THE unions claim for a 3 8 per cent minimum wage rise has collided with the most unfortunate circumstances In all likelihood the ACTU leadership knows it doesn t have a chance of winning the 21 a week it wants while the economic outlook is so bleak But other significant factors also conspire against the success of the claim The 1 3 million employees on minimum pay rates starting at 543 a week are typically in low paid retail and hospitality areas Their employers are already upset they face a substantial lift in penalty rates over the next few years because of an award modernisation process ordered by the Rudd Government to realign the nation s minimum pay rates In essence many employers will be forced to lift penalty rates by 20 per cent for the sake of creating a simpler homogenous pay system from state to state No wonder employers are unhappy at getting slugged an extra 3 8 per cent as well The union claim also coincides with the introduction of Labor s IR laws which will replace John Howard s Work Choices once and for all There are risks as the Government s own explanatory memorandum acknowledges that restoring fairness in workplaces could come at a cost as restored unfair dismissal claims and stronger union bargaining power adversely affect employer attitudes to hiring people The overriding difficulty for the union claim is undoubtedly the economy and jobs It was not surprising that ACTU secretary Jeff Lawrence yesterday denounced employers wanting a pay freeze until the economy improved But Lawrence went much further dismissing a link between minimum wage rises and the jobless rate and personally attacking the Fair Pay Commission s chief Ian Harper for lacking impartiality This is the same Harper who dished out 4 1 per cent last year by the way It obviously irritates Lawrence that Harper has indicated he will consider the impact of the Government s cash handouts and tax cuts in his wage decision For Lawrence nothing less than compensation for cost of living rises is acceptable and he dismisses business claims about wage rises causing higher unemployment as self serving and misleading Yet surely the Government s position indicates the views of Harper and employer groups are not rabid Julia Gillard and Wayne Swan accepted what Lawrence would not they said employment was the primary consideration In fact accepting wage trade offs and discounts that take account of social welfare payments is nothing new for unions Such deals were typical of the Hawke Keating government accords with the ACTU They were paraded as economic responsibility Your Comments 2 Comment s Jack Schitt of Newie 9 20am April 08 2009 Well John O Hagan of Melbourne I m glad that your quick little Google search was more effective than the 5 years of economics study I completed at university To say that there is no link between unemployment and minimum wage because some idiot calling themselves an economist wrote a paper on it is akin to saying that evolution did not happen because there s this bunch in the States who have this creationist museum Of course the secretary of the ACTU doesn t believe this and nor did his predecessor however their jobs rely on holding this belief Making the argument that there is no nexus between the cost of labour and the amount of labour employed makes you look like an economic flat earther Might be time to go back to Google John O Hagan of Melbourne 2 09pm March 27 2009 Rather than merely assuming that wage rises and labour regulations cause unemployment as does the author of this piece among many others let s look at the facts Many comparative studies have been done on this subject typical is one from the Journal of Economic Perspectives vol 11 no 3 1997 but just google them yourself like I did it s not that hard Mr Norington These studies show many things that contradict free market orthodoxies for example the following factors do not cause unemployment Strict employment protection and labour market legislation Generous unemployment benefits provided they are not open ended High unionization provided it is in a context of co ordinated bargaining with employer organisations Other relevant findings Minimum wage levels only affect youth unemployment when combined with high payroll tax and do not affect adult unemployment Poor education levels correlate strongly with unemployment Historically the amount of work to be done adjusts in line with the available labour supply rendering attempts to control unemployment by adjusting working hours futile A very clear influence on unemployment is demand which is improved by wage increases In conclusion there is no clea