Where are We with the Minimum Wage?

As with previous years, the Fair Work Commission have a comprehensive array of submissions to consider.

Submissions to the Fair Work Commission reflect a diversity of contributors across industry, labour and government. Each submission includes data indicative, in part, of the contributor’s sense of the broader national good.

The ACTU is seeking a 6% increase to the minimum wage.  In addressing their proposal before President Justice Ross, they highlighted the income and living circumstances of individuals receiving a minimum wage and the challenges which they face in meeting their costs of living.

The ACTU also reported on the earnings of those working variable hours across a number of jobs.

Other submissions from employer groups focused primarily on the economic outlook as reflected in both the government’s April budget papers and the pre-election fiscal outlook.

Submissions also included reference to global growth, Australia’s unemployment rates, inflation and variable sector prosperity together with industry sector and regional differentials.

Submissions also referenced the variable family settings and living costs being experienced across Australia.

The Australian Chamber of Commerce & Industry (ACCI) put to the President of the Commission, with updated economic data, a minimum wage adjustment of 1.8% with commensurate increases to other minimum rates and awards and orders consistent with standard practice.

The ACCI stated that this would ensure that wages of low paid employees kept pace with changes in the cost of living and ensure also that those earning minimum wages are not worse off following the decision.

The ACCI highlighted the Australian Bureau of Statistics’ (ABS) living cost index which was tracking below wages growth, measured by the wage price index and average weekly ordinary time earnings.

The ACCI also referred to the ABS’ updated living cost index in May 2019 which revealed a 0% change in the living costs of employee households in the March quarter of 2019, with annual growth standing at 1.6%.

The ACCI’s submission also referenced the challenge which small to medium sized enterprises may face with any increase in their labour costs which could lead to reduced employment as emerging technologies become more economic than employing staff.

With industry’s perspective, which differs from that of the ACTU representing unions, the re-election of the Federal Coalition government also removes the immediate likelihood of a reinstatement of penalty rates most recently determined by the Commission. Subject to Parliamentary support, reduced tax on low income earners would also contribute to their net available income in meeting changing living costs.

In the context of the Federal election result, it would be our view that the Commission would be unlikely to address the ACTU’s concept of a living wage in their 2019 decision.

Since submissions to the Commission were received, the Consumer Price Index (CPI) for the 12 months to the end of the March 2019 quarter stood at 1.3%.  The unemployment rate increased marginally in the 12 months to April 2019 to 5.1%, though the under-employment rate remained steady at 8.3% and the participation rate remained steady at 65.7%.

Recent observations from the Governor of the Reserve Bank foreshadowing a lower cash rate in order to support employment growth, will have potentially both positive and negative impacts on matters before the Commission.  Positive will be the potential impact on mortgage costs, negative may be the impact it has over time on inflation. The inflation effect might be more front and centre at the time the Commission is considering the minimum wage in April/May 2020.