1. The Panel’s decision this year will directly impact a higher proportion of the workforce than was the case only 4 years ago.  There are now 2.3 million workers who are dependent on the Annual Wage Review for an increase to their wages.  That is 2.3 million workers who currently are paid the lowest that they can lawfully be paid.  These low paid workers are more likely to women, more likely to be in insecure work and more likely to work in the services sectors which are supposedly the key to Australia’s economic future.

2. These workers are doing it tough, and are not getting their fair share of the nation’s economic prosperity.  Today wages make headlines because an economically conservative Treasurer has declared record low wage growth to be the biggest challenge facing the Australian economy.  The developing trends we have seen are now reaching a critical point where significant and decisive action as required. 

3. Wage distribution over the last 3 decades has been characterised by stagnation at to bottom and expansion at the top.  In recent times the gap between labour productivity growth and wage growth has continued to widen on a range of measures.  Real wages are growing at a glacial pace and while real unit labour costs and the share of wages in national income is declining.  Economic growth however continues, beyond many expectations.

4. A declining household savings ratio and higher consumption growth than income growth shows workers are spending, but their capacity to continue to do so is threatened by the disproportionate increases in the costs of non-discretionary items (such as utilities and housing) relative to headline CPI as well high levels of household debt and recent movements in retail interest rates on home loans.

5. The decisions of the Fair Work Commission have tended to closely follow headline CPI, and the movements in minimum wages have largely followed the direction of market wages albeit generally more conservatively so relative both to AWOTE and median earnings.  A trend declining minimum wage bite has generally been observed, with more recent flattening the more the result of lower growth in wages above the minimum rather than growth at the bottom.

6. In our submission, now is the time to lead, not follow.   It should not be the case that minimum wages adjustments result in either a falling, or roughly stable, minimum wage bite. In our view, the living standards of low paid workers are too low relative to other workers. Current minimum wage levels, in our view, provide neither a fair nor relevant safety net. The increase we propose would begin to reverse the erosion of relative living standards and restore fairness.  This also has the advantage of arresting the drag on growth produced from increased inequality and increasing aggregate demand.