What is the mean and the median?

What would be the effect in Australia if the minimum wage and unemployment benefits were pegged to the mean (or median) wage?

• For example, what would happen if the minimum wage was set by legislation at 50% of the mean (or median) wage, and unemployment benefits set to be 50% of the minimum wage? What would be the arguments for and against such a system? Has such a system been tried anywhere else in the world? For background: The mean wage is currently $72800. The median wage is currently $57400. The minimum wage is currently $32600 (44.7% of mean or 56.7% of median) The unemployment benefit (Newstart) rate is currently $13300 (40.8% of minimum wage) Just to clarify again: The question is not about making the minimum wage higher or lower. It's about pegging it (at any arbitrary level) to the wages of the rest of the population, instead of to the annual wage case or CPI.

• Answer:

  It's irresponsible to peg minimum wages to a set percentage of the mean or median wage. Every time you raise the minimum wage, the mean and median wage also increases. That's just the nature of averages. Even only indexing once a year, and even if everybody on higher than minimum was paid exactly same as the previous year, you'd have to raise the minimum wage again. The previous year's increase has fed back into the system in such a way that you are assured a wage increase even in a stagnant economy. That's not good. Currently, while the rate of change to minimum wage in Australia doesn't exactly follow the CPI (Consumer Price Index) is does have a http://www.workplaceinfo.com.au/payroll/wages-and-salaries/history-of-national-increases. This is such that the increases in minimum are somewhat closely aligned with the increases in costs of living, rather than what everybody else makes. It seems fair, too. I think the real problem you'd face with a fixed percentage rate is in the event of a downturn. What happens when the mean and median wages fall but the cost of living (CPI) stays the same or even increases? Fixing the minimum wage to a percentage would see minimum wage also fall. That makes it harder for people to live, so they buy less, which in turn feeds back into the economy, potentially pushing things into a recession. By keeping minimum wage correlated with CPI it's easier to keep at least some stability in the lower end of the economy even when the higher end is struggling. It does mean that less of the benefit of a thriving economy flows to those in more menial jobs, but those jobs tend to be the most stable come recession time. As for unemployment benefits, well, that's another question entirely. In fact, it would probably be better asked separately because it alone can provide some ... lively ... debate. But in short, the two main arguments for and against might be: For—the current rate isn't enough to allow people sufficient stability to be able to find work (e.g. after basic cost of living there's no extra to buy things like clothes for job interviews), and that people don't deserved to be punished with sub-poverty life just because there's no suitable work for them. Against—keeping it low provides an incentive for people to find work (e.g. they can make more than twice as much money than pretending to look for work and being poor), and why should they get a free ride when I have to work for a living (i.e. "I may as well just quit my [$100K+] job and live on the dole").