The economics of Christmas

In October Australia celebrated the 100th Anniversary of the “Harvester Judgment”, the ruling by the then Melbourne-based Arbitration Court that fair and reasonable remuneration must be paid to employees. Yet in 2007, “fair and reasonable” does not necessarily equate to “reasonable comfort” or even “financial security and independence”.

In 1906 the Protectionist Party and Australian Labor Party attempted to introduce guaranteed fair and reasonable wages and working conditions to workers. The decision was made in the Excise Tariff (Agricultural Machinery) Act, which stated that an excise on locally made machinery would be waived if workers were paid “fair and reasonable” wages.

The resulting Harvester Judgment came about on November 8, 1907 after Melbourne-based agricultural machinery manufacturer The Harvester Company applied for a remission of the excise. The Arbitration Court’s president, Henry Bournes Higgins, ruled against the company. He determined that fair and reasonable remuneration must be enough to support a wage earner in reasonable comfort, and therefore set a figure of £2/2/-, or seven shillings a day, as a minimum wage.

Fast forward to 2007. When most people think of “reasonable comfort” at Christmas, “good food” is generally one of the first things that pops into our heads, followed quickly in no set order by “time with family”, “presents”, “cricket on the beach” and “afternoon siesta”. However as we are painfully reminded each festive season, for far too many people the word Christmas evokes thoughts of “uncertainty”, “pressure” and “debt”. The push to spend our hard earned income on increasingly expensive products is often too great, leaving many of those already struggling on a minimum wage facing even more dire circumstances.

“Low paid workers live at the margin all of the time, so if you come to a time of year or life where there’s an excess demand, there’s a greater pressure on you to participate,” says Mr Colin Fenwick, the Director of the University of Melbourne’s Centre for Employment and Labour Relations Law.

“The reality is that people on low pay, people only receiving award conditions (or “Fair Pay” conditions as they’re now called) are not going ahead as fast as other people - they aren’t keeping up with inflation - and that means they just don’t have as much money to get by, in an environment where housing costs continue to go up where consumables are going up anyway.”

Dr John Howe, also working at the Centre, says Christmas provides an immediate pressure to all wage earners. “There’s certainly a pressure to spend more at a particular time like Christmas, and people do seem to spend more.”

The Australian Fair Pay Commission - previously the Industrial Relations Commission - is the independent, statutory body responsible for setting and adjusting Federal Minimum Wages “in a bid to promote the economic prosperity of the people of Australia”, according to the website. In its most recent decision in July, all workers earning less than $700 a week had their weekly pay increased by just over $10. The average Fair Minimum Wage is around $522.

But what is fair? “The real problem is that there is no explicit definition of fairness in the legislation,” says Mr Fenwick. “So there’s only an implicit definition of fairness, and the implicit definition of fairness is … you’ve got a job.”

Dr Howe takes the definition one step further. “The last Liberal government’s argument, based around WorkChoices version one before the introduction of the fairness test, has been that the system is fair because it creates jobs. But if your definition of fairness is a system which ensures that as many people as possible in our society have reasonable living standards then I don’t think it’s fair.”

The problem both Mr Fenwick and Dr Howe see is that legislation like WorkChoices has dramatically altered how people on low pay are treated. The Howard Government’s widely publicised legislation gave employers the ability to remove working conditions Mr Fenwick sees as very important to people on award wages, such as shift loading, because “it significantly affects people’s take home pay”.

He says the backlash resulted in the introduction of the fairness test of May this year, meaning for many award-wage earners, these conditions cannot be taken away unless something is given in return.