Australia’s lowest-paid workers are set to receive a significant pay increase as the country’s industrial umpire, the Fair Work Commission, has decided to raise minimum and award wages. This decision, announced on Friday as part of the annual wage review, will impact nearly 200,000 workers. The changes are scheduled to take effect in the first full pay period on or after July 1.
Approximately 2.5 million workers who rely on awards, accounting for almost one in four Australian employees, will see a 5.75 percent increase in their wages. Additionally, an estimated 184,000 workers currently earning the national minimum wage will receive an unprecedented 8.6 percent pay rise.
Workers on the national minimum wage can expect their weekly minimum pay to increase by around $70, rising from $812.60 to $882.90, while their hourly rate will go up from $21.38 to $23.23. For award-reliant workers, the hourly rate will increase by $1.23, from $21.38 to $22.61, and the weekly rate will climb by $46.72, reaching $859.32.
The higher increase in the national minimum wage is a result of the Fair Work Commission’s decision to change the classifications for workers on this wage. This change discontinues the 25-year alignment between the national minimum wage and the C14 award rate, which is an introductory rate in many awards. Workers on the national minimum wage will now be paid under the higher C13 rate and receive the 5.75 percent increase determined by the Fair Work Commission.
It is important to note that these workers, representing only about 0.7 percent of employees, are not covered by awards. Employment Minister Tony Burke praised the wage increase as the best decision ever made for workers, attributing its possibility to government actions. However, he acknowledged that there are still loopholes and wage undercutting issues that need to be addressed in the future.
The Albanese government advocated for a wage increase in line with inflation, which rose by 6.8 percent in the 12 months leading up to April. Last year, when inflation was at 5.1 percent, the Fair Work Commission raised the minimum wage by 5.2 percent to $21.38 per hour or $812.60 per week.
The Fair Work Commission acts as an independent tribunal responsible for establishing the national minimum wage and award rates of pay. It conducts an annual review from March to June before the start of the new financial year to ensure a safety net for workers in the national system.
Although the Fair Work Commission did not align national award rates with inflation this year, award-reliant workers’ pay will not keep up with consumer prices in the short term.
Inflation is not expected to return to a more manageable rate of 3.25 percent until 2024. Nonetheless, the 5.75 percent increase surpasses market expectations of a 5 percent boost and falls above the midpoint between the 7 percent increase proposed by the Australian Council of Trade Unions and the 3.5 percent rise suggested by employers.
The Australian Council of Trade Unions urged the Fair Work Commission to raise the minimum hourly rate for Australia’s lowest-paid workers by 7 percent to $22.88 from July, which would result in an annual wage of $45,337 for these workers. Employer groups have expressed concerns about significantly higher wages leading to a wage price spiral and increased inflation.
When announcing the decision, Fair Work Commission President Justice Adam Hatcher stated that the broader economic impact of the annual wage review outcome was limited.
He emphasised that the commission’s role was to establish a safety net and make its own assessment, rather than adjudicate between competing proposals.
Justice Hatcher acknowledged the current unusual combination of economic circumstances, including low unemployment, falling wages, high inflation, and an expected sharp slowdown in economic growth over the next year.
The business lobby responded to the Fair Work Commission’s decision with disappointment.
Andrew McKellar, Chief Executive of the Australian Chamber of Commerce and Industry, expressed surprise at the commission’s assertion that the wage increase would not contribute to a wage price spiral.
McKellar argued that businesses already face various pressures, making it challenging to see how this decision would not add to the strain on margins and prices.
In its submission to the Fair Work Commission’s 2023 wage review, the Labor party did not specify a specific wage increase figure but stressed that “low-paid workers” should not experience a decline in their income.
This year’s wage review marked the first inclusion of the objective of gender equality, with the government acknowledging the disproportionate representation of women among low-income earners. The submission did not recommend automatic across-the-board wage increases in line with inflation or consider inflation as the sole factor for the commission’s consideration.