Employers in a welfare state
by Simon Longstaff
Business wants to have its cake and eat it too. That's understandable. But is it reasonable?
When asked to comment on the recent 'living wage' case decision, the president of the Business Council of Australia, Stan Wallis, is reported to have said low-income earners should be assisted through the social welfare system, and not by centralised pay rises. In other words, Wallis is apparently looking to government to top up the wages of the low paid.
Had this suggestion been made by the welfare lobby, it would probably have passed by without much comment. However, Wallis's remarks come at a time when business regularly lobbies for a reduction in the size and cost of government. Given this, does the comment signal the adoption of a new approach by the council? If not, then how should be respond to the apparent inconsistency?
The idea that the community should provide significant financial assistance to business is nothing new. If one adds the value of direct subsidies to the cost of providing the infrastructure business needs, then the community already provides a huge amount of money to augment the funds of shareholders.
Few would argue the community's investment is a poor one. There is an implicit logic to the arrangement. In return for massive investment by the community, business plays a vital role in increasing the stock of common good to be enjoyed by society – jobs, wealth and a host of other goods.
If there is any ground on which the council can stake a claim for additional government assistance, then it must be that such a decision in its favour would ultimately make us all better off. As things stand, Wallis's proposal amounts to recommending the introduction of a new general subsidy to business. It is silent on the subject of matching benefits to needs. Given the usual position adopted by the council, this is quite remarkable. After all, even the wealthiest corporation might try to get away with paying the lowest wages possible.
At the very least, the council might have been expected to argue that any new employment bounty should be targeted to assist low-income earners working for companies genuinely unable to increase the remuneration of their employees.
This brings us to the crux of the problem. It could be that Wallis was being quite deliberate in his categorical assertion that government bear the cost of improving the lot of low-income earners. That is, he might genuinely believe the task of business is to pay as little as possible to its employees – using the market to set a “price” for labout.
If this is the position of the council, then it is consistent with the view of those who argue that the Industrial Relations Commission has no place in setting a minimum benchmark for wages and conditions. Advocates of this position deny it is sensible to talk about a 'fair' wage. Instead they say that remuneration should be set on a case-by-case basis and as a result of individual or enterprise bargaining.
Critics of this approach reject the idea of applying the raw principle of laissez-faire to the labour market. They argue there are many occasions when the relative bargaining power of corporations and employees is so lopsided as to guarantee an 'unjust' outcome.
The debate comes down to whether it is possible to agree on a definition of what counts as a 'fair' level of remuneration. Is it what the market dictates, is it what the IRC determines, or is there a broader standard based on contribution to profits, the need to maintain a basic quality of life, equitable treatment of stakeholders and so on?
A further difficulty with the idea of a general subsidy to business is that it will actually encourage employers to increase the proportion of low-income earners in their total workforce.
Should the council's proposals be applied, then, all things being equal, it would inevitably lead to a significant increase in the amount of money being spent on social security payments to low-income earners. Surely this implies that government be given the resources to do the job.
Wallis is in effect proposing an increase in government spending. This is noteworthy, for it marks a change in the usual position adopted by the peak business groups – that there should be a marked reduction in the 'cost' of government.
It is tempting to think that this new approach is based on an appreciation of the fact that cutting the cost and size of government does nothing to reduce the range of needs that government helps to meet.
It could be that the council genuinely supports the idea that low-income earners be given assistance. It's just that the council doesn't want business to pay – in either wages or taxes – even if it could afford to do so.
The desire of business to have its cake and eat it too is perfectly understandable. But is it reasonable?
discuss this articleDr Simon Longstaff is Executive Director of St James Ethics Centre.
A version of this article was published in The Australian on 15 May 1997 - page 11
© St James Ethics Centre