ControveryEcon CoreEcon, Joshua Gans thinks that the Australian Fair Pay Commission has been too generous. He points out that if they really only wanted to maintain the real incomes of minimum wage workers, they should’ve adjusted by less than the CPI, since workers save part of their wage, and savings are adjusted for inflation.
Tangentially, this reminds me of something I’ve been meaning to mention. The ACTU asked for an increase of $30 per week. The AFPC granted an increase of $27.36 per week, which they claimed was equivalent to CPI. So the real puzzle is not why theÂ decision was so high, butÂ why was the ACTU claim so low? Why did the ACTU ask for an increase that was lower than the rate at which average wages had been rising?