consistently finds that businesses pass minimum-wage costs on to their customers through price increases. Most minimum-wage employees work for small firms in competitive markets. These companies have small profit margins. They can only pay higher wages if they raise prices. Customers—not business owners—pay that cost. Some low-income families benefit from higher wages, but many more low-income families are hurt by higher prices. Overall minimum-wage effects are more regressive than sales-tax increases.

Source: The Heritage Foundation

Minister for Small and Family Business Michaelia Cash told Ross Greenwood [that] ‘Bill Shorten is playing politics, … you won’t see a rise in wages, what you will see is businesses close’.


Effect #2: Businesses will employ fewer people

Labor cannot force businesses to employ people.

If 1.2m of the 10.6m strong workforce is on the minimum wage, that’s 11% of the workforce. If 10% of minimum wage earners are laid off, then unemployment will increase by at least 1%. Historically, unemployment increases under Labor by 2-6%.

And if a large number of people exit the workforce, then the median will rise, which means the 60% mark will be even higher!

Effect #3: Businesses will pay less tax

Effect #4: Welfare expenses will rise

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