True compassion, or perhaps not?

Here’s an interesting business news item regarding Woolworths, one of the biggest national supermarket chainstores in Australia. The CEO is reportedly calling for an increase in his workers’ wages so their real purchasing power keeps up with inflation. Calling for? Who is he calling upon?

If the CEO wants to grant a wage increase, is it not within his powers to do so?

Such care and compassion from the CEO in outlining his concern for the real wage growth of around 180,000 workers. Why be photographed in the fruit and veggie section and have a press story written about this compassion? It becomes clearer: what the CEO wants is an increase in the industry wide mandated minimum wage. What’s more, he has agreed this position in advance with the CEO of Wesfarmers, another very large retail store chain, with a clear commonality in the labour market to that of Woolworths. That’s right, he doesn’t want Woolworths workers paid any more unless other competing employers also have to pay more. That would put Woolworths at a competitive disadvantage, and then he might shelve those concerns about falling real wages until some other time.

This is a problem with the mandated minimum wage: it becomes the de facto standard. Economically, there is only one true minimum wage and that is zero. Once government regulation steps in and sets a certain number of dollars per hour as the minimum, in addition to increasing unemployment, it allows CEOs to hide behind it as a kind of deflecting shield – blame the Fair Work Commission for not increasing your wages. Ordinarily, big employers stay out of the public eye when the wranglings over the minimum wage are underway. But if you remember that only a couple of months ago, Woolworths was in the press for the dubious honour of the largest pay shortfall in Australian history, perhaps the CEO is eager to show his virtuous side to a staff group that could well be frustrated with him.

Goodness knows what he will do if the impending wage case doesn’t increase the minimum wage by the amount he believes it should be. Will he go further voluntarily? Is that question really necessary?

And has he paid back the $600m yet?