Thread by @JimboStanford

THREAD on #FWC minimum wage decision today. The FWC froze wages for 75% of award-dependent workers: 40% for 4 months (to Nov. 1), and 35% for 7 months (to Feb. 1). The other 25% of workers will get a wage increase on the normal date (July 1), but a small one (1.75%)...2

On a weighted-average basis (weighting for shares of workforce and portion of the year covered), this works out to a 1.16% increase in the average minimum wage for the 2020-21 financial year. That's the smallest since the full 1-year freeze in 2009 (following the GFC)...3

This decision will tilt the macroeconomic balance even further toward deflation: a major risk in a crisis such as now. The wage is the most important price in the economy: it anchors other nominal levels. The #RBA agrees inflation will likely turn negative in coming months...4

Wage expectations have already become anchored at very weak rates (2%) after 7 years of record-slow wage increases. Now employers (public and private) are freezing wages, and sadly the FWC has largely ratified that approach. The new normal will become closer to 0%, not 2%...5

The fact that we entered this recession with wage growth already at record-low rates, and that govts, FWC & private employers are all now responding to the crisis with renewed wage austerity, makes deflation even more likely. Deflation has terrible effects on spending & debt...6

Employers in all sectors will mimic this decision: the FWC has provided high-profile ratification of the assumption that wage increases destroy jobs. In fact, in stagnant macroeconomic circumstances they're more likely to support job-creation (by boosting consumer spending)...7

A sure-fire way to turn recession into a Depression is by ripping spending power out of an economy starved for demand. Govt is already heading there with threats to end JobKeeper & other supports, & public sector wage freezes. FWC now metes out the same medicine to many more 👎