Social Justice doesn't need to be 'put on hold' to Fight Inflation

 

above:  Albanese doesn't need to 'put social justice on hold' to fight inflation

In Australia the Labor Government is being warned not to spend too much for fear of exacerbating inflation.  At the same time workers are urged to moderate wage demands to avoid a ‘wage/price spiral’.  This is the ‘common sense’ of the day.  But at the same time the labour share of the economy has fallen by over 10 per cent of GDP since the 1970s.

Furthermore, income inequality is marked.  ACOSS observes that:

“People in the highest 20% income group receive 42% of all national income, which is more than the share of the lowest 60% combined. People in the lowest 20% receive only 6% of all household income, while the second lowest 20% receive 12%.”

Here, those in the lowest 20% bracket earn on average $753 a week. While those in the highest 10% bracket take $5230.

Meanwhile, in terms of wealth the bottom 20% average $36,000, while the top 10% average $4,754,000.

Amidst this the Federal Labor Government’s support for an increase of the minimum wage in line with inflation is welcome. But ‘the bigger picture’ is one of increasing inequality, and an increasingly lower share of the economy going towards the needs of working Australians.  At some point Labor needs to confront inequality ; and rectify these imbalances.  But rather than suppressing wages or implementing austerity, the ‘heat’ could be taken out of the economy by raising tax.  Temporary tax increases could target those on middle incomes, while permanent tax increases could target those on high incomes with the goal on funding social wage measures – like Medicare Dental.   Because of the need to moderate demand at this time, the ‘middle’ will be affected either by interest rates, or wage suppression, or tax.  Choosing ‘the tax lever’ achieves this while providing the means to fund infrastructure, welfare and social wage initiatives.   At the same time wages – especially at the lower end – could rise – with the aim of furthering distributive justice.  Overall wages should also rise where the wage share is lower ; and where rectification is necessary. Labor should make representations to Fair Work Australia to achieve this ; and to increase the share going to lower income earners overall. But in the immediate term demand would be moderated through higher tax.  Over the longer term such taxes on ‘the middle’ could be removed to promote an economic recovery. 

The question Labor needs to ask is: ‘can social and distributive justice be furthered while tackling inflation at the same time?’  In this context, pursuing the Stage Three tax cuts makes no sense economically, and from a social and distributive justice perspective.  They will see a flat 30 per cent tax rate for all incomes from $40,000 to $200,000.   This will see an increase in overall demand rather than have a dampening effect.  (though by then the inflation genie may be 'back in the bottle' so to speak)  It will also minimise progressive redistribution and entrench inequality.   It means proportionately those on lower incomes will pay more for the services and infrastructure functions of government, The Stage Three Tax Cats will also cost the Budget billions: almost $250 biillion over nine years.  This money could fund high speed rail, and Medicare Dental, while improving pensions, and winding back user pays in Higher Education.  It could also fund a massive investment in public housing, while improving the wages of Aged Care workers significantly. And probably much more besides.  Some would say such investment would act as a stimulus ; but again it depends on what temporary and permanent tax increases accompany said measures.  Importantly, if such spending kicked in a bit later down the track, the inflation crisis might be over ; and stimulus may in fact be appropriate once more.

The bottom line is that managing inflation does not have to mean social and distributive justice are put on hold. There is scope to improve welfare and social wage while dampening demand overall in the immediate term ; but also rectifying the imbalance between capital’s share of the economy and labour’s share of the economy.  When we have Labor Governments we need to make the most of such opportunities.  We need an Albanese Government that makes the most of the possibilities of government ; and makes long term structural reforms which further the goals of social and distributive justice.

Wage Justice can be Delivered While Also Containing Inflation

above: Anthony Albanese wants Wages to at least Keep Pace with Inflation

Dr Tristan Ewins

Anthony Albanese stands besieged for suggesting a minimum wage increase which keeps pace with inflation.  Specifically, that is 5.1%   This would raise full time wages by just $39.40 a week – less than a dollar an hour.  Businesses are claiming such a move would drive them to the wall and fuel inflation.  But since the 1970s labour’s share of the economy has fallen by over 10 per cent, from 58.4 per cent to 47.1 per cent: or $16,800 a year for the average worker.  Especially ; why is it that the Conservatives believe it is the job of the country’s lowest paid to pay the price for inflation when many businesses are experiencing spiralling profits?  If wages cannot even keep pace with inflation, at what point can the structural inequities in the country’s labour market be addressed?

It is true that higher wages may have some impact on inflation.  There are areas where increased costs will at least in part be passed on to consumers. But this is a false economy based on the exploitation of the poorest workers.  It suggests a policy of drifting towards a US style labour market where there is a large class of working poor who can barely keep their heads above water.  Fear of falling into the working poor disciplines the so-called ‘middle class’.  And threat of homelessness and destitution disciplines the working poor themselves. This is the trajectory the Conservatives would take us down.

But arguably in the name of fairness there must be a ‘structural correction’ for low-paid workers at some time or another.  This may have a small, temporary impact on inflation ; but it is necessary if the most exploited are to survive in dignity and make ends meet.  The prosperity of high and middle income earners cannot be based upon the exploitation of a class of working poor.

Also there are other ways of dealing with inflation.  Raising taxation (for those who can afford it) could take the heat out of the economy without depending on the working poor to pay the price.  This is a better, fairer way of dealing with inflation.  But some inflation is inevitable on account of international factors ; and we should share the burden of dealing with this across society and economy.

At the end of the day an even larger correction is justified. That is: to restore labour’s share of the economy, and the grow the social wage and welfare state to support all Australians.  This is necessary as some problems are best faced collectively ; and also the labour market will never deliver full distributive justice to all workers. All workers deserve support ; including those who find it hard to organise ; or who face structural constraints to wage increases. Because of the way the Australian economy is now structured all this is no easy task.  The process could begin with claims for collective capital share in lieu of greatly increased wage levels.  This is a process that could be led by unions ; who could target areas that are not overly susceptible to capital flight.  Also low-paid workers could be assisted by a recission of secondary boycott bans where secondary boycotts are taken by well-organised workers in support of workers with little bargaining power ; and where such action can be shown to be being taken in good faith.

Albanese has promised action on wages.  But even committing to matching inflation does not compensate for falling wages over the course of the last decade and more.  Though Labor’s housing policy – which involves the government taking up to 40 per cent equity in families’ houses – will put home ownership within reach for many who may otherwise have felt the situation hopeless.   As interest rates increase the price of properties will probably fall – a ‘double edged sword’ that – while perhaps necessary – will leave many Australians looking poorer on paper.

One area where Albanese has been unequivocal has been his support for a 25 per cent rise in the wages of Aged Care workers.  This is one of many areas requiring a ‘structural correction’ ; both to deliver wage justice ; and also to improve care, and retain workers in the industry.  Given the taxing and skilled nature of the work there should be a minimum wage of at least $30/hour here. This is more than the existing claim.

In the final analysis the economy makes so much wealth ; and the question is one of distribution, as well as higher productivity ; and industry policy encouraging high wage industries. Increasing the size of the cake is good – but does not solve all problems. At some point we need to confront the question of who gets what share of the cake ; and this will require redistribution. Sometimes it’s possible to have ‘win-win’ – but not always.  We cannot become a US style economy where workers are disciplined by fear of destitution ; and where the living standards of a so-called ‘middle-class’ depend on the exploitation of the working poor.