The erosion of minimum wage policy in Australia and labour's shrinking share of total income

This article investigates the relationship between minimum wages and the labour share of GDP empirically. It sets out a range of indicators to evaluate the trend in minimum wages against the criteria stated in minimum wage legislation. Based on these indicators, the article finds that the present process of minimum wage determination does not adequately attain the objectives originally proclaimed in Australia’s minimum wage policy. The next section of this article defines the minimum wage and examines its historical evolution in Australia (including its performance relative to other countries). The following section describes the formal process for setting the minimum wage and critically considers the stated objective for minimum wage policy, as defined in the 'Fair Work Act' (2009) (FWA). Next comes a section reviewing the long-standing debate over the impact of minimum wages on employment and refuting the notion that stronger wage regulations would undermine employment growth and create unemployment. The concluding section calls for a reform in the guidelines for minimum wage policy to reestablish the original goal of ensuring a ‘living wage’ for Australian workers, thus helping to arrest and reverse the long decline in labour’s share of GDP.