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Issue #1792      August 30, 2017

Want a pay cut with that?

Wage growth has declined markedly in recent years to the lowest level since the early 1990s recession or even before that. Poverty and homelessness are on the rise along with record levels of household debt.

The recent tent city in Sydney saw homeless people come together as a community and stand up to the government. (Photo: Anna Pha)

In fact, the wages of many workers, in particular those on lower incomes, have declined. The decline is not just in real terms taking inflation into consideration, but also in nominal dollar terms.

The recent cut to weekend and public holiday penalty rates of workers in retail, hospitality and fast food sectors targeted workers on low incomes, many of them the “working poor”, such as sole parents, students and casuals.

Students living in poverty

The pre-tax earnings of a full-time student, for example, attempting to survive on 16 hours work at weekends – eight hours on Saturday and eight on Sunday – as a shop assistant are set to fall from $505.44 a week to $427.68 a week. Over a year, that is a wage decrease of $4,043.52, or 15.38 percent.

The process of phasing in the penalty rate wage reduction commenced on July 1. Some are attempting to make up the lost income by working longer hours.

Student visas prohibit international students from working more than 20 hours per week. This is being exploited to the hilt by slave-driving, unscrupulous employers who cook the books and make unpaid additional hours a condition of employment.

The Youth Allowance paid to students living away from home is $437.50 per fortnight, or $219 a week. If the student has children then the payment increases $573.30 per fortnight or $286.65 per week.

The Abstudy allowance for an independent student living away from home is $437.50 a fortnight for Indigenous students aged 16 to 21 and $535.60 for students over 21.

There are some additional allowances available through CentreLink for books, etc. Report after report notes students turning to charities for food and other necessities.

On an annual basis students are expected to study and survive on between $11,375 and $13,925.60 per annum. Even when additional allowances are thrown in, it is still a poverty level income. The national minimum wage is $694.90 for a 38-hour week.

On top of that students are accumulating large debts for TAFE or university fees. The Youth and Abstudy allowances are less than one third of the minimum wage. They should be increased to the same level as the minimum wage and the government should be looking at the building of cheap, student accommodation near tertiary institutions. At the same time fees should be abolished.

Working poor

The minimum wage has not been increased in real terms since 1994. It has failed to keep up with the rising cost of living, in particular the cost of housing – rental or purchase in the capital cities and elsewhere.

Permanent or ongoing work is being replaced by casual hire. This makes it harder for workers to maintain a steady income and more desperate to accept work on lower wages and poor conditions. Under-employment, in particular, is driving down household incomes.

Unemployment is far higher than official statistics suggest. Just one hour of paid employment during the past fortnight is recorded as being employed.

Rents in the major cities have surged along with house prices. State governments have been selling off public housing bit by bit to developers, with promises that new and better social housing will be included in the new developments.

These promises are rarely if ever kept. More people are thrown onto the streets. Housing waiting lists grow longer.

Housing stress is a major cause of poverty. There is a great deal that governments could do to provide affordable housing and low-cost loans and other housing services.

The recent tent city in Sydney saw homeless people come together as a community and stand up to the government. Ironically, or perhaps intentionally, they occupied the space in Martin Place with the Reserve Bank on one side and a large 16-story development site on the other side.

It attracted a great deal of support from the wider community and gave its residents a sense of purpose and pride as well as providing a safe and welcoming environment. It also exposed the government’s support for developers and inaction over the long waiting list for public housing.

Profits rocket

Low wages combined with higher productivity is a recipe for higher profits. And higher profits it is. Business profits have surged by a whopping 36 percent over the 12 months to March 2017! (ABS 5676.0 March 2017)

This increase in the share of wealth produced by workers going to corporate profits has accompanied the decline in wages. This confirms what Karl Marx said about the relationship between wages and profits under capitalism:

“They stand in inverse proportion to each other. The share of (profit) increases in the same proportion in which the share of labour (wages) falls, and vice versa. Profit rises in the same degree in which wages fall; it falls in the same degree in which wages rise.” (Wage, Labour and Capital)

Time bomb

Low incomes and the high cost of housing have pushed up the amount of debt Australians are carrying relative to their income.

The average household debt-income ratio in Australia is 190 percent. That average includes people who own their homes outright, who rent as well as those battling a mortgage.

It is one of the highest ratios in the world. At present interest rates are at a record low and loans until very recently have been relatively easy to obtain.

It is a time bomb waiting to explode if interest rates are increased. The government should step in to ensure people are protected from interest hikes and foreclosures.

Tax cuts are one means of increasing the share going to profits. Most of the taxation revenue has come from workers’ wages.

Next article – Water catchments and twisted irony

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