Key Points
- The Fair Work Commission is due to deliver its annual wage review decision.
- Unions are calling for a 7 per cent increase.
- Employer groups warn anything more than 4 per cent "would be extremely irresponsible".
The Fair Work Commission is weighing up how to deal with inflationary pressures as it prepares to hand down its annual wages decision later today.
Around 2.7 million workers will be directly impacted by the ruling, which covers both the national minimum wage and minimum award wages. The new rate will come into effect from 1 July.
Last year, the Fair Work Commission handed down a minimum wage increase of 5.2 per cent - the biggest increase in 16 years.
In its , it cited the "sharp increase in inflation" to 5.1 per cent over the year in the March quarter - the highest annual increase since 2000 at the time.
With in the year to April - driven up by the increased costs of housing, food and transport - what can we expect with this year's decision?
What pay increases are being put forward by stakeholders?
The industrial relations tribunal arrives at its minimum wage decision after months of considering arguments from unions, employer groups and federal, state and territory governments delivered through submissions and oral hearings.
In its submission, the Australian Council of Trade Unions (ACTU) called for a 7 per cent minimum wage and award wage increase.
That would see the minimum hourly rate for the lowest-paid workers increase from $21.38 to $22.88. The equivalent full-time minimum wage salary would rise by $3,000 to $45,337.
It cited "strong" overall corporate profits in 2022 and rising inflationary pressures on employee households, with the ABS Living Cost Index for Employees at 9.3 per cent for the year to December, three times the wage price index of 3.3 per cent over the same period.
The Australian Chamber of Commerce and Industry wants the figure up to 4 per cent, saying anything higher "would be extremely irresponsible" and "only add to inflationary pressure and extend the period of high inflation for much longer".
The federal government did not include a figure in its submission, but stated it "recommends that the Fair Work Commission ensures the real wages of Australia’s low-paid workers do not go backwards".
What factors are being considered by the Fair Work Commission?
The decision of the independent seven-member panel considers at times conflicting data points, with the Fair Work Act 2009 specifying reflection on economic indicators like inflation and employment growth as well as the needs of the low-paid.
Emeritus Professor Sue Richardson at Flinders University has been on the commission's expert panel for nine years to 2019. She said it is a balancing act to consider the competing interests, arguments and data points.
"It's not a mechanistic formula, it's a considered judgement on the basis of all the evidence," Professor Richardson said.
She said the employment picture is looking strong, but inflation and labour productivity are detracting factors.
"There's been quite a big increase in the number of hours worked over the last year, it's gone up by 7 per cent," she said.
"Youth unemployment is down and a high proportion of the working-age population is employed.
"On the employment front, things are looking really good. But then there's the problem of inflation, and labour productivity has been falling."
Associate Professor of Economics Michael Dockery at Curtin University said trying to tame inflation while responding to the cost of living pressures is difficult.
"Full indexation means that is going to feed into inflation. This is what is sometimes referred to as a wage-price spiral because when wages go up that forces prices to go up," he said.
How does Australia's minimum wage compare to the rest of the world?
OECD data places Australia in the top five countries based on the national minimum wage, measured by the real hourly minimum wage in 2021. Luxembourg is ranked number one (US$13.4), followed by Australia (US$12.8), France (US$12.6), Germany (US$12.2) and New Zealand (US$11.9).
Professor Mark Wooden at the University of Melbourne said Australia's approach to setting minimum wages is unique.
"Nobody else [outside of Australia] has this very strong system of administered award wages [by the commission] to many workers to almost a quarter of the workforce," he said. "Other countries essentially have just one wage set by the government - and it usually only affects between 2 and 5 per cent of the workforce."
Australia has one of the highest minimum wages among OECD countries. Source: SBS News
Professor Wooden said looking at the dollar figure alone on minimum wage doesn't tell the full story.
"You have to be careful [with comparisons] because some of the countries with the highest relative minimum wages are third world countries with very low living standards," he said.
Professor Richardson said other economists abroad in countries like the US do wonder how Australia achieved a low unemployment rate of 3.7 per cent considering the relatively high minimum wage.
"I'm not saying that we have a particularly equal or fair distribution of earning of pay. There are people who paid a lot more than others," he said.
"But in terms of providing some protection to people who have no bargaining power in the workplace, I think we are doing quite well; provided that the minimum wage is actually paid. There is still a big compliance question."
The difference between the set/nominal minimum wage (light blue) versus real minimum wage after accounting for inflation (dark blue). Countries are arranged by descending order of the real minimum wage growth between 2020 and 2022. Credit: Global Wage Report 2022-23/ILO minimum wage database/IMF inflation 2022 data
"Adequate adjustment of minimum wages could be an effective tool, given that 90 per cent of ILO Member States have minimum wage systems in place," the report reads.
