Submission to the Australian Fair Pay Commission /

July 2006 Includes bibliographical references (p. 11)

The relationship between wage levels and employment in the short termis uncertain There are some in the community who are urging the Commission to consider reducing the real value of the minimum wage over time in an attempt to stimulate low-skilled employment. We believe that this policy response is likely to have a negligible effect on employment and will hurt low-paid workers overall. Empirical evidence from other OECD countries fails to show a clear relationship between minimum wage changes and employment, and a number of studies have found no effect or only negligible increases in employment after increases in the minimum wage (see Dowrick & Quiggin 2003; Gregg 2000; Hyslop & Stillman 2004; Lemos 2004; Stewart 2002; Watson 2004) We understand that the Australian context differs from many of the countries studied in these references, such as the US and the UK. Australia is a country with one of the highest minimum wages in the OECD. However, the results do indicate that minimum wages and employment are not necessarily inversely related. We feel that there is a need for further research examining this relationship in the Australian context. Includes bibliography references.