As the United States debates the effects of raising the federal minimum wage, an instructive experience can be found across the Pacific. Australia has one of the world’s highest pay floors and relatively low unemployment, offering a case study in the modern economic theory that raising wages doesn’t kill jobs.
The Biden administration has cast its campaign to raise wages as a way to lift up millions of the working poor, reduce inequality and boost the economy. Despite retreating on plans to include a $15 minimum wage in the coronavirus relief bill this year, the president signed an executive order in April raising the hourly rate for federal contractors to that level by next year.
The move covers only a small portion of the millions who make minimum wage, but includes cleaning and maintenance workers, nursing assistants caring for veterans and cafeteria workers for the military; the current minimum wage for federal contractors is $10.95 an hour.
In Sydney, the going rate for babysitters and tutors is the equivalent of $22 an hour — well above the national minimum wage of about $15. Yet the economy hasn’t come crashing down. Until the pandemic, Australia was enjoying an almost three-decade growth streak. And the incidence of low-paid workers — defined by the Organization for Economic Cooperation and Development as the share of full-time workers earning less than two-thirds of median earnings — is lower than in the United States.
“The Australian experience would suggest that there’s not a big loss of jobs for lower-income workers,” said Shane Oliver, chief economist at AMP Capital in Sydney. “In fact, if you want to help spending, increasing the income of the lowest earners is a good way to do that.”
Minimum-wage earners in Australia shared their experiences with The Washington Post.
Martin Smith, 56; Batemans Bay, New South Wales
Martin Smith was a printer until the late 1990s, when people began printing their business cards at home. His trade vanished almost overnight.
“As I got older and older, it got harder and harder to find work,” he said. He struggled with addiction and drifted in and out of the workforce.
Finally, a manufacturer south of Sydney offered him a chance to learn a new trade: powder-coating products to protect them from corrosion.
Smith started at about $17 an hour, and was quickly promoted to section head. “I love my job. I wouldn’t want to be doing anything else,” he said. “I make it my daily duty to make my boss happy that he gave me that chance.”
The minimum wage is reviewed annually in Australia by an independent commission, which last month announced a 2.5 percent raise, to 20.33 Australian dollars (about $15) an hour. The decision influences wider wage growth; Jim Stanford, an economist at the Australia Institute’s Center for Future Work, estimates that the pay of about one-third of workers, including some professionals, is tied to changes in the minimum wage.
Yet Australia also shows how legislated wages don’t always reach workers’ pockets. A vast shadow market has sprung up of jobs that pay below the official rate — akin to the cash-based economy of undocumented workers in the United States.
Smith said he knows people working cash-in-hand for considerably less than the minimum rate. An independent government probe in 2019 found that underpayment of workers was significant and widespread.
“Australian business doesn’t have a big heart,” Smith said.
Kate Hsu, 32; Loxton, South Australia
Taiwanese backpacker Kate Hsu earns the minimum wage on a grape farm in Loxton, South Australia. She works six days a week, and it’s enough to cover expenses, including a room in a shared house in nearby Renmark. In her first year in Australia, she was able to save for a road trip across the country’s interior.
Hsu has hit some rough patches, though. When the pandemic arrived, thousands of backpackers were stranded, leaving them vulnerable to exploitation.
She wound up picking oranges for as little as $18 a day — the result of a system in which workers are paid based on the amount of fruit they pick. Hsu had to fill a bin that could hold nearly 2,000 pounds of oranges — a day’s labor.
“At a minimum wage, you can survive. But piece rates, you can’t. You’re hungry,” said Hsu.
By day’s end in the orchard, her hands were raw, her legs were bruised and her arms were scratched. At times, she went dumpster-diving for food.
Examples such as Hsu’s are “clearly an instance of underpayment,” according to the National Farmers’ Federation, which argues against further regulation and says piecework rates “incentivize productivity.”
A recent survey of 1,300 seasonal workers by Unions New South Wales and Australia’s Migrant Workers Center found some were earning as little as 75 cents an hour. The union also hired bilingual researchers to examine thousands of foreign-language job listings; 88 percent paid below the minimum wage, including nail technicians and housekeepers, who were offered as little as $6 an hour.
Two states, Victoria and Queensland, have made wage theft an offense punishable by prison time. But there aren’t many officials to police it.
“There’s a catch-us-if-you-can mentality,” said Mark Morey, the secretary of Unions NSW.
Cliff Fraser, 61; Skipton, Victoria
Cliff Fraser had a heart attack while driving his truck south of Sydney a decade ago. Unable to drive for a living anymore, Fraser went from earning $90,000 a year to less than a tenth of that. He fills out 10 to 15 applications a week, often competing for low-paid jobs with people half his age.
Last year, he picked up a cleaning job in an elementary school that paid about $18 an hour.
“I turned up on the first night, and I thought, I’m better than this,” he said. “What I’ve come to realize is there’s a lot of self-satisfaction. You turn up to a messy class and when you finish, it’s looking good.”
But the job is only for two hours a day.
Australia has experienced a steady rise in insecure and part-time work.
Even with a government welfare top-up, Fraser said he struggles to pay his bills. Once he has paid rent, he has about $50 left for everything else. He lost his home a few years ago, unable to keep up with the mortgage.
“We’re budgeting right down to the wire,” he said. “We don’t go out. Covid made little difference to us because we were in isolation anyway.”
In the early 1990s, Australia’s minimum wage was equal to about 65 percent of the median wage; now it’s 54 percent, according to OECD data. (The U.S. figure is 32 percent — the lowest of any industrial country.)
Fraser said he couldn’t make ends meet on $7.25 an hour, the American minimum.
“I don’t think kids would even mow lawns these days for $7 an hour,” he said.