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Minimum pay rise only part of the picture for families

26 Feb 2014: News from CPAG

Minimum pay rise only part of the picture for struggling families

Child Poverty Action Group welcomes the rise in the minimum wage but says sensible and fair adjustments to family income assistance are also needed.

Spokesperson Associate Professor Susan St John says, "A minimum wage rise is a blunt instrument if the intent is to help struggling families with issues of child poverty. The government needs to review its current policy on Working for Families so that families on minimum wages get the full benefit of any increase."

St John says, "One of the insidious changes made in the 2011 budget was that the threshold of family income at which families start to lose entitlement to Working for Families' tax credits was first frozen, and then gradually reduced instead of being properly inflation-adjusted."

When Working for Families was introduced in 2005, the threshold was $35,000. If it had been properly adjusted for inflation, by 2014 it should be around $44,000.

Take, as an example, a family with one and a half workers with two children on the new minimum wage. Their total family income is approximately $44,000. Under current rules they are entitled to Working for Families tax credits of $185 per week. Had there been proper indexation of the threshold since 2005, the amount they would get for their children would be $217 a week.

The loss for this family is $1,664 a year of net income or around $2,000 of gross earnings. This represents 3.5 weeks work at the minimum wage for the main earner. St John says, "Instead of relying solely on increasing the minimum wage to help low income working families, Government needs to take a long hard look at its policies on Working for Families. We are way out of line with Australia where the threshold for their family tax credits is adjusted every year and is now A$48,837. By 2018, ours will be reduced to $35,000 while theirs will be over $50,000."

"We need both a realistic increase in the minimum wage to begin to share the fruits of recovery more fairly, and properly indexed weekly Working for Families support to help sustain the living standards of those on low wages with children. These are not alternatives, they must work hand in hand."

-ENDS-

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