Thanks to psychologists (and a few economists), we know that the way issues are framed can have a big difference on how they’re perceived. In a signal illustration of the importance of context, the Fair Pay Commission’s decision to raise the minimum wage by 2% has been cast as stingy, in contrast to its 5.6% rise in October 2006, which was generally perceived as generous.
But in July 2007, the AFPC had raised the minimum wage 9 months ago; while in October 2006, the minimum wage hadn’t been raised for 17 months. Shouldn’t we take that into account?Â If we put them both on an annualised basis, the October 2006 decision was a 3.9% rise, while the July 2006 decision was a 2.6% rise. So the latest decision is a smidgin lower; but the difference is smaller than it looks if you were to merely read the media reports.
Clearly if it wants to be portrayed in the Australian media as a champion of the poor, the Australian Fair Pay Commission should only raise the minimum wage every two years – then it can give out increases that are twice as large. By contrast, politicians could save themselves a lot of grief over 6.7% pay rises if only they asked the Remuneration Tribunal to raise their salaries every six months.