The erosion of minimum wage policy in Australia and labour's shrinking share of total income

The long-run decline in labour's share of GDP in Australia over the last generation, and the consequent increase in personal income inequality, has coincided with a parallel erosion in the real economic 'bite' of Australia's minimum wage over the same period. This correlation is not surprising, since an active and ambitious minimum wage policy was one of the most important policy tools invoked to support real wage gains through the initial postwar decades. Minimum wages establish a floor for wage outcomes, and thus influence the distribution of economic output between labour and capital. So the weakening of minimum wage policy since the 1980s, evident not only in the statutory level of the minimum wage but also in the scope and strictness of its application, naturally helps explain at least part of the subsequent decline in relative labour incomes. Minimum wages have been relatively stagnant in real terms over this period, and have lagged well behind both overall average and median wages, and behind average labour productivity growth.