Fair Work, Fair Pay: Lessons From Australia

On January 1, Connecticut will become the first state in the United States to require at least some employers to provide paid sick leave for their employees. The Connecticut law covers only a fraction of the state's workers, caps the required paid sick leave at five days per year and explicitly excludes the state's most vulnerable workers: day laborers and temp workers. Still, it's a start.

One-third of all American workers – including 79 percent of low-wage workers – don't get any sick days at all.

See also: “Michele Bachmann Advocates Abolishing Minimum Wage

Among cities, San Francisco and Washington, DC, have paid sick leave laws and Seattle is introducing paid sick leave next September. San Francisco and Washington also have living wage ordinances that set citywide minimum wages at levels substantially higher than the federal minimum wage of $7.25 an hour. In fact, San Francisco leads the country with a local minimum wage of $9.92 an hour.

That's pathetic.

Across the Pacific in Australia, the national statutory minimum wage is $15.51 an hour in Australian dollars. Over the past three years, the Australian dollar has been roughly equal in value to the American dollar, so the figure in American dollars is about the same. One Australian dollar roughly equals one American dollar.

Only about 2 percent of Australians, however, are covered by the minimum wage. The rest are covered by industry-wide agreements that are negotiated by the government on behalf of workers. The minimum wage in most of these agreements (including, for example, for adult fast food workers) is $17.03 an hour.

But wait, there's more: full-time permanent employees in Australia, from toilet cleaners to chief executives, get at least ten sick days, 20 vacation days and (depending on the state) ten or more paid holidays every year. Everyone. All over Australia.

Of course, there is a catch. Part-time and temp workers don't get these benefits. Instead, they get paid an extra 20 percent to 25 percent in cash compensation. As a result, a part-time, entry-level adult fast food worker in Australia makes a minimum of $21.25 an hour. Oh, plus health insurance. That's universal in Australia.

Of course, exchange rates go up and down over time. But at $21.25 Australian dollars an hour, it doesn't matter what exchange rate you use or how you adjust for cost of living. The simple fact is that an Australian entry-level fast food worker makes more than the average American worker. An absolute majority of Americans would increase their income if they moved to Australia and got fast food jobs.

Australia is not some super-rich bankers' paradise or oil sheikdom. It's a country of 22 million people that's about the size of the continental United States. The main difference is that while most of America's national income goes to the super-wealthy, Australians share their national income more equally among the whole population.

All Australian workers are entitled to benefits that are extended only to the richest Americans: parental leave, caregiver's leave, extra vacation for shift workers etc. And when Australians are called for jury duty, their employers must give them the time off – and must make up the difference in pay between the jury duty rate and their normal pay rate. In short, working-class Australians get the same kinds of benefits as investment bankers and top corporate lawyers.

Then, there's the final benefit that sets Australia (and New Zealand) apart from the rest of the world: long service leave. People don't have to work their entire careers without a break. After their first ten years with a company, they get two months off (with pay). It's another month every five years after that.

In other words, if you go to work in fast food straight out of high school, you can take a two-month paid honeymoon when you get married in your late twenties – and still have your regular four weeks vacation time to spend with the family.

How does Australia do it? Most Australians – and almost all working-class Australians – bargain collectively with their employers instead of one on one. In the United States, union contracts cover only 7.7 percent of private-sector workers. Everyone else is on their own.

What most Americans think of as a free market is really just a turkey shoot. When a minimum-wage worker (annual revenue: $15,000) walks into a negotiating session with Wal-Mart (annual revenue: $421,849,000,000), he/she doesn't stand a chance.

Increasingly, in America, even unionized workers don't stand a chance. Over the past 50 years the revenues of a typical Fortune 500 firm have grown by a factor of seven times (even after adjusting for inflation). The size of the average union has shrunk. A company with operations in 100 countries can always outgun a union with operations in one country.

Australian unions face the same challenges, but with a difference. In Australia, the government provides a backstop. A government agency, Fair Work Australia, negotiates industry-wide wage agreements with the private sector. Workers covered by Australia's 122 industry-wide agreements don't do as well as workers who are covered by a union contract, but they do well enough. After all, $21.25 an hour isn't bad.

This government backstop gives Australian employers an incentive to work with unions instead of against them. In general, Australian employers are just as anti-union as American ones. But if employers want the flexibility to go around the very rigid Fair Work Australia rules, they can only do it by negotiating an agreement with a union representing their workers.

In fact, one of the biggest problem facing unions in Australia is that the benefits provided to all Australian workers by government-brokered industry agreements are so good that many workers don't see the point in joining a union. Just as in America, union membership in Australia is declining rapidly. The difference is that, in Australia, people are leaving unions because they feel safe without one. In America, people avoid unions because it's often not safe to join one.

So, what about unemployment? The business lobby in the United States is forever warning that wages must be kept low to promote full employment. Raise minimum wages, and companies will not be able to afford to put people to work – or so the argument goes.

The unemployment rate in Australia today is 5.2 percent. And, of course, unemployed Australians keep their national health insurance for themselves and their families.

To Americans, this must all sound too good to be true, but the fact is that America could afford a system just as generous. America's national income per person is slightly higher than Australia's. We have the money. We just choose to use our income differently.

To begin with, rich Americans make far more money than rich Australians. Doctors and lawyers and bankers and, of course, CEOs make much more in the US than in Australia. Then, rich Americans pay far less in taxes than rich Australians. The top tax rates in the United States are 35 percent on earned income and 15 percent on unearned income. The equivalent rates in Australia are 45 percent on earned income and 22.5 percent on unearned income.

The real difference between the two countries, though, appears in company profits. American companies make far more in profits than Australian companies. Over the past ten years, the profits of corporations and proprietors have amounted to an average of 20.4 percent of America's national income. The equivalent figure in Australia is 12.7 percent. It's hard to make super-sized profits when you have to pay a living wage.

While we in the United States are arguing over $1 increase to the minimum wage and whether or not people should get to stay home when they're sick, the rest of the world has long since passed us by. In Australia and other rich countries overseas, life is simply better than it is in America, for almost everyone.

We can afford the good life for all. We choose not to. It's time for America to start learning from the rest of the world and start making smarter choices.