By Julie Novak
THE Australian Fair Pay Commission's decision to freeze the minimum wage was the finest moment of its short life.
From October, the federal minimum wage will remain at $543.78 a week, or $14.31 an hour. Statutory pay scales mandated by awards will also stay unchanged.
Unlike many other government regulators that tend to announce decisions without transparent explanation, the commission released a comprehensive dossier explaining its case for a wages halt.
Put simply, the dossier shows that the case for a regulated minimum wage rise cannot be sustained in the present economic climate.
With the national economy stuck in a low-growth dynamic, there has been an unfortunate rise in the proportion of people out of work.
The seasonally adjusted unemployment rate was 3.9 per cent at the start of last year, growing to 5.8 per cent last month.
In Victoria, the unemployment rate is higher as key industries such as manufacturing and financial services bear the brunt of the slowdown.
It is in this climate, the commission finds "the ability of employers to offer sufficient work has been curtailed and there is a heightened risk that an increase in regulated minimum wages would reduce employment and working hours".
Some of the criticisms of the wages decision were as vociferous as they were predictable.
ACTU president Sharan Burrow described the wage freeze as appalling and her secretary, Jeff Lawrence, labelled it as "another kick in the guts for working Australians".
This criticism overlooks the fact that the unions' claim for a wage rise would have destroyed jobs.
According to the commission's modelling, a minimum wage rise similar to that of the past three years would have translated into a 0.12 percentage point increase in the unemployment rate. This would be equivalent to about 12,000 jobs lost nationally.
With the prospect of a jobless recovery looming, a mandated wages rise today would spell disaster for the livelihoods of too many people.
Perhaps the most surprising criticism of the wage decision came from Federal Workplace Relations Minister Julia Gillard.
She claimed the commission failed to strike the right balance, even though the Federal Government chose not to nominate its preferred wages growth target in its submission.
Gillard said "zero movement in minimum wages does equal a real wage reduction for these workers".
The latest TD Securities/Melbourne Institute survey suggests that inflation has now hit a seven-year low.
Therefore, this is as good a period as any to have a pause in wage increases set by regulation.
Gillard fails to recognise that hiring labour represents a cost to the employer.
Even a slight real wage reduction will encourage businesses to retain or hire more workers than would otherwise be the case.
Such effects have been confirmed by studies here and overseas.
With Australia having one of the highest statutory wage floors of any advanced economy, any action that reduces the real cost of labour is desirable in the current climate.
It has been the actions of the Rudd Government that has belied its publicly stated concerns about the plight of the working poor and jobless.
Since coming to office, it has embarked on an extensive reregulation of the labour market that will effectively increase the cost of employment.
Although the Government has made concessions for the restaurant industry, its "fair work" legislation encompassing pattern bargaining and award adjustments still risks increasing wages, penalty rates and loadings for labour-intensive, yet cost-sensitive sectors such as retailing and hospitality.
The union movement has also signalled that it now wants to move its across-the-board wages campaign to the seemingly more union-friendly Fair Work Australia bureaucracy.
By no means is our economy out of the jobless woods.
However, the commission's decision ensures that more people than otherwise could will beat back the unemployment scourge.
Julie Novak is a research fellow with the Institute of Public Affairs.