Australia has twice the minimum wage as the US and Big Macs cost roughly the same.
JAISAL NOOR, TRNN PRODUCER: Welcome to The Real News Network. I’m Jaisal Noor in Baltimore.
Over the past year, increasing amounts of fast food and retail workers have been on strike demanding $15 an hour and better benefits and working conditions. Their struggle has spread nationwide, and their demands have been hotly debated in the media.
To talk about this issue, we’ll go to Australia, where the minimum wage is over $16 an hour for fast food workers.
We’re now joined by Salvatore Babones. He is a senior lecturer in sociology and social policy at the University of Sydney in Sydney, Australia, associate fellow at the Institute for Policy Studies in Washington, D.C., and also writes for numerous publications, such as Truthout.
Thank you so much for joining us.
SALVATORE BABONES, UNIVERSITY OF SYDNEY: Oh, thanks for having me on.
NOOR: So, Salvatore, from your perspective, working in a country where the minimum wage is almost $15 an hour and for fast food workers it’s over $16 an hour, what’s your take on these demands by the fast food workers in the United States, which so far have not really been taken seriously by the media or policymakers?
BABONES: I think it’s long past the time when Americans should wake up and see, you know, how far along the rest of the world has come. If a $15 minimum wage seems unrealistic, it’s only because we’re stuck in the 1950s or 1960s idea of how you should live as a worker in America. Ordinary workers, people who do, you know, grocery store checkout or fast food, simply do much better in the rest of the developed world than they do in the United States.
NOOR: And the idea of fast food and retail workers getting $15 an hour has been fiercely criticized by, especially, conservatives in the media and in the press. Charles Koch, who’s worth $44 billion, recently said the best way to stimulate the U.S. economy is by eliminating the minimum wage altogether. What’s your response?
BABONES: Well, research in the U.S. tends to focus only on the United States. And so when people study the minimum wage and they say the best way to increase employment is to cut the minimum wage, they don’t really look overseas and see how it’s done in other countries. When you look overseas, you see that minimum wages are much higher among our trading competitors, and these countries are doing very well. Countries like France, Germany, Australia, you know, while they may have occasional recessions like the U.S. has right now, over the long haul, over a, you know, 30- or 40-year period, they do just as well as the United States, but they have much higher wages for their workers. And so while overall economic growth is about equal between the U.S. and other countries, conditions for ordinary working people are far better in places like Australia and Europe.
NOOR: And so Australia has avoided the brunt of the global recession altogether.
BABONES: Oh, right. Australia had no recession. There was not a single quarter in which GDP declined in Australia. There was a—you know, the recession just didn’t happen. There was a mild slowdown in hiring in 2008, and then things picked right back up. And, you know, we have to remember that’s in a context where ordinary workers don’t just make, you know, $17, $18, $19 an hour, but in which those workers have, you know, vacation days, sick days, four weeks annual leave, and full health insurance.
NOOR: Can you talk more about your response to the conservative position that raising minimum wage will actually hurt the economy? You argue that in fact it actually benefits the economy. Talk more about why you believe so.
BABONES: There’s a theory that make raising the minimum wage will result in fewer jobs. And that theory seems to make intuitive sense, that when wages are higher, you know, people hire fewer people. And in isolation that would be true. There’s an assumption economists like to make called ceteris paribus, which means all other things remaining equal, this would happen.
But all other things are never equal. For example, if you raise the minimum wage, people make more money. That’s the first thing that’s not equal. As people make more money, they spend more, they pay more in taxes. The entire character of the economy changes.
And so what we really need to do is instead of arguing from theory that if you raise minimum wage it would cause problems for employers, you should argue from fact, that is, look at countries where the minimum wage is higher, see how well they’re doing. And, in fact, those countries are doing quite well. Even in the United States, we recently raised the minimum wage from an extraordinarily low level of $5.15 an hour in 2007 up to—now it’s $7.25 an hour—not a high level, but still that’s an enormous increase in the minimum wage, you know, almost a 50 percent increase in just a few years. And what have we seen? Even though there’s been a big recession in the U.S., we’ve seen low-wage employment actually increase. So, you know, the idea that raising the minimum wage will hurt employment just has no basis in empirical fact. It’s an interesting idea, and it’s a very nice idea if you’re an employer and you want to pay low wages, but the studies just don’t bear out that raising the minimum wage has any impact on employment whatsoever.
NOOR: And Australia has in fact raised their minimum wage almost every year, while the U.S. has only seen three increases in the past 15.
BABONES: In Australia, as in most countries, minimum wages are set through some kind of automatic mechanism. In Australia, it’s an organization called Fair Work Australia that every year sits down, reviews economic conditions, reviews productivity levels across the economy, and sets the minimum wage accordingly. So the Australian minimum wage just went up on July 1. The fast food rate went up from $17.03 an hour to $17.98 an hour on July 1. And every year there’s a revision, and the revision is usually upward.
NOOR: So critics of raising the minimum wage in the United States often counter the example of Australia by noting the cost of living there is so much higher, the minimum wage is negated. Can you respond, especially in light of the recent study which compared the cost of Big Macs across the world?
BABONES: The cost of living in Australia is in fact slightly higher than in the United States. And if you want to make an adjustment for that, the Australian fast food wage of $17.98 an hour probably comes down to around $12 an hour if you adjust for cost of living. On the other hand, if you adjust for the fact that that Australian $17.98, on top of that, Australian workers get four weeks’ annual vacation, retirement benefits, and full health insurance, then of course you would have to revise the figures upward. So there is some truth in the argument that the cost of living is higher in Australia. But on the other hand, you get more for your tax money and you get more for your wages in Australia as well. So I think the two either balance out or in fact probably workers are better off in Australia.
As far as the Big Mac index goes, that’s a really interesting index compiled by The Economist magazine. And, in fact, Big Macs are slightly more expensive in Australia than in the U.S., something like $0.70 more expensive in Australia. What you get for that in Australia is you get to go to a fast food restaurant where you know that everybody behind the counter has full health insurance, everyone behind the counter gets a really good wage, they’re treated well, and they have, you know, options in life beyond just a grueling minimum-wage existence like in the United States. For my money, I’d rather buy a hamburger for $0.70 more, knowing that people behind the current counter have a living wage, than to pay $0.70 less for a hamburger and have slave labor conditions in fast food restaurants.
NOOR: Thank you so much for joining us, Salvatore.
BABONES: Thanks for having me on.
NOOR: And thank you for joining us on The Real News Network.