Minimum Wages Case

Illustration by Sam Wallman

Each year the ACTU and unions claim a pay rise for Australian workers through a ‘Minimum Wages Case’ — which is now called the ‘Annual Wage Review’.

There are about 1.9 million low-paid Australian workers on minimum award wages who rely on the case to protect their living standards – that’s almost one in five workers.

These workers include cleaners, retail and hospitality staff, child care workers, farm labourers, and some factory workers. They include large numbers of women and part-time or casual workers employed in the private sector in lower-skilled jobs. For these workers, the minimum wages case is still their only chance of a pay rise each year. 

After a steady decline over the previous decade as collective agreements became more widespread, In the past couple of years, the number of workers reliant on minimum award wages has risen in the past couple of years.

Since 2000, unions have been successful in achieving about $130 a week more than employers have offered in minimum wages cases. This is a significant achievement considering the challenge for unions in operating for much of that time under the former Howard Liberal Government’s unfair IR laws.

It is also worth noting that unions vigorously pursue a pay rise in minimum wages cases for award workers despite the fact that most are not members of unions.  

 

The 2015 Annual Wage Review

On 2 June, the Fair Work Commission announced a 2.5% increase to all Award base rates of pay as the outcome of the 2015 Annual Wage Review.

From 1 July, the National Minimum Wage rose by $16 a week to $17.29 an hour or $656.90 for a full-time working week.

This fell short of the ACTU’s claim, which had sought to increase all Award rates up to the C10 tradesperson’s rate by $27 to $667.90 per week or $17.58 per hour.

For workers above the C10 classifcation, the ACTU sought to increase wages by 3.6%.

In contrast, the peak employers’ organisation, the Australian Chamber of Commerce and Industry has submitted that Award wages should rise by no more than $5.70 a week this year.

The Fair Work Commission also did not grant the ACTU’s claim for compulsory superannuation to be increased by 0.5% to 10% for minimum award wage workers.

This was to compensate Australia’s lowest paid workers for the cut to their retirement savings caused by the Abbott Government’s decision to freeze the 0.5% increase to compulsory super that was due to come into effect on 1 July under the Superannuation Guarantee.

The new wage levels (see below) came into effect on 1 July 2015.

The size of the union claims in recent years has aimed to make progress towards closing the gap between those on minimum wages and the rest of the workforce, which has grown over the past decade.

The NMW has fallen to just 43.4% of the average full-time wage, the lowest minimum wage ‘bite’on record, down from 47.8% ten years ago. Two decades ago, it was 51.6% 

If this trend continues, Australia’s minimum wage will be on par with the United States by 2037 and our society will have an entrenched underclass of working poor.

 

A fairer way to set Award wages

The Howard Government’s WorkChoices laws changed the way minimum wages were set to make them lower.

This meant that over the period of WorkChoices - which ended in 2010 – the wages of over 1.4 million Australians reliant on award wages went backwards in real terms. Average award wages dropped by around $30 a week and some award workers had their real wages cut by almost $100 a week.

In a final blow for award workers, the WorkChoices pay commission decided in July 2009 to freeze minimum wages – so award workers did not get a pay rise that year.

The pay freeze decision meant the average award worker had to wait almost two years until July 2010 for a pay rise, despite having to cope with increases in rents, health care and other basic living costs in the meantime.

A new pay setting body was established by the Labor Government – now-called the Fair Work Commission – to conduct the Annual Wage Review under fairer industrial relations laws.

Under the new laws, the wage review panel considers not only the economic criteria, like inflation and productivity, but also important issues like social inclusion, relative living standards and the needs of the low paid.

 

Minimum wages under attack

By world standards, Australia’s minimum wage of $17.29 an hour is high and provides a modest standard of living for the lowest paid workers.

This is in sharp contrast to the United States, where the federal minimum wage is just US$7.25. As union membership density has declined in the US, so has the minimum wage; today, adjusted for inflation, it is 25% lower than it was in 1968.

The movement to raise the minimum wage in the US to $US$15 an hour is gaining momentum, and has been adopted in numerous states and.

But here in Australia, big business is pushing hard to cut the minimum wage.

This has gained traction, and the 2014 National Commission of Audit report, chaired by former Business Council of Australia President Tony Shepherd, recommended cutting the national minimum wage for a decade, and then abolishing the annual wage review all together.

Under its proposal, growth of the minimum wage would be slowed by raising it by the rate of inflation, minus 1%, each year for the next decade until it had reached 44% of national Average Weekly Earnings.

Under a model similar to that of the US, states and territories would then be free to set their own different minimum wage each year, in line with the growth of average earnings in the state.

In a similar fashion, business groups are also seeking to cut or abolish the other pillar of a decent wage, penalty rates.

 

Minimum wages are based on skill

There are a range of minimum award wages, depending on the skill involved in the job. Note that there are also different minimum wages for workers covered by awards in the State industrial relations systems. 

For award workers in the Federal system, the 16 level benchmark award classification structure and different minimum award wage levels are shown below:

Federal award classification and minimum weekly wage (from 1 July 2015)

Classification level

Hourly wage

Weekly wage

C14

$17.29

$656.90

C13

$17.79

$675.90

C12

$18.47

$701.80

C11

$19.10

$725.90

C10

$20.13

$764.90

C9

$20.76

$788.80

C8

$21.39

$812.80

C7

$21.96

$834.60

C6

$23.08

$876.90

C5

$23.55

$894.80

C4

$24.18

$918.80

C3

$25.44

$966.90

C2(a)

$26.08

$991.00

C2(b)

$27.22

$1034.30