01 Feb 2018

DAVID SPEERS: Brendan O’Connor thanks for joining us this afternoon. Let’s start with the minimum wage. What is your concern about the minimum wage, and how it is set at the moment?

BRENDAN O’CONNOR, SHADOW MINISTER FOR EMPLOYMENT AND WORKPLACE RELATIONS: Well, historically Australia has had a very high minimum wage - and still does have a higher minimum wage compared to some comparable countries. However, David, in recent times it’s fallen down the ladder amongst the OECD countries, and indeed it’s fallen as a proportion to average wages. In the last few years, Labor has been making submissions to the National Wage Case saying we’re concerned about the drop relative to the average wage.
Yesterday, Bill was outlining our concerns about that, because with a falling minimum wage compared to the average wage, cost of living pressures are more acute for those workers who are struggling.

SPEERS: We need to be clear about when it fell though. It has fallen as a proportion of the median wage, but that really happened though back between 2005 and 2008. You were in Government, of course, for years beyond that. In recent years, under this Government, it’s steadied at around 54 per cent of the median wage.

O’CONNOR: Well, we weren’t in Government between 2005 and 2007, but yes, it’s gone up-

SPEERS: You were in Government between 2007 and 2013. The fall really happened between 2005 and 2008.

O’CONNOR: Yes, and I’m saying as a proportion to average wages what has happened is that we’ve had good economic growth over 25 years. Wage growth has been reasonable although wage growth has been better at the higher end, and that’s why we’ve seen a fall as a proportion to the average wage.
But it’s not just that. Wage growth in the last several years now David, as you know, has stagnated. This is the lowest wage growth since 1995, and enterprise bargaining agreements are falling in terms of the number of agreements being struck. So we’re saying the IR -

SPEERS: I want to come to that-

O’CONNOR: Yeah, ok. But in direct-

SPEERS: But the minimum wage-

O’CONNOR: Yes, sure ok. But what I’m saying is let’s just talk-

SPEERS: It needs to be higher than 54 per cent, which is roughly where it is at the moment. Where does it need to be? The ACTU talks about a living wage at 60 per cent of the median wage. Is that what you’re considering?

O’CONNOR: We haven’t set a number, but we are, of course, going to make a submission for this year’s national wage case. I think we’ll have more to say in detail.
But as Bill was outlining, there is a concern - wage growth is stagnating, even with a slight dip in the unemployment number there’s no commensurate increase in wage growth. Even with productivity and profits going quite well - in the case of profits, very well - there’s been no consequential improvement to wage growth.
That’s a concern for Labor, and that’s why Bill was outlining that concern and declaring our intention to do something about it.

SPEERS: Alright, but a submission is one thing. What I’m getting to is - would a Labor Government be prepared to legislate - somehow mandate - that the minimum wage has to be a certain proportion of the median wage?

O’CONNOR: That’s certainly one option. We have already alerted the Commission and the public that we’ve got a concern about where it sits as a proportion to average wages. We’ve made that clear now for some time. This is not some thought bubble. We’ve been submitting that now for some years.
It’s been elevated by Bill’s speech yesterday by saying because wage growth is at an historic low, certainly lowest in 20 years, we have concerns.
Now, as for how we will do that, we are yet to articulate that, but we will certainly present that in detail before the next election.

SPEERS: Ok, you said it is an option, so just to be clear - Labor is considering whether to mandate pegging the minimum wage to the median wage at a certain percentage?

O’CONNOR: We are certainly looking at that as an option, about where it should sit. We’re also mindful of the vagaries of the economy - we don’t want to have any adverse consequence. Like anything, you temper the things you want to do because you don’t want, for example, to cause undue inflationary pressures by increasing the wage. So we’re mindful of other economic considerations.

SPEERS: Employer groups are worried about this already; because they are the one I assume who have to pay for the higher wages. The say with the increased cost they wouldn’t be able to hire as many people. They might even have to fire some workers.

O’CONNOR: Yes, well they’ll always say that. Employers will always want to see reduced wages and profits perhaps go up and wages go down. But look, it’s in the interests of employers too - as long as we get this right - because at the moment we’ve got a problem with aggregate demand.
I mean, one of the reasons why consumer confidence over the last five years has been relatively low - it’s not just coming off of the back of the Global Financial Crisis - it has been because of wage stagnation. That means consumption has fallen, consumer confidence and business confidence has been down.
So, there is an impact on the economy when people’s wages are not keeping up with CPI, and that has an adverse effect on hiring, growing our economy, and so on. We will have to look at all of these things, and we will take a responsible position.

SPEERS: But the bottom line here Brendan O’Connor is that if you are saying that the minimum wage has to be higher, and it was set at 60 per cent of the median wage, that’s quite a jump. It’s business that has to pay for it. Where do they get the money to do that?

O’CONNOR: Well, wages are paid by employers, but look - in many parts of the labour market, wages are falling in real terms. That is not acceptable. We want to see workers share the dividend. We want to see that they get some of the share of the profits.

SPEERS: But are they falling in real terms? We have seen today in the inflation numbers the annual inflation rate is 1 per cent. The minimum wage was lifted by 3.3 per cent in June, so the minimum wage is actually outstripping inflation.

O’CONNOR: There are about 1 million people on the minimum wage, but overall, in the last few years in many parts of the labour market you can argue that it has been flat lining. In some other areas of course there has been a net increase, in some other areas there has been a net decrease. There are plenty of people losing out here, who are falling behind. I think that is a real problem.
This is not just a phenomenon in Australia. Even when we have seen significant falls in unemployment in the United States and Britain, there has been no commensurate wage increase.
The orthodox view was that when unemployment falls, wages rise and it has not happened. It’s not just Labor, very eminent people – the Governor of the Reserve Bank, economists, are suggesting that the nexus is broken.

SPEERS: Can I turn to some other elements now. In Bill Shortens address yesterday he also pledged to tackle the gender pay gap. That is very real – no doubt about it – but what can the Government do about it?

O’CONNOR: Firstly, we need to make sure that industries where women are predominantly employed are being paid commensurate with their value, their skills, their experience, their qualifications, and their output.
What we have seen historically – and you would know this David, when I was at the National Press Club, you were in attendance when I was asked questions about this – historically, in areas where women are predominant in the workforce, wages have been relatively low. There has been entrenched discrimination towards women in the workplace.
Of course we need to do this carefully, but we need to examine the pay gap. The pay gap is not narrowing - and again, if we don’t encourage women to participate in the labour market, if we don’t provide women with equitable wage outcomes, it’s not only unfair, it’s economically unsound. It won’t increase the participation of women in the labour market, and that in itself is a big problem for our economy.
So, how do we do that? There is a number of things we can do that-

SPEERS: That is one element of it certainly, in sectors that have predominantly female employees-


SPEERS: But what about businesses, sectors, where you have an even split of men and women? We still see a gender pay gap in some instances there too. What could you do about it?

O’CONNOR: That’s right. Well, I certainly think that publically listed companies and governments should be providing more information about where women sit in those companies. How many women sit on boards on publically listed-

SPEERS: So a breakdown of – not necessarily each individual, but of what women earn vs. what men in the company collectively earn is that-

O’CONNOR: Not just earn – but what positions they hold in the company. I would hope to think that if they are holding an executive position then they are paid comparable wages to men, but there are too few women on boards in executive positions across the corporate sector – and in government too, mind you.
I think there needs to be more transparency. I think people need to know, and they want to know what certain companies are doing, and that there is some accountability required for those companies to be transparent about the way in which they treat women workers throughout their corporation.

SPEERS: So they may be required to actually publish – for a publically listed company – publish how many men or women are in senior positions, and also an aggregate of what they earn?

O’CONNOR: I think so. There are privacy issues - I am not talking about identifying an individual and finding out their wages. But I do think we need a broad understanding of what is happening.
I think, quite frankly, that companies are now more sensitive to this issue of pay equity and discrimination towards women. I think that if there is more transparency, having regard to some sensitivities around companies and the need to not disclose matters, I think that will help as well.
I think companies are aware that there is a community expectation that they should treat women equally.

SPEERS: Now, on enterprise bargaining - Bill Shorten said it’s on life support at the moment. This Government – under Tony Abbott and Malcolm Turnbull – as far as I am aware have not changed any rules around enterprise bargaining. What are you suggesting needs to happen?

O’CONNOR: Enterprise bargaining has fallen in recent times, in two ways. Firstly, there are fewer agreements struck in the last quarter than previously. It has not been this low since 1995, almost since the inception of collective bargaining. So we know that there are fewer agreements. There must be less incentive to strike agreements.
The rates of pay in those enterprise agreements, which of course normally were superior to just ordinary minimum wage increases, have fallen too – quite markedly from 3.4 per cent to 2.2 per cent this year around inflation.
So even with what we normally think would be a superior industrial instrument - an enterprise bargaining agreement - wages are not doing as well, and there’s fewer of them.
We are concerned that because, as you say the laws haven’t changed, but there’s been some significant Federal Court decisions. For example, the Aurizon decision which allowed the termination of an agreement or agreements that affected thousands and thousands of workers in Queensland - and since then there’s been more terminations of agreements which have meant that those workers have reverted to the award, which in some cases were falls of up to 35 per cent in wages.

SPEERS: So has it stopped them from being able to revert to the award?

O’CONNOR: Yes. Normally what would happen is you have an agreement which nominally expires, you negotiate something around the same, and you might give it an increase to deal with the CPI, you might have some other matters. What’s happening now with these recent decisions, it means that employers have gone to the Commission, have had agreements terminated, and then are holding a whip handle. They do not always revert to the award, but they say they will if they don’t then sign a much inferior agreement, below the preceding agreement. Now, we think the idea that you can-

SPEERS: If they’re not allowed to do that, what would happen if they can’t - if this goes on and on, the negotiations drag out - if the employer can’t do that, what would happen?

O’CONNOR: Two things – what happens now if you couldn’t terminate but you haven’t reached agreement, is that the agreement itself goes on indefinitely. Because it’s nominally expired, the parties can take protective industrial action after that nominal expiry date. It’s protected; at least your status quo is there.
With these terminations recently David, it means that people are in a very weak position to bargain - but now employers can just now threaten to terminate, and that places them in a very strong position. We think that is not reasonable.

SPEERS: But under that plan, we would see more strikes wouldn’t we? If the existing agreement continued, but you could take protected action, you’d see more strikes inevitably.

O’CONNOR: Not necessarily. You have the nominal expiry date. Even with the termination of agreements you’ve got the right to strike. Most workers, of course, don’t resort to strike action - it is the last resort for most workers, and most workers of course never strike in that way or take industrial action.
My concern is just favouring one side over the other too greatly, and that’s a recent phenomenon - all because of a couple of Federal Court decisions. Bill made clear that’s something we don’t accept.
We want there to be incentives to reach bargaining agreements not incentives to avoid it and find other ways to avoid reasonable pay increases, reasonable outcomes, which are fair for employers and fair for workers.

SPEERS: Finally, Brendan O’Connor, can I just ask you about the story this afternoon - these Cabinet documents the ABC’s been reporting actually came from an actual Cabinet that was sold at a second hand government furniture auction. Whoever bought it prised it open, apparently, and found all these Cabinet documents.
There’s now an inquiry underway as to how this happened. You’re a former Cabinet Minister, and it’s covered some of your period sitting around the Cabinet table – can you understand how this could have possibly happened?

O’CONNOR: It’s quite extraordinary. I have to say it is remarkable that documents in that number and of that nature could be released in that manner, and I understand that the Government is investigating it.
That is a very serious breach of national security and is of great concern to me as a former National Security Committee member. That is really, very concerning. I’m not sure what the Government is going to do other than investigate, and I guess the holders of that information - I understand the ABC has said they will be very careful about what they release, but you know that may well be subject to legal recourse by the Government for all I know. I’m not sure what they might do there.

SPEERS: We’ll see. Brendan O’Connor-

O’CONNOR: It’s the most serious breach I’ve seen since in my time. It’s extraordinary. Sorry David, but you know it is extraordinary.

SPEERS: That’s interesting. The most serious breach of Cabinet confidentiality that you have seen in your time?

O’CONNOR: Yes, absolutely.

SPEERS:  Brendan O’Connor thanks very much for joining us this afternoon.

O’CONNOR: Thanks David.

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