Australia's 2.3 million lowest paid workers will get their biggest pay rise in six years but the industrial umpire concedes it is still not enough to lift them all out of poverty.
Neither unions nor business groups are happy with the 3.3 per cent increase in the national minimum wage and modern award minimum wages, which they say will be negated by cuts to penalty rates from July 1.
The national minimum wage will rise by $22.20 - half of what the ACTU had called for but more than double what business groups wanted - to $694.90 a week.
Fair Work Commission president Justice Iain Ross says the increase will not lead to inflationary pressure and is highly unlikely to have any measurable negative impact on employment.
"It will, however, mean an improvement in the real wages for those employees who are reliant on the national minimum wage and modern award minimum wages and an improvement in their relative living standards," he said on Tuesday.
The FWC expert panel acknowledged the increase - the biggest since 2011 - is not enough to lift all 2.3 million employees who rely on minimum rates of pay out of poverty, particularly those households with dependent children and a single wage earner.
But Justice Ross said an increase of the size necessary to immediately lift all full-time workers out of poverty would likely have adverse employment effects on groups already marginalised in the labour market, with a corresponding impact on households' vulnerability due to a loss of employment or hours.
The Australian Catholic Council for Employment Relations says while the increase is more generous than in previous years, it is still woefully inadequate to halt the widening gap between the rich and poor.
"The national minimum wage can no longer be described as a living wage," acting ACCER chair Tony Farley said.
ACTU secretary Sally McManus said the modest pay increase of only 59 cents an hour was not enough to raise people out of poverty.
"The minimum wage will now be just over $36,000 a year. That's not enough to support yourself, let alone a partner and a family anywhere in Australia."
Ms McManus says 700,000 workers in retail and hospitality will effectively not receive the pay increase because of the cut in penalty rates from July 1.
Fast food, hospitality, retail and pharmacy workers will have their Sunday penalty rates cut by five percentage points, with deeper cuts over the next three years.
Australian Retailers Association executive director Russell Zimmerman said almost half of that initial penalty cut announced on Monday had now been eaten up by the "devastating" minimum wage increase.
"It virtually negated yesterday's decision and I think it will be a long time unfortunately before you see retailers really start to think about putting more people on," he said.
The Australian Industry Group said the excessive wage increase was out of sync with the current fragile business environment.
