Business Economics Report: Analyzing Minimum Wage in Australia

This economics report analyzes the impact of increasing the minimum wage in Australia, focusing on the strategies employed to raise wage rates, such as collective bargaining and legal enactments like the Factories Act of 1896. The report examines the effects of minimum wage increases on prices, goods and services, and the labor market, including the potential for wage-push and demand-pull inflation. It uses supply and demand diagrams to illustrate the consequences of wage adjustments on aggregate demand, supply, and price levels. The report also references key macroeconomic problems like unemployment and analyzes how minimum wage policies influence these issues. The analysis incorporates relevant figures and references to support its arguments and findings, providing a comprehensive overview of the economic implications of minimum wage policies in the Australian context.

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Business Economics
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3.1
Mr. Bill Shorten would seek to increase the minimum wage rates through encouraging
unionism or a process known as ‘collective bargaining’. This can be done by forming trade
unions where all workers come together and choose representatives who will be responsible to
raise their complaints to the respective persons (Crowe, 2019). If Mr. Bill Shorten was made
President, his promise would be easily fulfilled in a way that these trade unionsrepresentatives
could reach him.
Also, legal enactment would be employed by Mr. Bill Shorten to raise the minimum
wage rates. The minimum wage rate of the Australia as a nation is regarded as ‘the minimum
base rate’ of pay for different hours that an employee who is not considered under ‘Modern
Award’ or even an ‘agreement’ works. He would rely on the Factories Act that was amended in
1896 in Victoria where wage creation was made by the wages board(Crowe, 2019). However,
under this Act the wages board never developed a minimum wage for all industries in the
country but rather only six industries that were said to pay low wages to their employees were
considered. In those early years, several states such as the new South Wales state and the state of
Western Australia also created wages boards. Since Australia was among the first countries to
form these wages that forced other countries to develop them too, then Mr. Bill Shorten would
not have experienced any difficult in increasing the minimum wage rates (Green, 2014).
Increasing minimum wages for employees whose salaries are very low in Australia is therefore a
legal issue that is supported by the Factories Act of 1896. In addition, the recently launched ‘Fair
Work Australia’ that replaced ‘Australian Fair Pay Commission in 2010 was supported by a
number of political leaders and this alone shows that in case Mr Bill wished to raise the
minimum wages, it would be simple and supported.

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3.2 The scenario of increase in minimum wage rate in Australia.
It is evident that, when the economy experiences the increase in the minimum wage,
several things change in terms of price, goods and services and the labor market. For the case of
price and products in the economy, when the minimum wage is increased, many individuals are
in position of earning the reasonable amount of money to compete in both money and goods
market (MitrefinchInc, 2019). The bargaining power of individuals is raised which increases the
prices of commodities in the economy. Due to the increased demand for goods, prices are likely
to increase.
Also, when the minimum wage is increased, the demand for labor is low since most of
the employers prefer workers who earn low wages to those who earn highly. It is evident that and
increase in workers’ wages increases the costs of production is hiked. This scenario therefore
increases the prices of goods and services are high in return to cover the gap caused by increase
in wages.
Another incident caused by the minimum wage rates is wage-push inflation. It is evident
that when employers spend more on wages, inflation is likely to occur in the country. Also, this
situation may result into demand pull inflation due to the increased demand for goods and
services by people.

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Figure 1: A change in Minimum wage
Source: Author, 2019
Figure 1 shows the way how demand for commodity changes as the minimum wage is increased
by employers. When workers’ wages are increased from We to W2, this will increase the
purchasing powers of the people from quantity Qeto Q1.
3.3.
(a). Almost every economy has got a one of the main macroeconomic problem known as
‘unemployment’. It is well known that the supply and demand of any normal commodity like

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soap, bananas, an asset say equity or even a resource factor like labor determines the value or
price of it (Sorkin, 2015). When the wage rate is increased, labor demand will decline and labor
supply increases. In the process, the demand for goods increases leading to a push in price of
goods and later a fall in quantity demanded (Sorkin, 2015). The subsequent figure 2 portrays the
supply and labor for the production of a given commodity (Beggs, 2019). The supply curve is
named SS and the demand curve is DD. The horizontal line indicates the labor quantity
employed well as the vertical line shows the ‘nominal wage’ per labor unit. The figure assumes
that the general price is constant (Beggs, 2019).
Figure 2: Impact of minimum wage rate on demand, supply
Source: Carty, 2017
(a).In situations where the minimum wage rate exists, there is seen increase in aggregate demand
well as the aggregate supply remains constant (Pandey, 2019). A raise in aggregate demand
forces the prices to rise too and later the quantity demanded will also decrease in Australia as it is
revealed in the graph below.
Figure 3: Effect of Increase in Minimum wage on demand, supply and price levels

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Source: Author, 2019

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References
Beggs, J. 2019. The Impact of an Increase in the Minimum Wage. Retrieved from:
https://www.thoughtco.com/increased-minimum-wage-impact-4019618
Carty, L.S. 2017. How Does an Increase in Wages Affect Aggregate Supply? Retrieved from:
https://bizfluent.com/info-8568276-increase-wages-affect-aggregate-supply.html
Crowe, D. 2019. Labor fuels business fears with talks of higher wage. Retrieved from: https://
www.theage.com.au/politics/federal/ Labor- fuels- business- fears –with- talks- of higher- wage.
Green, A.D. 2014. What Is a Minimum Wage For? Empirical Results and Theories of Justice.
Canadian Public Policy / Analyse de Politiques Vol. 40, No. 4, pp. 293-314. Retrieved from:
https://www.jstor.org/stable/24365133?seq=1#page_scan_tab_contents
Mitrefinch Inc. 2019. 4 Ways Minimum Wage Increase Might Effect Companies. Retrieved from:
https://mitrefinch.com/blog/4-ways-minimum-wage-increase-might-effect-companies-in-2019/
Sorkin, I., 2015.Are There Long-Run Effects of the Minimum Wage? Retrieved from:
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4415654/
Pandey, S., 2019. Australia's minimum wage rises slowly as growth, inflation cool. Retreived
from:https://www.reuters.com/article/us-australia-economy-wages/australias-minimum-wage-
rises-slowly-as-growth-inflation-cool-idUSKCN1T004X
Swati Pandey