FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.285—Annual wage review
JUSTICE ROSS, PRESIDENT |
MELBOURNE, 4 JUNE 2014 |
Contents
Abbreviations
2009–10 Review decision |
Annual Wage Review 2009–10 decision |
2010–11 Review decision |
Annual Wage Review 2010–11 decision |
2011–12 Review decision |
Annual Wage Review 2011–12 decision |
2012–13 Review decision |
Annual Wage Review 2012–13 decision |
AAA |
Accommodation Association of Australia |
AAWI |
average annualised wage increases |
ABI |
Australian Business Industrial |
ABS |
Australian Bureau of Statistics |
ACCER |
Australian Catholic Council for Employment Relations |
ACCI |
Australian Chamber of Commerce and Industry |
ACOSS |
Australian Council of Social Service |
Act |
Fair Work Act 2009 |
ACTU |
Australian Council of Trade Unions |
AFEI |
Australian Federation of Employers and Industries |
AHA |
Australian Hotels Association |
Ai Group |
Australian Industry Group |
ANRA |
Australian National Retailers Association |
ANZSIC |
Australian and New Zealand Standard Industrial Classification |
APCSs |
Australian Pay and Classification Scales |
Apprentices decision |
Re Modern Awards Review 2012—Apprentices, Trainees and Juniors |
ARA |
Australian Retailers Association |
AWE |
average weekly earnings |
AWOTE |
average weekly ordinary time earnings |
AWR |
annual wage review |
C10 |
Engineering Tradesperson Level I |
C14 |
Engineering/Production Employee Level 1 |
CCIQ |
Chamber of Commerce and Industry Queensland |
Commission |
Fair Work Commission |
CPI |
Consumer Price Index |
ECAQ |
East Coast Apprenticeships—Queensland |
EEH |
Employee Earnings and Hours |
GDP |
gross domestic product |
HES |
Household Expenditure Survey |
HIA |
Housing Industry Association |
HILDA |
Household Income and Labour Dynamics in Australia |
IMF |
International Monetary Fund |
IPA |
Institute of Public Affairs |
Junior Rates decision |
Modern Awards Review 2012—General Retail Industry Award 2010—Junior Rates |
LCI |
Living Cost Index |
MGA |
Master Grocers Australia |
NFF |
National Farmers’ Federation |
NMW |
national minimum wage |
NTWS |
National Training Wage Schedule |
OECD |
Organisation for Economic Co-operation and Development |
Panel |
Expert Panel for annual wage reviews |
R&CA |
Restaurant and Catering Australia |
RBA |
Reserve Bank of Australia |
Review |
Annual Wage Review 2013–14 |
RNNDI |
real net national disposable income |
SG rate |
superannuation guarantee rate |
Statistical Report |
Statistical Report—Annual Wage Review 2013–14 |
SWSS |
Supported Wage System Schedule |
VACC |
Victorian Automobile Chamber of Commerce |
VECCI |
Victorian Employers’ Chamber of Commerce and Industry |
WPI |
Wage Price Index |
[1] The Fair Work Act 2009 (the Act) requires the Expert Panel (the Panel) to conduct and complete a review of minimum wages in modern awards and the national minimum wage (NMW) in each financial year. The Panel may set, vary or revoke modern award minimum wages and must make a national minimum wage order. This decision deals with the 2013–14 annual wage review (the Review) and directly affects over 1.5 million employees in Australia who are award reliant. 1
[2] The Act sets out some important procedural fairness requirements for the Review. The Panel must ensure that all persons and bodies (referred to collectively as parties) are given a reasonable opportunity to make and reply to written submissions. In this Review, a number of parties took up this opportunity by lodging one or more written submissions, participating in consultations on 4 March 2014 and 20 and 21 May 2014, or both. The timetable for the Review and all of the submissions, transcript, research reports, and some additional economic data were published on the Fair Work Commission’s (the Commission) website to ensure that all parties had a reasonable opportunity to participate. The Panel considered all of the material received from parties and the published research in making its decision.
[3] This chapter summarises the matters we have considered, our reasoning and the increase we have decided upon. A more detailed discussion of these matters is provided in the subsequent chapters.
[4] The Act provides that in conducting the Review, the Panel must take into account the general objects in s.3, the modern awards objective in s.134(1) and the minimum wages objective in s.284. We have taken all of these matters into account. These provisions contain some common elements and to a large extent this decision has been structured around the statutory considerations we are required to take into account and we deal with them in Chapters 2–9. We do not repeat all of that material here but the views expressed in this chapter should be seen in the context of our decision as a whole. We turn first to the nature of the Panel’s task.
[5] A number of submissions contended that the increases in award rates of pay in past reviews had overcompensated workers for a projected increase in inflation which did not eventuate. Similar submissions were put in last year’s Review proceedings. These submissions proceed on a false premise.
[6] As the Panel has observed before, there is often a degree of tension between the economic, social and other considerations which the Panel must take into account. It is this complexity which has led the Panel to consistently reject a mechanistic or decision rule approach to wage fixation, such as the adoption of real wage maintenance.
[7] The real wages of award-reliant employees are relevant to our task but not determinative. To adopt real wage maintenance as a decision rule would fail to take into account other considerations including, for example, relative living standards (as we are required to do by s.284(1)(c)) in circumstances where the rate of growth in average earnings and bargained rates of pay have outstripped growth in award rates of pay.
[8] The submissions of the parties focus, naturally enough, on those statutory considerations which support the outcome for which they contend. However, the Act requires the Panel to take into account all of the relevant statutory considerations and the range of matters we are required to take into account is not limited to economic considerations.
[9] The statutory considerations we are required to take into account calls for the exercise of broad judgment rather than a mechanistic approach to minimum wage fixation.
[10] In terms of the nature of the Panel’s task, a number of parties advanced submissions in favour of an award-by-award review of minimum wages or a differential wage increase for specific employers or industries. The scheme of the Act is more consistent with establishing adjustments across the range of modern awards, and in the absence of exceptional circumstances, taking the sectoral variations into account when determining the level and nature of adjustments that will apply to the modern awards generally. Exceptional circumstances can and should be considered on their merits as required by the Act.
[11] Before turning to the relevant statutory considerations it is convenient to deal with the issue of proposed legislative change. This issue is discussed in more detail in Chapter 5.
[12] The Superannuation Guarantee (Administration) Amendment Act 2012 increases the superannuation guarantee rate (SG rate) from 9 per cent to 12 per cent. The increase is to be phased in, commencing with increases of 0.25 percentage points on 1 July 2013 and 1 July 2014.
[13] The Annual Wage Review 2012-13 decision (2012–13 Review decision) concluded that it was consistent with the statutory framework to have regard to the SG rate increase to take effect from 1 July 2013 in its determination of the level of increase in minimum wages. While the Panel took the 0.25 percentage point increase in the SG rate into account in determining the level of increase in minimum wages in the 2012–13 Review, it did not apply a direct, quantifiable, discount to the minimum wage increase. In the 2012–13 Review decision, the Panel said:
“The SG rate increase to apply from 1 July 2013 is a moderating factor in considering the adjustment that should be made to minimum wages. As a result, though it would not be appropriate to quantify its effect, the increase in modern award minimum wages and the NMW we have awarded in this Review is lower than it otherwise would have been in the absence of the SG rate increase.”
[14] In our view, such an approach is consistent with the objects of the Act, the modern awards objective and the minimum wages objective and, in particular, the legislative requirements that we take into account:
[15] The 0.25 percentage point increase in the SG rate to take effect from 1 July 2014 is the second increase in the SG rate since the contribution rate reached 9 per cent on 1 July 2012. For the reasons given in the 2012–13 Review decision, we have decided to take the scheduled 0.25 percentage point increase in the SG rate into account in our determination of the level of any minimum wage increase.
[16] Submissions in these review proceedings also addressed the proposed repeal of the carbon pricing mechanism.
[17] The Australian Government has announced its intention to repeal the existing carbon price arrangements. The Clean Energy Legislation (Carbon Tax Repeal) Bill 2013 (the CTR Bill) was tabled in Parliament on 13 November 2013. It sought to repeal the legislation that establishes the carbon pricing mechanism. The CTR Bill was defeated in the Senate on 20 March 2014. It has not, to this date, been reintroduced.
[18] The Australian Government submitted that the Panel should “take account of the carbon tax repeal (and the continuation of compensation) in its 2014 decision”. 2 The carbon price compensation is also part of the rationale stated by the Australian Chamber of Commerce and Industry (ACCI) in support of the position it has taken in these proceedings. ACCI submitted that the Panel should increase minimum wages by not more than $8.50 per week. In determining that figure ACCI stated that it had regard to, among other things: “the retention of the carbon price compensation for low income earners”. In its reply submission, ACCI addressed the proposed repeal of the carbon pricing mechanism and put a similar submission to that put by the Australian Government.
[19] Implicit in the submissions of the Australian Government and ACCI is that the Panel should award a lower increase than it otherwise would on account of an asserted improvement in living standards consequent upon the abolition of the carbon price. In essence, the Panel is being invited to speculate on the outcome of an uncertain political process. We reject that approach. The prospect of legislative change is not something we propose to take into account in making our decision.
[20] For the same reasons, we have not taken into account the proposed changes to the tax-transfer system announced in the 2014–15 Budget. At the time of this decision, the Australian Government has introduced its appropriation bills and they remain before parliament. Further, in the event that the proposals are enacted without amendment, a number of the proposed changes will not commence until 1 July 2015 or later.
[21] We now turn to the considerations which we must take into account. The matters of direct relevance to the Review can be grouped into three broad categories: economic; social; and collective bargaining.
Economic considerations
[22] The outlook for the Australian economy remains sound, with solid growth, relatively low unemployment and continuing moderate inflation anticipated in the near future. Global conditions are expected to continue to improve with stronger growth expected in the world economy and within Australia’s major trading partners.
[23] Gross domestic product (GDP) growth was solid, although slightly below trend, increasing by 2.8 per cent over the year to the December quarter 2013, with stronger growth in the second half of the year. Domestic GDP growth is forecast to remain slightly below trend before increasing in 2015–16. The transition to broader growth extending beyond the resources sector is underway. Exports in a range of sectors have grown over the past year. Some strengthening of household consumption activity and new dwellings investment has occurred, although non-resources investment remains weak and is projected to remain subdued.
[24] Labour productivity has risen by over 2 per cent per annum over the past two years. Some diversity of productivity growth is evident across the award-reliant industries, with some above and some below the national average. Over the longer term, growth has benefited capital disproportionately to labour and the labour share of income has declined materially over the past two decades.
[25] The inflation rate remains within the Reserve Bank of Australia’s (RBA) target band of 2–3 per cent, although it has accelerated over the year to the March quarter 2014, whether measured by the Consumer Price Index (CPI) or Living Cost Index (LCI) for employee households. The CPI grew by 2.9 per cent over the year to the March quarter 2014. Inflation is anticipated to decline toward the midpoint of the RBA range in 2014–15.
[26] Based on various measures, the rate of wages growth fell in 2013 to its lowest recorded level over the past decade. It is expected to increase a little in 2014–15. Bargaining outcomes, measured by average annualised wage increases (AAWI), grew by more than other wage measures over the year to the December quarter 2013 but at a lower rate than over the past decade.
[27] Nominal unit labour costs bring together wages growth and productivity. Nominal unit labour costs increased by around 3.0 per cent annually, on average, between the December quarter 2003 and the December quarter 2013, but barely rose over the past year. Real unit labour costs, which remove the effect of inflation, fell by 3.9 per cent over the last decade, and by 1.8 per cent over the year to the December quarter 2013. They are at historically low levels, contributing to improved international competitiveness. In aggregate, there are no signs of cost pressures emanating from the labour market.
[28] Labour market conditions were subdued in 2013 and into 2014. Employment increased by 0.9 per cent over the year to April 2014, although hours worked did not grow over that time. Employment growth is expected to be stronger in 2014–15. The unemployment rate has edged up since the middle of 2011, to 5.8 per cent in April 2014. The unemployment rate is forecast to peak at 6� per cent in the June quarters of both 2015 and 2016, although it could peak at a lower level given the positive labour market developments since the start of this year. Youth unemployment, while high, is not showing signs of a structural shift from its longer-term relationship with aggregate unemployment.
[29] There is no evidence to suggest that the economic conditions for small businesses have diverged materially from those of businesses generally within the industries in which they operate, as reflected in aggregate and sectoral economic data.
[30] The diversity in outcomes between the award-reliant industries indicates that the most award-reliant industries do not face a uniformly difficult economic environment. The industry data does not provide a basis for concluding that recent minimum wage increases have significantly impacted on the economic performance of the award-reliant industries.
[31] Overall, Australia’s economic performance and outlook remains sound and consistent with a moderate increase in minimum wages. The continuing moderate inflation and historically low aggregate wages growth provide scope for increasing minimum wages without inflationary consequences.
Social considerations
[32] The minimum wages objective and the modern awards objective both require us to take into account relative living standards and the needs of the low paid. These are different, but related, concepts.
[33] The relative living standards of award-reliant employees are affected by the level of wages that they earn, the hours they work, tax-transfer payments and the circumstances of the households in which they live.
[34] We find that the real value of the NMW (as adjusted by the CPI) rose by only a cumulative 0.9 per cent in the five years to December 2013 and declined by 0.1 per cent in the past year. It should be noted that this does not include the 0.25 per cent rise in the superannuation guarantee levy, which was taken into account in our 2012–13 Review decision. Other award rates of pay have grown more slowly or declined in real terms over the same five year period. All award rates of pay have fallen relative to the Wage Price Index (WPI) and to measures of median and average earnings over the past five years.
[35] The ratio of the NMW to median earnings has fallen since the first annual wage review adjustment from 54.4 per cent in August 2009 to 52.7 per cent in August 2012 (the latest date for which data are available).
[36] Although Organisation for Economic Co-operation and Development (OECD) data show that the NMW in Australia remains relatively high as a proportion of average earnings, it also discloses a significant reduction over the past two decades, both in an Australian context and in an international context. Whilst the ratio of the NMW to average earnings within Australia provides one measure of the relative living standards of the low paid, it remains our view that data about the Australian minimum wage bite relative to other OECD countries is of limited significance in evaluating the relative living standards supported by award wages.
[37] We accept that the evidence is clear that households of various types that are reliant on award rates of pay or the NMW have had a fall in their relative earnings and that on this measure their relative standard of living has declined. We accept also that the distribution of earnings has become steadily less equal over recent decades. However, we note that in the most recent years this has not translated directly into rising inequality of equivalent household disposable income.
[38] We note that a number of the proposed changes to tax-transfer payments announced in the 2014–15 Budget will particularly impact on families, rather than individuals. The appropriate reference household for the purposes of setting minimum wages is the single person household, rather than the couple household with children. For this reason, it should not be assumed that the tax-transfer payments announced in the Budget will automatically be taken into account in determining the level of the increase in next year’s Review.
[39] The needs of the low paid are difficult to identify and to quantify, since many live in households with others. We considered their needs by examining changes to the real value of their earnings, to the real value of household disposable income in the lower deciles, to hypothetical families that are reliant on low award wages, and to indicators of material stress in low-earning families. For some of these indicators, there is no new data to add to the material that was before us in the 2012–13 Review.
[40] We conclude that the capacity of the low paid to meet their needs has seen little improvement from the contribution made by award wages in recent years. Some, but not all, low-paid households have made gains through the effects of the tax-transfer system, and potentially from changes in the composition and level of workforce participation of the family.
[41] The evidence on the changes in the relative living standards of those on award rates of pay is consistent. Those on the lowest award rates, including the NMW, have fallen relative to rates of pay, as measured by the WPI. The higher award rates have fallen even further behind on this measure, although at the same rate over the past three years.
[42] The Panel is also required to take into account promoting social inclusion through increased workforce participation. We accept that our consideration of social inclusion is limited to increased workforce participation. This involves a consideration of the increased incentives that higher minimum wages can provide to those not in employment to seek paid work, balanced against potential impacts on the demand for low-paid workers and hence the supply of low-paid jobs, from increases in minimum wages. However, we also accept that the impact of minimum wages upon an employee’s capacity to engage in community life and the extent of their social participation can appropriately be considered in the context of the legislative requirements to “maintain a safety net of fair minimum wages” and to take into account “the needs of the low paid”.
[43] The Panel’s view continues to be that modest minimum wage adjustments lead to a small, or zero, effect on employment. What is considered to be a modest minimum wage adjustment will depend upon the prevailing circumstances.
Bargaining
[44] As part of the modern awards objective, the Panel must ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions, taking into account the need to encourage collective bargaining.
[45] Several of the submissions commented on findings presented in Research Report 6/2013 3 and Research Report 7/20134 on award reliance and the incentives to bargain. The research does not reveal any particular relationship between minimum award increases and the incentive to bargain. Instead it points to a complex mix of factors that may contribute to employee and employer decision making about whether or not to bargain.
[46] The available evidence indicates that the level of increases in minimum award wages over the past decade or so have been compatible with the encouragement of collective bargaining. We are satisfied that the increase awarded in this Review is also compatible with the need to encourage collective bargaining.
[47] It is convenient at this point to note the broader findings of Research Report 7/2013 regarding the flow-on of annual wage review increases to non award-reliant employees (whether covered by an enterprise agreement or otherwise) and the reasons for this. We have taken into account the evidence that the impact of annual wage review decisions extends beyond award-reliant employees and employers, while acknowledging that there is some uncertainty about the nature and extent of this impact.
The decision
[48] A number of considerations have led us to award a higher increase than that determined in last year’s 2012–13 Review decision. The economic outlook remains sound, with GDP growth expected to ease in 2014–15 before increasing to just below trend in 2015–16. Employment growth is expected to be stronger in 2014–15, and the unemployment rate is expected to increase only slightly over the forecast period. Inflation has been contained, and is anticipated to slow in the period ahead, approaching the mid-point of the RBA’s target band.
[49] Annual growth in the WPI has declined each year from the December quarter 2010, and average weekly ordinary time earnings (AWOTE) recorded its lowest annual growth in a decade in the year to the December quarter 2013. Wages growth is forecast to increase only moderately from current low levels. The outlook for contained inflation growth and relatively low aggregate wages growth provide scope for increasing minimum wages without inflationary consequences.
[50] The real value of award minimum wages and the NMW would decline if no adjustment were awarded. The CPI increased by 2.9 per cent over the past year.
[51] The rise in labour productivity together with the low growth in wages has meant that nominal unit labour costs barely rose over the past year and real unit labour costs remained at an historically low level. In aggregate, there are no signs of cost pressures arising from the labour market.
[52] The SG rate increase to apply from 1 July 2014 has been a moderating factor in our assessment of the adjustment that should be made to minimum wages. As a consequence, though it would not be appropriate to quantify its effect, the increase in modern award minimum wages and the NMW we have awarded in this Review is lower than it otherwise would have been in the absence of the SG rate increase.
[53] We have not taken into account the proposed repeal of the existing carbon price arrangements or the proposed changes to the tax-transfer system announced in the 2014–15 Budget. It has been a long-standing practice of the Commission and its predecessors to determine the matters before it on the basis of the existing legislative framework and not otherwise.
[54] We noted in the 2012–13 Review decision that, if sustained, the recent improvement in labour productivity could provide the capacity to address the declining relative position of the low paid and for them to share in increasing community living standards. Labour productivity has risen by more than 2 per cent per annum over the past two years. We also note that a number, but not all, of award-reliant industries recorded labour productivity growth above that for all industries in the year to June 2013.
[55] As we have mentioned, relative living standards and the needs of the low paid are among the matters we are required to take into account in the fixation of minimum wages. The relative living standards of award-reliant employees have declined over time.
[56] Over the past decade, all award rates of pay have fallen relative to measures of median and average earnings. The NMW has fallen from 47 per cent to 43.3 per cent of AWOTE and from 59.8 per cent to 55.8 per cent of average weekly earnings (AWE) over the five year period from the December quarter 2008 to the December quarter 2013. We conclude that earnings from jobs paid at the award rate are contributing less to the maintenance of relative living standards than they have in the past decade.
[57] The real weekly earnings of full-time workers have become progressively less equal over the past decade—for each decile, the lower the earnings, the lower the rate of growth in earnings—although this rising inequality has become less pronounced in the past five years. No party disputed the fact that the distribution of earnings has become more unequal in Australia over recent decades and the Panel acknowledges that annual wage review decisions have a role to play in ameliorating inequality.
[58] While real earnings have generally increased over the past decade, earnings inequality is increasing. Over the past five years, the rate of growth in average earnings and bargained rates of pay have outstripped growth for award-reliant workers. This has reduced the relative living standards of award-reliant workers and reduced the capacity of the low paid to meet their needs—needs being a relative concept. Chart 1.1 shows these changes.
Chart 1.1: Change in real value of C14, C10, WPI, AWOTE and AAWI—December quarter 2008–December quarter 2013
Source: ABS, Average Weekly Earnings, Australia, Nov 2013, Catalogue No. 6302.0; ABS, Wage Price Index, Australia, Dec 2013, Catalogue No. 6345.0; Department of Employment, Trends in Federal Enterprise Bargaining, December quarter 2013, <http://employment.gov.au/trends-federal-enterprise-bargaining>; Metal, Engineering and Associated Industries Award 1998; Manufacturing and Associated Industries and Occupations Award 2010 (from 1 January 2010).
[59] We have decided that the range of considerations we are required to take into account favours the award of an increase which will result in a modest improvement in the real value of modern award minimum wages. There has been almost no growth in the real value of award rates over a period when other employees have had substantial wage increases in circumstances in which the economic environment has been sound. The deterioration in the relative living standards of award-reliant workers; the needs of the low paid; the recent widespread improvement in labour productivity growth; the historically low levels of real unit labour costs; and the absence, in aggregate, of cost pressures from the labour market are all factors favouring a real increase in minimum wages. These factors are moderated by the SG rate increase to apply from 1 July 2014.
[60] As to the form of the increase, past flat dollar increases in award minimum rates have compressed award relativities and reduced the gains from skill acquisition. The position of the higher award classifications has reduced relative to market rates and to average earnings and has fallen in terms of real purchasing power. These considerations led the Panel to determine a uniform percentage increase. The increase in modern award minimum wages we have decided on is 3 per cent. Weekly wages will be rounded to the nearest 10 cents.
[61] The national minimum wage is currently set at the minimum wage for the C14 classification. 5 We have not been persuaded to depart from that relationship. The national minimum wage will be $640.90 per week or $16.87 per hour. The hourly rate has been calculated by dividing the weekly rate by 38, on the basis of the 38 hour week for a full-time employee. This constitutes an increase of $18.70 per week to the weekly rate or 50 cents per hour to the hourly rate.
[62] The determinations and order giving effect to our decision will come into operation on 1 July 2014.
[63] A number of parties sought differential treatment in respect of any determination arising from this Review being applied to certain modern awards. In terms of those parties arguing exceptional circumstances the onus is on a party submitting such circumstances to justify this. We recognise particular drought conditions and other industry circumstances and associated hardships affecting a number of businesses. But, for the reasons given in Chapter 10, those advocating differential treatment have not persuaded us that their proposals have sufficient merit. The evidence does not support a conclusion that the industry circumstances are such that would warrant the differential treatment sought. We have, however, taken these matters into account in our consideration of the economy and in the decision more generally.
[64] In relation to incapacity arguments more generally, we again draw attention to the practical difficulties which arise from the interaction of ss.157(2), 285(1) and 286 of the Act. In particular, there is no mechanism in the Act for revisiting a determination varying modern award minimum wages after an annual wage review has been completed. As a result of this legislative inflexibility, a small or large business; a sector; or a region facing circumstances warranting the deferral of, or exemption from, an annual wage review increase can only make such an application in the context of an annual wage review. So if the adverse circumstances arose in, for example, July, the businesses affected would have to wait until the following year (i.e. the next annual wage review) before they could seek relief. This is a matter which requires legislative amendment to provide parties with an avenue to seek relief from increases flowing from an annual wage review. Such relief could be available to an individual employer or on industry sector or geographic basis.
[65] The Panel drew attention to these issues in the 2011–12 and 2012–13 Review decisions but no legislative amendments have been made and, as a consequence, the practical difficulty created by the legislative framework remains.
[66] The Act requires the Panel to take into account a number of considerations in reviewing modern award minimum wages and the national minimum wage order. The minimum wages objective in s.284 applies to the exercise of functions and powers under the Parts of the Act concerning minimum wages (Part 2–6) and modern awards (Part 2–3). Section 284 is in these terms:
“284 The minimum wages objective
What is the minimum wages objective?
(1) The FWC must establish and maintain a safety net of fair minimum wages, taking into account:
(a) the performance and competitiveness of the national economy, including productivity, business competitiveness and viability, inflation and employment growth; and
(b) promoting social inclusion through increased workforce participation; and
(c) relative living standards and the needs of the low paid; and
(d) the principle of equal remuneration for work of equal or comparable value; and
(e) providing a comprehensive range of fair minimum wages to junior employees, employees to whom training arrangements apply and employees with a disability.”
[67] In setting, varying or revoking modern award minimum wages, we are also required to take into account the modern awards objective in s.134(1). Section 134(1) states:
“134 The modern awards objective
What is the modern awards objective?
(1) The FWC must ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions, taking into account:
(a) relative living standards and the needs of the low paid; and
(b) the need to encourage collective bargaining; and
(c) the need to promote social inclusion through increased workforce participation; and
(d) the need to promote flexible modern work practices and the efficient and productive performance of work; and
(da) the need to provide additional remuneration for:
(i) employees working overtime; or
(ii) employees working unsocial, irregular or unpredictable hours; or
(iii) employees working on weekends or public holidays; or
(iv) employees working shifts; and
(e) the principle of equal remuneration for work of equal or comparable value; and
(f) the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden; and
(g) the need to ensure a simple, easy to understand, stable and sustainable modern award system for Australia that avoids unnecessary overlap of modern awards; and
(h) the likely impact of any exercise of modern award powers on employment growth, inflation and the sustainability, performance and competitiveness of the national economy.”
[68] The modern awards objective applies to the performance or exercise of the Commission’s “modern award powers”, which are defined to include the Commission’s functions and powers under Part 2–6, so far as they relate to modern award minimum wages. The provisions relating to the annual wage review are set out in Part 2–6 of the Act, and so requires the performance or exercise of the Commission’s “modern award powers”. It follows that the modern awards objective applies to the Review proceedings.
[69] Section 578(a) of the Act is also relevant—it directs the Commission to take into account, among other things, the objects of the Act in performing functions or exercising powers.
[70] Sections 284, 134 and 578 all direct the Commission to “take into account” certain specified considerations in reviewing modern award minimum wages and the national minimum wage order. To take a matter into account means to evaluate it and give it due weight, having regard to all other relevant factors. 6 A matter which the Commission is directed to “take into account” is a “relevant consideration” in the Peko-Wallsend7 sense of matters which the decision maker is bound to take into account.
[71] The minimum wages objective, modern awards objective and objects of the Act contain some common elements. As we indicated in the Annual Wage Review 2011–12 decision (2011–12 Review decision and the 2012–13 Review decision, the matters of direct relevance to the Review can also be understood by grouping them into three broad categories: economic; 8 social;9 and collective bargaining.10 We have considered these matters in making our decision and specifically address them in Chapters 4 and 6–9 of this decision. Chapter 3 discusses the proposals of the parties to the Review.
[72] It is important to appreciate that there is often a degree of tension between the economic, social and other considerations which the Panel must take into account. For example, a substantial wage increase may better address the needs of the low paid and improve the relative living standards of award-reliant employees, but it may (depending upon the prevailing economic circumstances) also reduce the capacity to employ the marginalised and hence reduce social cohesion. It is this complexity that has led the Panel to reject a mechanistic or decision rule approach to wage fixation, such as the adoption of real wage maintenance. 11 The real wages of award-reliant employees are relevant to our task, but not determinative. The range of considerations we are required to take into account calls for the exercise of broad judgment rather than a mechanistic approach to fixing minimum wages.
[73] We note that a number of parties again contended that the Panel should adopt an award-by-award approach to the review of minimum wages. We deal with the submissions at Chapter 10. Three further aspects of the statutory framework have been the subject of submissions to this Review:
[74] We consider each of these matters in turn below.
Error of law
[75] As part of submissions to this year’s Review, the Australian Catholic Council for Employment Relations (ACCER) submitted that in the 2012–13 Review decision the Panel made an “error of law” in its construction of s.284(1) and failed to give proper effect to the intended operation of the provision and to paragraph 284(1)(c) in particular. Section 284(1)(c) directs the Panel’s attention to “relative living standards and the needs of the low paid”.
[76] In previous review decisions, the Panel has stated that the Act required it to take into account all of the relevant statutory considerations, 12 and that the relative living standards and needs of the low paid were “one of a number of considerations that [the Panel] must take into account.”13 In the 2012–13 Review decision, the Panel stated:
“[56] As noted in the Annual Wage Review 2009–10 decision (2009–10 Review decision), both minimum wages and the tax-transfer system are relevant to the maintenance of an effective safety net for the low paid—each has its part to play. Minimum wages play a particularly important role in the disposable income of households that do not receive income support payments. We agree with the following observation from the 2009–10 Review decision:
‘[244] Our view is that the low paid need the highest level of wages that is consistent with all other objectives including low unemployment, low inflation and the viability of business enterprises. At the least, this level of wages should enable a full-time wage earner to attain a standard of living that exceeds contemporary indices of poverty. We are open to evidence that there are particular economic developments that are placing unusual and severe strain on the budgets of the low paid.’” 14 [footnotes omitted]
[77] In the preliminary consultations to this Review, ACCER submitted that the above extract from the 2012–13 Review decision contained an error of law. Two propositions were advanced in this regard. 15 The first is that in considering s.284(1), and in particular paragraph 284(1)(c), “all factors had to be assessed and that it was not a matter of distributing what is left over after priority has been given to the other factors.”16 The second proposition was that the Annual Wage Review 2009–10 decision (2009–10 Review decision)—and therefore the 2012–13 decision which adopted parts of the 2009–10 Review decision—did not give adequate consideration to the needs of the low paid.17 ACCER’s complaint is directed at the extract from the 2012–13 Review decision, which is set out above at paragraph [76].
[78] ACCER’s submission is misconceived, for two reasons.
[79] First, it is simply wrong. ACCER’s analysis suffers from the vice of reading one passage in the Panel’s decision in isolation from the decision as a whole, pouncing on an infelicitous expression and contending that it warrants the inference of an error of law. Such an approach should be rejected. 18 In the 2012–13 Review decision, the Panel also said that:
“[9] The submissions of the parties tended to focus, naturally enough, on those statutory considerations which support the outcome for which they contend. But the Act requires the Panel to take into account all of the relevant statutory considerations.” 19
[80] Further, the proposition that the “needs of the low paid” were not taken into account in the 2012–13 Review decision is devoid of merit. Chapter 6 of that decision dealt directly with “relative living standards and the needs of the low paid”, as required by sections 134(1)(a) and 284(1)(c) of the Act.
[81] Secondly, the submission is advanced in the abstract and is not directed towards the adoption of a particular construction of the relevant provisions of the Act. It is not the function of review proceedings to embark on some sort of judicial review of past Panel decisions.
[82] We make it clear that there is nothing wrong with a party advancing a submission that a past Panel decision had wrongly construed a statutory provision and advancing an alternate construction. ACCI took such a course in last year’s Review proceedings in relation to the proper construction of s.284(1)(b). The Panel acknowledged the force of ACCI’s submission and accepted the proposition that the Panel’s consideration of “social inclusion” in s.284(1)(b) is limited to increased workforce participation. 20 But that is not what ACCER has sought to do in these proceedings. During the preliminary consultations, the Panel asked ACCER to articulate the formulation of any proposed remedy to this contention in their main submission.21 In its subsequent submissions, ACCER did not directly address the question of the formulation that should be applied.
Relative living standards
[83] The second matter concerns ACCER’s submission that the Panel make “a ruling” that the living standards of pensioners are relevant to the determination of “relative living standards” under section 284(1)(c). 22 ACCER submitted that the Panel has construed the term “relative living standards” in s.284(1)(c) to mean the relative living standards of wage earners and that this “narrow” interpretation excludes comparisons between the minimum wage safety net and payments received by pensioners.23
[84] ACCER’s submission proceeds on a false premise. Contrary to ACCER’s contention, the Panel has not proceeded on the basis that payments received by pensioners are excluded from its consideration of relative living standards. In the 2012–13 Review decision the Panel stated:
“[361] The minimum wages objective and the modern awards objective both require us to take into account two particular matters, relative living standards and the needs of the low paid. These are different, but related, concepts. The former, relative living standards, requires a comparison of the living standards of award-reliant workers with those of other groups that are deemed to be relevant. The latter, the needs of the low paid, requires an examination of the extent to which low-paid workers are able to purchase the essentials for a “decent standard of living” and to engage in community life. The assessment of what constitutes a decent standard of living is in turn influenced by contemporary norms ...
[365] In assessing relative living standards, the comparison we focus on is other employed workers, especially non-managerial workers. There is no absolute relationship that the living standards of award-reliant workers should bear to all employees. In taking into account relative living standards, we pay particular attention to changes in the earnings of the award-reliant compared to changes in measures of average and median earnings more generally.” [emphasis added]
[85] The Panel’s assessment of relative living standards focuses on the comparison between award-reliant workers and other employed workers, especially non-managerial workers. Given the context and the nature of the review proceedings such a focus is appropriate—no party contended otherwise. Indeed, ACCER submitted that “primary emphasis needs to be given to the wages of other workers across a broad range of incomes”. 24 The fact that the Panel focuses on the comparison with other employed workers does not exclude a consideration of the comparative living standards of award-reliant workers and other groups, including pensioners. It is a matter of the weight to be given to such comparisons.
[86] We also note the Australian Federation of Employers and Industries’ (AFEI) submission as to the relevance of pension rates to our consideration of relative living standards:
“Specific consideration of pension levels – funded by the taxpayer and established within the social welfare system – should not a [sic] determining factor in setting the minimum wage.
The aim of the proposition advanced by the ACCER appears to be introducing an equivalent mechanism in the minimum wage which installs the pension’s link to the higher of price/living cost indexes and the wages benchmark of male total average weekly earnings …” 25
[87] To the extent that ACCER’s submission sought the application of the mechanism for adjusting pension payments to the adjustment of minimum wages, we reject that proposition. As we observed earlier, the range of considerations we are required to take into account calls for the exercise of broad judgment, rather than a mechanistic or decision rule approach to minimum wage fixation.
[88] In taking into account relative living standards the Panel has paid particular attention to changes in the earnings of the award reliant compared to changes in measures of average and median earnings more generally. We are not persuaded to depart from that approach.
Consideration of s.134(1)(da)
[89] The modern awards objective is directed at ensuring that modern awards, together with the National Employment Standards, provide a “fair and relevant minimum safety net of terms and conditions” taking into account the particular considerations set out in paragraphs 134(1)(a) to (h).
[90] The Fair Work Amendment Act 2013 (Cth) amended the modern awards objective by inserting an additional matter to be taken into account, in the following terms:
“(da) the need to provide additional remuneration for:
(i) employees working overtime; or
(ii) employees working unsocial, irregular or unpredictable hours; or
(iii) employees working on weekends or public holidays; or
(iv) employees working shifts.” 26
[91] The Explanatory Memorandum to what became s.134(1)(da) states:
“This amendment promotes the right to fair wages and in particular recognises the need to fairly compensate employees who work long, irregular, unsocial hours or hours that could reasonably be expected to impact their work/life balance and enjoyment of life outside of work.”
[92] CCIQ submitted that the Panel must ensure that it:
“considers the impact of the new section 134(1)(da), which provides for additional remuneration for employees through overtime, penalty rates and allowances. This will have potentially significant implications for employment costs in traditionally award reliant industries, including retail and hospitality.” 27
[93] CCIQ’s submission seems to assume that parties will seek to rely on s.134(1)(da) in support of applications to vary modern awards to increase overtime payments, penalty rates and allowances and, further, that such applications will be granted, resulting in increased employment costs in award-reliant industries.
[94] At this time there are no applications to vary modern awards in the manner contended by CCIQ. To the extent that such applications are made in the context of the 4 yearly review of modern awards they will be assessed against the relevant statutory provisions. In the decision dealing with some of the preliminary jurisdictional issues related to the 4 yearly review of modern awards the Commission stated:
“a party seeking to vary a modern award in the context of the Review must advance a merit argument in support of the proposed variation. The extent of such an argument will depend on the circumstances ... where a significant change is proposed it must be supported by a submission which addresses the relevant legislative provisions and be accompanied by probative evidence properly directed at demonstrating the facts supporting the proposed variation.
...
What is ‘necessary’ in a particular case is a value judgment based on an assessment of the considerations in s.134(1)(a)–(h), having regard to the submissions and evidence directed to those considerations. In the Review the proponent of a variation to a modern award must demonstrate that if the modern award is varied in the manner proposed then it would only include terms to the extent necessary to achieve the modern awards objective.” 28
[95] Implicit in the submission put by CCIQ is the proposition that the Panel should award a lower increase than it otherwise would on the basis that s.134(1)(da) may result in variations to modern awards which may increase employment costs.
[96] There is no factual basis for the submission. Even if applications were made to vary modern awards in the manner suggested the outcome of such applications is far from certain. Section 134(1)(da) requires the Commission to take into account certain considerations but it does not dictate a particular result. The modern awards objective is very broadly expressed and no particular primacy is attached to any of the considerations set out in s.134(1)(a) to (h). CCIQ’s submission is entirely speculative and on that basis we reject it.
[97] A wide range of proposals were put forward by the parties over the course of the Review. The Panel received submissions from the Australian and state governments, collective bodies representing employees and employers and other organisations. Views were divided on the quantum and form of any increases to modern award minimum wages and the NMW. A number of parties identified issues for consideration but made no particular recommendation as to whether there should be an increase in the rate of the NMW or modern award minimum wages, or the extent of any such increase. Some submissions recommended that there should be no increase to the NMW or to minimum wages in certain modern awards, 29 while others sought an exemption from any variation determination.30 A summary of the submissions made in relation to the proposed adjustments to minimum wages is provided at Appendix 1 and the claims for exemptions and differential outcomes are addressed in Chapter 10. This chapter summarises the range of parties’ submissions in respect of the quantum and form of increase to be awarded in modern award wages and the NMW.
Proposals for a flat dollar increase
[98] A number of business and industry associations recommended flat dollar increases, although views on the appropriate quantum of any increase differed. ACCI, AFEI, Business SA, the Chamber of Commerce and Industry Queensland (CCIQ), the Victorian Employers’ Chamber of Commerce and Industry (VECCI), the Australian National Retailers Association (ANRA), the Pharmacy Guild of Australia and the Victorian Automobile Chamber of Commerce (VACC) proposed an increase of not more than $8.50 per week to the NMW and modern award wage classifications. 31 The recommended increase was determined having regard to a range of matters, including the forthcoming increase to the superannuation guarantee, continuing assistance to low income earners for the carbon price, and increases awarded in the previous two reviews that were said to be in excess of projected increases in inflation.32 ACCI submitted that:
“It may be proposed that the Panel should increase wages more rapidly than it did last year so that minimum and award wage employees continue to receive a real wage increase. However in the current labour market conditions this will mean job losses. Low wages growth has also been the key moderating influence on inflation, and a significant increase in minimum and award wages is likely to add to inflationary pressure, making it more difficult for the RBA to keep interest rates low to support investment and export growth. In any case there have been significant real increases in the NMW in recent years, and ACCI’s recommended increase will ensure that there will have been a real increase over the span of the Panel’s wage determination.” 33
[99] The Australian Retailers Association (ARA) provided qualified support for a flat dollar increase. ARA submitted that the Commission should review minimum wages on a modern award by modern award basis. 34 However, in the event of an increase, ARA recommended that it should be no more than $8.50 per week, or 1.3 per cent on the NMW.35
[100] Both the National Retail Association and ANRA expressed opposition to a percentage increase. 36 The National Retail Association submitted that if a percentage increase is applied to modern award wages, “the average impact of that increase across levels should be no more than $9.30 for a 38-hour week”.37
[101] A number of other submissions recommended no increase to minimum rates of pay in respect of particular modern awards. The Australian Hotels Association (AHA) recommended no increase to the NMW and award rates specified within the Hospitality Industry (General) Award 2010 38 but added that if the Panel decides an increase to the NMW is justified, then AHA recommends that an increase of not more than $8.50 per week be applied to modern award wages and the NMW.
[102] The Accommodation Association of Australia (AAA) also recommended no increase to minimum wages in the Hospitality Industry (General) Award 2010. 39 The AAA submitted that if the Commission increased the NMW and minimum wages in modern awards, such an increase should be “minimal”.40
[103] Restaurant & Catering Australia (R&CA) submitted that there should be no increase for modern award wages in the hospitality sector, 41 namely the Restaurant Industry Award 2010, Hospitality Industry (General) Award 2010 and the Fast Food Industry Award 2010.42 R&CA limited its recommendation to the hospitality sector and did not specify a quantum in respect of the NMW or other modern award wages.
Proposals for a percentage increase
[104] Four submissions from employer groups put forward proposals for a percentage increase. The Australian Industry Group (Ai Group) proposed that a 1.6 per cent increase be applied to both the NMW and modern award wages. This figure represents an increase of $10.00 per week in the NMW and an increase of $11.60 per week in the C10 rate. 43
[105] Australian Business Industrial (ABI) recommended an increase in the NMW and modern award wages of not more than 1.3 per cent. ABI explained that this proposal was based on “the implications of changes in economic conditions”. 44
[106] Master Grocers of Australia (MGA) recommended an increase of not more than 1.25 per cent be applied to modern award wage rates. 45 Cost pressures arising from the combination of payroll tax liability, the increase in the superannuation guarantee levy and wage increases from the final stage of phasing in modern award pay rates were raised as key considerations for the Panel in this Review.46
[107] The National Farmers’ Federation (NFF) recommended that a 1.1 per cent increase be applied to minimum wages in modern awards and the NMW, the lowest of the proposed percentage increases. 47
Proposals for a tiered approach
[108] Two submissions put forward a tiered approach. 48 The Australian Council of Trade Unions (ACTU) recommended a flat dollar increase of $27.00 per week to the NMW and to modern award wages up to and including the C10 level,49 and a 3.7 per cent increase to all modern award minimum wages above that level.50
[109] The flat dollar increase of $27.00 per week is equivalent to an increase at the C10 level of approximately 3.7 per cent. The increase represents larger percentage increases over the classifications below the C10 level, ranging from around 3.9 per cent at the C11 level to 4.3 per cent at the NMW and C14 level.
[110] The ACTU submitted that:
“We believe that an increase structured in this way best balances the range of factors that the Panel must take into account. It delivers the largest proportionate increase to the lowest paid, while preserving the existing skill-based relativities for award classifications above C10. Research for this Review finds that 75% of award-reliant workers are employed below the C10 rate of pay, strengthening our contention that there should be special emphasis on the needs and relative living standards of the lowest paid.” 51
[111] United Voice supported the ACTU’s recommendation for a flat dollar increase in the NMW and to modern award wages up to and including the C10 level, and a 3.7 per cent increase to all modern award minimum wages thereafter. 52 Noting that its members were some of the “lowest paid workers in society”, United Voice argued that a flat increase would be most beneficial to the workers it represents.53 United Voice submitted that “[t]he minimum wage needs to maintain some link to average or median earnings to ensure economic imbalance (growing inequality) does not impede the goals of social inclusion.”54
[112] ACCER also put forward a tiered approach. ACCER proposed an increase to modern award minimum wages at or above the C10 level equal to the sum of the quarterly CPI increases from the March quarter 2013 to the March quarter 2014, plus another 1 per cent for productivity increases. 55 This equates to an increase of 3.9 per cent, based on a 2.9 per cent increase in the CPI through the year to the March quarter 2014.56 For all modern award wage rates below the C10 level, ACCER proposed a flat dollar increase equal to the C10 increase as a dollar figure,57 which amounts to $28.30 per week.58 ACCER considered that a flat dollar increase for employees at these classifications, rather than a percentage increase, was the best way to “improve the living standards of other low paid workers who are on a wage rate in excess of the NMW and living in poverty.”59
[113] In respect of the NMW, ACCER proposed an increase equivalent to the change at the C10 rate plus a further $10.00 per week. 60 In arriving at this recommendation, the principal objective of ACCER is “to increase the NMW to the level of the lowest award rate for cleaners” and, more generally, “to obtain increases in safety net rates that reflect cost of living increases, productivity gains and the improvements in incomes across the broader Australian community”.61
Other proposals
[114] The majority of submissions did not make any recommendation as to the quantum of any change to the NMW or modern award minimum wages.
[115] The Australian Government supported a “cautious approach” 62 and submitted that the Panel “should not limit its focus to the effect of an individual annual wage review decision but consider matters of broader context.”63 The Australian Government recommended that the Panel should have particular regard to the impact of any decision on “the hiring of the low paid, especially considering the economic and labour market outlook”.64 The Australian Government made no submission as to whether wages should be increased or the extent of any increase.
[116] The New South Wales, Victorian and Queensland Governments also recommended that the Commission exercise caution in determining the level of any adjustment in minimum wage rates. 65 The New South Wales Government did not elaborate on what outcome would constitute a “cautious approach” but offered the following explanation of its position:
“The NSW Government has arrived at its position after giving careful consideration to the relevant economic indicators. These reveal that economic growth continues to be below trend and appears likely to remain so in the short term. More broadly, current economic conditions and the outlook in the medium term remain uncertain.” 66
[117] The Victorian Government argued that it was essential to take into account “the current and prospective relative weakness in labour demand”. 67 In its written response to the questions for final consultations, the Victorian Government indicated that the Victorian Government’s public sector wages policy may be relevant in the context of determining what constitutes a “cautious approach” to the 2013–14 Review:
“the Government’s public sector wages policy has a wage guideline rate of 2.5 per cent per annum, with any enterprise agreement outcomes in excess of the guideline rate being fully offset by genuine productivity gains linked to workplace reform achieved as part of the agreement negotiations.” 68
[118] The South Australian Government submitted that the Panel “should increase national minimum wages taking into account current economic conditions”. 69
[119] The Western Australian Government did not specify a quantum of increase in its initial submission but supported the Panel taking “a balanced approach to the 2013–14 Review”. 70 In response to questions for final consultations on what would constitute a “balanced” approach, the Western Australian Government submitted that:
“On 13 May 2014, the Minister for Commerce, on behalf of the Western Australian Government, made a submission to the Western Australian Industrial Relations Commission State Wage Case 2014 which also supported a balanced approach being taken to minimum and award wage setting.
The Minister submitted to the State Wage Case that it is fair and prudent to adjust minimum and award wage rates of pay to the extent that their real value is maintained and the spending power of employees is preserved while ensuring that wage costs for employers remain sustainable.
The Minister’s submission to the State Wage Case therefore advocated a percentage increase to minimum and award wage rates equivalent to the most recent Western Australian Department of Treasury estimate of growth in the Consumer Price Index (CPI) for Perth for the financial year 2013-14, as published in the 2014-15 Western Australian State Budget, which is 3.0 per cent.” 71
[120] The Australian Council of Social Service (ACOSS) submitted that a substantial increase in real minimum wages was necessary in order to reduce the growing gap between minimum wage and median pay levels. While ACOSS supported setting the minimum wage “well above” poverty levels, it recognised the need to “maintain a gap between maximum social security payments and minimum wages to preserve work incentives”. 72
[121] While the Housing Industry Association (HIA) did not recommend a specific change to the NMW or modern awards, it opposed the increase sought by the ACTU and made a number of submissions in that regard. HIA argued that an increase of $27.00 per week in the NMW was “unsustainable and unreasonable” and would not alleviate housing affordability pressures. 73
[122] Similarly, the South Australian Wine Industry Association Incorporated opposed a percentage increase and recommended that any variation should be “a flat increase that is fair to all employees and capped no higher than the rate of inflation”. 74
[123] The Australian Road Transport Industrial Organization took the view that any increase in wages should be “modest”. 75 The submission highlighted unemployment, a fall in the labour force participation rate and modest wages growth as providing “useful guidance to the Fair Work Commission in terms of its decision making”.76
[124] The Institute of Public Affairs (IPA) submitted that “the current minimum wage be frozen at its current level”. 77 In relation to the statutory framework within which the Panel must operate, IPA argued:
“We consider that nothing in the FW Act precludes the Fair Work Commission from freezing the minimum wage, reducing the minimum wage, or indeed setting the minimum wage to zero.” 78
4. The Economy
[125] As part of the minimum wages objective, the Panel must establish and maintain a safety net of fair minimum wages, taking into account, amongst other things, the performance and competitiveness of the national economy, including productivity, business competitiveness and viability, inflation and employment growth.
[126] The modern awards objective requires the Panel, to ensure that modern awards provide a fair and relevant minimum safety net of terms and conditions, amongst other things, to take into account: the need to promote flexible modern work practices and the efficient and productive performance of work; the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden; and the likely impact of any exercise of modern award powers on employment growth, inflation and the sustainability, performance and competitiveness of the national economy.
[127] In this Chapter, we consider:
Recent economic performance
Economic growth
[128] Submissions described the Australian economy as performing below trend despite growth picking up in the December quarter 2013. The domestic economy was described as being in transition, in response to the recent falls in the terms of trade, recent falls in the exchange rate and with mining investment having reached its peak. Submissions also noted that net exports had offset the fall in business investment as a key driver of growth. All data are seasonally adjusted unless otherwise noted.
[129] GDP increased by 0.8 per cent in the December quarter 2013 and 2.8 per cent over the year to the December quarter 2013 (Chart 4.1), which is slightly below trend growth. GDP growth in 2013 was almost the same as that for 2012 and 2011, and higher in the second half of the year.
Chart 4.1: Economic growth, annual and quarterly growth rates
Source: ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2013, Catalogue No. 5206.0.
[130] The contributors to increased expenditure on GDP in the December quarter 2013 were net exports (0.6 percentage points), final consumption expenditure (0.5 percentage points), public gross fixed capital formation (0.2 percentage points) and changes in inventories (0.2 percentage points). The main detractor was private gross fixed capital formation (–0.5 percentage points). 79
[131] Over the year to the December quarter 2013, the significant contribution from net exports reflects a 6.5 per cent increase in exports and a 4.6 per cent reduction in imports. Household and government consumption growth both contributed to GDP growth, rising 2.6 per cent and 2.7 per cent respectively. The terms of trade fell by 1.2 per cent, continuing the decline since its peak in the September quarter 2011. Private gross fixed capital formation fell by 0.4 per cent, whilst public capital formation fell by in excess of 10 per cent.
[132] Growth in household consumption expenditure of 2.6 per cent over the year to the December quarter 2013 was slightly higher than the 2.4 per cent recorded over the year to the December quarter 2012. Quarterly retail turnover data beyond the December quarter 2013 suggest consumption growth has further increased. In current prices, the seasonally adjusted estimate for Australian retail turnover rose 1.2 per cent in the March quarter 2014 and 3.2 per cent over the year to the March quarter 2014, with growth accelerating in each quarter within that year. Retail turnover increased in each industry segment, other than department stores, over the year to the March quarter 2014.
[133] The household saving ratio was 9.7 per cent in seasonally adjusted terms in the December quarter 2013, around its historical norm, 80 and down from 10.9 per cent in the December quarter 2012 and 11.8 per cent a year earlier.
[134] The stronger growth in real net national disposable income (RNNDI) 81 relative to real GDP associated with the prolonged and large increase in the terms of trade in the decade to the September quarter 2011 produced a substantial cumulative gap between real GDP and RNNDI by the middle of 2011. The subsequent fall in the terms of trade in the two years to the December quarter 2013 has caused RNNDI to increase by only 1.8 per cent, while GDP has grown by 5.7 per cent.82
[135] The Australian economy continues to outperform the average of the OECD Major 7 countries in terms of quarterly GDP growth (Chart 4.2). The strong growth relative to the OECD Major 7 countries has been evident since the global financial crisis.
Chart 4.2: International comparisons of quarterly GDP growth
Source: OECD, Economics: Key Tables from OECD, OECD iLibrary, Table No. 13, 4 April 2014, <http://www.oecd-ilibrary.org/economics/economics-key-tables-from-oecd_2074384x
[136] Data for gross value added by industry, which provides information about the sectoral contribution to aggregate growth, reveals diversity over the past year. Chart 4.3 shows the average annual percentage change in gross value added by industry over the year and over the decade to the December quarter 2013. Mining; Health care and social assistance; and Financial and insurance services continued to grow strongly during 2013, while Agriculture, forestry and fishing; Rental, hiring and real estate services; and Public administration and safety grew at a pace that was well above their decade average. In contrast, against the longer term trend, gross value added fell in Wholesale trade; Electricity, gas, water and waste services; and Accommodation and food services while Manufacturing continued its long-term decline.
Chart 4.3: Average annual change in gross value added by industry—December quarter 2003–December quarter 2013(Percentage)
Source: ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2013, Catalogue No. 5206.0.
[137] Over the decade to the December quarter 2013, the strongest growth in gross value added occurred in the Mining; Construction; and Professional, scientific and technical services industries, and service industries such as the Health care and social assistance; and Financial and insurance services industries. Gross value added in the Manufacturing industry fell marginally over the decade. The differential growth in gross value added between industries evident over the past decade reflects structural change in the economy, driven particularly by the resources boom and a shift in community spending toward services such as those provided by the Health care and social assistance industry.
[138] In its more recent decisions, the Panel considered structural change in the economy, most notably change associated with the resources boom. 83 In that consideration, the Panel noted the RBA’s analysis84 which suggested that resources investment as a share of GDP was expected to peak over the course of 2013, although remaining high for a time, with a shift toward the production and export phase.85
[139] Investment and export data suggest that the resources sector has moved, as expected, from the investment to the export phase. Investment declined for the economy in aggregate in the past year, with capital expenditure falling by 5.7 per cent over the year to the December quarter 2013. Chart 4.4 shows Mining investment declining by 7.1 per cent over the year to the December quarter 2013, with investment declining by 11.1 per cent in Manufacturing and 2.2 per cent in other selected industries over that time.
Chart 4.4: Average annual change in actual private capital expenditure by selected industries, over the year, five years and 10 years to the December quarter 2013 (Percentage)
Note: Other selected industries includes Electricity, gas, water and waste services; Construction; Wholesale trade; Retail trade; Transport, postal and warehousing; Information media and telecommunications; Finance and insurance (excluding ANZSIC class 6330: Superannuation funds); Rental, hiring and real estate services; Professional, scientific and technical services; Accommodation and food services; Administrative and support services; Arts and recreation services; and Other services. All data are seasonally adjusted, based on chain volume estimates.
Source: ABS, Private New Capital Expenditure and Expected Expenditure, Australia, Dec 2013, Catalogue No. 5625.0.
[140] The fall in mining investment from peak levels, following the exceptional growth over the past five and ten year periods, confirms the shift from the investment phase of the resources boom. Mining investment is no longer contributing to growth in investment or GDP. However, it remains at high levels (Chart 4.5) and continues to constitute over half of total new capital expenditure and over 5 per cent of total GDP. 86
Chart 4.5: Actual capital expenditure—Mining
Source: ABS, Private New Capital Expenditure and Expected Expenditure, Australia, Dec 2013, Catalogue No. 5625.0.
[141] Export growth is strong, with net exports being the major contributor to GDP growth in the December quarter 2013. Growth in exports over the year to the December quarter 2013 improved markedly over the average of the past five years (Chart 4.6).
[142] Sectoral export data support the proposition that the resources boom has moved into the production and export phase. Mining exports have risen by 24.8 per cent over the year to the December quarter 2013, significantly stronger growth than the 6.6 per cent per annum growth over the five years and 13.9 per cent per annum over the eight years to the December quarter 2013.
[143] Exports of Agriculture, forestry and fishing also grew strongly, at about double the average rate over the five years to the December quarter 2013. Of particular note is the recent growth in non-primary exports (Manufacturing and Other services). From a recent history of almost no growth, these sectors grew by 5.6 and 9.0 per cent, respectively, over 2013. Strong growth has occurred in both goods and services exports over the past year.
[144] Export growth now comes from a number of sectors, providing reason for cautious optimism that the economy is adjusting to the peak in mining investment. Although the exchange rate is still relatively high, this has not prevented export growth over 2013.
[145] We note the Ai Group submission that around three-quarters of manufacturing exporters are seeking to take advantage of the high dollar by importing components and capital, with the proportion of their cost base represented by imports increasing significantly towards the end of 2013. Ai Group also reported that its member surveys indicated that the proportion of businesses that say they are exporting has increased. 87
Chart 4.6: Average annual change in exports by selected industries, over the year, five years and eight years to December 2013 (Percentage)
Note: The point at which exports are valued is on a free on board (FOB) basis. A FOB price at the customs frontier includes the transaction value of the goods, the value of outside packaging (other than international containers used for containerised cargo), and related distributive services used, up to and including loading the goods onto the carrier at the customs frontier of the exporting country. Data for this series commences in July 2005. All data are in original terms.
Merchandise exports are allocated to an ANZSIC 2006 industry. Mining includes all related Mining subdivisions apart from Exploration and other mining support services. The ‘Other’ category includes subdivision 54: Publishing (except internet and music publishing) and also includes the sum of items not readily classified and those which are confidential and cannot be more specifically classified.
Source: ABS, International Trade in Goods and Services, Australia, Mar 2014, Catalogue No. 5368.0.
[146] Private investment in new housing, reflected in Australian Bureau of Statistics (ABS) building approvals data, 88 shows a 19.4 per cent increase in the total number of houses approved over the year to March 2014, although falling from a peak level within that year in January 2014.
[147] The necessary transition in the sources of economic growth following the passing of the acceleration in investment in resources extends beyond the shift to increased resources exports to broader-based growth.
Productivity and real unit labour costs
[148] Many submissions provided data about and discussed GDP per capita, labour productivity, the wages/profits share and unit labour costs. These concepts were discussed extensively in the Panel’s 2012–13 Review decision. 89
[149] Chart 4.7 presents the annual changes in productivity each year over the decade to the December quarter 2013 in trend terms. Productivity is defined as GDP per hour worked for “all sectors” and gross value added per hour worked for the “market sector”. GDP per capita is also included in the chart. Short-term measures of productivity should be interpreted with some caution as productivity is best measured over a business cycle.
[150] On both measures, trend labour productivity has risen over the past two years, though at a somewhat faster rate in 2012 (2.5 per cent) than in 2013 (1.7 per cent for all sectors and 1.8 per cent for the market sector). GDP per capita also rose in both years, at the lower rate of 0.9 per cent per annum (reflecting a faster growth in population than in hours worked).
Chart 4.7: Measures of productivity—Annual growth rates
Note: Data are in trend terms. Gross value added measures the value of output at basic prices minus the value of intermediate consumption at purchasers’ prices. The series “Gross value added per hour worked—market sector” has been introduced by the ABS from the September quarter 2011, and replaces the “GDP per hour worked—market sector” series. The market sector includes all industries except for Public administration and safety; Education and training; and Health care and social assistance.
Source: ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2013, Catalogue No. 5206.0.
[151] Several parties directed our attention to productivity at the industry level. The Australian Government submitted that the lower rates of productivity growth in award-reliant industries affect the affordability of award wage increases in these industries 90 and that since productivity only happens at the firm level, it should be addressed through enterprise bargaining.91 In the responses to final consultations questions, the Australian Government noted that:
“The capacity for firms to pay wages is determined at the firm level. As such, improvements to productivity at the firm level also improve the capacity to pay for increases in wages. The productivity performance of the industry reflects an aggregate measure of firm level productivity within that industry. Therefore, labour productivity increases within an industry provide a more accurate reflection of the capacity for employers in that industry to afford potential wage increases. This is more direct than considering the national aggregate of productivity growth. For example, high productivity growth in Agriculture, the industry with the highest productivity growth in the current cycle, does not increase the ability of employers in the Accommodation and Food services sector to afford higher wages (particularly if productivity in the latter industry has not improved).” 92
[152] ACCI submitted that productivity has been increasing largely in the mining sector and it makes no sense to examine productivity growth across the economy. 93 However, the ACTU provided industry labour productivity data for 2012–1394(Table 4.1) which showed productivity was growing in a number of non-mining sectors.
Table 4.1: Labour productivity growth by industry—2012–13
Change (%) | |
Financial and insurance services |
7.6 |
Administrative and support services* |
7.0 |
Electricity, gas, water and waste services |
6.5 |
Rental, hiring and real estate services* |
5.7 |
Health care and social assistance |
5.2 |
Public administration and safety |
4.2 |
Mining |
3.2 |
Retail trade* |
2.2 |
All industries |
2.1 |
Transport, postal and warehousing |
1.2 |
Construction |
0.8 |
Arts and recreation services |
0.0 |
Manufacturing |
–0.1 |
Professional, scientific and technical services |
–0.1 |
Wholesale trade |
–0.5 |
Education and training |
–0.9 |
Agriculture, forestry and fishing |
–1.3 |
Accommodation and food services* |
–2.2 |
Other services* |
–3.5 |
Information media and telecommunications |
–4.4 |
Note: *Award-reliant industries.
Source: ABS, Australian System of National Accounts, 2012–13, Catalogue No. 5204.0.
[153] Whilst both aggregate and sectoral productivity are relevant in considering Australia’s recent economic performance, when considering the relative living standards of the award reliant, aggregate productivity performance is relevant in that it provides a measure of increasing community living standards.
[154] We disagree with the argument that productivity improvement is generated entirely at the enterprise level. It arises also from enterprises networking and sharing information and technology, transferring knowledge, improved infrastructure and human capital, and from structural reform overall in the economy. The distribution of productivity entirely at an enterprise or sectoral basis through wages outcomes would not necessarily help the flow of resources into more productive areas.
[155] The proposition that recent aggregate productivity growth is driven by the mining sector is not supported by industry level productivity data, shown for 2012–13 in Table 4.1.
[156] As shown by Table 4.1, productivity growth by industry varies considerably around the all industries average of 2.1 per cent in 2012–13, ranging from –4.4 per cent in the Information media and telecommunications industry, through to 7.6 per cent in the Financial and insurance services industry. Productivity growth in the Mining industry was 3.2 per cent, ahead of the all industries average but by no means the highest productivity growth sector in 2012–13.
[157] The five industries in Table 4.1 in which the highest proportions of employees are award reliant are indicated by an asterisk. The Accommodation and food services and Other services industries show a decline in productivity. The Administrative and support services and Rental, hiring and real estate services industries show productivity growth well in excess of the all industries average. Productivity growth in the Retail trade sector was marginally above the all industries average. The 2012–13 data indicate that labour productivity has increased over the last financial year in three of the five most award-reliant industries.
[158] The usual caveats about annual productivity statistics and their volatility and the proposition that productivity outcomes are best measured over a productivity cycle apply even more strongly to such data at an industry level. However, the growth in labour productivity in award-reliant sectors is confirmed by a consideration of the average level of growth over the past two financial years. Over that two-year period, average annual labour productivity has increased in each of the most award-reliant industries—by 0.8 per cent in Accommodation and food services, 0.4 per cent in Other services, 1.9 per cent in Administrative and support services, 2.7 per cent in Retail trade and 4.9 per cent in Rental, hiring and real estate services (with an all industry average of 2.1 per cent).
[159] At both an aggregate level, and within award-reliant sectors, growth in labour productivity has been sustained, providing some support for a modest rise in the real value of minimum wages.
[160] In the 2012–13 Review, the ACTU drew attention to the falling labour share of national income since 2000, and the decoupling of wages and productivity over that period. In its decision the Panel noted that the recent relationship between wages and productivity is a complex story, given:
[161] The Panel did not draw conclusions about the gap between award wages and productivity for the purpose of its determination. We invited further submissions on the implications of the fall in the labour share of national income over the last decade for minimum wage fixation in the current Review. 96
[162] The ACTU again relied on the falling labour share of national income over the decade to 2012–13, contending that the increase it sought would help to deliver some benefits from productivity growth to low-paid workers. It submitted that whilst labour productivity grew by 12.3 per cent between 2002–03 and 2012–13, the real (CPI-adjusted) value of the NMW rose by only 3.4 per cent, and that the real value of minimum wages lagged behind labour productivity growth in all but one of the four more award-reliant industries. 97 The ACTU submitted that while many, though not all, OECD countries experienced a falling labour share of income in recent decades, the fall in Australia’s labour share (or, equivalently, real unit labour costs) has been larger than in all but one other OECD country.98
[163] The New South Wales Government, ACCI and AFEI cited a recent Productivity Commission research paper (authored by Mr D Parham) 99 submitting that it provided explanations for the fall in labour’s share of income in Australia since the 2000s. These submissions argued that the research found that although labour’s share of income fell sharply over this period, labour was no worse off as the real income of labour had nonetheless grown.100
[164] ACCI provided a summary of recent international research conclusions about the reasons for the widespread fall in the labour share of national income across OECD countries as follows:
“Various drivers have been suggested, including shifts in industry composition, technological change allowing the substitution of capital for labour, increased global trade allowing more mobile capital to demand higher returns, additional competition created by global trade reducing economic rents that had been captured by labour, and a growing financial sector creating more pressure to improve returns to capital.” 101
[165] They go on to summarise Mr Parham’s view of the developments in Australia in the following terms:
“economies tend to become more capital intensive over time. This means that the increase in the ratio of capital to labour needs to be offset by a fall in the returns received by capital relative to wages. In other words, wages actually have to increase relative to capital rents more quickly than capital volumes increase relative to hours worked. These two factors offset each other during the 1990s. In the 2000s, the rate at which the relative rent for capital declined was largely unchanged. However, it was outstripped by unprecedented growth in capital investment.” 102
[166] We summarise the main points of Mr Parham’s paper as:
[167] It is generally accepted, and we accept, that the labour share of income has declined materially over the past two decades. There has been a redistribution of income from labour to capital. It is true that real wages have grown over that time but, as is apparent from Mr Parham’s paper, capital income growth (including its capacity to purchase consumer goods) accelerated more rapidly. The benefits of the increase in Australia’s income associated with the terms of trade increase over the past decade has benefited capital disproportionately to labour.
[168] We note that the terms of trade, which have been an important cause of the rise in the purchasing power of labour and capital income in the past decade, has declined over the past two years, although it remains at historically high levels. At the same time, labour productivity, if not multi-factor productivity, has begun to rise. Both of these are indicators that the major shock to the economy caused by the very high prices of resources, and subsequent capital investment in mining, is beginning to pass. With it will pass, at least to a degree, the unusual impact on the labour and capital shares of national income, and the boost to employee purchasing power from a high exchange rate.
[169] It is our view that shorter-term volatility in the shares of labour and capital, caused by exceptional circumstances, do not provide a foundation for altering the NMW and award rates. We agree that changes in labour productivity that are sustained provide a firmer basis for any increase in real minimum rates. Longer-term trends in the labour share of national income should be kept in mind, as they can influence assessments of the fairness of, and relative standard of living provided by, minimum wages.
[170] We are required by s.134(1)(f) of the Act to have regard to the likely impact of our decision on business, including on productivity.
[171] In the 2012–13 Review decision, 103 the Panel noted research undertaken for the United Kingdom’s Low Pay Commission and the OECD which suggested that a higher minimum wage was likely to promote productivity improvement but noted that the evidence was limited and was not directed to the impact of minimum wage increases in the context of the annual wage review in Australia.
[172] In the current Review, many submissions discussed productivity, but few addressed the issue of the impact of minimum wage movements on productivity. The Australian Government referred us to various reports of the Productivity Commission from 1998–2000 which suggested that enterprise bargaining provided an opportunity for productivity improvement at the workplace. 104 An impact of our decision on that opportunity for productivity improvement would only arise if it affected the extent of enterprise bargaining undertaken, an issue considered at paragraphs [472]–[473], where we conclude that the level of increases in minimum wages over the past decade or so have been compatible with the encouragement of collective bargaining. The increase awarded in this Review is also compatible with the need to encourage collective bargaining.
[173] Nothing in the limited submissions and evidence put to us in relation to the likely impact of our decision on productivity causes us to depart from the conclusion of the Panel in the 2012–13 Review that:
“There is no evidence that minimum wage increases arising out of the annual wage review will have an adverse impact upon productivity, at an aggregate level or at the firm level. The limited evidence before us suggests that minimum wages increases are more likely to stimulate productivity measures by some employers directly affected by minimum wage increases.” 105
Business competitiveness and viability
[174] The profits and wages shares of national income represent the returns to capital and labour, respectively, in the process of production. Over the decade to the December quarter 2013, the profits share increased by 1.0 percentage point while the wages share decreased by 0.5 percentage points (Chart 4.8). The profits share increased by 1.0 percentage point over the year to the December quarter 2013, to be 27.3 per cent. The wages share fell by 1.1 percentage points over the year, to be 53.3 per cent.
Chart 4.8: Profits and wages shares of total factor income
Note: Total factor income represents the value added by labour and capital in the process of producing GDP.
Source: ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2013, Catalogue No. 5206.0
[175] For the non-Mining industries, company gross operating profits rose by 0.9 per cent over the year. For all industries, including Mining, company gross operating profits grew by 10.7 per cent over the year. (Chart 4.9). Company gross operating profits in Mining rose by 36.4 per cent over the year.
Chart 4.9: Company gross operating profits, quarterly growth rates—All and non-mining industries
Source: ABS, Business Indicators, Australia, Dec 2013, Catalogue No. 5676.0
[176] The business bankruptcy rate is defined as the number of business-related bankruptcies divided by the number of self-employed and employers in the economy. Over the first half of the decade to 2012–13, these rates fluctuated between 0.3 and 0.4 per cent, before increasing to a peak of 0.47 per cent in 2012–13.
[177] Levels of business closures and insolvencies were also raised by employer groups 106 by reference to data from the Australian Securities and Investments Commission (ASIC) and ABS business entry and exit data.107 The AAA and R&CA submitted that company insolvencies were the “highest on record” in the 2013 calendar year. R&CA also submitted that business-related bankruptcies continued to rise in 2012–13.108 VACC and Business SA noted the closures of major companies in the Manufacturing sector, such as Holden, Ford and Toyota.109 The ACTU relied on RBA analysis,110 arguing that business failure rates for incorporated enterprises “eased slightly and is around its typical level” and that the rate for unincorporated enterprises fell “sharply” over the past year or so.111
[178] ASIC publishes insolvency data derived from information provided by liquidators, receivers and voluntary administrators in accordance with obligations under the Corporations Act 2011 (Cth). The most recent data 112 showed 2552 companies entering external administration (EXAD) in the December quarter 2013, 2.5 per cent lower than the December quarter 2012. Over 2013, 10 821 companies were reported as entering external administration, the highest level recorded.
[179] The upward trend in the absolute numbers of companies entering external administration has been evident over the past decade 113 (and probably longer) and reflects increased numbers of incorporated businesses in Australia: the number of incorporated businesses has grown by around 0.8 per cent per annum over the eight years to 2013. The rate at which companies have entered external administration has changed little over the past eight years and at March 2014 is at a relatively low 0.03 per cent (Chart 4.10).
Chart 4.10: Rate of new company registrations and rate of insolvencies (EXADs) per month as a percentage of total companies incorporated
Note: ASIC has a concern that the number of new business registrations may be biased upwards as a result of an increase in recent years in the registration of self-managed super funds. The number of self-managed super fund companies entering EXAD is very small, within the natural variation of the series. Accordingly, there is no plan to revise the EXAD series. All data is seasonally adjusted and current up to March 2014.
Source: Reproduced from data provided by ASIC. See ASIC, Corporate insolvencies: December quarter 2013, ASIC Insolvency statistics summary,
https://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/Insolvency-stats-summary-Dec-Qtr-2013.pdf.
[180] ASIC information shows that the number of companies entering external administration on average is only 6 per cent of the number of new business incorporations. The ratio was lower in 2013 than was typical for the eight year period to the December quarter 2013.
[181] The ASIC data show continuing low levels of incorporated companies entering external administration relative to the total population of incorporated companies over the past decade. The RBA data for unincorporated businesses show a broadly similar position, although the relative level of unincorporated business failures increased from the time of the global financial crisis through to December 2012, before falling in 2013.
[182] ABS Counts of Australian Businesses data show that the number of businesses declined by 2.9 per cent in 2012–13, following limited increases in the preceding two years. 114 It should, however, be noted that a significant proportion of businesses do not employ labour. At the beginning of 2012–13, 61 per cent of the total 2 141 280 businesses counted were non-employing businesses.115 For non-employing businesses the entry rate in 2012–13 fell from 14.7 per cent to 12.4 per cent and the exit rate rose from 16.2 per cent to 17.4 per cent. For employing businesses, the entry rate in 2012–13 fell from 11.6 per cent, to 9.3 per cent, and the exit rate rose from 8.1 per cent to 8.8 per cent. New entries of employing businesses exceeded business exits in 2012–13, although by a reduced level than in recent years. The ABS publication does not provide information about exit and entry rates for employing businesses by industry sector.
[183] Some employer submissions referred to closures of major companies in the Manufacturing sector. VACC and Business SA noted the closures of major companies in the Manufacturing sector, such as Ford in 2016 and Holden and Toyota in 2017, 116 submitting that there are going to be many thousands of employees looking for work in the automotive and other related sectors over the next few years and that employees will be relying on the Commission to ensure that business conditions are such that will allow employers to take on new employees.117 The closure of the three vehicle manufacturers will adversely affect businesses in the broader automotive industry and parts manufacturers in particular. In responses to the final consultation questions, the Australian Government submitted that “[t]he Commonwealth estimates that the closure of Toyota, Ford and Holden automotive manufacturing facilities in Australia would result in 6,600 direct job losses. ABS data suggests that a further 37,600 jobs in automotive and automotive part manufacturing in Australia may be consequentially affected.”118
[184] ACCI submitted that “[l]ow paid work will be a key pathway back into the workforce for many workers that are forced to change industries and retrain.”119 The ACTU commented that “[t]he appropriate way to assist workers and communities is through such packages [supported from state and federal governments], not through awarding lower increases in minimum wages than would otherwise be the case.”120 It is not evident that the annual wage review should or can be directed to mitigating the effect of the vehicle companies’ decisions to cease manufacturing motor vehicles in Australia.
[185] R&CA, in its submissions, listed a number of restaurants which have closed or relocated to foreign countries. It submitted that “if labour costs continue to rise thousands more will be forced to close permanently”. 121 In media reports in relation to the closures cited by R&CA in its submissions, the restaurateurs identified factors such as inadequate demand, failed concepts, rents, increased local competition and financing issues.122 Only one, Blanchura, cited labour costs (amongst other factors).123 In its questions to the parties, the Panel asked R&CA if it was submitting that the restaurant closures cited in their submission have occurred due to the level of (and/or increases in) minimum wages and other award labour costs and, if so, what evidence is there in support of this submission. R&CA responded that “labour costs is a contributing factor in the closure of many restaurants and cafes in Australia”124 and provided statements from two business owners that contended, in general terms, that “changes in Industrial Relations” or “labour costs” were a factor in the closure of their restaurants.125 The media identified in the Panel’s question to R&CA,126 including those for whom R&CA provided the statements in response, do not disclose minimum wages or labour costs to have been a causal factor in their decisions.
[186] Similarly, R&CA submitted that “[r]estaurateurs and small business entrepreneurs will continue to relocate to foreign countries rather than Australia if labour costs continue to remain excessively high”, citing the opening of a Los Angeles restaurant by Curtis Stone. 127 In its reply submission, R&CA responded to a question posed by the Panel and stated:
“Restaurant & Catering Australia cites operators that have relocated to Bali where labour costs are significantly lower including Tetsuya Wakuda, Caf� Brunetti, Charlie & Co. in Singapore, Robert Marchetti in Bali, Matthew Yazbek (Toko) in Bali, China and Dubai.” 128
[187] For the purpose of consultations, the Panel noted a number of articles and restaurant websites referring to businesses that have closed in Australia and opened overseas. 129 They disclosed personal and business reasons for opening a restaurant overseas and the exploitation of business opportunities overseas by Australian restaurants based on successful businesses which the restaurateurs continued to operate in Australia. None suggested that relative labour costs were a factor in the decision to open a restaurant overseas. The Panel asked if there was any evidence that labour costs in Australia played a role in the decision of any of the restaurateurs cited by R&CA to open a restaurant overseas. R&CA responded that it has been “unable to [obtain] statistics or data that expressly records labour costs as the reason for relocating overseas”.130
[188] The Panel is required to discharge its responsibilities on the basis of evidence, rather than assertion. There is no proper evidentiary basis for R&CA’s assertion that decisions to close restaurants in Australia or locate restaurants overseas is related to annual wage review outcomes or labour costs more broadly.
[189] Submissions by employer organisations within specific industries raised a range of cost and competitive pressures on the businesses of their members which we were urged to take into account in determining increases in the NMW and minimum award rates. These matters are considered in Chapter 10.
Inflation
[190] The CPI measures changes over time in the prices of a “basket” of consumer goods and services, weighted to the expenditure patterns of the average household. Underlying inflation, measured as the average of the trimmed mean and weighted median, eliminates volatile items. 131 Both measures assist with understanding the general trend in inflation.
[191] The ABS also produces a set of LCIs to estimate the average impact of price changes on the “out-of-pocket” living expenses experienced by particular household types. 132 Chart 4.11 includes the LCI for employee households, for whom the principal source of income is wages and salaries. It focuses more directly on the impact of price rises on wage-earner households and is a broader measure of the costs facing wage earners since it includes the impact of mortgage interest and consumer credit payments.
[192] Each of the CPI, underlying inflation and the LCI provides relevant information about changes in the purchasing power of wages, which is shown in Chart 4.11.
[193] The CPI increased by 0.6 per cent in the March quarter 2014 to be 2.9 per cent higher over the year. Underlying inflation has remained within the RBA’s medium-term target band of 2–3 per cent since the June quarter 2010, rising by 0.5 per cent in the March quarter 2014, and increasing by 2.7 per cent over the year.
[194] The LCI for employee households increased by 0.7 per cent in the March quarter 2014 and by 2.1 per cent over the year. The LCI for employee households recorded a larger rise than the CPI (0.6 per cent) in the March quarter 2014, due to a rise in interest charges, which is not included in the CPI.
Chart 4.11: Measures of inflation—CPI, underlying inflation and LCI for employee households, growth rates
Note: The CPI measures quarterly changes in the price of a ‘basket’ of goods and services which account for a high proportion of expenditure by the CPI population group (i.e. metropolitan households). The LCI for employee households measures the change in the price of a ‘basket’ of goods and services which is based on the expenditure of employee households whose principal source of income comes from wages and/or salaries. CPI and LCI data are in original terms. Underlying inflation is calculated as the average of the trimmed mean and weighted median. The trimmed mean is calculated by ordering the CPI expenditure class components by their price change in the quarter and taking the expenditure weighted average of the middle 70 per cent of these price changes. The weighted median is the price change of the component in the middle of this ordering.
Source: ABS, Consumer Price Index, Australia, Mar 2014, Catalogue No. 6401.0; ABS, Selected Living Cost Indexes, Australia, Mar 2014, Catalogue No. 6467.0.
Wages
[195] Various measures of wages growth are available:
[196] Each of the measures of wages growth is shown in Chart 4.12 and Table 4.2. The different basis of each measure should be borne in mind, with each measure showing different perspectives of wages growth.
[197] The seasonally adjusted WPI increased by 0.7 per cent in the December quarter 2013 to be 2.6 per cent higher over the year. For the award-reliant industries, over the year to the December quarter 2013, the WPI increased by 2.4 per cent in Administrative and support services, 2.7 per cent in Retail trade, 2.2 per cent in Accommodation and food services and 2.8 per cent in Rental, hiring and real estate services.
[198] AWOTE increased by 1.1 per cent in the six months to November 2013 and by 2.9 per cent over the year, the lowest annual growth rate recorded over the past decade. Over the longer term, with changes occurring in the Australian labour market and a general shift to higher paying occupations, AWOTE (which reflects these shifts) generally rose faster than the WPI (Chart 4.12). The rate of growth in wages (Table 4.2) has declined each year from the December quarter 2010 for the C10 and C14 classification rates and for the WPI. The rate of growth of AAWI declined from 3.9 per cent to 3.7 per cent over the year to the December quarter 2012, and again declined to 3.5 per cent over the year to the December quarter 2013.
Chart 4.12: Measures of nominal wages growth, quarterly and cumulative percentage change
Note: The WPI is an index for total hourly rates of pay excluding bonuses in both private and public sectors. AWOTE estimates refer to full-time adult employees. AWOTE data are published biannually for the May and November months and a quarterly series is derived through linear interpolation. AWOTE data are expressed in original terms. AAWI measures the average percentage increase in the base rates of pay across registered agreements for the year. It does not take into account payments such as allowances, bonuses and increases linked to productivity. The C14 and the C10 are minimum award rates set under the Manufacturing and Associated Industries and Occupations Award 2010 and the former Metal, Engineering and Associated Industries Award 1998.
Source: ABS, Average Weekly Earnings, Australia, Nov 2013, Catalogue No. 6302.0; ABS, Wage Price Index, Australia, Dec 2013, Catalogue No. 6345.0; Department of Employment, Trends in Federal Enterprise Bargaining, December quarter 2013, <http://employment.gov.au/trends-federal-enterprise-bargaining>; Metal, Engineering and Associated Industries Award 1998; Manufacturing and Associated Industries and Occupations Award 2010 (from 1 January 2010).
[199] Table 4.2 sets out annual changes in the WPI, AWOTE and AAWI over the past decade, together with increases in the C14 and C10 classification rates over the same period. The WPI grew at the relatively low rate of 2.6 per cent in 2013, AWOTE by 2.9 per cent and the AAWI in enterprise agreements in the December quarter 2013 was 3.5 per cent, with similar rates in both the public and private sectors. 133 On each of the measures a moderation in aggregate wages growth over the past year is evident. The annual increase in the WPI and AWOTE is the lowest recorded over the past decade and the AAWI in enterprise agreements has remained around the level recorded in the December quarter 2012, at the lowest level recorded over the decade. The moderate wages growth over the past year, in the context of increased labour productivity, is reflected in declining real unit labour costs (see Chart 4.13). Wages growth is not currently a source of inflationary pressure within the economy.
Table 4.2: Measures of nominal wages growth, annual percentage change
Year ended |
WPI |
AWOTE |
C14 |
C10 |
AAWI |
(Quarter) |
(% change) |
(% change) |
(% change) |
(% change) |
(% change) |
Dec-03 |
3.7 |
5.3 |
3.9 |
3.2 |
4.2 |
Dec-04 |
3.7 |
3.9 |
4.2 |
3.5 |
4.1 |
Dec-05 |
4.0 |
4.8 |
3.6 |
3.0 |
4.7 |
Dec-06 |
4.2 |
3.2 |
5.7 |
4.8 |
4.0 |
Dec-07 |
4.0 |
5.2 |
2.0 |
1.7 |
4.0 |
Dec-08 |
4.3 |
5.4 |
4.1 |
3.5 |
4.5 |
Dec-09 |
2.9 |
5.9 |
0.0 |
0.0 |
3.9 |
Dec-10 |
3.9 |
3.9 |
4.8 |
4.1 |
3.8 |
Dec-11 |
3.6 |
4.3 |
3.4 |
3.4 |
3.9 |
Dec-12 |
3.4 |
5.0 |
2.9 |
2.9 |
3.4 |
Dec-13 |
2.6 |
2.9 |
2.6 |
2.6 |
3.5 |
Note: The Wage Price Index (WPI) is an index for total hourly rates of pay excluding bonuses in both private and public sectors. AWOTE estimates refer to full-time adult employees. AWOTE data are expressed in original terms for the November quarter. AAWI measures the average percentage increase in the base rates of pay across registered agreements for the year. It does not take into account payments such as allowances, bonuses and increases linked to productivity. The C14 and the C10 are minimum award rates set under the Manufacturing and Associated Industries and Occupations Award 2010 and the former Metal, Engineering and Associated Industries Award 1998.
Source: ABS, Average Weekly Earnings, Australia, Nov 2013, Catalogue No. 6302.0; ABS, Wage Price Index, Australia, Dec 2013, Catalogue No. 6345.0; Department of Employment, Trends in Federal Enterprise Bargaining, December quarter 2013, <http://employment.gov.au/trends-federal-enterprise-bargaining>; Metal, Engineering and Associated Industries Award 1998; Manufacturing and Associated Industries and Occupations Award 2010 (from 1 January 2010).
Nominal unit labour costs
[200] Nominal unit labour costs bring together wages growth and productivity. Nominal unit labour costs increased by around 3.0 per cent annually, on average, between the December quarter 2003 and the December quarter 2013, but barely rose over the past year. They rose by 0.3 per cent in the December quarter 2013, but only by 0.2 per cent over the year (Chart 4.13). Real unit labour costs, which remove the effect of inflation, fell by 3.9 per cent over the last decade, and by 1.8 per cent over the year to the December quarter 2013. Real unit labour costs are at historically low levels, contributing to an improvement in international competitiveness. In aggregate, there are no signs of cost pressures from the labour market.
Chart 4.13: Nominal and real unit labour costs, index
Source: ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2013, Catalogue No. 5206.0.
[201] Bargained rates in the award-reliant industries have increased at a much faster rate than have award rates or rates set by other means, as indicated by the lower rates of increase in the WPI for these industries (Table 4.3).
Table 4.3 WPI and AAWI growth in award-reliant industries
Industry |
WPI growth over year to the December quarter 2013 |
AAWI under new collective agreements, December quarter 2013 |
Accommodation and food services |
2.2 |
2.8 |
Administrative and support services |
2.4 |
4.1 |
Other services |
2.2 |
2.9 |
Retail trade |
2.7 |
4.1 |
Rental, hiring and real estate services |
2.8 |
4.4 |
All industries |
2.5 |
3.5 |
Note: The WPI is in original terms.
Source: ABS, Wage Price Index, Australia, Dec 2013, Catalogue No. 6345.0; Department of Employment, Trends in Federal Enterprise Bargaining, December quarter 2013, <http://employment.gov.au/trends-federal-enterprise-bargaining>.
[202] We note the broader findings of Research Report 7/2013 regarding the flow-on of annual wage review increases to non award-reliant employees (whether covered by an enterprise agreement or otherwise) and the reasons for this. We have taken into account the evidence that the impact of annual wage review decisions extends beyond award-reliant employees and employers, while acknowledging that there is some uncertainty about the nature and extent of this impact.
Labour market
[203] Employment increased by 0.9 per cent over the year to April 2014 (Chart 4.14). Annual growth in employment peaked at 2.9 per cent over the year to November 2010 and has remained relatively subdued since late 2011.
Chart 4.14: Employment levels
Source: ABS, Labour Force, Australia, Apr 2014, Catalogue No. 6202.0.
[204] The increase in total employment of 0.9 per cent over the year to April 2014 was driven by part-time employment growth (2.6 per cent growth), while full-time employment barely increased (0.2 per cent).
[205] The annual percentage change in aggregate monthly hours worked is shown in Chart 4.15. In trend terms, aggregate monthly hours worked decreased 4.2 million hours (0.3 per cent) to 1595.7 million hours in April 2014 and by 0.2 per cent over the year to April 2014. The chart utilises trend data, rather than seasonally adjusted data, due to the significant reduction (2.4 per cent) of hours worked recorded in April 2014, associated with Easter and ANZAC Day, reflected in a substantial reduction in average hours worked by full-time employees in that month. The use of the trend data is consistent with the ABS advice that “[t]he trend estimates provide a better measure of the level and direction of the series, especially when there are significant irregular events such as the proximity of Easter and ANZAC Day.” 134
Chart 4.15: Monthly hours worked—Annual percentage change
Note: Data are in trend terms.
Source: ABS, Labour Force, Australia, Apr 2014, Catalogue No. 6202.0.
[206] Average annual employment growth across all industries was 2.0 per cent over the decade to the February quarter 2014 (Chart 4.16). Some of the industries that experienced relatively high average annual employment growth over that period were Mining (10.3 per cent); Electricity, gas, water and waste services (5.8 per cent); Health care and social assistance (4.1 per cent); and Professional, scientific and technical services (3.7 per cent). Average annual growth in employment declined over the decade to the February quarter 2014 in Agriculture, forestry and fishing (–1.2 per cent); Manufacturing (–0.7 per cent); and Information, media and telecommunications (–0.7 per cent).
Chart 4.16: Average annual change in employment by industry—February quarter 2004– February quarter 2014(Percentage)
Source: ABS, Labour Force, Australia, Detailed, Quarterly, Feb 2014, Catalogue No. 6291.0.55.003.
[207] Average annual growth in employed persons over the decade in the award-reliant industries of Accommodation and food services; Retail trade; Administrative and support services; Rental, hiring and real estate services; and Other services was between 1 and 2 per cent per annum.
[208] Over the year to the February quarter 2014 in the award-reliant industries, employment grew strongly in Other services (10.3 per cent) and also grew in Rental, hiring and real estate services (1.9 per cent) and Retail trade (0.6 per cent). Employment fell by 7.2 per cent in Accommodation and food services and 3.0 per cent in Administrative and support services (Table 4.4). There is considerable year-to-year volatility in annual growth within industries over the past three years and this should be borne in mind when evaluating changes over the past year.
Table 4.4: Employment by industry, average annual growth over decade and annual percentage changes for 2012–2014
Average annual growth rate |
Annual percentage changes | |||
Feb-04–Feb-14 |
Feb–12 |
Feb–13 |
Feb–14 | |
Agriculture, forestry and fishing |
–1.2 |
1.2 |
–7.3 |
7.4 |
Mining |
10.3 |
22.6 |
7.0 |
1.6 |
Manufacturing |
–0.7 |
–2.4 |
–3.1 |
2.8 |
Electricity, gas, water and waste services |
5.8 |
2.5 |
–11.8 |
15.8 |
Construction |
3.0 |
0.5 |
0.9 |
2.1 |
Wholesale trade |
–0.2 |
-6.4 |
16.0 |
–17.6 |
Retail trade |
1.1 |
–1.8 |
1.1 |
0.6 |
Accommodation and food services |
1.3 |
–6.5 |
8.3 |
–7.2 |
Transport, postal and warehousing |
2.2 |
–7.6 |
10.4 |
–2.5 |
Information media and telecommunications |
–0.7 |
2.6 |
–2.5 |
–6.0 |
Financial and insurance services |
1.9 |
4.1 |
–2.0 |
2.4 |
Rental, hiring and real estate services |
1.2 |
13.7 |
–12.2 |
1.9 |
Professional, scientific and technical services |
3.7 |
0.7 |
3.9 |
–2.2 |
Administrative and support services |
1.2 |
0.7 |
–1.6 |
–3.0 |
Public administration and safety |
2.5 |
5.2 |
–2.5 |
3.5 |
Education and training |
2.6 |
2.7 |
6.4 |
1.4 |
Health care and social assistance |
4.1 |
4.3 |
3.4 |
3.9 |
Arts and recreation services |
2.9 |
–4.1 |
0.7 |
4.8 |
Other services |
1.5 |
7.7 |
–5.4 |
10.3 |
Note: The annual percentage change is calculated in relation to the corresponding quarter in the previous year.
Source: ABS, Labour Force, Australia, Detailed, Quarterly, Feb 2014, Catalogue No. 6291.0.55.003.
[209] Recent subdued growth in employment has been insufficient to prevent an increase in the unemployment rate since the middle of 2011. The unemployment rate of 5.8 per cent in April 2014 exceeded the 5.6 per cent level recorded a year earlier, having fallen from 6.0 per cent in February 2014. Month-to-month volatility in ABS labour market data requires some caution in assessing monthly movements.
[210] The participation rate for persons aged 15+ years has not changed significantly over the course of the past year. The decline evident from late 2010 was considered in the 2012–13 Review decision. 135 After assessing the evidence, the Panel concluded that the decline in the participation rate observed, when measured by reference to those aged 15+ years, was largely explained by the ageing population, with the effect of softer labour market conditions, particularly for males seeking full-time employment being offset by the trend rise in female participation.136 That conclusion is consistent with the view, cited by ACCI, in the RBA Statement on Monetary Policy of February 2014:
“The recent decline in the participation rate continues a trend seen since late 2010, and it is likely to reflect a mixture of structural and cyclical factors. A little over half of the decline in the participation rate over this period can be attributed to the ageing of the population, since older persons tend to have a lower rate of labour force participation than younger working-age persons...” 137
[211] As in the 2012–13 Review, many submissions addressed change in the participation rate for persons aged 15+ years and its implications for assessing labour market conditions. 138 ACCI and Ai Group contended that the decline in the participation rate illustrated the fragile nature of the labour market.139 The Australian Government examined a number of factors contributing to short-term and long-term trends in the participation rate, including the impact of population ageing and the discouraged worker effect140 and noted that the participation rate for Australia in September 2013 was above the OECD average but lower than the rates recorded in Canada and New Zealand.141 A number of other submissions discussed the association between declining participation rates and population ageing.142 The ACTU reported findings from their own analysis that examined the relative contributions of changes in labour force participation within age groups and the changing demographics of the population. Their estimates showed that the entire fall in the participation rate for persons aged 15–64 years between December 2010 and April 2013 was due to ageing, however, “most of the decline since April 2013 has been due to within-age group falls in participation”.143 ACCI agreed that the ageing workforce was partially responsible, however, did not agree that it was entirely responsible.144
[212] The participation rate of those aged 20–64 years is a simple way to reveal most of the changes that would be identified by more sophisticated methods of adjusting for age-related differences in the propensity to be in the labour force. 145 A comparison of participation rates for those aged 15+ years and for persons aged 20–64 years is shown in Chart 4.17, together with the unemployment rate. Participation rates for persons aged 20–64 years are also shown in Table 4.5. This data supports the Panel’s previous conclusion that in the context of an ageing population, with the baby boomer generation increasingly moving out of the labour force, it is necessary to remove the effects of the changing age structure before drawing any inferences about labour market conditions from changes to the participation rate.
Chart 4.17: Unemployment and participation rates
Note: The participation rate for 20–64 year olds is in original terms. The participation rate for persons aged 15 and over and the unemployment rate are seasonally adjusted.
Source: ABS, Labour Force, Australia, Apr 2014, Catalogue No. 6202.0; ABS, Labour Force, Australia, Detailed—Electronic Delivery, Apr 2014, Catalogue No. 6291.0.55.001.
[213] The data in Table 4.5, for those aged 20–64 years, shows continuing high participation rates during the last decade. The participation rate for females aged 20–64 years increased over the past decade. The participation rate for males aged 20–64 years remains historically high, although declining from its highest point of 2010. However, there has been some reduction in labour force participation for males over the past year, consistent with some softness in the labour market for males.
Table 4.5: Participation rates—By gender, rates and percentage change (20–64 year olds)
Month |
Participation |
Participation |
Participation |
Participation |
Participation |
Participation |
(ppt change) |
(ppt change) |
(ppt change) | ||||
Dec-03 |
85.3 |
|
67.5 |
|
76.4 |
|
Dec-04 |
85.2 |
–0.1 |
68.3 |
0.8 |
76.7 |
0.3 |
Dec-05 |
85.9 |
0.7 |
69.6 |
1.3 |
77.7 |
1.0 |
Dec-06 |
86.2 |
0.3 |
70.7 |
1.1 |
78.4 |
0.7 |
Dec-07 |
86.5 |
0.3 |
71.2 |
0.5 |
78.8 |
0.4 |
Dec-08 |
86.3 |
–0.2 |
71.6 |
0.4 |
78.9 |
0.1 |
Dec-09 |
86.1 |
–0.2 |
71.5 |
–0.1 |
78.8 |
–0.1 |
Dec-10 |
86.9 |
0.8 |
72.0 |
0.5 |
79.4 |
0.6 |
Dec-11 |
85.9 |
–1.0 |
72.0 |
0.0 |
78.9 |
–0.5 |
Dec-12 |
86.4 |
0.5 |
72.0 |
0.0 |
79.1 |
0.2 |
Dec-13 |
85.8 |
–0.6 |
71.9 |
–0.1 |
78.9 |
Note: The participation rate is the number of persons in the labour force expressed as a percentage of the civilian population. The ppt change calculates the percentage point change from the corresponding month in the previous year. All data are in original terms.
Source: ABS, Labour Force, Australia, Detailed—Electronic Delivery, Apr 2014, Catalogue No. 6291.0.55.001.
[214] A different perspective on the state of the labour market is given by the employment to population ratio, which shows the proportion of the civilian population that are employed. It reflects changes in the extent to which people are encouraged (or discouraged) to look for work, as well as changes in unemployment and employment. Table 4.6 shows the employment to population ratios for people aged 20–64 years, in total and separately for males and females. Between December 2003 and December 2013, the employment to population ratio for males fell by 0.2 percentage points, while for females the ratio increased by 4.3 percentage points. Over the year to December 2013 the employment to population ratio fell by 0.8 percentage points in total and by 1.3 percentage points for males and by 0.2 percentage points for females. The recent and continuing fall in the ratio for males suggests some weakness in parts of the labour market for males.
Table 4.6: Employment to population ratio—Total and by gender (20–64 year olds)
Month |
Male |
Female |
Total |
(%) |
(%) |
(%) | |
Dec-03 |
81.6 |
64.2 |
72.9 |
Dec-04 |
81.8 |
65.6 |
73.7 |
Dec-05 |
82.5 |
66.8 |
74.6 |
Dec-06 |
83.3 |
68.0 |
75.7 |
Dec-07 |
83.7 |
68.8 |
76.2 |
Dec-08 |
83.1 |
69.0 |
76.0 |
Dec-09 |
82.3 |
68.3 |
75.3 |
Dec-10 |
83.8 |
69.0 |
76.4 |
Dec-11 |
82.6 |
68.8 |
75.7 |
Dec-12 |
82.7 |
68.7 |
75.7 |
Dec-13 |
81.4 |
68.5 |
74.9 |
Note: All data are in original terms.
Source: ABS, Labour Force, Australia, Detailed—Electronic Delivery, Apr 2014, Catalogue No. 6291.0.55.001.
[215] Chart 4.18 shows the unemployment rates for young people aged 15–24 years and lone parents. The unemployment rate for each group has been higher than the aggregate unemployment rate over the 10 years to February 2014, as is usual. The unemployment rate for both groups declined until 2008. The unemployment rate for 15–24 year olds increased sharply as a result of the global financial crisis and has remained elevated since. Indeed, it is currently at its highest level in a decade. In April 2014, the unemployment rate for 15–24 year olds was 12.9 per cent—higher than in April 2013. A number of submissions 146 drew attention to the high rate of youth unemployment and urged the Panel “to be very mindful of this when determining the level of any minimum wage increase.”147 The Australian Government noted that youth unemployment rates have historically been higher than for the broader population due to the nature of the cohort, who have relatively low levels of education and skills and a lack of experience.148
[216] The unemployment rate for lone parents was affected to a lesser extent by the global financial crisis. The unemployment rate for lone parents was 9.2 per cent in April 2014, which was a slight decrease compared with April 2013 (10.4 per cent) after peaking at 10.9 per cent in February 2013.
Chart 4.18: Unemployment rates— 15–24 year olds and lone parents
Note: The unemployment rate for lone parents is in original terms. Unemployment rates for 15–24 year olds and aggregate unemployment are seasonally adjusted.
Source: ABS, Labour Force, Australia, Apr 2014, Catalogue No. 6202.0; ABS, Labour Force, Australia, Detailed—Electronic Delivery, Apr 2013, Catalogue No. 6291.0.55.001.
[217] IPA cited research that concluded that the employment of youth is more sensitive to changes in minimum wages than is the case for older workers, a view supported by ACOSS. 149 While the unemployment rate for young people remains disturbingly high, we note that its relationship with the aggregate unemployment rate is not much changed: for the last decade the former has been about twice the latter and they have moved together. This relationship is shown in Chart 4.19, which displays youth unemployment as a ratio of aggregate unemployment. It also provides this ratio separately for young people who are engaged in full-time education, and for those who are not. We note that the ratio for those in full-time education is consistently the higher of the two. For this reason, the proportion of the cohort that is in full-time education will affect the total youth unemployment rate. The ACTU argued that youth unemployment is more sensitive to cyclical variations in the economy than is aggregate unemployment and for this reason they “believe the recent rise in youth unemployment to be largely cyclical”.150 On the basis of the evidence before us, we conclude that youth unemployment, while high, is not showing signs of a structural shift from its longer term relationship with aggregate unemployment.
Chart 4.19: Ratio of unemployment rates for 15–24 year olds by full-time education status, and persons aged 25 years and over to the aggregate unemployment rate
Note: All data is in original terms and has been smoothed using the three-month moving average.
Source: ABS, Labour Force, Australia, Apr 2014, Catalogue No. 6202.0; ABS, Labour Force, Australia, Detailed—Electronic Delivery, Apr 2014, Catalogue No. 6291.0.55.001.
[218] The underemployment rate was highlighted in a number of submissions but there was disagreement as to how these data should be interpreted. 151 The ACTU argued that the fall in the underemployment rate between November 2013 and February 2014 “gives further cause for optimism that the softening of the labour market may be coming to an end”.152 In contrast, employer groups submitted that the increase in the underemployment rate over the year to the February quarter 2014, accompanied by high labour underutilisation rates, was evidence of an oversupply of labour relative to demand at current wage rates.153
[219] Underemployment is measured by the ABS as part-time workers who would prefer to work more hours and full-time workers who worked part-time hours in the reference week for economic reasons. 154 The latter are a small proportion of the total. Underemployment is therefore, by definition, mainly confined to people who work part-time (and want to work more hours). It is influenced both by the proportion of the workforce that works part-time, and by the extent to which part-time workers wish to work more hours. We note that the underemployment rate does not take into account the extent to which workers, both full-time and part-time, work more hours than they wish. The underutilisation rate is the sum of the unemployed and the underemployed, expressed as a proportion of the labour force.
[220] The underemployment rate peaked in the November quarter 2009. In the February quarter 2014, the underemployment rate was 7.4 per cent and the underutilisation rate was 13.5 per cent (Table 4.7).
Table 4.7: Unemployment, underemployment and underutilisation, per cent
Month |
Unemployment rate |
Underemployment rate |
Underutilisation rate |
(%) |
(%) |
(%) | |
Nov-03 |
5.7 |
7.3 |
13.0 |
Nov-04 |
5.2 |
6.9 |
12.1 |
Nov-05 |
5.0 |
6.8 |
11.8 |
Nov-06 |
4.5 |
6.3 |
10.9 |
Nov-07 |
4.4 |
6.1 |
10.6 |
Nov-08 |
4.5 |
6.4 |
10.9 |
Nov-09 |
5.6 |
7.7 |
13.3 |
Nov-10 |
5.1 |
7.0 |
12.2 |
Nov-11 |
5.2 |
7.2 |
12.5 |
Nov-12 |
5.3 |
7.2 |
12.5 |
Nov-13 |
5.8 |
7.6 |
13.4 |
Feb-14 |
6.0 |
7.4 |
13.5 |
Note: Underemployment and underutilisation are measured quarterly.
Source: ABS, Labour Force, Australia, Apr 2014, Catalogue No. 6202.0.
[221] Table 4.7 shows a broadly consistent picture of the labour market between the unemployment rate, the underemployment rate and the underutilisation rate. Each declined from 2003 through to the global financial crisis, reflected in the November 2009 data, with a slight improvement immediately thereafter. A softening in labour market conditions since late 2010 has been more evident in the unemployment rate than in the underemployment rate.
Small and medium-sized businesses
[222] There is no specific reference to small and medium-sized businesses in the minimum wages and modern awards objectives. However, the general object of the Act is directed to providing a balanced framework for cooperative and productive workplace relations which promote national economic prosperity and social inclusion for all Australians by, amongst other things, acknowledging the special circumstances of small and medium-sized businesses.155
[223] The submissions of many employer organisations urged us to have particular regard to the circumstances of small businesses. Aside from the general object of the Act, consideration of the circumstances of small business is necessary given their significance to the Australian economy and the relatively high award reliance in small businesses compared to businesses generally.
[224] ACCI drew our attention to an RBA discussion paper, Small Businesses—An Economic Overview, 156 which identified characteristics of small business, which were noted in the 2012–13 Review decision.157
[225] Little direct evidence was put to us in relation to the economic circumstances confronting small businesses and the extent and manner in which they are differentially affected by them. There is no evidence to suggest that the economic conditions for small businesses have diverged materially from those of businesses generally within the industries in which they operate, as reflected in aggregate and sectoral economic data.
Evidence from the parties
[226] A number of employer associations relied on data derived from surveys of their members in relation to, amongst other things, economic conditions within their industries and, in some cases, the economic conditions confronting small and medium-sized enterprises. 158 We have expressed our reservations about the reliability of the data from such surveys for the purpose of providing a representative picture at either an industry or an economy-wide level. In the 2012–13 Review decision, the Panel set out some guidance as to requirements of surveys, reflecting well-established rules for the conduct of surveys if such surveys are to provide a reliable account of the experience of the underlying “populations” from which they are drawn.159 None of the employer associations relying on surveys of their members have addressed our concerns or met those requirements. We must therefore see the survey material that they present as a form of anecdotal information. We cannot be confident that the survey results provide a reliable representation of the issues at hand, including economic conditions.
[227] It is possible that some or all of the business surveys do reflect a representative account of some or all of the facts that they purport to show. Our difficulty is that, since they do not adhere to the statistical norms for producing reliable results, we cannot be sure of this. There is an alternative and more economical, though less reliable, approach that could increase the confidence of the Panel in the quality of the business surveys. This alternative is to produce graphs or tables that track the relationship over time between the survey outcomes (including projections/expectations) and the actual outcomes as subsequently published by a highly reputable statistical source, such as the ABS or the RBA.
[228] The particular insights that employers are able to bring to the deliberations of the Panel are potentially of great assistance. They need, however, to be either explicitly qualitative or anecdotal, or drawn from demonstrably reliable survey methods.
[229] ACCI discussed, and attached to its submissions, its February 2014 Small Business Survey, which compares the reported observations (or expectations) in relation to a number of economic variables—such as economic conditions, employment, sales revenue and profit growth—for small-business respondents and medium and large-business respondents. 160 Given the methodological uncertainty, it cannot be relied on as evidence representative of employers within the economy generally. In any case, the information in relation to small-business members is limited, disclosing slightly less positive responses by small-business respondents than by medium and large-business respondents in respect to the surveyed variables, an outcome which is consistently evident over the 17 years for which the survey results are shown. The consistently less positive responses of ACCI’s small-business members reflects particular features of small businesses and differences in the industries in which they operate, identified in the RBA discussion paper, rather than a different impact of the economic conditions on small businesses over recent years.
[230] Ai Group provided information drawn from indexes of performance of manufacturing, services and construction and a national survey of Chief Executive Officers (CEOs). Ai Group provided additional material arising from the final consultations comprising a series of charts showing the values of various aspects of their Performance of Manufacturing Index plotted against relevant ABS series as an indication of their surveys’ past performance. This comparison shows a reasonably strong relationship in some cases.
[231] The performance indexes showed a mixed picture:
[232] Respondents to Ai Group’s annual survey of CEOs in 2014 expect general business conditions in 2014 to be only modestly better than in 2013, with 37 per cent of all CEOs expecting an improvement in general business conditions in 2014, 35 per cent expecting a deterioration, relative to 2013, and the remaining 28 per cent expecting conditions to be unchanged in 2014. 162
[233] The ARA submission contained results from its March 2014 Minimum Wage Poll in relation to employment intentions over the next 6–12 months, 163 and information from the Roy Morgan Research Retail Pulse report measuring “retail sentiment.” No information was provided as to the methodology or representativeness of the survey. Because the Panel has no information about the reliability of the ARA surveys, we cannot draw on them as evidence of prospective employment conditions or trading conditions in the retail industry or the economy more broadly.
The award-reliant industries
[234] This section considers the circumstances of industries in which a relatively high proportion of employees are award-reliant workers based on the Australian and New Zealand Standard Industrial Classification (ANZSIC) 2006. Award reliance is a measure of the proportion of employees whose pay rate is set according to the relevant award rate specified for the classification of the employee and not set above that relevant award rate. Such information is obtained from the ABS Survey of Employee Earnings and Hours (EEH), 164 conducted in May every two years. It is a relevant measure in assessing the impact of annual wage review decisions because they impact directly on the wages paid to award-reliant employees.
[235] The most recent award reliance data remain those for 2012, which show on aggregate 16.1 per cent of employees were award reliant. The 2012 data identify the Accommodation and food services (44.8 per cent); Administrative and support services (29.0 per cent); Retail trade (25.6 per cent); Other services (24.6 per cent); and Rental, hiring and real estate services (20.9 per cent) industries as the most award reliant, in that they are the industries in which the highest proportion of employees are award reliant. 165
[236] Research Report 6/2013 found that 19 per cent of employees in the surveyed sample were award reliant, i.e. had their pay set at exactly the award rate, and that 25 per cent of non-public sector organisations were award reliant, with more than half of all non-public sector organisations (52 per cent) reportedly using awards in some way to set pay or guide pay decisions for at least one of the employees in their organisation. 166 The extent of award reliance of employees reported—at 19 per cent—is higher than that indicated by the EEH survey, reflecting methodological differences between the surveys. While the definition for award-reliant employees is consistent with the award-only category featured in the EEH survey, the approach used to collect data on pay-setting arrangements in the Award Reliance Survey differs from the approach used in the EEH survey.167 Most significantly, the sample for the Award Reliance Survey was restricted to non-public sector organisations in the national system, whereas the sample for the EEH survey is based on all employees in Australia.168
[237] The Award Reliance Survey reports the highest proportion of employees being award reliant in the Accommodation and food services (54 per cent); Administrative and support services (35 per cent); Retail trade and Arts and recreation services (both 27 per cent); Public administration and safety and Health care and social assistance (both 18 per cent); and Other services industries (15 per cent). 169
[238] Although Research Report 6/2013 identified a slightly different group as the most award-reliant industries and different levels of award reliance than the EEH survey, both identified the same three industries—Accommodation and food services; Administrative and support services; and Retail trade—as the most award-reliant industries.
[239] Table 4.8 summarises data for output, profitability, wages growth and employment in respect of the Accommodation and food services; Administrative and support services; Retail trade; Other services; and Rental, hiring and real estate services industries—the most award-reliant industries identified by the EEH survey in 2012. It includes an average for the five award-reliant industries (where available) and an all industries average in the final two columns. The table also includes changes in each indicator over the year against the preceding year in brackets.
Table 4.8: Economic indicators by award-reliant industries (data for preceding year in brackets)
|
Accommodation and food services |
Administrative and support services |
Other services |
Retail trade |
Rental, hiring and real estate services |
Five award-reliant industries |
All industries |
Percentage of employees reliant on award wages 2012 |
44.8 |
29.0 |
24.6 |
25.6 |
20.9 |
30.5 |
16.1 |
Gross value added: percentage growth over the year to December quarter 2013 |
–2.4 |
2.4 |
2.6 |
2.2 |
6.6 |
2.3 |
2.5 |
Company gross operating profits: percentage growth over the year to December quarter 2013 |
–13.7 |
19.0 |
18.6 |
0.0 |
3.2 |
1.0 |
10.7 |
Wage Price Index: percentage growth over the year to December quarter 2013 |
2.2 |
2.4 |
2.2 |
2.7 |
2.8 |
– |
2.5 |
Percentage annual wage growth under new collective agreements December quarter 2013 |
2.8 |
4.1 |
2.9 |
4.1 |
4.4 |
– |
3.5 |
Employment: percentage increase over the year to the February quarter 2014 |
–7.2 |
–3.0 |
10.3 |
0.6 |
1.9 |
–0.4 |
0.6 |
Hours worked: percentage increase over the year to the February quarter 2014 |
–5.3 |
–6.0 |
10.4 |
1.3 |
–3.6 |
–0.1 |
0.6 |
Note: Figures in brackets are for the preceding year. The WPI and actual hours worked data are in original terms. Average growth in the WPI and annual wage growth under new collective agreements for the five award-reliant industries are not calculated.
Source: ABS, Employee Earnings and Hours, Australia, May 2012, Catalogue No. 6306.0; ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2013, Catalogue No. 5206.0; ABS, Business Indicators, Australia, Dec 2013, Catalogue No. 5676.0; ABS, Labour Force, Australia, Detailed, Quarterly, Feb 2014, Catalogue No. 6291.0.55.003; ABS, Wage Price Index, Australia, Dec 2013, Catalogue No. 6345.0; Department of Employment, Trends in Federal Enterprise Bargaining, December quarter 2013, <http://employment.gov.au/trends-federal-enterprise-bargaining>.
[240] Table 4.8 shows that over the most recent 12 months:
[241] As the Panel has previously noted, the industry-level economic indicators show considerable volatility from year to year, within industries and between the most award-reliant industries— most especially growth in gross value added, growth in gross operating profit and in hours worked. 170 The year-to-year volatility in respect of employment growth at an industry level, both for award-reliant industries and other industries, is illustrated by the data in Table 4.8. We also note that the AAWI growth in the December quarter 2013 may reflect the small number of agreements in some industry sectors. Better guidance may arise from data for AAWI growth over the course of the entire year at a sectoral level. The annualised wage increase for all new agreements in 2013 for the award-reliant sectors were: 3.4 per cent in Accommodation and food services, 4.0 per cent in Administrative and support services, 3.2 per cent in Other services and Retail trade and 4.5 percent in Rental, hiring and real estate services, with 3.4 per cent across the five award-reliant sectors in aggregate and 3.5 for all industries.
[242] Some consistency in the outcomes for the various indicators over the past year is evident in the Accommodation and food services industry, which shows negative outcomes for all measures, other than wages growth which increased more slowly than for the all industries average. However, illustrating the volatility in outcomes between years, the Accommodation and food services industry saw employment grow strongly over the year to the February quarter 2013 (8.3 per cent), and fall substantially over the year to the February quarter 2014.
[243] The clear exception to the more consistent outcomes within the industries is the Administrative and support services industry in which employment fell, notwithstanding growth in gross value added at around the all industries average and strong growth in company gross operating profits when compared to either the all industries average, or the average for all industries other than Mining.
[244] The diversity in outcomes between the award-reliant industries indicates that the most award-reliant industries do not face a uniformly difficult economic environment. The industry data does not provide a basis for concluding that recent minimum wage increases have significantly impacted on the economic performance of the award-reliant industries.
Outlook
[245] The 2014–15 Budget expects world GDP growth to gradually pick up towards trend with growth of 3� per cent in both 2015 and 2016, largely reflecting improvement in the recoveries of advanced economies. Growth in China is expected to moderate though remain solid, while economic growth in the United States is forecast to be above trend growth. Risks to the global outlook are balanced, though still to the downside, with both advanced and emerging market economies continuing to deal with issues from the global financial crisis. Forecast growth for Australia’s major trading partners has improved and will remain above its trend rate and above world GDP growth across the forecast years (Table 4.9).
Table 4.9: Budget forecasts—International GDP growth
2013 |
2014 |
2015 |
2016 | |
(outcomes) |
(forecast) |
(forecast) |
(forecast) | |
World |
3.0 |
3� |
3� |
3� |
Major trading partners |
4.6 |
4� |
4� |
4� |
Note: World growth rates are calculated using GDP weights based on purchasing power parity, while growth rates for major trading partners are calculated using export weights.
Source: Australian Government, Budget Paper No. 1: Budget Strategy and Outlook 2014–15, Canberra, p. 2-6.
[246] The International Monetary Fund (IMF) forecasts GDP growth in Australia, the advanced economies and for the world to increase over 2014 and 2015 (Table 4.10). The forecast for Australia is for GDP to grow by 2.6 per cent in 2014 due to the continued slowdown in mining-related investment. GDP growth in Australia is forecast to be above that of advanced economies and below world GDP growth in both 2014 and 2015.
Table 4.10: IMF real GDP growth forecasts
2013 |
2014 |
2015 | |
Australia |
2.4 |
2.6 |
2.7 |
Advanced economies |
1.3 |
2.2 |
2.3 |
World |
3.0 |
3.6 |
3.9 |
Note: Year-on-year percentage changes shown. World and domestic economy growth rates are calculated using GDP weights based on PPP.
Source: IMF, World Economic Outlook, April 2014, <http://www.imf.org/external/pubs/ft/weo/2014/01/index.htm>.
[247] The 2014–15 Budget forecasts domestic GDP growth to be slightly below trend at 2� per cent in 2013–14 and 2� per cent in 2014–15 before increasing to 3 per cent in 2015–16 (Table 4.11). The 2014–15 Budget notes that investment in resources projects has passed its peak and is shifting from being the key driver to a significant detractor from growth. The fall in resources investment is forecast to continue until at least 2015–16, though the precise timing is uncertain, with the decline in the terms of trade to continue for longer. However, the strong rise in resources exports over recent years is expected to continue over the forecast period and the lower exchange rate is likely to support modest growth in non-commodity goods exports.
[248] Non-resources businesses investment remains subdued with the forecast for 2014–15 to be below trend before picking up in 2015–16, as firms begin to respond to improving demand and absorb spare capacity. The 2014–15 Budget notes that the scale and timing of the anticipated recovery in non-resources business investment is the predominant source of uncertainty affecting the outlook.
[249] The 2014–15 Budget forecasts nominal GDP growth to be below its 20-year average over the forecast period, reflected in weak growth in company gross operating surplus corresponding to low output prices, and weak growth in compensation of employees corresponding to low wage growth.
[250] The unemployment rate is forecast to peak at 6� per cent in the June quarters of both 2015 and 2016, although it could peak at a lower level given the positive labour market developments since the start of this year. The participation rate is forecast to fall as employment growth is not expected to attract discouraged workers back into the labour force and the effect of the ageing population is expected to exert further downward pressure by the end of the decade. Wages growth is expected to be subdued until spare capacity in the labour market is absorbed, leading to lower unit labour costs and lower inflationary pressure.
[251] Household income is expected to grow at below its average growth rate due to moderate employment growth and subdued wages growth. Household consumption is expected to grow faster than income due to further gains in household wealth, however, the household saving ratio is expected to remain well above the levels seen before the global financial crisis.
[252] Risks to the domestic economy are evenly balanced. The household sector is responding to low interest rates, while further improvement in domestic or external demand could encourage firms to upgrade their plans, leading to an increase in business investment. However, the fall in resources investment is likely to be lumpy and there is uncertainty around the timing of the rise in exports. These risks could lead to weaker GDP growth in the short-term. Further, trade-exposed sectors remain affected by the still-elevated exchange rate, while continued softening in the labour market will affect household consumption.
Table 4.11: Domestic economy forecasts—Growth rates(a)
2012–13 |
2013–14 |
2014–15 |
2015–16 | |
outcomes(b) |
forecast |
forecast |
forecast | |
Demand and output(c) |
||||
Household consumption |
2.0 |
2� |
3 |
3� |
Private investment |
||||
Dwellings |
–0.1 |
3� |
7� |
5� |
Total business investment(d) |
6.1 |
–4 |
–5� |
–3� |
Non-dwelling construction(d) |
13.9 |
–2� |
–9� |
–12� |
Machinery and equipment(d) |
–4.3 |
–9� |
–2 |
7 |
Private final demand(d) |
2.8 |
1� |
1� |
2 |
Public final demand(d) |
–1.3 |
1� |
1� |
1 |
Total final demand |
1.9 |
1� |
1� |
1� |
Change in inventories(e) |
–0.3 |
–� |
� |
0 |
Gross national expenditure |
1.6 |
1� |
1� |
1� |
Exports of goods and services |
6.0 |
5� |
5� |
7 |
Imports of goods and services |
0.5 |
–3 |
2 |
2� |
Net exports(e) |
1.2 |
1� |
1 |
1� |
Real gross domestic product |
2.6 |
2� |
2� |
3 |
Non-farm product |
2.8 |
2� |
2� |
3 |
Farm product |
–3.6 |
5 |
–4 |
1 |
Nominal gross domestic product |
2.5 |
4 |
3 |
4� |
Other selected economic measures |
||||
External accounts |
||||
Terms of trade |
–9.8 |
–5 |
–6� |
–1� |
Current account balance (per cent of GDP) |
–3.6 |
–3� |
–4 |
–3� |
Labour market |
||||
Employment(f) |
1.2 |
� |
1� |
1� |
Unemployment rate (per cent)(g) |
5.6 |
6 |
6� |
6� |
Participation rate (per cent)(g) |
65.1 |
64� |
64� |
64� |
Prices and wages |
||||
Consumer Price Index(h) |
2.4 |
3� |
2� |
2� |
Gross non-farm product deflator |
–0.3 |
1� |
� |
1� |
Wage Price Index(f) |
2.9 |
2� |
3 |
3 |
Note: The forecasts are based on several technical assumptions. The exchange rate is assumed to remain around its recent average level—a trade-weighted index of around 71 and a United States dollar exchange rate of around 93 US cents. Interest rates are assumed to move in line with market expectations. World oil prices (Malaysian Tapis) are assumed to remain around US$113 per barrel. The farm sector forecasts are based on an assumption of average seasonal conditions in 2014–15 and 2015–16.
[253] The RBA expects GDP growth to be below trend over 2014–15, while lower interest rates are expected to support the housing sector. Business investment is expected to continue falling due to lower Mining investment, while non-Mining investment is expected to pick up gradually after a period of subdued growth. Over time, improved domestic demand will flow through to stronger non-Mining investment, employment and GDP growth. Growth in Australia’s major trading partners is expected to be around its long-run average, while the terms of trade are expected to be lower than in recent years, although still remaining around 50 per cent higher than their long-run average. The RBA forecasts are provided in Table 4.12.
Table 4.12: RBA economy forecasts, per cent
|
Dec-13 |
Jun-14 |
Dec-14 |
Jun-15 |
Dec-15 |
Jun-16 |
GDP growth |
2.8 |
3 |
2� |
2�–3� |
2�–3� |
2�–4� |
Non-farm GDP growth |
2.6 |
3 |
3 |
2�–3� |
2�–3� |
2�–4� |
CPI inflation |
2.7 |
3 |
2� |
2�–3� |
2�–3� |
2–3 |
Underlying inflation |
2� |
2� |
2� |
2�–3� |
2–3 |
2–3 |
Note: Underlying inflation is calculated by taking the average of the weighted median and trimmed mean measures of inflation. Percentage change for the year-ended shown. Technical assumptions include the Australian dollar at US$0.93, Trade Weighted Index at 71, Brent crude oil price at US$105 per barrel. Inflation forecasts are based on current legislation for the price of carbon.
Source: RBA, Statement on Monetary Policy, May 2014, Table 6.1.
[254] Improvements in the labour market in recent months have led the RBA to forecast a lower increase in the unemployment rate over the next year. However, the recovery is expected to be “fairly drawn out” as the unemployment rate is not forecast to decline consistently until after mid 2015, with any decline expected to be relatively modest. Wages growth is expected to remain contained due to spare capacity in the labour market and a continued focus by firms on containing costs. The WPI is forecast to be around 2� per cent over 2014, before picking up gradually to around 3 per cent. Moderate income growth and higher wealth are expected to have important implications for consumption growth.
[255] The RBA forecasts for inflation are affected by two opposing influences. Higher import prices due to the lower exchange rate are expected to exert an upward influence for several years, with the depreciation of the exchange rate expected to add around � to � a percentage point to underlying inflation in both 2014–15 and 2015–16. In contrast, domestic inflationary pressures are expected to remain subdued, with below-trend growth in output leading to a degree of spare capacity in the labour and product markets for several years. The inflation forecasts also reflect the effect of government legislation on prices, with the staged increase in tobacco excise increasing the forecasts for headline inflation and the change to a floating carbon price from 1 July 2015 expected to result in a fall in headline and underlying inflation.
[256] The RBA cautions that there is significant uncertainty about the path for GDP and inflation. The RBA notes that the Australian economy continues to face several key challenges, with considerable uncertainty surrounding the timing and magnitude of both the decrease in mining investment as well as the projected increase in non-mining activity. Due to fairly large anticipated changes in sectoral growth rates, there is significant uncertainty as to whether the timing of stronger activity will coincide with weaker activity in other parts of the economy, and whether aggregate growth will increase over the forecast period as predicted. A significant change in the composition of activity and growth could result in either excess demand for, or supply of, particular labour skills or types of capital which could have implications for employment growth, among other things. Forecasts for both economic activity and inflation are expected to be affected by the exchange rate, with any depreciation anticipated to occur over several years, although the size and speed of any pass-through to consumer prices is highly uncertain.
[257] The Department of Employment Monthly Leading Indicator of Employment is based on the weighted average of a select number of economic and employment indicators. The indicator fell for the seventh consecutive month in May 2014, signalling that employment is likely to grow more slowly than its long-term trend rate of 1.2 per cent per annum over the coming months. In contrast, cyclical employment has risen for three consecutive months. That positive indicator is consistent with the upturn in job advertisements measured by the ANZ index which has increased in four consecutive months up to and including April 2014. 171
Chart 4.20: Department of Employment Monthly Leading Indicator of Employment
Source: Department of Employment, Monthly Leading Indicator of Employment, May 2014, http://employment.gov.au/department-employment-s-leading-indicator-employment-latest-release
Conclusion
[258] GDP growth over the course of 2013 was solid, although slightly below trend, increasing by 2.8 per cent over the year to the December quarter 2013, with stronger growth in the second half of the year. Growth of the Australian economy remains stronger than that for most other developed economies. The sources of growth have shifted, with net exports and final consumption expenditure contributing more to growth and private gross fixed capital formation detracting from growth, with the resources sector shifting from the investment to the export phase. Retail turnover data beyond the December quarter 2013 suggest continuing consumption growth into 2014. The transition to broader growth extending beyond the resources sector is underway. Exports in a range of sectors have grown over the past year. Some strengthening of household consumption activity and new dwellings investment has occurred, although non-resources investment remains weak and is projected to remain subdued.
[259] Labour productivity has risen by over 2 per cent per annum over the past two years. GDP per capita also rose in both years, at the lower rate of 1.0 per cent per annum (reflecting a faster growth in population than in hours worked). Recorded labour productivity growth has varied between industries, ranging from –4.4 per cent to 7.6 in 2012–13 around the all industry average of 2.1 per cent. The diversity of productivity growth is also evident across the award-reliant industries.
[260] Over the longer term the benefits of growth have benefited capital disproportionately to labour, with the labour share of income declining materially over the past two decades. Whilst real wages have grown over that time, capital income growth accelerated more rapidly. The profits share of national income increased by 1.0 percentage points over the decade to the December quarter 2013 and over the year to the December quarter 2013. Real unit labour costs fell over much of the past decade through to mid 2011, rising to the December quarter 2012 but falling again over the year to the December quarter 2013.
[261] The inflation rate remains within the RBA medium-term target band of 2–3 per cent, although it has accelerated over the year to the March quarter 2014, whether measured by the CPI or LCI for employee households. The CPI grew by 2.9 per cent over the year to the March quarter 2014. Inflation is anticipated to decline towards the midpoint of the RBA’s medium-term target band in 2014–15. The rate of wages growth fell in 2013: the WPI grew by 2.6 per cent and AWOTE by 2.9 per cent in the year to the December quarter 2013—in each case the lowest wages growth recorded over the past decade. It is expected to increase a little in 2014–15. Bargaining outcomes, measured by AAWI, grew by more (by 3.4 per cent) in the year to the December quarter 2013, at around the same level as the preceding year and lower than the growth recorded in the rest of the past decade. Nominal unit labour costs barely rose over the past year.
[262] Labour market conditions remained subdued in 2013 and into 2014. Employment increased by 0.9 per cent over the year to April 2014, consistent with GDP growth below 3 per cent and labour productivity growth in the order of 2 per cent (as measured to the December quarter 2013), although hours worked have not grown over that time and the ratio of full-time employment to population has fallen. The unemployment rate has edged up since the middle of 2011, from 5.6 per cent in April 2013 to 6.0 per cent in January 2014, notwithstanding a decline in the participation rate over that time, moderating to 5.8 per cent in April 2014. While the unemployment rate for young people remains disturbingly high, its relationship with the aggregate unemployment rate is not much changed: for the last decade the former has been about twice the latter and they have moved together. Youth unemployment, while high, is not showing signs of a structural shift from its longer-term relationship with aggregate unemployment. The softening in labour market conditions since late 2010 has been more evident in the unemployment rate than in the underemployment rate.
[263] Whilst the aggregate profits share and company gross operating profits rose over the year to the December quarter 2013 by 0.9 per cent, they fell by 0.5 per cent in the December quarter 2013. The strong growth in gross operating profits was driven by the Mining sector, with a small decline in gross operating profits for non-Mining industries as a whole.
[264] There is no evidence to suggest that the economic conditions for small business have diverged materially from those of businesses generally within the industries in which they operate, as reflected in aggregate and sectoral economic data.
[265] Industry level economic indicators show considerable volatility from year to year, within an industry and between the most award-reliant industries. The diversity in outcomes between the award-reliant industries indicates that the most award-reliant industries do not face a uniformly difficult economic environment. The industry data does not provide a basis for concluding that recent minimum wage increases have significantly impacted on the economic performance of the award-reliant industries.
[266] The outlook for the Australian economy remains sound, with solid growth, relatively low unemployment and continuing moderate inflation anticipated in the near future. Global conditions are expected to continue to improve with stronger growth expected in the world economy and within Australia’s major trading partners.
[267] Domestic GDP growth is forecast to remain slightly below trend at 2� per cent in 2013–14, and 2� per cent in 2014–15 before increasing to 3 per cent in 2015–16. Exports have grown over the past year. Household consumption is expected to grow more strongly in 2014–15, although tempered by weaker than average income growth associated with moderate employment growth and subdued wages growth. Improved recent growth in demand for dwellings is expected to continue. The outlook for non-resources business investment remains subdued.
[268] Employment growth is expected to be stronger in 2014–15 than it was in 2012–13 and 2013–14. The unemployment rate is forecast to peak at 6� per cent in the June quarters of both 2015 and 2016, although it could peak at a lower level given the positive labour market developments since the start of this year.
[269] Inflation is anticipated to decline toward the mid-point of the RBA range in 2014–15, following the current levels approaching the top of that range. Conversely, wages growth in expected to increase moderately, from current low levels.
[270] In summary, Australia’s economic performance and outlook remains sound. It continues to exceed that of the major OECD economies. Economic growth at the aggregate level has been solid, although growth in RNNDI continues to lag GDP growth as the terms of trade continue to fall. While multifactor productivity shows no sign of increasing, labour productivity has sustained its recent increase, having risen by a total of 7.6 per cent over the past three years and by 1.9 per cent in the last year. This growth in labour productivity is not confined to mining. The outlook for economic growth remains positive, although forecast to moderate slightly as the sources of growth shift toward net exports and households. Australia’s labour market has performed reasonably both in terms of employment growth and a recent stabilisation of unemployment levels. Some aspects of labour market performance, especially weak growth in hours worked, continuing high youth unemployment and a falling full-time employment to population ratio for the working age population, are a cause for concern. Further, whilst vacancy surveys suggest an improved employment outlook, the budget forecasts a slight increase in unemployment. Although it has risen over the last year, inflation remains moderate, and wages growth is benign. Real unit labour costs remain at historically low levels. The profit share has increased over the past year, as has gross operating surplus of companies, although the growth has been driven by the Mining sector, with limited growth in the non-mining sector in aggregate. There is no evidence of unusual levels of business failure.
[271] Despite the structural adjustment from the mining boom’s investment phase to its export phase and the moderation in the historically high terms of trade, there is export growth outside the resources sector.
[272] Overall Australia’s economic performance and outlook remains sound and consistent with a moderate increase in minimum wages. The continuing moderate inflation and relatively low aggregate wages growth provide scope for increasing minimum wages without inflationary consequences.
5. Proposed Legislative Change: Superannuation and the Carbon Price
Superannuation
[273] The Superannuation Guarantee Scheme commenced in 1992 with the introduction of the Superannuation Guarantee Charge Act 1992 (Cth) and the Superannuation Guarantee (Administration) Act 1992 (Cth). The Acts introduced the superannuation guarantee at the initial rate of 3 per cent and, over a 10 year period, provided for incremental increases to 9 per cent.
[274] The Superannuation Guarantee (Administration) Amendment Act 2012 (Cth) amended the Superannuation Guarantee (Administration) Act 1992 to increase the SG rate from 9 per cent to 12 per cent. The increase is to be phased in, commencing with increases of 0.25 percentage points on 1 July 2013 and 1 July 2014, followed by annual increases of 0.5 percentage points on 1 July each year until the SG rate reaches 12 per cent on 1 July 2019. Table 5.1 below sets out how the increases will be implemented.
Table 5.1: Superannuation guarantee increase—July 2013–July 2019
Year |
Superannuation percentage |
Percentage point increase |
Year starting on 1 July 2013 |
9.25 |
0.25 |
Year starting on 1 July 2014 |
9.5 |
0.25 |
Year starting on 1 July 2015 |
10 |
0.5 |
Year starting on 1 July 2016 |
10.5 |
0.5 |
Year starting on 1 July 2017 |
11 |
0.5 |
Year starting on 1 July 2018 |
11.5 |
0.5 |
Year starting on or after 1 July 2019 |
12 |
0.5 |
Source: Superannuation Guarantee (Administration) Amendment Act 2012, Schedule 1.
[275] The Superannuation Guarantee (Administration) Amendment Act 2012 (Cth) also amended the Superannuation Guarantee (Administration) Act 1992 to provide that, from 1 July 2013, the superannuation guarantee age limit of 70 will be removed and employers will be obliged to contribute to complying superannuation funds on behalf of eligible mature age employees 70 years and older. 172 The changes introduced by the Superannuation Guarantee (Administration) Amendment Act 2012 affect around 8.4 million employees.173
[276] The 2012–13 Review decision addressed the extent to which the changes introduced by the Superannuation Guarantee (Administration) Amendment Act 2012 are to be taken into account in the Panel’s determination of the level of any increase to minimum wages. In that decision the Panel began its consideration by broadly agreeing with Ai Group’s characterisation of superannuation as part of the social safety net and went on to observe:
“But superannuation has some unique characteristics that distinguish it from the general tax-transfer system. The SG contribution is a legislative requirement paid by employers for the benefit of employees. An increase in the SG rate is a labour cost to business that provides a deferred benefit to employees. It is a deferred benefit in the sense that “superannuation is directed to enhancing living standards in retirement rather than living standards during employment”. The SG Acts are also an important component of a broader retirement incomes policy.” 174 [footnotes omitted]
[277] We endorse the above observation. This characterisation of superannuation guarantee contributions distinguishes them from other non-wage labour costs. This has implications for a submission advanced by the ACTU, which we address later.
[278] The 2012–13 Review decision concluded that it was consistent with the statutory framework to have regard to the SG rate increase to take effect from 1 July 2013 in its determination of the level of increase in minimum wages. While the Panel took the 0.25 per cent increase in the SG rate into account in determining the level of increase in minimum wages in the 2012–13 Review, it did not apply a direct, quantifiable, discount to the minimum wage increase. In the 2012–13 Review decision, the Panel said:
“The range of considerations we are required to take into account calls for the exercise of broad judgment, rather than a mechanistic approach to minimum wage fixation.
The SG rate increase to apply from 1 July 2013 is a moderating factor in considering the adjustment that should be made to minimum wages. As a result, though it would not be appropriate to quantify its effect, the increase in modern award minimum wages and the NMW we have awarded in this Review is lower than it otherwise would have been in the absence of the SG rate increase.” 175
[279] The 0.25 percentage point increase in the SG rate to take effect from 1 July 2014 is the second increase in the SG rate since the contribution rate reached 9 per cent on 1 July 2002.
[280] We note that Schedule 6 of the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 (the MRRTR Bill) proposes to amend the timing of the currently legislated increase in the SG rate such that the superannuation guarantee charge percentage is maintained at 9.25 per cent for the years starting on 1 July 2014 and 1 July 2015, and increases to 9.5 per cent for the year starting on 1 July 2016. 176
[281] The MRRTR Bill was passed in the House of Representatives and referred to the Senate Economic Legislation Committee on 14 November 2013 for inquiry and report. The Bill was defeated in the Senate on 25 March 2014. 177 Given that the MRRTR Bill has not passed the Senate, the Australian Government submitted, in its post-Budget submissions, that the SG rate will increase from 9.25 per cent to 9.5 per cent from 1 July 2014, as currently legislated.
[282] Most of the submissions in these review proceedings, including that of the Australian Government, contended that the Panel should take into account the scheduled 0.25 per cent SG rate increase to apply from 1 July 2014 in its determination of the level of any minimum wage increase. 178
[283] However, the ACTU argued that the Panel should “not award a lower increase in minimum wages than it would have in the absence of this increase” 179 for the following reasons:
“We provided material in our submission to last year’s review that showed that non-wage labour costs declined between 2002-03 and 2010-11 as a proportion of total labour costs. Workers reliant on minimum wages did not receive an additional wage increase as a result of this fall in non-wage labour costs. Employers of the low-paid enjoyed a benefit from this decline in costs. We ask that the Panel not treat changes in non-wage labour costs (such as compulsory superannuation contributions or workers’ compensation premiums) asymettrically [sic], by reducing the wage rise it awards when costs rise but not increasing the wage rise it awards when costs fall.” 180
[284] A similar submission was advanced, and rejected, in the 2012–13 Review. As we have mentioned, superannuation guarantee contributions are distinguishable from other non-wage labour costs and consequently we do not accept the premise of the ACTU’s submission. Not every movement in non-wage labour costs will have a consequential effect on the level of minimum wage increases determined in a review.
[285] For the reasons given in the 2012–13 Review decision we have decided to take the scheduled 0.25 per cent increase in the SG rate into account in our determination of the level of any minimum wage increase.
The carbon price
[286] As part of the Clean Energy Future package a carbon price was introduced from 1 July 2012. This measure was expected to increase consumer prices by 0.7 per cent in 2012–13, as measured by the CPI. 181 A Household Assistance Package of tax cuts and increases to transfer payments was associated with the introduction of a price on carbon. The assistance package was said to be targeted at low- and middle-income households to help with the impact of the carbon price and to ensure that the most vulnerable households were not left worse off.182
[287] In the 2011–12 Review decision, the Panel considered the projected impact on the CPI of the introduction of a price on carbon and assistance to employees to compensate for those price effects. The Panel decided not to provide additional assistance to compensate for the anticipated price effects associated with the introduction of a price on carbon, because compensation had already been provided through the assistance package and further compensation by minimum wage adjustments would amount to double dipping. Consequently, the Panel abstracted the projected 0.7 per cent increase in the 2012–13 CPI from its deliberations.
[288] For the purposes of the 2012–13 Review decision, the Panel considered 2012–13 CPI figures from which the projected carbon price effect had been abstracted.
[289] The Australian Government has announced its intention to repeal the existing carbon price arrangements. The Clean Energy Legislation (Carbon Tax Repeal) Bill 2013 (the CTR Bill) was tabled in Parliament on 13 November 2013. It sought to repeal the legislation that establishes the carbon pricing mechanism. The CTR Bill was defeated in the Senate on 20 March 2014. 183 It has not to this date been reintroduced.
[290] Submissions in these review proceedings addressed both the impact of the carbon price on business and the proposed repeal of the carbon pricing mechanism.
[291] A number of employer groups and the Victorian Government submitted that the carbon price adversely impacted on business profitability. 184
[292] In its submission in reply, the ACTU noted that submissions arguing reduced business profitability due to the carbon tax are inconsistent with the Australian Government and ACCI positions that its removal will benefit households. In particular, the ACTU noted that:
“Either the carbon price has been passed on to households in the form of higher prices, in which case households will receive some benefit from its repeal, or it has reduced employers’ profit margins, in which case its repeal will assist businesses and not households.” 185
[293] We accept that the introduction of a carbon price has increased energy costs for employers. The Panel considered this issue in the 2012–13 Review decision and rejected the proposition that minimum wage outcomes should be moderated to offset increased energy costs of employers. The Panel’s reasons are set out in the 2012–13 Review decision:
“The carbon price was intended to alter relative prices in order to drive a structural change towards low emission-intensive products and production processes, and away from more emission-intensive sectors. In reporting the results of its modelling of the impact of the Clean Energy Future package, Treasury noted that “[w]hile impacts vary widely across industries, the broad sectoral effects are small compared to the normal variation over time driven by productivity, the terms of trade or changing tastes.” Treasury’s estimation of the impact of the carbon price on CPI (a 0.7 per cent increase) also assumed that most of the increase in costs to businesses would be passed on in higher prices. In this context, the proposition that minimum wage outcomes should be moderated to offset increased energy costs of employers is flawed. An attempt to offset intended price effects on employers through lesser wage outcomes would be inconsistent with the intended structural change. In any case, the impact of increased energy costs will vary from industry to industry and from employer to employer. In our view, the aggregate economic impact of measures such as the Clean Energy Future package are better considered in terms of the broader economic information to which we have regard, which reflects the effects of a variety of factors acting on economic conditions, of which the “price on carbon” is one. 186
[294] We have not been persuaded to change the position taken by the Panel in the 2012–13 Review decision.
[295] The Australian Government submitted that the Panel should “take account of the carbon tax repeal (and the continuation of compensation) in its 2014 decision”. 187 The argument in support of this proposition is set out in the Australian Government submission:
“The previous government introduced the carbon tax. The Commission’s 2012 and 2013 minimum wage decisions did not provide any additional assistance for the inflationary impacts of the carbon tax, due to the compensatory tax cuts and transfer payment increases introduced at that time.
The Australian Government has committed to abolish the carbon tax effective from 1 July 2014. All Australians, including the low paid, will be the beneficiary of a lower cost of living. Under the Government’s commitment to abolish the carbon tax from 1 July 2014, on average, Australian households will be around $550 better [sic] in 2014-15 than they would be with the carbon tax in place. In particular, average retail electricity prices are expected to be around 9 per cent lower and average retail gas prices around 7 per cent lower than they otherwise would be in 2014-15. In addition, the Government will leave in place the carbon tax compensation that is already in place. As a result, these tax cuts and fortnightly benefit increases will become genuine cost of living relief.
Since the Government’s decision to abolish the carbon tax will financially benefit households, including the low paid, the Panel should take account of the carbon tax repeal (and the continuation of compensation) in its 2014 decision.” 188
[296] In its submission in reply, the ACTU noted that the Panel should not take the carbon tax repeal into account:
“The Panel cannot and should not base its decision in this Review on a presumption that legislation to amend the carbon price will be passed by Parliament. Submissions on this matter invite the Panel to speculate on the outcome of a highly uncertain political process. This is inappropriate. Such submissions should be dismissed.” 189
[297] ACOSS submitted that the Panel should continue to set aside or “look through” the impact of household compensation associated with the carbon tax because the relevant legislation has not yet been passed. 190 In its submission in reply, ACCER noted that the carbon tax should be considered in 12 months time as “price levels in the current period between wage decisions will be affected by the Carbon Tax”.191
[298] The carbon price compensation is part of the rationale stated by ACCI in support of the position it has taken in these proceedings. ACCI submitted that the Panel should increase minimum wages by not more than $8.50 per week. In determining that figure ACCI stated that it had regard to, among other things, “the retention of the carbon price compensation for low income earners”. 192 In its reply submission, ACCI addressed the proposed repeal of the carbon pricing mechanism and put a similar submission to that put by the Australian Government. In its submission in reply ACCI submitted that:
“The ACTU is incorrect when it asserts that ‘…there is no evidence that there are likely to be changes to tax or transfer policy that improve living standards this year’. Repealing the carbon tax remains a high priority for the Government and it is likely to be successfully implemented once the Senate composition changes mid-year. Removing the carbon tax will have a significant impact on household incomes given the Government has also pledged to retain the compensation measures introduced to offset the impact of the tax on living standards.
These compensation measures were skewed toward low income households, resulting in them being over-compensated for the impact of the carbon tax. High income households were less than fully compensated by the previous government’s changes to the tax and transfer system. Retention of the carbon tax compensation measures while repealing the carbon tax will lead to a significant increase in the after-tax incomes of a range of households, particularly the low paid...
The repeal of the carbon tax will have a considerable impact on the incomes of the low paid and it remains a factor which should be taken into consideration when determining any increase in the National Minimum Wage and award rates of pay.
True, removing the carbon tax remains contingent upon the passage of legislation through Parliament and therefore subject to residual uncertainty. ACCI nevertheless believes that given the likelihood that the carbon tax will be repealed it is appropriate for the Minimum Wage Panel to factor in its impact.” 193
[299] Implicit in the submissions of the Australian Government and ACCI is that the Panel should award a lower increase than it otherwise would on account of an asserted improvement in living standards consequent upon the abolition of the carbon price. In essence, the Panel is being invited to speculate on the outcome of an uncertain political process. We reject these submissions. The possibility of legislative change, in the event that the CTR Bill becomes law, is irrelevant to our consideration of this issue. It has been the longstanding practice of the Commission and its predecessors to determine the matters before it on basis of the existing legislative framework and not otherwise. 194 The High Court took a similar approach in Ramsay v Aberfoyle Manufacturing Co (Australia) Pty Ltd, in which Starke J said:
“Courts of law ... can only act upon the law as it is, and have no right to, and cannot, speculate upon alterations to the law that may be made in the future.” 195
[300] For the reasons given, the prospect of legislative change is not something that we propose to take into account in making our decision.
[301] For the same reasons, we have not taken into account the proposed changes to the tax-transfer system announced in the 2014–15 Commonwealth Budget. At the time of this decision, the Australian Government has introduced its appropriation bills and they remain before the Parliament. Further, in the event that the proposals are enacted without amendment, a number of the proposed changes will not commence until 1 July 2014 or later.
6. Relative Living Standards and the Needs of the Low Paid
[302] The minimum wages objective and the modern awards objective both require us to take into account two particular matters, relative living standards and the needs of the low paid 196 when setting fair and relevant minimum rates. These are different, but related, concepts. Relative living standards requires a comparison of the living standards of award-reliant workers with those of other groups that are deemed to be relevant. The needs of the low paid requires an examination of the extent to which low-paid workers are able to purchase the essentials for a “decent standard of living” and to engage in community life. The assessment of what constitutes a decent standard of living and the requirements to engage in community life are in turn influenced by contemporary community norms.
[303] In this chapter, we consider:
The award-reliant workforce
[304] We were provided with information about the characteristics of employees paid award wages, primarily derived from EEH data and Research Report 6/2013, which has assisted us in forming a view about changes in both the needs of the low paid and relative living standards.
[305] The EEH survey contains information regarding the characteristics of employees who are paid the award rate. The EEH survey is conducted every two years and the latest data is for May 2012, which was considered in the 2012–13 Review.
[306] The EEH survey shows:
[307] Additional analysis provided by the ACTU, including unpublished EEH data, also shows:
[308] A further perspective on the characteristics of award-reliant employees is provided by Research Report 6/2013. The survey conducted for the Report covered a subset of the whole workforce. It found that 19 per cent of non-public sector employees were award reliant. By industry, the highest proportion of award-reliant employees was found in Accommodation and food services, where over half of employees are in award-reliant organisations (that is, have at least one award-reliant employee). The proportion of award-reliant employees was highest in medium and small organisations, and regional/rural locations, although a majority of the award-reliant were employed in larger enterprises. In micro organisations with less than five employees, only 14 per cent of employees were paid at exactly the rate specified in the award. 199
[309] In considering the different results from the ACTU analysis using EEH data and Research Report 6/2013, it is necessary to bear in mind the difference in the approach and coverage used to collect data on pay-setting arrangements in the Award Reliance Survey and the EEH Survey. 200
The low paid
[310] As to assessing the needs of the low paid, we remain of the view stated by the Panel in the 2012–13 Review decision that a threshold of two-thirds of median full-time wages provides a suitable and operational benchmark for identifying who is low paid. 201 Submissions on this topic mostly supported, and utilised, this benchmark.
[311] The Australian Government provided two definitions of low paid. The first is “less than two-thirds of median hourly earnings (including those on junior rates)”, 202 as measured by the EEH data—a figure of $17.35 per hour. The second defines low pay as equal to or less than two-thirds of median hourly earnings in their main job, using Household Income and Labour Dynamics in Australia (HILDA) Survey data for 2012—a figure of $17.60 for adults. Both the Australian Government figures are lower than the more usual measure of two-thirds of median adult ordinary time earnings ($18.60 in May 2012, as calculated by the ACTU from the EEH data),203 or between $19.17 (on the assumption of a 40 hour week) and $20.18 (on the assumption of a 38 hour week), based on the median earnings data for August 2012 contained in Table 8.1 of the Statistical Report—Annual Wage Review 2013–14 (Statistical Report).
[312] On the basis of the EEH data and their threshold of $17.35, the Australian Government estimated that there were around 1 058 000 low-paid employees in mid-2012. The survey found that 461 900 of the low paid were award-reliant employees, 292 600 employees were on individual arrangements and 303 500 employees were on collective agreements. 204 Of these, an estimated 104 000 (1.1 per cent of all employees) were paid the NMW. They also provided a chart205 that showed that 1 544 100 employees were award reliant in 2012. These two sets of information imply that 30 per cent of award-reliant employees were low paid.
[313] The Australian Government also used HILDA data to identify the extent and nature of the low-paid workforce. Using the adult low-paid threshold of $19.00 per hour (based on median earnings as reported in the Statistical Report for this Review, Table 8.1), the Australian Government estimates that there were about 2.0 million low-paid employees in 2012, comprising 22.7 per cent of all employees, 38.7 per cent of whom were aged under 25. 206 The higher number reflects the use of a higher value for median earnings (one which includes only adults in its estimation).
[314] ACCI argued that “[m]any award-reliant employees may not be low paid, although the data is mixed”. 207 ACCI referred to the ACTU submission to the 2012–13 Review which used unpublished EEH data to show that just over 50 per cent of award-reliant employees earn more than the C10 rate.208 ACCI submitted that the C8 rate should be used as a proxy for two-thirds of median full-time earnings, and this leads to a proportion of low-paid award-reliant employees of just over 40 per cent.
[315] Using unpublished data from the EEH survey 209 and imputing classifications based on average hourly ordinary time cash earnings, the ACTU matched the EEH data to classifications and wage rates in the Manufacturing and Associated Industries and Occupations Award 2010 to provide a distribution of award-reliant employees.210 They concluded that just under half of award-reliant workers are employed at or below the C10 level, with a clustering around the C10 to C12 level. On their calculations, these workers earned below two-thirds of the median hourly ordinary time cash earnings of non-managerial adult employees. Their estimates included juniors, apprentices and those on a supported wage.
[316] While there is widespread agreement that “less than two-thirds of the median” is a good working definition of being low paid, it is clear that the practical application of this measure is not straightforward. First, the surveys that provide the information about the distribution of earnings from which a median is derived vary in their sources, coverage and definitions in ways that affect the absolute values of average and median wages (and hence the calculation of two-thirds of these values). To illustrate this point, Table 6.1 contains estimates of two-thirds of median weekly earnings based on data from the two main ABS surveys of the distribution of earnings, the Employee Earnings, Benefits and Trade Union Membership (EEBTUM) and the EEH.
Table 6.1: Two-thirds of median weekly earnings
Year |
EEBTUM |
EEH |
2008 |
$666.67 |
$705.33 |
2009 |
$666.67 |
n/a |
2010 |
$700.00 |
$743.33 |
2011 |
$733.33 |
n/a |
2012 |
$766.67 |
$808.00 |
Note: Weekly earnings from the EEBTUM survey are earnings in the main job for full-time employees. The figure is for August of each year. Weekly earnings from the EEH survey are weekly total cash earnings for full-time non-managerial employees. The figures for 2008 are for August and for 2010 and 2012 for May.
n/a = not available.
Source: ABS, Employee Earnings, Benefits and Trade Union Membership, Australia, various, Catalogue No. 6310.0; ABS, Employee Earnings and Hours, Australia, various, Catalogue No. 6306.0.
[317] On this data, two-thirds of median full-time wages differs by about 6 per cent, or $41 on the most recent measures, even when provided by the same (high quality) statistical agency. On both measures, the value of two-thirds of median earnings was above the C8 rate at the relevant time. We note that two-thirds of AWOTE equated to approximately the C3 rate in May 2012.
[318] The calculation of the median will also be affected by whether or not juniors are included in the population from which the median is derived.
[319] Research Report 6/2013 found that around 75 per cent of adult award-reliant employees in the non-public sector were found to be on the equivalent of the C10 rate of $18.60 per hour or below. 211
[320] Whilst caution is required in drawing conclusions as to the precise extent of low pay among the award reliant, the ACTU’s analysis based on unpublished EEH data, the Research Report 6/2013 and the estimates of the Australian Government all suggest that a sizeable proportion—perhaps half—of employees who are award reliant are also low paid. Many of these are people under the age of 21.
[321] The definition of low paid by reference to employees on award wages that are below two-thirds of median adult ordinary-time earnings excludes a substantial proportion of workers who are paid at the higher levels of award rates. The modern awards objective applies to the adjustment of minimum wages through annual wage reviews. 212 It requires the Commission (the Panel in the context of Part 2–6 of the Act) to ensure that modern awards provide a fair and relevant minimum safety net of terms and conditions, taking into account a range of matters, including the relative living standards and the needs of the low paid.213 It is necessary in doing so to have regard to whether minimum award rates at higher classification levels provide a fair and relevant safety net for award-reliant employees at those classification levels.
[322] As assessment of the needs of the low paid is more difficult. There is no single contemporary measure available to assess either the needs of the low paid or the extent to which those needs are being met. A variety of proxy measures must be used.
[323] In assessing the needs of the low paid, we accept that if the low paid are forced to live in poverty then their needs are not being met. We also accept that those in full-time employment can reasonably expect a standard of living that exceeds poverty levels. In assessing the needs of the low paid we rely on a range of measures including comparisons of hypothetical low-wage families with customary measures of poverty, both before and after taking account of the impact of the tax-transfer system and survey evidence of financial stress and material deprivation among low-paid households.
[324] ACOSS urged the Panel to take into account the impact of the level of the minimum wage on poverty, through its indirect but stable relationship with the level at which unemployment benefits are set. 214 We accept that such a relationship does most probably exist. However, the matters that we are required to consider in setting the national minimum and other award wages do not include the standard of living, or risk of poverty, of people who are in receipt of unemployment benefits or other government payments. Our attention must be confined to employees who are in receipt of award wages or the national minimum wage.
Relative living standards
[325] In setting fair and relevant award rates of pay, we are required to take into account the relative living standards of award-reliant workers. This requirement relates to all award rates, not just to those that fall below a threshold of low pay.
[326] Our obligation to consider the relative living standards of those who are paid award rates requires us to decide who the comparison groups should be. ACOSS claims that “[t]he quality of people’s living standards can only be properly assessed relative to what the community defines as adequate, which depends in turn on typical living standards in the community.” 215 This is the broadest view that might be taken. It implies that the living standards of everyone, including the aged, others not in the labour force, the self-employed and senior executives and professionals, should be taken into account, since they all have an influence on the “typical living standards in the community”. As noted in Chapter 2, our assessment of relative living standards focuses on the comparison between award-reliant workers and other employed workers, especially non-managerial workers. Whilst this focus does not exclude a consideration of the comparative living standards of award-reliant workers and other groups, it is a matter of the weight to be given to such comparisons.
[327] In this regard, it is not just the average or median level of wages that is relevant, but also the degree of dispersion (or inequality) around those “typical” measures. The two measures are linked, since a rise in dispersion will also increase the ratio of the average and median wage to the wages of the deciles that are below the median.
[328] The remainder of the chapter considers various indicators of relative living standards and needs.
Real earnings
[329] The relative living standards of award-reliant employees are affected by the level of wages that they earn, the hours they work, tax-transfer payments and the circumstances of the households in which they live. Our assessment of relative living standards commences with an examination of how the wages of award-reliant employees have changed relative to prices.
[330] Although subject to year-to-year variation, the NMW has increased in real terms over the past decade and in most years within the decade. The real value of the NMW increased by a cumulative 0.9 per cent over the five years to the December quarter 2013, and by 5.3 per cent over the 10 years to the December quarter 2013 (Table 6.2). While the CPI-adjusted real value of the minimum wage fell over the most recent year, to the December quarter 2013, this measure does not reflect the 0.25 per cent rise in the superannuation guarantee levy that the Panel took into account in its 2012–13 Review decision. 216
Table 6.2: Real minimum wage and percentage change—2002–2013, December quarter 2012 dollars
Year |
Real minimum wage |
Change |
($) |
(%) | |
2003 |
575.31 |
1.5 |
2004 |
584.97 |
1.7 |
2005 |
589.60 |
0.8 |
2006 |
602.88 |
2.3 |
2007 |
597.71 |
–0.9 |
2008 |
600.28 |
0.4 |
2009 |
588.18 |
–2.0 |
2010 |
599.89 |
2.0 |
2011 |
602.29 |
0.4 |
2012 |
606.40 |
0.7 |
2013 |
605.58 |
–0.1 |
Note: Real minimum wage calculated from C14 (the national minimum wage) and CPI (original data) from the December quarter of each year.
Source: ABS, Consumer Price Index, Australia, Mar 2014, Catalogue No. 6401.0; Metal, Engineering and Associated Industries Award 1998; Manufacturing and Associated Industries and Occupations Award 2010.
[331] Chart 6.1 shows an index of the real value of selected award classification rates since December 2002—the C14 (and NMW), C10, C4 and C1(b) classification rates in the Manufacturing and Associated Industries and Occupations Award 2010 and the Metal, Engineering and Associated Industries Award 1998, and the L4 classification rate in the Professional Employees Award 2010. The chart shows real increases in the level of the C14 (and NMW) and C10 rates and real reductions in the higher C4 and C1(b)/L4 classification rates. The real increases are more pronounced at the C14 level and the real reductions are more pronounced at the C1(b)/L4 level. This reflects the previous adjustment of award wages by “flat dollar” amounts. Since the Annual Wage Review 2010–11 decision (2010–11 Review decision), minimum modern award rates have been adjusted by percentage increases and real wages have increased at each classification level at the time of each review adjustment.
Chart 6.1: Real value of selected minimum wage rates, December quarter 2003–March quarter 2014
Note: Minimum wage rates are measured at end of quarter, except for the September quarters since 2007, which measures the minimum wage rates as of 1 October in each year.
Up until 27 March 2006 minimum rates of pay are those in the Metal, Engineering, and Associated Industries Award 1998; between 27 March 2006 and 30 June 2009 the minimum rates are those in Australian Pay and Classifications Scale (and from 1 July 2009, transitional Australian Pay and Classification Scale) derived from the Metal, Engineering, and Associated Industries Award 1998; post 1 January 2010 minimum rates C14, C10 and C4 are those in the Manufacturing and Associated Industries and Occupations Award 2010 and the L4 rate from the Professional Employees Award 2010. For the purpose of the analysis, the L4 rate was calculated by dividing the annual salary for the L4 classification by 365 and multiplying by 7 to get a weekly rate from which a comparable real value could be derived.
Source: ABS, Consumer Price Index, Australia, Mar 2014, Catalogue No. 6401.0; Metal, Engineering and Associated Industries Award 1998; Manufacturing and Associated Industries and Occupations Award 2010; Professional Employees Award 2010.
[332] Evidence on the changing real value of award rates was provided by several parties. ACCER submitted that many higher classification workers had experienced real wage cuts. The submission showed that in the period from January 2001 to January 2014, CPI increases were greater than increases for award rates that are currently equal to or above $785.00 per week. 217 ACCER commented that there has been an “increasing disconnection between the safety net rates for higher paid classifications and the wage rates for those classifications in the broader workforce.”218
[333] The ACTU also adjusted nominal minimum wage growth using the employee LCI which, it submitted, is a “conceptually preferable means of measuring changes in the cost of living for workers than the CPI.” 219 The ACTU concurred with the Panel’s view expressed in its 2012–13 Review decision that “it is appropriate to have regard to each measure of inflation, noting the conceptual differences.”220 The ACTU showed that in the year to the December quarter 2013, real minimum wages increased when deflated by the employee LCI and fell when deflated by the CPI.221 The ACTU noted that the rise in the real NMW rate (LCI-adjusted) over the year comes after a “prolonged period of decline and stagnation.”222 The ACTU added that the real NMW (LCI-adjusted) was only $10 per week higher than it was in 2006.223 They judged this to be a “very modest rise in the purchasing power of the NMW, in the context of rising labour productivity and average wages.”224
[334] ACCI recommendation of an $8.50 increase to the NMW, which is supported by some other employer organisations, is premised on the basis that the real value of the NMW should remain approximately constant over time. 225 It takes into account the CPI increase over the past year, some reduction on account of NMW increases in excess of inflation in the past two reviews, together with the legislated increase in the superannuation guarantee contribution of 0.25 per cent from 1 July 2014 and the proposed repeal of the carbon price. We have had regard to the legislated increase in the superannuation contribution for the reasons stated at paragraphs [278], [284]–[285]. For the reasons stated at paragraphs [299]–[300] we do not propose to have regard to the proposed repeal of the carbon price. Further, to the extent that the ACCI position is based on the adjustment of the NMW in line with inflation over a period of time, it seeks that the Panel revisit past decisions, a course we do not intend to follow. More fundamentally it reflects a formulaic real wage maintenance approach to fixing the NMW. Such an approach is inconsistent with our requirement to have regard to a range of statutory matters in the context of the evidence relevant to a particular review. Further, it suggests no place for NMW increases in excess of CPI to reflect increasing community living standards associated with productivity growth and no role for the statutory criteria of relative living standards of the low paid. As the Panel noted in the 2009–10 Review decision:
“In the context of productivity growth and increasing community living standards, the maintenance of the real value of award wages alone would not adequately maintain relative living standards. This is one of a number of relevant considerations that we must take into account.” 226
Relative earnings in Australia
[335] With regards to relative earnings, the Australian Government and ACTU submitted that the NMW has grown more slowly than the median 227 and average full-time weekly earnings.228 The ACTU characterised this as “continuing the long-term trend.”229
[336] The Western Australian Government compared growth in the NMW in the 10 years to 2013 with both national and Western Australia CPI growth and WPI growth and noted that:
“over the last decade, the national minimum wage has increased at a rate which is greater than inflation, but generally lower than wage inflation both nationally and in Western Australia.” 230
[337] ACCER provided a comparison between safety net wages and various measures of wages and incomes over time. ACCER submitted that if the NMW had increased at the same rate as AWOTE over the 13 years to January 2014, the NMW would be greater by $98.50. 231 ACCER put this submission to demonstrate how much the NMW and other safety net workers have lost when compared to community wage movements and general living standards, although it did not seek an arithmetical nexus between safety net rates and AWOTE.
[338] Over the past decade, all award rates of pay have fallen relative to measures of median and average earnings, with much of that decline occurring in 2006 and 2008, and the ratio being volatile from year to year. The ratio has fallen since the first annual wage review adjustment in 2009—from 54.4 per cent in August 2009 to 52.7 per cent in August 2012. The annual movements in the C14 rate relative to median weekly earnings of full-time employees is shown in Table 6.3, which shows a fall from 57.5 per cent in 2002 to 52.7 per cent in 2012.
Table 6.3: C14 rate relative to median weekly earnings of full-time employees
Month and year |
C14 |
Median earnings of full-time employees in main job |
Ratio of C14 to median earnings in main job |
($) |
($) |
(%) | |
Aug-02 |
431.30 |
750.00 |
57.5 |
Aug-03 |
448.40 |
769.00 |
58.3 |
Aug-04 |
467.40 |
800.00 |
58.4 |
Aug-05 |
484.40 |
843.00 |
57.5 |
Aug-06 |
484.40 |
900.00 |
53.8 |
Aug-07 |
511.86 |
940.00 |
54.5 |
Aug-08 |
522.12 |
1000.00 |
52.2 |
Aug-09 |
543.78 |
1000.00 |
54.4 |
Aug-10 |
569.90 |
1050.00 |
54.3 |
Aug-11 |
589.30 |
1100.00 |
53.6 |
Aug-12 |
606.40 |
1150.00 |
52.7 |
Note: Following the amendments to the Workplace Relations Act 1996 taking effect in 2006, the federal minimum wage was set as $12.75 per hour, equivalent to $484.50 per week.
Source: ABS, Employee Earnings, Benefits and Trade Union Membership, Australia, Aug 2012, Catalogue No. 6310.0; Metal, Engineering and Associated Industries Award 1998; Manufacturing and Associated Industries and Occupations Award 2010 (from January 2010).
[339] The Australian Government submitted that “there has been an increase in earnings inequality over the longer term, but income inequality has remained steady over recent years, with the strongest growth in incomes accruing to low-income households”, 232 while the ACTU suggested that “[e]arnings inequality has grown over time” and “is at least partly due to the fall in the relative value of minimum wages”.233
[340] Chart 6.2 shows the changes in the nominal value of the C14 and C10 award rates, compared with changes in AWOTE, AWE and the WPI, over the 10 years to the December quarter 2013. It shows that the award rates have grown more slowly over the decade than the measures of average pay, although growth in the C14 rate has remained close to that of the WPI. All rates above C10 have fallen further behind average pay increases than is displayed for the C10 rate, although this relative decline was arrested by the uniform percentage increases in the past three annual wage reviews.
Chart 6.2: Growth in C14 and C10 relative to AWOTE, AWE and WPI, cumulative percentage change
Note: This chart reflects data for the period December quarter 2002 to December quarter 2012. WPI is the index for total hourly rates of pay excluding bonuses in both private and public sectors. It is unaffected by change in the quality or quantity of work performed. AWOTE is calculated by dividing estimates of weekly ordinary time earnings by estimates of the number of employees. It is calculated before taxation and other deductions such as superannuation. It also excludes payments which are not related to the reference period such as overtime, leave loading and redundancy payments. AWOTE estimates refer to full-time adult employees. Average weekly earnings is the gross (before tax) earnings of employees (excluding salary sacrifice). C14 and the C10 are minimum award rates set under the Manufacturing and Associated Industries and Occupations Award 2010 and the former Metal, Engineering and Associated Industries Award 1998. AWOTE and AWE data are published half-yearly, hence, a quarterly time-series is derived through linear interpolation. AWOTE and AWE data are expressed in original terms.
Source: ABS, Average Weekly Earnings, Australia, Nov 2013, Catalogue No. 6302.0; ABS, Wage Price Index, Australia, Dec 2013, Catalogue No. 6345.0; Metal, Engineering and Associated Industries Award 1998; Manufacturing and Associated Industries and Occupations Award 2010 (from 1 January 2010).
[341] As shown in Table 6.4, the NMW has fallen from 47 per cent to 43.3 per cent of AWOTE, and from 59.8 per cent to 55.8 per cent of AWE, over the five year period from the December quarter 2008 to the December quarter 2013. Similar reductions in the ratio of higher classification rates (C5 and C10) to AWOTE and AWE have occurred over the same period.
Table 6.4: Ratio of C14, C10 and C5 classifications to AWOTE and AWE wage measures—December 2008 and December 2013
Ratio to |
AWOTE |
AWE | ||
Dec 2008 |
Dec 2013 |
Dec 2008 |
Dec 2013 | |
C14 |
47.0 |
43.3 |
59.8 |
55.8 |
C10 |
55.1 |
50.4 |
70.1 |
65.0 |
C5 |
64.8 |
59.0 |
82.5 |
76.1 |
Source: ABS, Average Weekly Earnings, Australia, Nov 2013, Catalogue No. 6302.0; Metal, Engineering and Associated Industries Award 1998; Manufacturing and Associated Industries and Occupations Award 2010 (from 1 January 2010).
[342] While low-paid employees are not necessarily paid award rates, it is useful to note the broader changes in overall levels of earnings inequality. There can be little doubt that the overall levels of earnings inequality have increased over time. Chart 6.3 shows the growth in real weekly earnings by selected percentiles. It shows that real weekly earnings of full-time workers have become progressively less equal in the past decade—for each decile, the lower the earnings, the lower the rate of growth in earnings. The rising inequality over the past decade was concentrated in the period up to 2008 and is less pronounced over the past five years. The fanning out of the earnings distribution provides the context in which to assess movements in award wages. It should be noted that, while relatively small, there has been some growth in the real earnings of even the lowest decile.
Chart 6.3: Real weekly total earnings (full-time adult non-managerial employees) by percentile—2002–2012
Note: Earnings figures are slightly inflated from May 2006 due to the inclusion of salary sacrificing. The EEH Survey was not conducted in 2003, 2005, 2007, 2009 and 2011. Results for these years have been obtained through linear interpolation.
Source: ABS, Consumer Price Index, Australia, Mar 2013, Catalogue No. 6401.0; ABS, Employee Earnings and Hours, Australia, various, Catalogue No. 6306.0.
[343] No party disputed the fact that the distribution of earnings has become more unequal in Australia over recent decades. The Australian Government provided a table that showed that “between 2002 and 2012, earnings in the 10th and 25th percentile grew by 12.6 per cent and 14.8 per cent respectively, compared to growth rates of 22.3 per cent and 28.0 per cent for the 75th and 90th percentiles. These changes have resulted in an increase in earnings inequality over time.” 234 No data were available to consider any changes since 2012.
[344] A number of arguments were put to us about the reasons for the continuing rise in inequality of earnings. These included an increased premium on higher skills; the strong demand from, and high pay in, the resources sector; and a change in the structure of jobs towards the more highly paid. These are, in turn, driven, at least in part, by both technological change and the greater integration of the world economy. The ACTU also argued that the fall in the value of the NMW relative to average and median earnings is part of the reason for the rising inequality of earnings. They drew attention to the rise, between 2002 and 2012, in the proportion of full-time employees who had earnings below two-thirds of median earnings (from 13.8 per cent to 18.9 per cent). They also identified a close correlation between “the falling minimum wage bite and the rising level of inequality and low pay.” 235 We believe that there is some force in this point. The number of adults who are employed at or near NMW rates is probably not large enough for there to be a strong and direct link between rises in the NMW and lower award rates that are below average and relatively slow growth in the earnings of the lower deciles of the earnings distribution. But the concentration of award-reliant employees in the lower deciles of the earnings distribution, the relatively slow rate of increase in the value of awards, and the influence of award rate changes on nearby bargained rates all point towards some direct contribution from annual wage review decisions to rising inequality of earnings. This is not to imply that the annual wage review decisions were inappropriate, they were made taking into account many factors other than their impact on the inequality of earnings.
[345] The Australian Government highlighted the impact of the trend towards higher-paid, higher-skilled jobs on earning inequality. 236 If the economy has a changing structure of jobs towards the higher skilled, as the Australian economy has had, we would not expect minimum rates of pay to keep pace fully with average earnings. Nonetheless, the evidence is clear that even the lowest award rates have barely kept pace with growth in rates of pay more generally (as measured by the WPI). Higher award rates have fallen well behind growth in the WPI over the decade. While the lower award rates have had small increases in their real purchasing power, all award rates have fallen substantially, relative to measures of average or median earnings. We conclude that earnings from jobs paid at the award rate are contributing less to the maintenance of relative living standards than they have in the past decade.
[346] In the 2012–13 Review, ACCI and ABI argued that the needs of the low paid should include small business employers in receipt of low wages from their business. The Panel rejected the proposition that low-paid business owners are low paid for the purpose of assessing the relative living standards of the award reliant. 237 Whilst that conclusion was not challenged, some employer organisations submitted that regard should be had to them as a relevant benchmark in considering the relative living standards of the award reliant.238
[347] In the current Review, ACCI submitted 2011 Census data on the earnings distribution of employees and employers of 1–19 staff who work full‐time in key award‐reliant industries in order to address some of the concerns raised by the Panel, with the analysis conducted by ABI and ACCI in 2013, using 2011 Census and other data. 239
[348] We remain concerned about the extent to which the Census data submitted by ACCI can be relied on to show the income of small business employers from full-time employment within their business. The distribution compares gross income from all sources—wages and salaries, government transfers and investment income—and does not isolate income derived from wages. Further, the concerns the Panel raised in 2012–13 about the equivalence of these two forms of employment remain apposite.
[349] More fundamentally, even if comparable data were available, there is no logical reason why the wages and salaries of working small business operators relative to their employees would have a particular significance in assessing the relative living standards of the award reliant. It would seem no more relevant than, for example, the wages and salaries, and movements in them, of directors and managers of incorporated businesses relative to those of their employees or any other subgroup of persons in the workforce or the broader community. Whilst the incomes, and movements of them, of subgroups within the workforce or broader community are of some relevance in assessing the relative living standards of award-reliant workers, better guidance is provided by broader measures of incomes of the workforce and the community as a whole, with particular focus on the comparison between award-reliant workers and other employees. We note that we have had regard to profitability, competitiveness and viability of business, including small business, in Chapter 4.
Relative earnings—an international perspective
[350] Several parties relied on making international comparisons as determinants of Australia’s relative competitiveness. Several parties compared the purchasing power of minimum wages in Australia with wages earned by workers elsewhere in the OECD.
[351] Ai Group and IPA noted that on a purchasing power parity basis, Australia has one of the highest real minimum wage rates amongst OECD countries. 240
[352] Ai Group and the ACTU provided comparisons of the ratio of minimum wages relative to average wages for full-time employees across OECD countries in 2012. 241 The Chart presented by Ai Group is reproduced as Chart 6.4.
Chart 6.4: Comparison of OECD Minimum Wage levels Relative to Average Wages 2012
Source: Ai Group submission at p. 28; OECD StatExtracts, Real Minimum Wages, extracted 26 March 2014.
[353] Ai Group submitted that the minimum wage is 44 per cent of the average wage for a full-time employee (this is one measure of the minimum wage bite, the other being the ratio of the minimum wage to median earnings), compared with an average of 38 per cent across the sample of OECD countries in 2012. 242 Ai Group commented that Australia’s minimum wage levels are closer to average wages than in all but three other OECD countries and commented that in relation to the NMW “Australia’s minimum wage levels are relatively generous in their contribution to meeting the needs of the low paid.243
[354] The ACTU and ACCER noted that the NMW, as a proportion of full-time AWOTE, fell to 43.3 per cent in 2013. 244 The ACTU submitted that the minimum wage in Australia, as a proportion of full-time AWOTE, had fallen from nearly 60 per cent in 1992, to 48.2 per cent 10 years ago and 46.9 per cent five years ago, to the 2013 level of 43.4 per cent, which the ACTU argued was the “lowest minimum wage bite on record.”245 The ACTU also presented OECD data on the minimum wage bite for the last two decades and submitted that “as Australia’s bite has continued to fall over the past decade, those of many OECD countries have risen. Australia’s minimum wage bite is no longer distinctively high and we are rapidly descending to the middle of the pack.”246
[355] The ACTU maintained that international comparisons are somewhat more informative than in the past 247 as the “fall in Australia’s minimum wage bite and compression of award relativities makes Australia less distinctive than it was a decade or more ago.”248 As such, the ACTU argued that international comparisons can provide an indication of the likely consequences of allowing the minimum wage bite to decline further.249 However the Australian Government submitted that:
“The Government recommends that the Panel, when considering the level of minimum wages in an international context, note also that award wages are often considerably higher than the NMW.” 250
[356] The OECD-based comparative data discloses that the NMW in Australia remains relatively high as a proportion of average earnings. However, it also discloses a significant reduction in the relative level of the NMW over the past two decades both in an Australian context and in an international context. Whilst the ratio of the NMW to average earnings within Australia provides one measure of the relative living standards of the low paid, it remains our view that data about the Australian minimum wage bite relative to other OECD countries is of limited significance in evaluating the relative living standards supported by award wages.
The tax-transfer system
[357] The tax-transfer system has a significant role to play in alleviating the impact of earnings inequality and supporting the living standards of low-paid workers. Wages do not entirely determine the living standards of the majority of individual wage earners who live in households with others. We agree with the view expressed in the past three review decisions that:
“minimum wages and the tax transfer system are both relevant to the maintenance of an effective safety net for the low paid: each has its part to play. Wages play a particularly important role in the maintenance of disposable incomes for households not receiving income support payments.” 251
[358] The effect of taxes and transfers on disposable incomes of the low paid is relevant to the needs of the low paid and their relative living standards. This is so in relation to both specific changes in the tax-transfer system at the time of a particular annual wage review and assessing broader information in relation to measures of the income of the low-paid expressed as a proportion of overall median or average incomes. Consideration of the effect of changes in the tax-transfer system on the absolute or relative circumstances of the low paid must be made in the particular circumstances that apply.
[359] The Australian Government submitted that “minimum wage increases are not a well-targeted tool for lifting incomes of low paid households”. 252 It presented analysis using data from the 2012 HILDA Survey to show that low-paid workers are found across the equivalised household income distribution, comparing all households to households with at least one adult employee. It submitted that when considering employee households, low-paid workers remain distributed across the income distribution although there are a higher proportion of low-paid employees in the lower deciles (around 30 per cent in the bottom two deciles) than the top deciles. Part-time low-paid workers tend to be more heavily concentrated in the lower household income deciles than full-time low-paid workers.253
[360] The relative living standards of the low paid are affected by the level of wages that they earn, and by the circumstances of the households in which they live. Increases in minimum wages are a blunt instrument for addressing the needs of the low paid. 254 However, there is some concentration of low-paid workers within lower income employee households.
[361] The Australian Government calculated changes in real disposable income for a number of hypothetical household types with a NMW earner, covering the period between 1 January 2009 and 1 January 2014. 255 They show a reduction for single income couples without children in which the wage earner works full-time and is in receipt of the NMW. Increases are shown for each other family type modelled over that period, with the most limited increases being for couples, ranging from 0.5 per cent to 1.6 per cent for couples with children. Both full-time singles and full-time two-income couples earning the NMW recorded an increase of 1.6 per cent. Single parents also experienced a relatively large real increase in their real disposable incomes (Table 6.5).
Table 6.5: Changes in real disposable household income by selected household types—1 January 2009–1 January 2014, selected household types
Household type |
Change with real NMW increases |
(%) | |
Single, no children | |
Full-time NMW |
1.6 |
Part-time NMW |
3.1 |
Student on part-time NMW |
15.9 |
Single parent | |
Full-time NMW, child age 3 |
5.3 |
Part-time NMW, child age 3 |
6.3 |
Full-time NMW, child age 9 |
8.3 |
Part-time NMW, child age 9 |
9.7 |
Single income couples | |
Full-time NMW, no children (a) |
–2.1 |
Full-time NMW, child age 3 |
0.9 |
Full-time NMW, children aged 3 and 9 |
1.6 |
Dual income couples | |
Both full-time NMW, no children |
1.6 |
One full-time and one part-time NMW, no children |
0.5 |
One full-time and one part-time NMW, child aged 3 |
0.7 |
One full-time and one part-time NMW, children aged 3 and 9 |
1.5 |
Note: (a) Assumes couple is born after 1952 and therefore affected by the removal of the dependent spouse tax offset. This is the main reason single earner couples without children have experienced a real decline in disposable income over the past five years.
Source: Australian Government submission at p. 65, Table 6.7.
[362] ACCER provided a longer-term perspective over the period 2001 to 2014. 256 It calculated the rise in disposable income for award-reliant families (with two children) relative to a family with a wage earner on AWOTE over that period. Table 6.6 summarises their key results and shows that taxes and transfers have increased the real purchasing power of disposable incomes at the NMW/C14 and C10 levels, and reduced the difference compared to those with average earnings.
Table 6.6: Rise in components of income between safety net-dependent and AWOTE families (couple or sole parent with two children families)—2001–2014
NMW |
C10 |
AWOTE | |
(%) |
(%) |
(%) | |
Rise in pre-tax and transfer wages |
|||
Wage increase—pre-tax and transfer |
55.4 |
47.2 |
80.0 |
Rise in components of disposable income |
|||
Wage increase—net of tax |
64.2 |
59.3 |
80.2 |
Increase in transfers |
89.8 |
89.8 |
210.4 |
Increase in disposable income |
71.9 |
67.6 |
93.8 |
Source: ACCER submission at p. 128, Table 19.
Recently proposed tax-transfer measures
[363] In its post-Budget submissions, the Australian Government identified a range of tax-transfer payment measures in the 2014–15 Budget, which will take effect during the 2014–15 financial year, which will impact on award-reliant and award-free minimum wage workers. 257 A number of these measures, including those affecting family payments by government, will impact negatively upon some low-paid employees.
[364] For the reasons stated at paragraph [301] we have not taken into account the tax-transfer measures proposed in the 2014–15 Budget in the current Review.
[365] We note that a number of the proposed changes to the tax-transfer system will particularly impact on families, rather than individuals. The appropriate reference household for the purposes of setting minimum wages is the single-person household rather than the couple household with children. For this reason it should not be assumed that the tax-transfer payments announced in the 2014–15 Budget will be automatically taken into account in determining the level of the increase in next year’s Review.
Earnings, income inequality and poverty
[366] We accept that for many people their material standard of living is only partly determined by their own wage. The other main influences are the hours that they work, the earnings and needs of other members of their household, and the impact of the tax-transfer system. ACOSS provides one illustration of this point when it cited analysis of ABS data from 2009–10 that show that 30 per cent of people who live below the poverty line (defined as 60 per cent of median equivalent household disposable income) live in households where the main source of income is wages—20 per cent live in households that have a full-time wage earner. 258 Given that a single person who works full-time at the minimum wage has disposable income that is estimated as 14 per cent above the “60 per cent median” poverty line,259 it is family needs and hours of work that lie behind the number of “working poor” households.
[367] This view is supported by data from Table 8.2 in the Statistical Report for this Review. This table shows that the family type on the NMW or a low award rate that most struggles to obtain an equivalent income above the 60 per cent median poverty line is a single-earner couple with no children. Such a couple would need to receive a wage equivalent to the C4 rate to have an equivalent disposable income equal to the 60 per cent median poverty line. Single-earner couples with one or two children also fall close to or below the 60 per cent median poverty line if they receive the C10 rate or less. In each case, receipt of the Newstart Allowance by the non-employed adult would lift disposable income to equal or above the 60 per cent median poverty line. 260
[368] Despite the importance of family composition and the tax-transfer system, we appreciate that the level of the NMW and other award rates affects the distribution of equivalent household income, through their impact on the amount of earnings that a worker on these rates is able to bring into the household. It is also likely that choices of family type are influenced by their capacity to support themselves, and to support a family, on the wages that they earn.
[369] We note here the ACOSS conclusion that households with wages as their principal source of income have a much lower risk of being in poverty than other households. They represent almost one-third of people in poverty, mainly because there are many more people in this category than in any other. That is, wage-earning households are both large in number, and have a relatively low risk of poverty (e.g. a 9 per cent risk of being below the 60 per cent median poverty line).
[370] We agree with ACCER that “[t]he setting of wages based, in part on need, should not be limited to finding the poverty line and placing the lowest paid workers on it. Work should deliver something above poverty.” 261
[371] ACCER urged the Panel to give much more weight to the evidence that it presents on the declining relative position of families that are reliant on the NMW or lower award rates. They emphasised the circumstances of hypothetical single-earner families, particularly those where the second adult is not in the labour force. They calculated changes from 2001–14 in the disposable incomes of couple families with two children who are reliant on the NMW, the C12 award rate and the C10 award rate. These are compared with changes in a 60 per cent of median equivalent disposable household income poverty line. 262
[372] They summarised the results as follows:
“ The NMW-dependent family of four fell further into poverty: from 3.3% below to 10.0% below [the equivalent poverty line]...
[373] We note also that ACOSS adopted the position that the appropriate reference household for the purposes of setting minimum wages is the single person household 264 rather than couple households with children. This is also our view.
[374] We accept that the evidence is clear that households of various types that are reliant on the lower award classification rates or the NMW have had a fall in their relative incomes and are thereby less able to meet their needs. We accept also that the distribution of earnings has become steadily less equal over recent decades. However, it is important to appreciate that in recent years this has not translated directly into rising inequality of equivalent household disposable income. The Australian Government provided three different perspectives on the changes in the distribution of real equivalent household disposable income between 2001–2012 and 2010–2012. 265 They showed that all points in the distribution have had a rise of at least 38 per cent in their real disposable income over the decade; that this rise was greatest for households in the third and fourth deciles of the distribution; that in the two years from 2010, lower income households had larger rises than higher income ones; and that overall inequality as measured by the Gini coefficient rose from 2001 to 2008, but has since fallen.
[375] These data show that the forces for increasing inequality that are seen in the distribution of earnings have been offset in more recent years by the other factors that affect equivalent household disposable income. Many of these come from outside the wage structure, especially since the measures of household disposable income are based on all Australian households, not just those in the workforce. Other major factors are eligibility for and levels of social welfare payments, the distributional impact of direct household taxes, household composition and numbers in the workforce, income from assets and self-employment. Some of these factors can and do mitigate the effect of the falling relative value of award rates of pay on the distribution of disposable household income. But less work would be required of these other determinants if the relative value of award rates of pay held their own.
Other measures of living standards and needs
Financial stress
[376] ACCOS submitted that financial stress and deprivation measures record the degree to which needs are not being met, rather than directly measuring needs. Such measures identify a number of different components of financial stress: such as being unable to pay bills on time, missing meals or asking for help from community or welfare organisations. They involve an element of subjectivity, in that respondents may perceive the meaning of each question differently. 266
[377] Questions which seek to ascertain how many Australian households experience financial stress or material deprivation have been included in the ABS General Social Survey (GSS) and Household Expenditure Survey (HES) surveys, and annually in the longitudinal HILDA Survey, and are reported in the Commission’s Statistical Report. 267 No new information from the GSS and HES surveys is available to the Panel beyond that considered in the 2012–13 Review.268
[378] The HILDA Survey provides additional information, measuring financial stress experienced by households in 2012. ACCI cited Hahn and Wilkins who cautioned that the financial stress data are not a good overall measure of living standards and noted reservations about using financial stress data in isolation of other measures. 269 ACCI submitted that none of the figures reported in the Statistical Report specifically capture all low-paid employees and pointed to different results for the same questions between the surveys.270
[379] Nonetheless, a suite of deprivation and financial stress measures can inform the Review process in combination with other measures of the needs of the low paid, subject to an understanding of what they measure. Further, changes in all of the levels of financial stress and deprivation reported in low-paid households over time, in absolute terms and relative to other households, can also provide relevant information for the Panel’s consideration.
[380] The Australian Government presented an analysis of financial stress data from Wave 12 (2012) of the HILDA Survey based at the individual level. The submission stated that the proportion of low-paid employees who experienced at least one type of financial stress (27.1 per cent) was higher than the proportion for higher-paid employees (18.1 per cent), but lower than the proportion for unemployed persons (38.0 per cent). 271 The Australian Government also provided data showing the proportion of persons experiencing some form of financial stress by equivalised household disposable income, which showed that the proportion of persons experiencing financial stress declines as household income rises.272 The proportion of low-paid employees experiencing some form of financial stress was above 40 per cent in the lowest two income deciles and below 20 per cent in the highest four income deciles.273
[381] Drawing on the ABS HES data presented in the Statistical Report, the ACTU noted that the proportion of households with only low-paid adult employees experiencing financial stress and deprivation increased across several indicators from 2003–04 to 2009–10. 274 Citing HILDA Survey data, ACOSS noted that financial stress had increased across both low-paid and all employee households between 2007 and 2011.275
[382] The HILDA Survey shows considerable variation in reported levels of financial stress experienced by low-paid employee households year-to-year and between the various measures. In 2012, highest levels of financial stress were reported in respect of an inability to raise $3000 in a week for something important (11.2 per cent), an inability to pay electricity, gas or telephone bills on time (14.0 per cent), an inability to pay the mortgage or rent on time (7.8 per cent) and a need to seek financial help from friends or family (15.3 per cent). Around 30 per cent of respondents reported any stress in terms of at least one of the measures and 21.6 per cent in relation to one or two of the measures. 276
[383] No significant overall change in reported levels of financial stress experienced by low-paid employee households is evident between 2011 and 2012. Nor is there any general pattern of stress levels relative to those reported by all employee households. The additional information for 2012 shown in the Statistical Report does not disclose any significant change or pattern of reported levels of financial stress experienced by low-paid employee households.
[384] Across each of the three surveys (HES, GSS and the HILDA Survey) financial stress (as variously measured) is higher for low-income individuals and households than their high-income counterparts. The level of financial stress reported has risen both for all households and for low-paid households across most measures over the most recent four or five years. However, no increase in stress was evident in the HILDA Survey data for 2012. The financial stress and deprivation information shown in the Statistical Report does not disclose any significant change or pattern in reported levels of financial stress experienced by low-paid employee households over recent years.
Expenditure
[385] The Statistical Report includes data on expenditure patterns of households with low-paid workers, using ABS HES data for 2009–10. 277 It is the same information considered by the Panel in the 2012–13 Review decision.278
[386] United Voice referred the Panel to a recent report published by the Council of Social Service of New South Wales. The report draws on data from the ABS HES and CPI to show how cost of living pressures impacted differently between low-income and higher-income households in New South Wales over the 10 years from December 2003 to December 2013, with respect to six categories of household expenditure: housing, food, transport, health care, utilities and education. 279
[387] The report states:
“low income households spend a greater proportion of their weekly budget on core commodities, such as housing and utilities, which have seen significant cost increases relative to the CPI over the last ten years.” 280
[388] The areas in which low-wage households spend the highest proportion of their income 281 (Current housing costs; Food and non-alcoholic beverages; Transport; and Recreation) represent 64.6 per cent of total expenditure. Over the five years to the March quarter 2013, the relevant CPI components have increased, per annum, by 4.6 per cent, 1.3 per cent, 2 per cent and 2 per cent respectively, whilst the CPI grew by 2.6 per cent per annum over that period. Prices in only one of the largest four expenditure groups grew by more than the CPI over the past four years. Whilst the Council of Social Service of New South Wales report is right to point out that utility prices have risen significantly in recent years,282 low-wage households spent only 3.1 per cent of their total expenditure on domestic fuel and power in 2009–10.283
[389] United Voice also referred to information derived from a survey of its members, which sought to identify major issues facing them, their families and their communities, and reported comments by a number of its members. 284 The nature of the survey is unexplained. No basis is advanced to satisfy us that it meets well-established rules for the conduct of surveys. The United Voice survey is subject to the same reservations we express in relation to employer surveys of their members in relation to economic conditions at [226]–[228]. The information provided is anecdotal.
[390] ACOSS and ACCER also presented material pertaining to “budget standards”. 285 The budget standards approach estimates what is needed, in terms of material goods and services, by a particular type of family to achieve a particular standard of living in a specified location.286 In the current Review, ACCER put extensive submissions drawing upon its materials based on the budget standards research of the Social Policy Research Centre (SPRC) in the 1990s.287 The budget standards material submitted by ACOSS and ACCER is based on a 1997 study by the SPRC, commissioned by the former Department of Social Security, to assist in the assessment of the adequacy of social security payments. We accept that contemporary budget standards measures can provide an effective means of measuring the needs of the low paid, which can be considered, together with other relevant data. However, the budget standards measures derived from the 1997 SPRC study do not provide useful contemporary information about the needs of the low paid.288
Conclusion
[391] We have examined the evidence put to us about the level of and changes in the needs of the low paid. In doing so we accept the prevailing view that the low paid are those award-reliant employees who receive a rate of pay that (as a full-time equivalent) would place them below two-thirds of median (adult) ordinary time earnings.
[392] While the concept of low pay is reasonably agreed, its measurement is not. Estimates of the proportion of the award reliant who were low paid (in 2012) varied from 75 per cent to 30 per cent. While this is a large range, it is not essential for our purposes that we have an exact estimate. The important conclusion is that a large number, and a sizeable proportion, of award-reliant workers are low paid. Our obligation to take account of their capacity to meet their needs is bolstered by that fact.
[393] In meeting the requirement to set a level of award wages that is fair and relevant, we must also take into account the relative standard of living of those who are paid award rates. This requirement encompasses all of the award reliant, including those on the highest award classification rates.
[394] The needs of the low paid are difficult to identify and to quantify, since many live in households with others. We considered their needs by examining changes to the real value of their earnings, to the real value of household disposable income in the lower deciles, to hypothetical families that are reliant on low award wages, and to indicators of financial stress in low-earning families. For some of these indicators, there is no new data to add to the material that was before us in the 2012–13 Review.
[395] We find that the real value of the NMW (as adjusted by the CPI) rose by only a cumulative 0.9 per cent over the five years to December 2013 and declined by 0.1 per cent over the past year. It should be noted that this does not include the 0.25 per cent rise in the superannuation guarantee levy, which was taken into account in the 2012–13 Review decision. Other award rates of pay have grown more slowly or declined in real terms over the same five year period, and also declined by 0.1 per cent over the past year. All award rates, including the lower rates, have risen in real terms by 0.9 per cent over the past three years. However, all award rates of pay have fallen relative to measures of median and average earnings over the past five years.
[396] The relative living standards of award-reliant employees are affected by the level of wages that they earn, the hours they work, tax-transfer payments and the circumstances of the households in which they live. Consideration of the effect of changes in the tax-transfer system on the absolute or relative circumstances of the low paid must be made in the particular circumstances that apply.
[397] We accept the evidence that increases in minimum wages have a limited impact on lifting the disposable incomes of low-income households. They do have some effect, however, and they most probably have a greater effect on raising the earnings of those in the lower deciles of the earnings distribution. Minimum wages affect the contribution that low-paid workers can make to their household income, and the capacity to live independently of the support of others.
[398] Over the five years to January 2014, real disposable income of most hypothetical family types with a NMW earner rose, by amounts that varied from 0.5 to 9.7 per cent. It fell for a single-earner couple with no children (by 2.1 per cent). This family type would have to be on an award rate of C4 or above to avoid being below the 60 per cent median poverty line.
[399] Single-earner families that receive the NMW or a low award rate have had declines in their equivalent real disposable income, to the point where today a couple with two children would be in poverty as conventionally measured. Households that rely on earnings as their principal source of income comprise about one-third of all families below a 60 per cent median poverty line.
[400] Direct measures of financial stress among low-wage households do not show any significant change in the most recent period. Low-wage households typically report more financial stress than higher-wage households, and the levels for both types have risen somewhat over the past four or five years.
[401] We conclude that the capacity of the low paid to meet their needs has seen little improvement from the contribution made by award wages in recent years. Some, but not all, low-paid households have made gains through the effects of the tax-transfer system, and potentially from changes in the composition and level of workforce participation of the family.
[402] The evidence on the changes in the relative living standards of those on award rates of pay is consistent. Those on the lowest award rates, including the NMW, have fallen a little relative to rates of pay, as measured by the WPI. The higher award rates have fallen even further behind on this measure, although at the same rate over the past three years. All award-reliant workers have fallen behind more when compared to comprehensive measures of average earnings, such as AWOTE and AWE, as well as median earnings. They have also fallen behind in the growth in labour productivity, from which growth in living standards is ultimately derived.
7. Promoting Social Inclusion through Increased Workforce Participation
[403] The Act provides that the Panel must take into account “promoting social inclusion through increased workforce participation”. 289
[404] The Panel has previously considered the statutory framework relevant to “social inclusion”. In the 2012–13 Review decision we stated:
“We accept that our consideration of “social inclusion” in the context of s.284(1)(b) is limited to increased workforce participation. On that basis it is obtaining employment which is the focus of s.284(1)(b). This involves a consideration of the increased incentives that higher minimum wages can provide to those not in employment to seek paid work, balanced against potential impacts on the demand for low-paid workers and hence the supply of low-paid jobs, from large increases in minimum wages.
However, we also accept that modern award rates of pay impact upon an employee’s capacity to engage in community life and the extent of their social participation. These are matters that can be appropriately taken into account in our consideration of the legislative requirement to “maintain a safety net of fair minimum wages” and to take into account “the needs of the low paid” (s.284(1)(c)). Further, the broader notion of promoting social inclusion is also relevant to the fixation of minimum wages, quite apart from the more limited construct reflected in s.284(1)(b). One of the objects of the Act is to promote “social inclusion for all Australians by” (among other things) “ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through…modern awards and national minimum wage orders” (s.3(b)).” 290
[405] We adopt the approach to social inclusion stated in the 2012–13 Review decision.
Minimum wages, employment and the demand for labour
[406] In the 2012–13 Review decision, the Panel stated that:
“The research presented by parties to this Review has not convinced the Panel to alter its position from previous reviews that a modest increase in minimum wages has a very small, or even zero, effect on employment.” 291
[407] The Australian Government and New South Wales Government advocated a cautious approach to the setting of minimum wages by this Panel. The Australian Government contended that the conventional theory is that setting a minimum wage (or more relevantly, increasing a minimum wage) has a negative impact upon the demand for labour or availability of low-paid employment. 292 This in turn reduces the capacity to increase employment, in particular for the long-term unemployed as well as youth and the mature unemployed.
[408] IPA noted that it was “philosophically” opposed to the mandating of wage levels stating that “the imposition of a mandatory wage ... is fundamentally at odds with conceptions of social inclusion”. It submitted:
“The economic theory is unequivocal about the effect of a minimum wage on employment. There is also more than sufficient empirical evidence of the disemployment effects of minimum wages.” 293
[409] The ACTU presented an extensive review of recent US and UK literature regarding the relationship between minimum wages and employment. This material provides empirical support for the proposition that observed rises in minimum wages have little or no negative impact on employment and also advances an alternate theoretical understanding of such findings.
[410] The ACTU submitted that there is no new evidence that should lead the Panel to depart from the finding in the 2012–13 Review decision (above) 294 and referred to a recent empirical study in Australia by Olssen (2011).295 This study has not previously been referred to the Panel.
[411] Olssen examined the effect of youth minimum wages in Australia on employment using data from the HILDA Survey by comparing the employment rates of those who are just older than a threshold for a higher minimum wage, with the employment rates of those who were just younger than the threshold. In this instance, the study compared the employment rates of persons just under 19 or just over 19 years of age, as turning 19 years old entitles an employee to be paid a higher minimum rate than at age 18. 296
[412] The ACTU submitted that Olssen found “no evidence at all that award minimum wage [sic] have any short term causal impact on employment… mean hours worked is not statistically different for individuals in the higher award minimum wage group relative to those in the lower award minimum wage group.” 297
[413] ACCI submitted that modelling exercises demonstrate that increases in minimum wages lead to “significant job losses” and stated that Australian studies have found that “an increase in minimum rates of pay will lead to a reduction in employment”. 298
The relevance of international studies
[414] The ACTU and IPA noted the limited number of empirical studies canvassing the effects of increases in minimum wages in the Australian context. 299
[415] In the 2009–10 Review decision, the Panel stated that:
“The relevance of some of the studies is limited insofar as they are directed to the effects of increasing a single minimum wage in circumstances which are quite different to those which characterise the Australian industrial relations systems, including the range of minimum rates at various levels throughout the award system.” 300
[416] While acknowledging the Panel’s position, a number of parties submitted findings from international research as evidence of their claims, particularly in respect to the impact of minimum wages on labour demand. The Panel posed a question to be addressed in submissions in reply asking for parties to identify the main issues that should be taken into account when interpreting the relevance of international minimum wage research for the Review. 301
[417] The Australian Government submitted that the Panel should have regard to the minimum wage bite, being the proportion of the minimum wage to the median wage, of Australia when compared with other countries, particularly those within the OECD. The Australian Government submitted that the minimum wage bite of Australia is 40 per cent higher than that of the US and is above the OECD average. The Australian Government noted however that there is no evidence of a “tipping point” where job losses start, but reiterated the proposition that an increase in the minimum wage will make labour less affordable. 302
[418] Ai Group submitted that international comparisons remain useful in considering the impact of minimum wages on cost competitiveness and relative standards of living.
[419] A number of submissions argued that the unique Australian industrial relations system means that findings from international studies are of limited relevance. 303 The Australian Government responded that “the Panel should approach international comparisons and research with caution, carefully considering the different contexts within which international minimum wages are developed and the multitude of individual factors impacting particular national systems.”304 ACCI and Ai Group made similar points.
[420] In contrast, the ACTU submitted that, even though caution should be exercised when applying results of international studies to Australia, “their relevance has increased over time due to the convergence of our minimum wage bite with that of other OECD countries, and the compression of award relativities”. 305 This position was reiterated at the final consultations.306 The ACTU presented a chart307 as evidence of the decline of the minimum wage bite in Australia “during both economic booms and times of slower growth” and “under each of these three institutions that have responsibility for setting minimum wages over that time”308 and suggested that this demonstrated an increase in the relevance of international literature on minimum wages to the Panel.309
[421] The ACTU also provided an extensive review of recent US and UK literature on the employment effects of increases in their minimum wages. 310 This new literature is a considerable advance on existing studies. It uses superior empirical techniques and data.
[422] The new literature has been highlighted by the Panel because it further develops the theoretical understanding that may explain the counter-intuitive empirical results. These results have shown that the observed rises in minimum wages have had little or no negative impact on employment (although they have substantially increased earnings).
[423] The United Kingdom’s Low Pay Commission has concluded that:
“We have now commissioned over 100 research projects that have covered various aspects of the impact of the National Minimum Wage on the economy. Since the introduction of the NMW, the low-paid had received higher than average wage increases but that the research had, in general, found little adverse effect on aggregate employment; the relative employment shares of the low-paying sectors; individual employment or unemployment probabilities; or regional employment or unemployment differences.” 311
[424] IPA provided an alternative interpretation of the international literature and emphasised those that found negative employment effects from minimum wage rises in the US. The studies that were cited focussed particularly on the effects on youth and on the least skilled. We acknowledge that there are US studies that do find significant disemployment effects, particularly for youth and those with the least skills, from increases in minimum wages.
[425] As noted in many submissions, the Australian industrial relations system encompasses a range of rates at various classifications levels throughout the modern awards and these all apply as minimum rates. The scope and higher relative coverage of the minimum wages in the Australian system and the context set by these wages in the unique system of collective bargaining are factors that must be considered when seeking to rely upon international studies for present purposes.
[426] However, the quality of this new research and the refined theoretical understandings are consistent with the view taken by the Panel that a modest increase in minimum wages leads to a very small, or even zero, effect on employment. We also note that the value of minimum wages relative to median earnings in Australia has been growing steadily closer to that of other countries, and as a result, this particular aspect of distinctiveness of the Australian system is less significant than it has been.
[427] Although we asked parties in the questions to submissions in reply for information on the relevance of international studies we would welcome submissions from the parties in the 2014–15 Review about the relevant distinctions between Australian and other industrial relations systems, and the manner in which those distinctions affect the relevance of international research on the impact of minimum wages on employment, in light of the developments canvassed above.
Work incentives and labour supply
[428] In relation to work incentives, the Panel concluded in its 2012–13 Review decision that:
“[461] Incentives for individuals to supply their labour remain a consideration for the Panel. We have previously concluded that incentives to work full-time at the NMW are significant, although the incentives for working part-time may be less. Modelling from DEEWR generally shows that there are financial incentives for obtaining a job. The evidence suggests that strong incentives exist for individuals in single-earner and couple households to take up full-time work paid at the NMW, although we note lower incentives for secondary earners taking up part-time work paid at the NMW, which may be further eroded if childcare costs are incurred as a result.” 312
[429] Research Report 2/2013 found that the labour supply decision was influenced by many factors, not just wages and other financial benefits. This finding was noted by the Panel in the 2012–13 Review. 313 ACCI noted that the labour supply decision was “complex” and the increases to minimum wages by the annual wage review were unlikely to be a key factor in the labour supply decision of most individuals.
[430] ACOSS maintained its position from the last review that high effective marginal tax rates can create acute disincentives to undertake part-time employment, particularly for Newstart Allowance recipients. The Panel acknowledged this in its 2012–13 Review decision.
[431] IPA submitted that, whilst it accepted that differences in the NMW and (for instance) Newstart Allowance create an “effective gap of employment prohibition” 314 it did not necessarily follow that this gap leads to greater job search activity. Consistent with its submissions in relation to demand for labour, IPA submitted that this gap did not “overcome the negative demand-side effects of higher labour costs”.315
[432] The Australian Government submission, consistent with previous years, modelled the interaction of the tax-transfer system and minimum wages to submit that there remains incentive to take full-time work at the NMW. Following from this, the Australian Government submitted that the current NMW already provided substantial financial incentives to work and consequently this Panel should alter its focus to job creation rather than further incentive creation.
[433] The Australian Government’s modelling found that all families with children were financially better off when moving into full-time NMW employment. The financial benefit of moving to full-time NMW employment was greatest for single adult households.
Labour market transitions
[434] The Australian Government referred to the HILDA Survey 316 as a source of findings in relation to labour market outcomes from one year to the next.
[435] In previous review material, the Australian Government assessed that less than one-quarter of people entering employment did so via a low-paid job. Using the most recent data drawn from the HILDA Survey (pooled waves 1 to 12), the Australian Government’s analysis found that more than one-third entered employment via a low-paid job.
[436] The Australian Government’s analysis was consistent with the material presented in submissions to previous reviews in other respects, finding that nearly half of those in low-paid employment transitioned into higher-paid employment within one year. Those in low-paid employment are more likely to be in employment, and higher-paid employment, the following year, than someone who was unemployed. The Australian Government concluded that many young people are at risk of failing to transition to employment. 317
[437] The Victorian Government and New South Wales Government both referred to the “stepping-stone” effect for new entrants into the workforce. 318
[438] ACOSS commented that “many people cycle between joblessness and employment—especially low-paid employment—within a given year. People also move from low-paid employment to higher paid jobs and vice versa”. 319 Based on data from the Commission’s Statistical Report—Annual Wage Review 2011–12, ACOSS submitted that:
“The evidence on the job mobility of low paid employees is mixed. Jobless people are more likely to be able to secure low paid jobs—especially casual jobs—than they are to move straight into higher paid, more secure jobs. Low paid workers have roughly an equal chance of progressing within two to three years into a higher paying job on the one hand, or either remaining in low paid employment or leaving employment on the other”. 320
[439] Similarly to the Australian Government, ACOSS concluded that many young people are at risk of failing to make a successful transition to employment, although acknowledged that some of this may be voluntary.
Conclusions
[440] The Panel has previously stated that promoting social inclusion via increased workforce participation, in the setting of an annual wage review, is not a simple exercise. In assessing any correlation between the promotion of social inclusion and workforce participation, there are competing factors that must be taken into account, including the possible outcome of a reduction in labour demand as a result of any potential increase in the national minimum wage.
[441] The benefits of paid work provide advantages on a financial and wider social basis at individual and household levels, and provide broader intergenerational benefits, and a ripple effect to the broader family and community network.
[442] The Panel’s view continues to be that modest minimum wage adjustments lead to a small, or zero, effect on employment. What is considered to be a modest minimum wage adjustment will depend upon the prevailing circumstances.
[443] In accordance with the 2012–13 Review decision, the Panel again notes the complexity of the labour supply decision and that the annual wage review is but one factor in individual labour supply decisions. The Panel concurs that the financial benefit of obtaining full-time NMW employment provided significant incentives for a range of households.
[444] In considering labour market transitions linked to minimum wage adjustments, the Panel considered a range of submissions and material relating to the transition from unemployment or low-paid employment to higher-paid employment, and also factors related to the transition of young people into employment. The Panel again observes that low-paid employment provides an entry point for some as a transition to higher-paid employment—the “stepping stone” effect.
8. Encouraging Collective Bargaining
[445] As part of the modern awards objective, the Panel must ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions, taking into account the need to encourage collective bargaining.
[446] Chart 8.1 shows EEH data on the method of setting pay. It reveals that from 2000 to 2012 (the period for which method of setting pay data is available) the proportion of employees whose pay is set by awards has declined (from 23.2 per cent to 16.1 per cent), while the proportion of employees on collective agreements has risen (from 36.8 per cent to 42.0 per cent). Despite this overall trend, the data also show that between 2010 and 2012 the proportion of employees receiving award rates has marginally increased (from 15.2 per cent to 16.1 per cent), while the proportion of employees on collective agreements marginally declined (from 43.4 per cent to 42.0 per cent).
Chart 8.1: Method of setting pay
Note: As defined by the ABS, individual arrangements include registered or unregistered individual agreements and owner managers of incorporated businesses.
Source: ABS, Employee Earnings and Hours, Australia, various, Catalogue No. 6306.0.
[447] Some submissions cautioned that increases to minimum wages may act as a disincentive to bargain. 321 The Australian Government noted that “the level of Australia’s award wages can have an adverse impact on further growth in enterprise level bargaining”.322 Specifically, the Australian Government submitted that this is not due to one individual annual wage review decision:
“The Government considers the level of minimum wages (including award relativities), and how they relate to the wage structure of the economy, have an effect on the incentive to bargain. The level of minimum wages has evolved over a period of time and is not the result of any individual AWR decision.” 323
[448] The Australian Government submitted that the Panel should consider the link between increased award rates and greater proportions of award-reliant employees compared to those covered by enterprise agreements. 324 In particular, the Australian Government noted that:
“Between 2010 and 2012 there was a shift away from collective bargaining towards awards – as measured by the proportion of employees who had their pay set by collective agreements and awards respectively (ABS 2013c). This was the first increase in the proportion of employees who were award-reliant during the 12 years that the ABS Employee Earnings and Hours data has been regularly collected. This recent increase in award-reliance has coincided with the period where the Commission increased all award wages by a percentage of the NMW, rather than a dollar amount.” 325
[449] In response to a question from the Panel, the Australian Government indicated that it was unable to provide statistical evidence of a causal link between recent increases to minimum wages and higher levels of award reliance. 326
[450] ACCI also noted this rise in award reliance over the two years to 2012, arguing that it “offers a cautionary note, particularly in light of the levels of increase determined over the operation of the FW Act”. 327
[451] In contrast, the ACTU offered a number of explanations to explain the rise in award reliance over the two years to 2012, submitting that:
“a. Small changes in award-reliance between EEH surveys could be statistical noise. The standard error around the estimate of the number of award-reliant employees in 2012 is 58 700 persons. This gives a 95% confidence interval of 1 426 700 to 1 661 500 persons.
b. The small decline in the proportion of employees covered by a collective agreement between 2010 and 2012 came after a large rise between 2008 and 2010.
c. To the extent that the ‘density’ of award-only workers did rise (rather than being a statistical aberration), this could have been because minimum rates have fallen so far relative to average or median wages that employers have a diminished incentive to bargain.
d. A rise in the employment share of the more award-reliant industries accounts for a little over a fifth of the rise in the density of award-reliant workers between 2010 and 2012.” 328
[452] On the relationship between minimum wages and collective bargaining, the ACTU argued that there are significant incentives to bargain for both employers and employees:
“Employees have significant incentives to bargain given the large difference between minimum rates and the wages paid in collective agreements. Employers have incentives to bargain due to the ability to negotiate for working conditions that best suit the enterprise.” 329
[453] The New South Wales Government noted that it is “critical that a sustainable safety net of minimum wages is one that supports enterprise bargaining” and submitted that the Commission should set minimum wages that “maintain incentives for enterprise bargaining that rewards flexible and productive work practices”. 330 Similarly, Ai Group argued that “the National Minimum Wage Order 2014 must be at a level significantly below average enterprise agreement wage outcomes, so as not to discourage the making of enterprise agreements under the FW Act”.331 The Victorian Government also noted that “[u]naffordable increases in minimum wages undermine businesses’ capacity to bargain at the enterprise level”.332
[454] Similarly, the New South Wales Government noted that the difference between award wage outcomes and enterprise bargaining outcomes “remain significant”. 333 Further, the New South Wales Government submitted that the number of employees who have their pay set by awards has “steadily declined” over the past decade.334
[455] A number of parties also discussed how minimum wage increases can affect enterprise bargaining wage outcomes. The Australian Government presented data from the Department of Employment’s Workplace Agreements Database to illustrate how minimum wage increases can affect federal collective agreement wage outcomes:
“as at December 2013, there were 116 200 employees who were on collective agreements where wage increases flowed on directly and automatically from AWR decisions (out of 2 621 600 employees on federal collective agreements).
Agreements where wage increases flowed on directly and automatically from AWR decisions were more common for agreements covering fewer than 15 employees – with 11.8 per cent of agreements covering fewer than 15 employees including the clause, compared to 9.4 per cent for all other agreements. It was also more common in the following industries: Retail trade; Accommodation and food services; Agriculture, forestry and fishing; and Arts and recreation services.
Including the 116 200 employees mentioned above, there were a total of 439 400 employees who were covered by collective agreements that were in some way linked to AWR decisions.” 335
[456] In addition, the Australian Government provided estimates on spillover effects of minimum wages on higher wage earners:
“Assuming that employees paid up to 20 per cent above the minimum wage are affected by wage spillovers, then in Australia this would account for about 5 per cent of all employees (481 200 employees in May 2012).” 336
[457] However, the Australian Government also noted that spillover effects may be larger in Australia than overseas:
“the effect of spillovers may actually be larger in Australia than overseas, given the number of people employed on award [sic] who earn at or above the median wage, resulting in spillovers deeper into the wage structure. Furthermore, since Australian minimum wages are reviewed annually, firms and workers may be more likely to use minimum wage changes as a benchmark for setting other wages.” 337
[458] Similarly, the Victorian Government and AFEI also discussed how minimum wages are a baseline for wage adjustments, arguing that it has an effect on bargaining as it flows through to the wage negotiation process and becomes the minimum increase for collective bargaining agreements. 338
Views of the parties on the relevance of Research Report 6/2013 and Research Report 7/2013
[459] Several of the submissions made to the 2013–14 Review commented on findings presented in Research Report 6/2013 and Research Report 7/2013 on award reliance and the incentives to bargain. These reports were commissioned and undertaken by the Workplace Relations Centre, University of Sydney Business School.
[460] Parties were invited to make submissions on findings presented in the research reports at the preliminary consultations. 339 Parties differed on how the research might inform the Panel in the 2013–14 Review.
[461] ACCI noted that, in relation to the effect of minimum wage adjustments on collective bargaining, findings from the Award Reliance Survey data presented in Research Report 6/2013 do not provide additional information on award reliance. ACCI submitted that it does “little to change the understanding of where most award-reliance lies and is not suitable for a time series” and argued that the ABS’ EEH has the “most comprehensive and consistent” data on award coverage. 340
[462] In contrast, the ACTU submitted that the research “provides the Panel with additional information in relation to the potential effect of minimum wage increases on over award payments” 341and concluded that “the findings support the conclusion that the effect of minimum wage increases on over-award wage outcomes is minimal.”342 The ACTU further submitted that:
“In previous years some parties have cautioned that an increase to minimum wages may act as a disincentive to bargaining. However, the research suggests that this is not the case. Indeed the importance of other factors influencing the decision of employers to engage in bargaining suggests that there is scope to improve the position of minimum wage workers relative to average earnings without discouraging collective bargaining.” 343
[463] The ACTU also submitted that the prima facie associations identified in relation to some of the findings presented in Research Report 7/2013 should be interpreted by the Panel with caution:
“The prima-facie associations identified in relation to the 2009-10 AWR decision should be treated with a degree of caution given that no discernible impact on agreement outcomes is evident from the analysis of longer term trends and there may be other factors that explain the apparent association.” 344
[464] The New South Wales Government submitted that the research findings presented in Research Report 7/2013 “appears to paint a more complex picture, and suggests that minimum award wage decisions made by the Panel may have an indirect impact upon wage outcomes in the bargaining stream”. 345 The New South Wales Government then submitted that:
“It is critical that a sustainable safety net of minimum wages is one that supports enterprise bargaining at NSW workplaces. In particular, the Panel should set minimum wages at a level that maintains incentives for enterprise bargaining that rewards flexible and productive work practices.” 346
[465] Ai Group argued that the Panel should not place much weight on findings presented in Research Report 7/2013. In its outline of submissions, Ai Group commented that the report did not show “compelling, or conclusive links” in certain matters, submitting that:
“The Report does not show any compelling, or conclusive links one way or another in respect of AWR increases and employer decisions regarding over-award pay at the enterprise or incentives to bargain. Accordingly, this particular report should not be relied upon by the Expert Panel in making findings or reaching conclusions on these two issues. As identified by the authors, further investigation may be required.” 347
[466] Ai Group further cautioned that the findings of Research Report 7/2013 in relation to internal relativities in agreements and awards should be given limited weight by the Panel. This was chiefly on the basis of the limited sample of agreements and sectors used for the analysis which they argued were not broadly reflective of the labour market and concentration of agreements in particular sectors and industries. 348
[467] AFEI commented on the reported differentials between award rates and enterprise agreements of Research Report 7/2013 and submitted that:
“In terms of incentives to bargain, the findings that employers reported that AWR increases neither discouraged or encouraged bargaining, and that a [sic] for a significant number of industries the differential between award rates and enterprise agreements rates is small suggests that high minimum rates in those industries and occupations are a disincentive to bargain. Overall the report confirms that employers are sensitive to labour costs and ‘unless bargaining helps achieve a desirable commercial end employers will have little interest in it’.” 349
[468] The research reports were commissioned in 2011 to shed some light on the impact that minimum wage setting may have on the incentives to bargain.
[469] Following a range of research methods undertaken in Research Report 7/2013, including the inclusion of data from the large-scale survey undertaken as part of Research Report 6/2013, the research concluded that:
“The study did not reveal a positive or negative relationship between AWR increases and the incentive to bargain, instead pointing to a complex mix of factors that may contribute to employee and employer decision-making about whether to not to bargain.
...
The workplace case studies, qualitative relativities analysis and Award Reliance Survey each suggest that there may be a link between minimum wages (and their associated instruments) themselves and over-award wage outcomes, but the extent of this link remains unclear and may require further investigation.” 350
[470] The first conclusion in particular would appear consistent with earlier published qualitative research conducted for the Commission (also using empirical research methods) to examine the impact that minimum wage increases have on wage-setting decisions at the enterprise level. 351
[471] Though we acknowledge the limitations raised by parties on the research methods applied in both research reports, those limitations have not persuaded us to disregard the research or its conclusions. We note that no other empirical evidence was presented by the parties.
[472] The research does not reveal any particular relationship between minimum award increases and the incentive to bargain. Instead it points to a complex mix of factors that may contribute to employee and employer decision-making about whether or not to bargain.
Conclusion
[473] The available evidence indicates that the level of increases in minimum award wages over the past decade or so have been compatible with the encouragement of collective bargaining. We are satisfied that the increase awarded in this Review is also compatible with the need to encourage collective bargaining.
9. The Principle of Equal Remuneration for Work of Equal or Comparable Value
[474] The minimum wages and modern awards objectives require the Panel to take into account the principle of equal remuneration for work of equal or comparable value. 352
[475] The parties’ submissions differed on how the principle of equal remuneration should be considered, as well as measurements used to consider the gap in earnings between men and women.
The gender pay gap: measurement and effect of minimum wage setting
[476] The Australian Government and the ACTU submitted that minimum wage adjustments may have a modest or marginal impact on addressing the overall gender pay gap. 353 Although, the ACTU submitted that these adjustments, while modest, are important as part of a multi-faceted approach to reducing the gender pay gap.354
[477] Ai Group agreed with the conclusions of the Panel in previous review decisions, namely that although minimum wage increases may assist pay equity, other mechanisms under the Act may be more directly effective. 355
[478] The Australian Government and ACTU differed in the measures they adopted to discuss the gender pay gap. This in turn impacted on the reported effects of the gender pay gap and its relevance to award-reliant workers/sectors.
[479] The Australian Government submitted that it calculated the hourly gender pay gap to be 10.1 per cent as at May 2012, using calculations from EEH data 356 based on hourly earnings for permanent, full-time, non-managerial employees,357 which it noted was different to the usual measurement:
“The more widely reported 2012 pay gap of 17.5 per cent differs to the calculation in this submission of 10.1 per cent. The calculation used in this submission is based on hourly earnings rather than weekly earnings and only includes permanent, full-time, non-managerial employees. Furthermore, this calculation is based on ABS Employee Earnings and Hours data as opposed to ABS Average Weekly Earnings data.” 358
[480] The Australian Government submitted that the 2012–13 Review decision increase to minimum wages had a limited impact on the overall gender pay gap:
“All else being equal, any increase in award wages will reduce the measured gender pay gap, as award wages form a larger part of total female wages (9.5 per cent) than total male wages (6.2 per cent) [Permanent, full-time, non-managerial employees only].The effect of AWR decisions on the overall gender pay gap is, however, marginal. For example, the 2013 AWR increase of 2.6 per cent to all award wages was estimated, all else being equal, to have reduced the hourly gender pay gap for permanent full-time employees by about 0.1 percentage points. Further, award wage increases will not address any measured pay gap that arises from collective bargaining.” 359
[481] The ACTU submitted that the November quarter of the 2013 AWOTE ABS data was an appropriate measure for the gender pay gap, which showed the gender pay gap for full-time workers was 17.1 per cent. 360
[482] In questions on notice posed by the Panel to parties, the Panel drew attention to the findings of Research Report 3/2012 361 which outlined, among other matters, the different measures of the gender pay gap and the limitations associated with them.362 This research outlined that the use of hourly data derived from the EEH did not capture managerial or professional workers.363
[483] In its response to the Panel’s questions for final consultations, 364 the Australian Government submitted that its calculation of the gender pay gap using the hourly data derived from the EEH was appropriate for the context of an annual wage review:
“This data set was preferred because it contains a ‘method of setting pay’ variable which was needed to calculate the effect of minimum wage adjustments on the size of the gender pay gap.
...
Many of the Government’s EEH data calculations, particularly with regard to low paid workers, exclude managerial employees due to the lack of data on hours of work. This is an appropriate position to take in the context of an annual review of the national minimum wage and award wages.” 365
[484] The ACTU disputed the Government’s measures to calculate the gender pay gap on the basis that the calculations did not represent the Australian workforce:
“We do not accept that the measure used by the Australian Government to calculate the gender pay gap is the most accurate or relevant measure. The Australian Government’s figures pertain only to permanent, full-time, non-managerial employees. Such employees represent only 51.6% of all employed persons as at May 2012, according to the Employee Earnings and Hours survey.” 366
Incidence and characteristics of award-reliant females
[485] Several submissions discussed the incidence and characteristics of award-reliant female workers—some of which cited the findings of Research Report 6/2013.
[486] The Australian Government submitted that award-reliant women were more likely to be on higher award wage rates than men:
“in May 2012, the hourly gender pay gap was 10.1 per cent. However, amongst those on awards, women were paid, on average, 10.1 per cent more than men likely reflecting that women are on higher award wage rates than men (ABS 2013c). This suggests that the measured gender pay gap is concentrated amongst employees on collective agreements and above award arrangements.” 367
[487] The ACTU submitted that women were more likely to have wage-setting mechanisms reliant on award rates and were less likely to work in situations which afford them bargaining power to negotiate over award rates, 368 while ACOSS submitted the rate of award reliance in the health and community services sector had depressed rates of pay for its predominately female, “highly skilled”, workers. 369
[488] Research Report 6/2013 found that 61 per cent of adult award-reliant employees in non-public sector award-reliant organisations were female. 370 The research also found that nearly three-quarters (73 per cent) of adult employees on awards with professional classifications, and who are on professional or higher classifications, were female.371
Conclusion
[489] We again adopt the conclusions of the Panel in previous review decisions that women are disproportionately represented amongst the low paid and the principle of equal remuneration is a factor in favour of a moderate increase to award wages.
[490] In relation to the differing views expressed as to the appropriate measure of the gender pay gap, the Panel acknowledges that there are a number of ABS surveys which can be used to calculate the gender pay gap. Each data source has its strengths and weaknesses. While the Survey of Average Weekly Earnings (which provides the AWOTE measure) is the most regular and timely source of data on the gender pay gap, the EEH survey can produce a measure which incorporates data on methods of setting pay and occupation but excludes managerial employees in the analysis of hourly earnings. 372 We consider AWOTE to be a more appropriate measure as it includes managerial employees and nearly three-quarters of award-reliant adult employees on professional or higher classifications are female. We also note that the AWOTE measure is generally used by the relevant Australian Government agency—the Workplace Gender Equality Agency—in its reporting of the gender pay gap.373 Regardless of the measure used, however, the Panel considers that both measures show the gender pay gap to be significant.
[491] We agree with those submissions which suggested minimum wages are likely to have only a modest impact on addressing the overall gender pay gap. In our view, other mechanisms available under the Act, such as bargaining and equal remuneration provisions, provide a more direct means of addressing these issues.
10. Particular Award and Industry Circumstances
Our general approach to the circumstances of particular industries and awards
[492] The broader statutory framework for the Review has been outlined in Chapter 2 of this decision. The approach urged upon us by some of the organisations making submissions also raises important questions about the exercise of our discretion to vary one or more modern awards, and to provide for differential outcomes, as part of the Review. We deal with those issues as part of this Chapter.
[493] The Act provides that, in conducting an annual wage review, the Panel may make one or more determinations setting, varying or revoking modern award minimum wages (s.285(2)(b)) and must make a national minimum wage order (s.285(2)(c)). The Panel must complete an annual wage review in each financial year, with any determination made (s.286(1)) and the national minimum wage order (s.287(1)) required to come into operation on 1 July in the next financial year, except in exceptional circumstances.
[494] Further context for the Commission’s power to make modern award minimum wage determinations is provided by s.284(4) of the Act, which sets out the meaning of “setting” and “varying” modern award minimum wages:
“Setting modern award minimum wages is the initial setting of one or more new modern award minimum wages in a modern award, either in the award as originally made or by a later variation of the award. Varying modern award minimum wages is varying the current rate of one or more modern award minimum wages.”
[495] A note to s.286(2) states that, if the Commission exercises its power under that section to specify that a determination comes into operation on a later day, it may need “to make more than one determination, if different circumstances apply to different employers”.
[496] Different arrangements apply to the national minimum wage order. The Act provides that, except in exceptional circumstances:
[497] The national minimum wage order may set different wages or loadings only to the extent necessary because of the particular situation to which the exceptional circumstances relate (s.287(2)(b)) and s.287(3)(b)). Similarly, if the Commission is satisfied that exceptional circumstances exist justifying why a modern award minimum wage determination or an adjustment to an item in the national minimum wage order should commence after 1 July, the determination or adjustment must be limited to the particular situation to which the exceptional circumstances relate (s.286(2) and s.287(4)(b)).
[498] Section 286(4) provides that a modern award minimum wage determination cannot take effect on a day later than the day it comes into operation, which must be 1 July, unless exceptional circumstances apply. The national minimum wage order differs in that it must come into operation on 1 July, but its elements (the NMW, casual loading for award/agreement free employees and special national minimum wages) may take effect on a later day in exceptional circumstances (s. 287(1) and (4)).
[499] Section 292 requires the Commission to publish any varied modern award minimum wages before 1 July.
[500] The Commission also has the power to make a determination varying an award (other than to vary modern award minimum wages) 374 under s.157(1). This may include varying the coverage term of a modern award so that certain employers or employees stop being covered.375 However, s.163(1) provides that:
“FWC must not make a determination varying a modern award so that certain employers or employees stop being covered by the award unless FWC is satisfied that they will instead become covered by another modern award (other than the miscellaneous modern award) that is appropriate for them.” 376
[501] Section 157(2) provides that the Commission may make a determination varying modern award minimum wages outside of the annual wage review (or a 4 yearly review of modern awards) if it is satisfied that it is necessary to do so to achieve the modern awards objective and the variation is justified by work value reasons.
[502] In the current Review, VECCI, CCIQ, ARA, MGA and R&CA submitted that the Panel should take a differential approach to reviewing modern award minimum wages, either by considering each modern award separately or considering submissions seeking different treatment for particular industries or modern awards.
[503] Among those parties supporting a modern award by modern award review of minimum wages, a number of different views were expressed regarding the statutory basis for such an approach.
[504] VECCI expressed support for the proposition that the Panel should consider the impact of wage increases on specific industries, submitting that:
“Some industries will seek different wage outcomes based on their specific circumstances. Some will seek a wage freeze for 2013/14. It is vital that the Panel gives due consideration to their concerns and the fears expressed regarding the ongoing viability of many businesses. The Panel should be open to awarding different wage outcomes based on the particular circumstances of specific industries. Again, higher rates of pay are of little consolation if jobs disappear due to underlying cost pressures.” 377
[505] MGA took a similar approach in reference to the awards applying to the Retail industry. 378
[506] CCIQ submitted that “there is no presumption under the FW Act that the Panel must adjust wage rates in all modern awards.” 379 It also sought that the Commission consider an exemption for Queensland agriculture businesses, including businesses in the agriculture supply chain, due to the impact of drought.
[507] R&CA submitted that the Commission should review modern awards on a case-by-case or sector-by-sector basis and “[i]ndustries experiencing little or no financial growth should be exempt from Modern Award minimum wage increases.” 380
[508] ARA submitted that the Commission should review minimum wages on a modern award by modern award basis and that, as part of this process, it should “provide an interim decision or statement prior to handing down a final decision.” 381
[509] The ACTU opposed such an approach and submitted that the Commission should vary minimum wages uniformly across all modern awards. 382 It stated that:
“We agree with the Panel’s statement in its 2012-13 decision, that:
‘The award-by-award approach to minimum wage fixation, based on sectoral considerations, advocated by some parties in these proceedings is inimical to the safety net nature of modern award minimum wages.’
The increase that the Panel grants should take effect from 1 July. There are no extraordinary circumstances that would justify an adjustment taking effect at a later date.” 383
[510] The Australian Government did not support differential wage adjustments between modern awards, at least on the basis of different productivity performance. 384
[511] In previous reviews, the Panel has considered submissions from parties that the Commission should conduct a modern award by modern award review of minimum wages and that this should result in a different, lower, increase or no increase applying to specified industries or modern awards. In response to one such submission to the 2012–13 Review, from ACCI, the Panel stated that:
“[73] As the Panel stated in the 2011–12 Review decision, we accept ACCI’s contention that the Act does not compel the variation of modern award minimum wages in all modern awards. Section 285(2)(b) provides that in an annual wage review the Panel:
‘may make one or more determinations varying modern awards to set, vary or revoke modern award minimum wages.’ (Emphasis added).
[74] Further, s.284(4) defines varying modern award minimum wages as “varying the current rate of one or more modern award minimum wages.
[75] It follows that the Panel has a discretion to vary some or all modern award minimum wages in the context of an annual wage review. The real question is the basis upon which the Panel should exercise that discretion.” 385
[512] On the exercise of its discretion to vary some or all modern award minimum wages, in its 2012–13 Review decision, the Panel reiterated that the appropriate approach to such claims was that set down in the 2011–12 Review decision (drawing on the Australian Conciliation and Arbitration Commission’s decisions on the Economic Incapacity principle) 386 and stated:
“[543] As determined by the Panel in the 2011–12 Review, the onus is on the party seeking to rely on economic incapacity and a strong case must be made out in order to warrant relief. Also, an “incapacity claim” needs to be supported by oral and/or documentary evidence capable of analysis and evaluation. Further, such claims will only rarely be successful in respect of a whole industry. In a number of cases the diversity of experience in the sectors covered by an award have made it inappropriate to exempt all sectors from an increase.
[544] Nothing has been put to us to alter this approach.” 387
[513] More broadly, having outlined the principles that support the above approach, the Panel further stated that:
“[562] Consideration of differential increases or timing of minimum wage increases in relation to individual employers or specific industry sectors in exceptional circumstances should be primarily directed to addressing temporary issues and temporary relief from minimum wage increases, rather than to seek to hold back the ongoing process of structural change in the economy. The circumstances of those employers and industries, however, remain a relevant consideration for any economy-wide outcomes.” 388
[514] The Panel also dealt with the proposition of a supplementary determination or interim decision process to allow individual employers or industry representatives to seek an exemption or differential treatment. The Panel noted the practical difficulties associated with such an approach and that none of the parties proposing its adoption in the 2012–13 Review had responded to the Panel’s invitation to provide further submissions in support of their proposal. 389
[515] The Panel confirmed its view (as outlined in the 2011–12 Review) that the proposed interim decision mechanism was not necessary or practical, having regard in particular to the Act’s requirements outlined earlier regarding the time for completion of each annual wage review, commencement of minimum wage determinations and the national minimum wage order and publication of any varied modern award minimum wages. 390
[516] The Panel is not persuaded that a different approach should be adopted.
[517] The scheme of the Act is more consistent with establishing adjustments across the range of modern awards, and in the absence of exceptional circumstances, taking the sectoral variations into account when determining the level and nature of adjustments that will apply to the modern awards generally. Exceptional circumstances can and should be considered on their merits as required by the Act.
[518] We also note that any decision to provide different wage outcomes based upon the particular circumstances in each industry, as they might vary from time to time, would inevitably lead to the loss of any relativity between the wages specified in modern awards. This would not sit comfortably with the principle of equal remuneration for work of equal or comparable value, which forms part of the minimum wages objective. 391
[519] In previous reviews the Panel also drew attention to some practical difficulties arising from exceptional circumstances in that there is no mechanism in the Act for revisiting a determination varying modern award minimum wages after an annual wage review has been completed. In the 2012–13 Review, the Panel said:
“[96] The current legislative framework ensures that annual wage reviews are conducted in a timely way and provides certainty for businesses and employees, by nominating the operative date of any wage increases flowing from such reviews. But the interaction of ss.157(2), 285(1) and 286 does give rise to a practical difficulty in that there is no mechanism in the Act for revisiting a determination varying modern award minimum wages after an annual wage review has been completed.
[97] Apart from the context of an annual wage review, or the system of 4 yearly reviews of modern awards, the Commission may only vary modern award minimum wages if it is satisfied, among other things, that the variation is justified on work value grounds (s.157(2)). As a result of this legislative inflexibility, a small or large business; a sector; or a region facing circumstances warranting the deferral of, or exemption from, an annual wage review increase; can only make such an application in the context of an annual wage review. So if the adverse circumstances arose in, for example, July, the businesses affected would have to wait until the following year (i.e. the next annual wage review) before they could seek relief.” 392
[520] The practical difficulty created by the present legislative framework remains and this does impact on the ability of some parties to effectively raise exceptional circumstances matters with the Panel. This is an issue for the parliament.
The particular circumstances of industries/awards raised by the employers
Natural disasters
[521] We deal firstly with the claim seeking an exemption from any increase in minimum wages for specified employers affected by natural disasters.
[522] CCIQ submitted that:
“there is a strong case for the Commission to exempt Queensland agriculture businesses, and businesses in the agriculture supply chain, from any AWR increase in 2013/2014.” 393
[523] CCIQ provided an overview of the extent of drought affected areas and the range of Queensland Government and Australian Government programs currently available to primary producers:
“33 Local Government Areas are currently drought declared by the Queensland Government and a Drought Relief Assistance Scheme is in place and can be accessed by primary producers in drought declared area. The Commonwealth Government has also announced a drought assistance package worth $320 million to support those farm businesses, farming families and rural communities facing hardship brought on by drought. An Interim Farm Household Assistance Allowance is also available through the Australian Government to help farm families experiencing financial hardship to meet basic household needs and improve long term financial security.”394
[524] However, despite this assistance, CCIQ submitted that:
“These arrangements do not, however, assist those businesses in the agriculture supply chain that are necessarily affected by a decline in farming conditions. Nearly a third (30.1 per cent) of respondents to the CCIQ AWR survey said that their business had been significantly impacted by the current Queensland drought, either directly or indirectly.” 395
[525] The survey also canvassed whether businesses affected by the drought should receive special treatment and what that special treatment should involve. 396
[526] The NFF provided information about the extent and impact of drought conditions in Queensland and northern New South Wales. Although not seeking special or differential treatment, the NFF submitted that we should have regard to the impact of the drought, amongst other factors, in determining any increase in minimum wages. It stated that 79 per cent of Queensland was now in a declared state of drought:
“Queensland’s Minister for Agriculture has announced 38 shires in drought. Shires of Banana, Bundaberg, Cherbourg, Fraser Coast, Gladstone, Goondiwindi, Gympie, Moreton Bay, Noosa, North Burnett, South Burnett, Southern Downs, Sunshine Coast, Toowoomba and Western Downs have been added to the list as of 1 March 2014. Other areas are Balonne, Barcaldine, Barcoo, Blackall-Tambo, Boulia, Bulloo, Burke, Carpentaria, Central Highlands (part declared), Charters Towers (part declared), Cloncurry, Croydon, Diamantina, Doomadgee, Etheridge, Flinders, Isaac (part declared), Longreach, Maranoa, McKinlay, Mt Isa, Murweh, Paroo, Quilpie, Richmond, Winton and Woorabinda (part declared).” 397
[527] On the impact of drought conditions, the NFF stated that:
“The drought has had an impact on the national economy due to poor farming productivity. Also, the lack of capital and disposable income has had a compounding effect on small business in the regional country towns and on employment levels.
Hot seasonal conditions and lack of rain has adversely affected pasture growth and crop production and depleted on farm water supplies. Livestock producers have had to increase the number of stock to slaughter, whereas the planting of crops has reduced.
In Queensland slaughter has increased by 9 per cent year-on-year to 2.1 million, while in New South Wales slaughter rose by 14 per cent year-on-year to around 1 million head. For Australia as a whole, the number of cattle and calves slaughtered in 2013-14 is forecast to be the highest in more than a decade. The increase in supply of older cattle for slaughter has reduced the demand for younger cattle for herd replacement or rebuilding have contributed to lower cattle prices. The weighted average saleyard price of cattle fell by 5 per cent over the first seven months of 2013-14, to 294 cents a kilogram. The largest price falls were in Queensland, followed by New South Wales, South Australia and Victoria.” 398
[528] In the 2011–12 Review decision, the Panel outlined its approach regarding submissions seeking an exemption or deferral on the basis of natural disaster:
“[266] We are conscious of the hardship inflicted on many businesses, especially small businesses, by recent natural disasters. However, the declaration of natural disasters by government cannot, of itself, be regarded as constituting “exceptional circumstances” for the purpose of s.286. Information about the effect of the disaster event on different classes of employers and enterprises and the assistance provided by government are necessary elements in any case seeking to establish exceptional circumstances.
[267] Further, any assessment of the effect of a natural disaster must necessarily include an assessment of the impact upon employees who would bear the cost of a deferral of a minimum wage increase. For example, in circumstances where the impact of flooding on an employer was limited to the cessation of trading for the duration of the flooding, that employer’s employees might be stood down consistent with s.524(1)(c) of the Act or, if casual employees, not offered work. In both cases the employees concerned would sustain a loss of their normal income for the duration of flooding. The employer would suffer the loss of profits which would have been earned and would also need to meet fixed costs over the duration of the cessation of trading. The direct cost to both employers and employees would be relevant considerations in assessing whether a deferral of minimum wage increases should occur.
[268] Further, as was the case in the 2010–11 Review, no obvious mechanism was advanced which could properly identify the employers affected and to whom the deferral should apply.” 399
[529] In light of the positions advanced in the present Review, and noting the observations cited above, the Panel sought clarification from the CCIQ and others about the identification of parties who might be considered for an exemption. It also sought an update on the circumstances following recent rains in New South Wales and parts of Queensland.
[530] In response, CCIQ suggested three potential approaches to identify businesses in both farming and the agriculture supply chain for the purposes of an exemption as follows:
[531] In terms of the ongoing impact of drought, both the CCIQ and the NFF submitted that the recent rainfall was uneven and large areas of Queensland, and smaller areas in northern New South Wales, northern South Australia, Western Australia and the Northern Territory remained in drought. 401 Further, the impacts of drought were said to be far-reaching and not simply restricted to the period in which the drought is officially declared.402 The NFF also emphasised that even in areas that have received recent rain, farm incomes will not return until crops are harvested or the next generation of animals are sold.403
[532] Drought is part of the natural cycle in many areas of Australia, however we recognise that this drought has been for an extended period, particularly in large areas of southern and western Queensland and northern New South Wales. It has impacted upon the national economy and upon regional areas. This includes both direct farming businesses and those indirectly impacted by fluctuations in primary industries, and in each case, their employees.
[533] There has been recent rain in some of the affected areas; however the Panel recognises that this has been localised and insufficient to substantially change the drought conditions for many farmers. Further, there is a lead time before rainfall impacts upon farm and business income given the nature of farming.
[534] Other than the indication that certain regions have been declared as drought affected and have been given some government assistance, there is little before the Panel against which to assess the extent of the impact upon businesses and their employees. There is, as a result, also little material upon which to make a judgment about the degree to which modifications in the level or timing of adjustments in minimum wages would actually make a difference. There is also no material on the circumstances of, or impact of any potential deferral upon, the employees concerned.
[535] In that light, there is insufficient material to warrant a finding of exceptional circumstances. The approach suggested by the NFF is appropriate and we have had regard to the circumstances arising from the drought in forming our views about the aggregate economy and the overall adjustment in this case.
Other award/industry circumstances
[536] AHA, AAA, MGA and R&CA argued for special consideration to be given by the Panel to the adjustment of wages in particular industries, chiefly to the modern awards applying in the hospitality and retail sectors.
[537] AHA submitted that:
“with respect to the Hospitality Industry (General) Award 2010, and considering the prevailing business environment in the hotel sector, that the Panel should give special consideration to there being no increase to the national minimum wage awarded this year. However, if the panel considers that an increase is justified, then AHA submits such increase be no more than $8.50.” 404
[538] AHA based this submission in part on a survey of members, 405 which, it contended, indicates that a majority of members were small- and medium-sized employers, had reduced the total number of workable hours available as a result of the 2012–13 increase in award wages and would pass any increases arising from this Review onto customers, and/or further reduce available working hours.
[539] AHA also submitted that over the past financial year the hotel sector had been negatively affected by:
[540] AAA similarly submitted that there should be no increase to minimum wages in the Hospitality Industry (General) Award 2010 due to increased labour costs to the industry flowing from other sources such as transitional arrangements and increased apprentice wages, 410 adverse trading conditions,411 the increased SG rate,412 increased utilities (including due to the carbon tax)413 and vulnerability to the high Australian dollar.
[541] MGA submitted that the Panel should award an increase “in the vicinity of 1.25 per cent” for employers reliant on the General Retail Industry Award 2010.” 414 It was not clear whether this was sought as a special pleading for that award or as a general increase.
[542] MGA pointed to a high level of award reliance in the retail sector, particularly among independent supermarkets, 415 and that the retail business survival rate between June 2008 and June 2012 of 58.4 per cent was 3.4 per cent less than the all industries average.416 Further, MGA submitted that the General Retail Industry Award 2010 had “increased costs and imposed other regulatory burdens on retailers, resulting in considerable hardship for small businesses”,417 including due to phasing arrangements418 and the extension of adult pay rates to certain 20 year old employees.419
[543] MGA also cited the results of a survey of its members 420 and referred to rising energy costs and industry competition, the potential to reduce staff or change staffing configurations as a result of any increase in award wages, and the impact of increased superannuation contributions.
[544] R&CA submitted that there should be no increase to modern award minimum wages “in all hospitality industry modern awards”, nor should there be an increase for industries experiencing “little or no financial growth.” 421
[545] In its submission in reply, R&CA submitted that there should be no increase to minimum wages in the General Retail Industry Award 2010, the Hospitality Industry (General) Award 2010 and the Fast Food Industry Award 2010. 422
[546] On the matters the Commission should consider in deciding whether to grant an “exemption”, R&CA submitted that increased labour costs were contributing to high business failure rates. 423 It stated that employers in the restaurant catering sector have experienced increased costs flowing from award modernisation424 and relating to food and beverage costs, rent, rates and taxes.425
[547] R&CA also referred to a 2014 survey of its members indicating that the most common response of respondents to a 5 per cent increase in minimum wages would be to close their business, while a 2 per cent increase would most commonly result in reduced staff hours. 426
[548] Although not seeking a differential outcome for modern awards in their sectors, a number of other employer organisations raised concerns about the effect of the decision of the Commission in Re Modern Awards Review 2012—Apprentices, Trainees and Juniors 427 (the Apprentices decision) and the Modern Awards Review 2012—General Retail Industry Award 2010—Junior Rates428 (the Junior Rates decision). The Apprentices and Junior Rates decisions were made as part of the transitional review of modern awards that commenced in 2012. The Apprentices decision, and the subsequent variation of some other modern awards, involved the increase in rates of pay for first and second year apprentices, special provisions in relation to rates of pay and wage protection for adult apprentices, and provision for competency-based wage progression. The new rates of pay apply to apprentices who commenced their apprenticeship on or after 1 January 2014 and phasing arrangements were also introduced. The Junior Rates decision varied the General Retail Industry Award 2010 (the Retail award) to entitle a 20 year old retail employee who had worked for the employer for more than six months to adult rates of pay. The entitlement to adult rates of pay for a 20 year old employee in those circumstances will operate on or after 1 July 2014.
[549] VACC submitted that:
“VACC is concerned that a significant wage increase in the 2014 Annual Wage Review will exacerbate the impact of the Apprentice Wage Decision. We have seen a massive decrease in the numbers of adult apprentices being employed. There is also less willingness to employ junior apprentices as a result of the wage increase.” 429
[550] The ACTU submitted that “[t]here are no extraordinary circumstances that would justify an adjustment taking effect at a later date,” 430 and more specifically that:
“Regarding the recent decisions in respect of some apprentice rates and rates for 20 year old adults in the retail industry, we strongly submit that the Panel should not award a lower increase in this Review than it otherwise would have in the absence of these decisions. To do so would be to undermine the decisions of Full Benches of FWC in those cases.” 431 [footnotes omitted]
[551] The issues arising from these positions include:
The circumstances of the hospitality and retail sectors
[552] The case for differential treatment put in respect of the hospitality and retail sectors relied on the results of surveys of employer organisations within those industries, economic circumstances within the industries and the impact of the transition to, and variation of, modern awards.
[553] Significant reliance was placed on membership surveys in support of differential treatment of the retail and hospitality industries. The weight that might be afforded to the membership surveys referred to in these submissions has been discussed in at paras [226]–[228] of this decision. If the surveys of members are to be relied upon to support exceptional circumstances in an industry, they would need to be conducted with the rigour, and the disclosure of the detailed methodology and parameters, discussed by the Panel earlier in this decision.
[554] Despite the Panel’s previous statements in relation to these requirements, and in some cases expressly seeking further details, 432 none of the organisations relying on membership surveys provided technical or supporting information that would allow us to give them any significant weight.
[555] The economic circumstances of the hospitality and retail sectors, have been considered in Chapter 4 of this decision, including recent economic information in relation to the award reliant industries in Table 4.8. Caution is required in relation to the industry level data, given its volatility between industries and from year to year within an industry.
[556] Recent retail sales data and the industry specific indicators in Table 4.8 does not support a finding of exceptional circumstances in the retail industry.
[557] The industry specific indicators in Table 4.8 suggest more difficult trading conditions in the hospitality industry over the past year, with a reduction in gross value added, gross operating profits and employment in the industry at an aggregate level. The decline in employment followed strong employment growth in the preceding year. We are not satisfied that recent aggregate economic conditions in the hospitality industry, in themselves, establish exceptional circumstances which warrant differential minimum wages outcomes. Clear evidence of the causes of the economic outcomes in the industry and their application across all sectors within an industry would be required before applying a differential outcome in the industry which would disturb skill-based minimum wage relativities across awards. We have however taken the circumstances of the hospitality industry and the award-reliant industries more generally into account in the broader picture and our decision, particularly given the relatively high level of award reliance in those sectors.
[558] The general matters relied upon by those supporting an exemption, such as structural changes in the Australian economy, changed patterns of consumer behaviour, utility and rental costs, and a level of corporate insolvencies, also generally relate more broadly to the award-reliant sectors and do not support differential treatment for the modern awards that have been raised with the Panel. We have also considered the circumstances of small businesses in these sectors. Although these factors do not support a differential outcome, they are relevant matters taken into account in our consideration of the economy in Chapter 4 and in the decision more generally.
Changes in modern awards
[559] In the 2011–12 Review, the Panel indicated as follows:
“[270] It is convenient to deal first with the National Retail Association submission that the General Retail Industry Award 2010 and the Fast Food Industry Award 2010 be excluded from any variation determination because of the impact of the award modernisation process on employers in those industries. In the 2009–10 and 2010–11 Review decisions the Panel rejected similar claims for special treatment based on the alleged costs of award modernisation. Nothing has been put in these proceedings which has caused us to review those conclusions, either in relation to the costs of award modernisation or in relation to the desirability of giving special treatment to a particular industry, or part of an industry, because of award modernisation. As the Panel observed in the 2009–10 Review decision:
‘It would not be appropriate to delay the operation of our decision in this review on account of award modernisation. It is apparent that increased costs resulting from award modernisation have already been taken into account by the AIRC in deciding upon the transitional provisions and operative dates in modern awards.’” 433
[560] We are not persuaded that a different approach should now be taken. We also note that the Restaurant Industry Award 2010 was recently varied 434 in response to an application by R&CA and certain other matters arising from the 4 yearly review of modern awards remain subject to appeal or other review.435 Further, the transitional provisions associated with the modern awards, which apply to the modern awards more generally, are also shortly to conclude.436
[561] In relation to the adjustment of apprentice wages in some awards in the Apprentices decision and the adjustment of rates for 20 year olds in the Junior rates decision, the Commission clearly took account of the impact of those adjustments upon employment and business more generally. Along with the other changes to modern awards discussed above, this circumstance is relevant to the consideration of the Panel and we have taken it into account in our overall assessment.
Conclusions
[562] The general matters relied upon by those supporting an exemption or a particular differential adjustment as part of this Review are not sufficient to justify such an outcome. These factors are, however, relevant matters and we have taken them into account in our consideration of the economy in Chapter 4, the promotion of increased workforce participation in Chapter 7, and in the decision more generally.
Transitional Australian Pay and Classification Scales, Division 2B State awards and other transitional instruments
[563] The Panel is required to review and, if appropriate, make one or more determinations varying a number of transitional instruments. 437
[564] Most transitional instruments have ceased to operate or have been terminated in accordance with the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009. 438 Research Report 6/2013 also showed that few employees in non-public sector award-reliant organisations were reliant on transitional instruments.439 Transitional instruments which continue to operate are required to be reviewed by the Panel.
[565] Transitional instruments still operating can be divided into two categories. The first category of transitional instruments operate as a result of ongoing preservation whilst the Commission undertakes modernisation processes (as required under the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009). Such instruments include, but are not limited to, instruments which cover:
[566] The second category of transitional instruments are Transitional Australian Pay and Classification Scales (APCSs), State reference transitional instruments and Division 2B State awards preserved by operation of the Fair Work (Transitional Provisions and Consequential Amendments) Regulations 2009. These instruments can be further divided into two groups.
[567] The first group includes Transitional APCSs, State reference transitional instruments, Division 2B State awards preserved by the Fair Work (Transitional Provisions and Consequential Amendments) Regulations 2009 and transitional pay equity orders created by the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009.443 A more detailed outline of these instruments was included in the Panel’s 2012–13 Review decision.444 These instruments must be considered as part of the Panel’s review. 445
[568] The second group are copied State awards446 in relation to employees of non-national system state public sector employers who transfer their employment to a national system employer as part of a transfer of business. 447 The Panel is required to review and, if appropriate, make a determination varying minimum wages in copied State awards.448
[569] The ACTU submitted that most transitional instruments should be adjusted in line with the increase afforded to modern awards, except in the case of copied State awards, where the same approach to last year’s Review should be followed. 449
[570] The ACTU, Queensland Government and the HIA made submissions in relation to Queensland apprentices subject to transitional instruments where competency-based wage arrangements apply. 450 For these instruments, the ACTU supported an increase consistent with any increases afforded to modern awards.451
[571] The Queensland Government also submitted that transitional APCSs preserving wages for apprentices subject to competency-based wage arrangements should be adjusted in line with any adjustment by the Panel to minimum wages. 452
[572] We have decided that the increase we have awarded in modern award minimum wages should also apply to those transitional instruments, other than copied State awards, which remain in operation. For copied State awards currently in operation we have decided that increases should be consistent with the 2012–13 Review decision. The following increases will apply to copied State awards:
[573] There is no requirement to publish the variations. 453
Modern award minimum wages for junior employees, employees to whom training arrangements apply, employees with disability and piece rates
[574] The Panel is required to review minimum wages for junior employees, employees to whom training arrangements apply, employees with disability, and piece rates. 454
[575] Research Report 6/2013 made a number of findings in relation to the scope of award reliance for junior employees, employees to whom training arrangements apply and employees with disability in non-public sector award-reliant organisations. The report found that 9 per cent of all award-reliant employees in non-public sector organisations were paid junior rates, 6 per cent were paid apprentice rates, 2 per cent were paid trainee rates, and around 1 per cent of award-reliant employees were paid under the supported wage system. 455 Findings from the report are outlined in more detail in the relevant sections below.
[576] The Panel also notes that a number of submissions discussed the impact of two Commission decisions on the adjustment of wages for juniors and employees to whom training arrangements apply: the Apprentices decision and Junior Rates decision. These decisions are addressed earlier in Chapter 10.
Juniors
[577] Research Report 6/2013 found that the modern awards used to set pay for the largest proportions of award-reliant juniors in non-public sector award-reliant organisations were the General Retail Industry Award 2010 (31 per cent), the Cleaning Services Award 2010 (18 per cent) and the Hospitality Industry (General) Award 2010 (10 per cent). 456
[578] The ACTU, Ai Group, ACOSS and ABI submitted that any increase to minimum wages should flow through to junior rates of pay in modern awards. 457
[579] The ACTU submitted that an increase to junior wages would not have “a noticeable effect on youth unemployment.” 458 AFEI opposed an increase to junior wages459 while ACCI submitted that, for young people, the opportunity to enter and progress through the labour market was a more significant incentive to enter work, “more so than the current value of the minimum wage.”460
[580] The Australian Government submitted that the Panel should take into account evidence that higher wages would decrease job opportunities for young people. 461 It submitted:
“low paid work is often a stepping stone to higher paid work, and therefore the Panel should consider the importance of ensuring sufficient entry level job opportunities, and should note the worrying trend of the past few years of increased rates of youth unemployment.” 462
[581] The Victorian Government warned of the effects on youth unemployment if increased wage costs could not be absorbed by businesses. 463
[582] MGA also noted high levels of youth unemployment, 464 and the South Australian Wine Industry Association Incorporated submitted that with increases to junior rates of pay there would be increased labour costs to employers.465
[583] ACOSS submitted that present minimum wages for young people have not reduced their employment prospects, 466 while ACCER noted that junior employees had lower wage rates than adults because of differing needs.467
[584] No compelling case has been made to not flow through the adjustment to junior wages and we have decided to allow the increase we have granted in this Review to flow through to the operation of provisions for calculating junior rates in modern awards.
Apprentices and trainees
[585] In relation to apprentice wages, Research Report 6/2013 found that the four modern awards used to set pay for the largest proportions of award-reliant apprentices in non-public sector award-reliant organisations were the Vehicle Manufacturing, Repair, Service and Retail Award 2010 (26 per cent), the Building and Construction General On-site Award 2010 (23 per cent), the Electrical, Electronic and Communications Contracting Award 2010 (9 per cent) and the Manufacturing and Associated Industries and Occupations Award 2010 (8 per cent). 468
[586] In relation to trainee wages, Research Report 6/2013 found that the modern awards used to set pay for the largest proportion of award-reliant trainees in non-public sector award-reliant organisations were the Building and Construction General On-site Award 2010 (13 per cent), the Children’s Services Award 2010 (12 per cent) and the General Retail Industry Award 2010 (11 per cent). 469
[587] The ACTU, Ai Group, ACOSS and ABI supported the flow-on of any minimum wage increase from this Review to subsidiary wages including for employees to whom training arrangements apply. 470 The ACTU submitted that:
“the adjustment to modern award minimum wages should be sufficient to provide employees engaged in training with a real increase in minimum wages.” 471
[588] However, ACCI submitted that increases to minimum wages may not be a key factor affecting labour supply decisions against other factors such as the opportunity for training. 472 HIA submitted that the Panel should take into account the findings of Research Report 6/2013 and the impact of transitional phasing as part of any decision to increase apprentice modern award rates.473
[589] ACOSS noted a decline in traditional apprenticeships, 474 but submitted that there had not been a decline in adult apprentices despite their higher wages.475 ACOSS also proposed differentiating the adjustment of modern award apprentice and trainee wages for adults in accordance with differing labour force conditions.476
[590] East Coast Apprenticeships—Queensland (ECAQ) recommended the creation of two new wage structures for new adult apprentices in modern awards: one for apprentices with no skills and experience, and the other for apprentices with experience and skills. 477 It submitted that higher wages should be paid for skilled apprentices:
“An employer’s interest in apprentice wages is in direct proportion to the productivity returns of the apprentice. In the case of an adult apprentice with advanced experiences, skills and talents higher wages are more acceptable.” 478
[591] ECAQ also recommended broader recognition of competency-based, as opposed to time-based, wage progression arrangements for adult apprentices in modern awards. 479
[592] In relation to the adjustment of the National Training Wage Schedule (NTWS), the ACTU and ABI supported a flow on of any minimum wage increases awarded as part of this Review to the NTWS. 480 The ACTU further supported a flow-on of its proposed two-tiered increase to rates in modern awards for trainees who are not subject to the NTWS.481
[593] We have decided to flow through the increase we have awarded in this Review to employees to whom training arrangements apply in modern awards. We have also decided to flow on the percentage increase we have determined to the rates in the NTWS to maintain its existing relativities.
[594] ECAQ’s proposal was not subject to much elaboration in the proceedings and no detailed proposal was advanced. Nor was the proposal dealt with by other submissions in the Review. In the circumstances we believe the appropriate course is not to deal with this issue in these proceedings, however ECAQ may choose to advance their proposal in the 4 yearly review of modern awards.
Employees with disability
[595] Research Report 6/2013 found that the three main modern awards used to set pay for the largest proportions of award-reliant employees under the supported wage system in non-public sector award-reliant organisations were: the Supported Employment Services Award 2010 (35 per cent); the Food, Beverage and Tobacco Manufacturing Award 2010 (10 per cent); and the Social, Community Home Care and Disability Services Industry Award 2010 (8 per cent). 482
[596] The ACTU, Ai Group, ACOSS and ABI supported the flow-on of any minimum wage increases in this Review to subsidiary wages including to employees with disability. 483
[597] The ACTU, Ai Group and ABI also submitted that the supported wage system minimum weekly payment should again be increased in line with the Disability Support Pension income test-free threshold. 484 ACOSS supported a system of sub-minimum wages for employees with disability whose disability affects their productivity, but submitted that the supported wage system minimum weekly payment was too low.485
[598] The ACTU referred to the joint application made by United Voice and the Health Services Union to vary the Supported Employment Services Award 2010 but submitted that this application would not likely affect the flow on of rates for employees with disability. 486 ACOSS also advocated a standardisation of wage assessment tools for employees with disability.487
[599] We have decided that the adjustment will flow through to employees with disability through the operation of the Supported Wage System Schedule (SWSS) and that the minimum payment in the SWSS should be adjusted in accordance with past practice.
Piece rates
[600] Few submissions directly addressed the variation of piece rates. The ACTU and Ai Group directly supported a flow on of any minimum wage increase awarded as part of this Review to piece rates 488 and the NFF supported the flow on of any minimum wage increase to piece rates under the Pastoral Award 2010 and the Horticulture Awards 2010 “in the same manner” as previous reviews.489
[601] We have decided to flow on the increase we have determined in this Review to modern award employees engaged in piece work.
Casual loadings under modern awards and the casual loading for award/agreement free employees
[602] In each review the Panel is required to review casual loadings in modern awards and to include a casual loading for award/agreement free employees in the national minimum wage order. The casual loading for award/agreement free employees must be expressed as a percentage. 490
[603] The ACTU, Ai Group, and ABI supported increasing the casual loading for award/agreement free employees to 25 per cent. 491 The ACTU and Ai Group submitted that the casual loading in modern awards should be maintained at 25 per cent.492
[604] A number of employer groups also outlined the impact that the 2012–13 Review decision (and potential future review decisions) had/will have on the employment of casuals 493 as well as the high incidence of casual employment in the hospitality sector,494 the Retail trade industry495 and the restaurant and catering industry.496
[605] Research Report 6/2013 found that award-reliant casuals in non-public sector award-reliant organisations were more likely to be on lower pay ranges in awards:
“Adult employees engaged on a casual basis were relatively more likely to be on the lowest pay range than those employed on a permanent basis. However, while 45 per cent of all adult award-reliant employees were employed on a permanent basis, two-thirds of these permanent employees (30 per cent of all adult award-reliant employees) were paid less than $18.60 per hour. In comparison, while casual employees comprised 55 per cent of adult award-reliant employees, a higher proportion of casuals (and 45 per cent of all adult award-reliant employees) were also paid less than $18.60 per hour.” 497
[606] We have decided to increase the casual loading for award/agreement free employees to 25 per cent in line with the approach adopted in the 2009–10 Review decision. We have also determined that we will not make any alteration to the standard casual loading in modern awards, noting the transitional arrangements applying in those instruments.
Special national minimum wages
[607] The Panel is required by s.294 of the Act to set a national minimum wage order for award/agreement free employees which includes special national minimum wages for award/agreement free junior employees, employees to whom training arrangements apply and employees with disability.
[608] In the 2012–13 Review decision the Panel adopted the junior wage percentage scale in the Miscellaneous Award 2010 as the special national minimum wage for award/agreement free junior employees. 498
[609] Ai Group supported the continuation of the Panel’s approach to using the scale in the Miscellaneous Award 2010 for award/agreement free juniors. 499 The ACTU, ACOSS and ABI also supported the flow-on of the Panel’s percentage determination to junior special national minimum wages.500
[610] We have again decided to adopt the junior wage percentage scale in the Miscellaneous Award 2010 as the special national minimum wage for award/agreement free junior employees.
[611] In relation to award/agreement free employees to whom training arrangements apply, Ai Group supported the Panel’s approach in the 2012–13 Review in which apprentice and trainee rates were set in accordance with the apprentice provisions and NTWS in the Miscellaneous Award 2010. 501 The ACTU, ACOSS and ABI also supported a flow on of the Panel’s percentage determination to apprentice and trainee special national minimum wages.502
[612] Ai Group, however, submitted that the Panel should not take previous years’ approach of setting the award/agreement free adult apprentice minimum wage at the rate of the adult national minimum wage, but instead set it at the rate for adult apprentices set in the Miscellaneous Award 2010 (from 1 January 2014). 503 R&CA supported this proposed change.504 The ACTU submitted that the decision to include an adult apprentice rate in the Miscellaneous Award 2010 was not intended to interfere with existing, more favourable provisions and opposed the proposed change.505
[613] We have decided to adopt the provisions of the Miscellaneous Award 2010 as the basis for the special national minimum wages for employees to whom training arrangements apply. The national minimum wage order will incorporate, by reference, the apprentice and NTWS provisions of that award.
[614] We also accept Ai Group’s submission that the adult apprentice national minimum wage in the order should now be set in accordance with the Miscellaneous Award 2010 which, since 1 January 2014, has specified a rate for adult apprentices. Though we acknowledge that this rate is lower than the rate previously set in the national minimum wage order 506 we accept the Full Bench’s conclusion in the Apprentices decision that the minimum rate for a new adult apprentice be set (where not specified previously) at 80 per cent of the C10 or base trade rate in the first year or stage of the apprenticeship.507 The order will therefore provide that adult apprentices will have their rate set according to the adult apprentice rate in the Miscellaneous Award 2010. Award/agreement free adult apprentices engaged before 1 July 2014 and who are in Year 1 of their apprenticeship will continue on the rate set in the National Minimum Wage Order 2013 until they reach Year 2 of their apprenticeship, at which time they will transition to the adult apprentice rate in the Miscellaneous Award 2010.
[615] ACOSS supported a twofold approach of separating national minimum wages for employees with disability whose productivity is not affected and those whose productivity is affected. 508
[616] The ACTU, ACOSS and ABI supported a flow-on of any increase in minimum wages to wages for employees with a disability. 509 Ai Group and ABI submitted that, consistent with the usual approach, the minimum payment in the SWSS attached to the national minimum wage order should also be adjusted to reflect any increase to the disability support pension’s income free threshold.510
[617] We have decided to follow the approach of previous years to these wages and set two special national minimum wages for employees with disability. The first, for employees with disability without affected productivity, will be set at the rate of the national minimum wage. The second, for employees with disability with affected productivity, will be paid in accordance with an assessment under the supported wage system. The minimum payment will be fixed in accordance with the adjustment to the SWSS.
[618] This chapter sets out the outcome of the Review and mentions some matters relevant to the 2014–15 Review.
[619] The outcome of the Review in relation to modern award minimum wages is that from the first full pay period on or after 1 July 2014 minimum weekly wages are increased by 3 per cent, with commensurate increases in hourly rates on the basis of a 38 hour week. The increase applies to minimum wages for junior employees, employees to whom training arrangements apply and employees with disability, and to piece rates through the operation of the methods applying to the calculation of those wages. Wages in the NTWS will be adjusted by 3 per cent.
[620] The determinations necessary to give effect to the increase in modern awards will be made available in draft form shortly after this decision. Weekly wages in the national minimum wage order and modern awards will be rounded to the nearest 10 cents and hourly wages will be calculated by dividing the weekly rate by 38, on the basis of the 38 hour week for a full-time employee. Determinations varying the modern awards will be made as soon as practicable and the modern awards including the varied wage rates will be published as required by the Act.
[621] In relation to transitional instruments, from the first full pay period on or after 1 July 2014, wages in those instruments, including Division 2B State enterprise awards, will be varied by 3 per cent per week, with commensurate increases in hourly rates based on a 38 hour week. Wages in Division 2B State awards relating to Queensland trainees, apprentices and employees subject to specific Queensland labour market programs will be varied to achieve parity with minimum wages in the corresponding transitional APCSs and State reference transitional awards. Copied State awards will be varied on the basis discussed in Chapter 11 of this decision.
[622] The national minimum wage order will contain:
(a) a national minimum wage of $640.90 per week or $16.87 per hour,
(b) two special national minimum wages for award/agreement free employees with disability: for employees with disability whose productivity is not affected, a minimum wage of $640.90 per week or $16.87 per hour based on a 38 hour week, and for employees whose productivity is affected, an assessment under the supported wage system, subject to a minimum payment fixed under the SWSS,
(c) wages provisions for award/agreement free junior employees based on the percentages for juniors in the Miscellaneous Award 2010 applied to the national minimum wage,
(d) the apprentice wage provisions and the NTWS in the Miscellaneous Award 2010 for award/agreement free employees to whom training arrangements apply, incorporated by reference, and a provision providing transitional arrangements for first year award/agreement free adult apprentices engaged before 1 July 2014, and
(e) a casual loading of 25 per cent for award/agreement free employees.
[623] We foreshadowed in an earlier statement for this Review that a review of the medium-term research program for the Panel would be undertaken in the third quarter of 2014. 511 In another statement, it was also outlined that research to inform the Annual Wage Review 2014–15 would be undertaken using data obtained from the Australian Workplace Relations Study.512
[624] A statement outlining further details of the medium-term review will be issued by the Panel in July 2014. The Australian Workplace Relations Study research for the 2014–15 Review will be further scoped as part of the usual practice of consultation by Commission staff with the Minimum Wages Research Group after the completion of this Review.
[625] The timetable for the 2014–15 Review also will be announced in the third quarter of 2014.
[626] We wish to express our appreciation to the parties who participated in the Review for their contributions and to the staff of the Commission for their assistance.
PRESIDENT
Appendix 1—Proposed Minimum Wages Adjustments
Submission |
Proposal | ||||
National minimum wage |
Modern award minimum wages |
Exemption/deferral sought | |||
Australian Government |
No quantum specified |
||||
Government of Western Australia |
No quantum specified |
||||
New South Wales Government |
No quantum specified |
||||
Queensland Government |
No quantum specified |
||||
Government of South Australia |
No quantum specified |
||||
Victorian Government |
No quantum specified |
||||
Australian Council of Trade Unions |
$27.00 pw |
C10 and below: $27.00 pw |
|||
Australian Industry Group |
1.6%, applicable to all |
||||
Australian Chamber of Commerce and Industry |
Not more than $8.50 pw, applicable to all |
||||
Australian Council of Social Service |
No quantum specified |
||||
Australian Business Industrial |
Not more than 1.3%, applicable to all |
||||
Australian Federation of Employers and Industries |
Not more than $8.50 pw, applicable to all |
||||
Accommodation Association of Australia |
Supports no increase to the Hospitality Industry Award 2010 |
||||
Australian Hotels Association |
Supports no increase |
||||
Australian National Retailers Association |
Not more than $8.50 pw, applicable to all |
||||
Australian Retailers Association |
Consider any increase on an award-by-award basis
|
||||
Australian Road Transport Industrial Organisation |
No quantum specified |
||||
Business SA |
Not more than $8.50 pw, applicable to all |
||||
Chamber of Commerce and Industry Queensland |
$8.50 pw, applicable to all |
Exemption for Queensland agriculture businesses and businesses in the agriculture supply chain | |||
Victorian Employers’ Chamber of Commerce and Industry |
Not more than $8.50 pw, applicable to all |
Consider differential treatment for specific industries based on particular circumstances. | |||
East Coast Apprenticeships–Queensland |
No quantum specified |
||||
Gary E, Norris Park |
No quantum specified |
||||
Housing Industry Association |
No quantum specified |
||||
Institute of Public Affairs |
Nil increase |
||||
Master Grocers of Australia |
No quantum specified |
1.25%, applicable to all |
Consider differential increases for one or more modern awards | ||
National Farmers’ Federation |
Not more than 1.1% , applicable to all |
||||
National Retail Association |
Not more than $9.30 pw, applicable to all |
||||
The Pharmacy Guild of Australia |
$8.50 pw, applicable to all |
||||
Restaurant & Catering Australia |
No quantum specified |
No increase to modern awards in the hospitality sector | |||
Shaw, R |
No quantum specified |
||||
South Australian Wine Industry Association Incorporated |
No greater than CPI less 0.25% |
||||
United Voice |
$27.00 pw |
C10 and below: $27.00 pw |
|||
Victorian Automobile Chamber of Commerce |
$8.50 pw, applicable to all |
||||
Australian Catholic Council for Employment Relations |
$10.00 pw plus the equivalent of the C10 increase as a dollar amount |
C10 and higher:
|
|||
Note: pw = per week.
1 ABS, Catalogue no. 6306.0 - Employee Earnings and Hours, Australia, May 2012.
2 Australian Government submission, p. 17 at para 53.
3 Wright S and Buchanan J (2013) Award reliance, Research Report 6/2013, Fair Work Commission, December, Melbourne.
4 Buchanan J, Bretherton T, Frino B, Jakubauskas M, Schutz J, Garima V and Yu S (2013), Minimum wages and their role in the process and incentives to bargain, Research Report 7/2013, Fair Work Commission, December, Melbourne
5 Manufacturing and Associated Industries and Occupations Award 2010 [MA000010]; This is the lowest level in the Manufacturing Award.
6 Nestle Australia Ltd v Federal Commissioner of Taxation (1987) 16 FCR 167 at 184; cited with approval by Katzmann J in CFMEU v Deputy President Hamberger (2011) 195 FCR 74 at [103].
7 Minister for Aboriginal Affairs v Peko-Wallsend (1998) 162 CLR 24; Friends of Hinchinbrook Society Inc v Minister for Environment & Ors (1997) 77 FCR 153; Australian Competition and Consumer Commission v Leelee Pty Ltd [1999] FCA 1121; Edwards v Giudice [1999] FCA 1836, (1999) 94 FCR 561.
8 [2012] FWAFB 5000 at para 41: For example, promoting productivity and economic growth (s.3(a)); promoting flexible modern work practices and the efficient and productive performance of work (s.134(1)(d)); the likely impact of any determination on business including on productivity, employment costs and the regulatory burden (s.134(1)(f)); the likely impact of any determination on employment growth, inflation and the sustainability, performance, and competitiveness of the national economy (s.134(1)(h)); the performance and competitiveness of the national economy, including productivity, business competitiveness and viability, inflation and employment growth (s.284(1)(a)); and acknowledging the special circumstances of small and medium-sized businesses (s.3(g)).
9 [2012] FWAFB 5000 at para 41: For example; the establishment and maintenance of a safety net of fair, relevant and enforceable minimum wages within the context of an easy to understand, stable and sustainable modern award system (ss.3(b), 134(1), 134(1)(g) and 284(1)); the promotion of social inclusion and through increased workplace participation (ss.134(1)(c) and 284(1)(b)); relative living standards and the needs of the low paid (ss.134(1)(a) and 284(1)(c)); the principle of equal remuneration for work of equal or comparable value (ss.134(1)(e) and 284(1)(d)); and providing a comprehensive range of fair minimum wages to junior employees, employees to whom training arrangements apply and employees with a disability (s.284(1)(e)).
10 [2012] FWAFB 5000 at para 41: For example, the need to encourage collective bargaining (s.134(1)(b); see also s.3(f)).
11 See [2013] FWCFB 4000 at para 10.
12 [2010] FWAFB 4000 at paras 244–245; [2011] FWAFB 3400 at para 228; [2012] FWAFB 5000 at paras 4, 14–15, 41 and 149; [2013] FWCFB 4000 at para 56.
13 [2013] FWCFB 4000 at para 424.
14 [2013] FWCFB 4000 at para 56, citing [2010] FWAFB 4000 at para 244.
15 ACCER, Outline of submissions for the preliminary consultations at pp. 1–4, paras 2–10; Transcript at paras 85–95.
16 ACCER submission, p. 56 at para 270.
17 ACCER submission, pp. 57–58 at paras 271–273.
18 See generally Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 291 per Kirby J.
19 [2013] FWCFB 4000 at para 9.
20 [2013] FWCFB 4000 at paras 100–102.
21 Transcript at paras 85–95.
22 ACCER submission, p. 3 at para 2.
23 ACCER submission, p. 61 at para 283; see also ACCER submission re draft timetable, 20 September 2013, pp. 2–3 at para 10.
24 ACCER submission, p. 69 at para 313.
25 AFEI, Outline of submissions for the preliminary consultations, p. 13 at paras 47–48.
26 Fair Work Amendment Act 2013 (Cth), item 1 of Sch. 2, inserting s. 134(1)(da) into the Fair Work Act 2009.
27 CCIQ submission, p. 8 at para 27.
28 [2014] FWCFB 1788 at paras 23 and 36.
29 AHA submission at p. 8; AAA submission at p. 2; IPA submission at p. 2.
30 VECCI submission at p. 2; R&CA submission, p. 11 at para 33; CCIQ submission, p. 28 at para 61.
31 ACCI submission at p. 4; AFEI submission, p. 9 at para 33; Business SA submission at p. 1; CCIQ submission, p. 3 at para 4; VECCI submission at p. 1; ANRA submission, p. 4 at para 1.1; Pharmacy Guild of Australia submission in reply at p. 1; VACC submission at p. 6.
32 ACCI submission at p. 4.
33 ACCI submission at p. 6.
34 ARA submission at p. 7.
35 ARA submission at p. 4.
36 ANRA submission, p. 4 at para 1.2; National Retail Association submission, p. 3 at para 4.
37 National Retail Association submission, p. 3 at para 4.
38 AHA submission at p. 8.
39 AAA submission at p. 2; AAA submission in reply, p. 2 at para 4.
40 AAA submission at p. 2.
41 R&CA submission, p. 8 at para 26
42 R&CA Post-Budget submission at p. 4.
43 Ai Group submission at p. 43; Ai Group submission in reply at p. 2.
44 ABI submission, p. 2 at para 2.1.
45 MGA submission, p. 3 at para 2.1.
46 MGA submission, p. 16 at para 14.5.
47 NFF submission, p. 5 at para 1.9.
48 ACTU submission, p. 2 at para 8; ACCER submission, p. 2 at para 1.
49 The C10 level refers to the rate of pay for an employee classified as an Engineering/Manufacturing Tradesperson—Level I under the Manufacturing and Associated Industries and Occupations Award 2010, and equivalent levels within other modern awards.
50 ACTU submission, p. 2 at para 8.
51 ACTU submission, p. 2 at para 10; Wright S and Buchanan J (2013) Award reliance, Research Report 6/2013, Fair Work Commission, December, Melbourne.
52 United Voice submission, p. 4 at para 15.
53 United Voice submission, p. 4 at para 15.
54 United Voice submission, p. 3 at para 5.
55 ACCER submission, p. 2 at paras 1A–1B.
56 ABS, Catalogue No. 6401.0 - Consumer Price Index, Australia, Mar 2014.
57 ACCER submission, p. 2 at para 1C.
58 ACCER Post-Budget submission, p. 1 at para 1.
59 ACCER submission, p. 3 at para 5.
60 ACCER submission, p. 2 at para 1C.
61 ACCER submission, p. 3 at para 5.
62 Australian Government submission, p. 9 at para 3.
63 Australian Government submission, p. 14 at para 33.
64 Australian Government submission, p. 19 at para 69.
65 New South Wales Government submission, p. 29 at para 121; Victorian Government submission, p. 5 at para 18; Queensland Government submission, p. 3 at para 3.
66 New South Wales Government, Response to questions for consultations at p. 1.
67 Victorian Government submission, p. 5 at para 20.
68 Victorian Government, Response to questions for consultations at p. 1.
69 Government of South Australia, Post-Budget submission at p. 15.
70 Western Australian Government submission, p. 1 at para 6.
71 Western Australian Government, Response to questions for consultations at p. 1.
72 ACOSS submission at p. 11.
73 HIA submission at p. 8.
74 South Australian Wine Industry Association Incorporated submission at p. 9.
75 ARTIO submission at p. 3.
76 ARTIO submission at p. 3.
77 IPA submission at p. 5.
78 IPA submission at p. 4.
79 ABS, Catalogue No. 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Dec 2013.
80 [2013] FWCFB 4000 at paras 190–191.
81 RNNDI takes into account the impact of changes in prices of exports relative to imports, the real impact of income flows between Australia and the rest of the world, and the consumption of fixed capital. Income flows between Australia and the rest of the world are fairly smooth over time and changes tend to have little impact on short-term movements in RNNDI. The consumption of fixed capital tends to stall growth in RNNDI, but for the most part, the impact on short-term movement is small. ABS, ‘Real net national disposable income - a new national accounts measure’, Catalogue No. 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Dec 2001, Feature Article.
82 ABS, Catalogue No. 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Dec 2013.
83 [2013] FWCFB 4000 at paras 131–137 and 300–319; [2012] FWAFB 5000 at paras 123–135.
84 Bishop J, Kent C, Plumb M and Rayner V (2013), The Resources Boom and the Australian Economy: A Sectoral Analysis, RBA Bulletin, March Quarter.
85 [2013] FWCFB 4000 at para 133.
86 ABS, Catalogue No. 5625.0 - Private New Capital Expenditure and Expected Expenditure, Australia, Dec 2013; ABS, Catalogue No. 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Dec 2013.
87 Transcript at paras 750–761.
88 ABS, Catalogue No. 8731.0 - Building Approvals, Australia, Mar 2014.
89 [2013] FWCFB 4000 at paras 139–160.
90 Australian Government submission, p. 35 at para 157.
91 Transcript at para 413.
92 Australian Government Response to questions for consultations, p. 6 at para 8.
93 Transcript at para 691.
94 ACTU submission, p. 58 at Figure 58 (reproduced in its Chart-pack for consultations at p. 8).
95 [2013] FWCFB 4000 at para 163.
96 [2013] FWCFB 4000 at para 167.
97 ACTU submission at para 197 (on the basis of ACTU calculations).
98 ACTU submission at para 207.
99 Parham D (2013), Labour’s share of growth in income and prosperity, Visiting Researcher Paper, Productivity Commission, September.
100 ACCI submission at p. 35; AFEI submission, p. 38 at para 117; Parham D (2013), Labour's Share of Growth in Income and Prosperity, Visiting Researcher Paper, Productivity Commission, September.
101 ACCI submission at p. 34.
102 ACCI submission at p. 35.
103 [2013] FWCFB 4000 at paras 172–173.
104 Australian Government submission, p. 18 at paras 61–63; Productivity Commission (1998), Work arrangements in container stevedoring, Productivity Commission Research Paper, AusInfo, Canberra; Productivity Commission (1998), The Australian black coal industry, Productivity Commission Inquiry Report, AusInfo, Canberra; Productivity Commission (1998), Work arrangements in Australian meat processing industry, Productivity Commission Research Paper, AusInfo, Canberra; Productivity Commission (1999), Microeconomic reforms and Australian productivity: Exploring the links, Productivity Commission Research Paper, AusInfo, Canberra; Productivity Commission (2000), Productivity in Australia’s wholesale and retail trade, Productivity Commission Staff Research Paper, AusInfo, Canberra.
105 [2013] FWCFB 4000 at para 175.
106 Ai Group submission at p. 6; AAA submission, p. 9 at para 49; Business SA submission at p. 1; R&CA submission, p. 4 at para 7 and p. 7 at para 22; VACC submission at p. 12.
107 ABS, Catalogue No. 8165.0 - Counts of Australian Businesses, including Entries and Exits, Jun 2009 to Jun 2013.
108 AAA submission, p. 9 at para 49; R&CA submission, p. 4 at para 9.
109 Business SA submission at p. 1; VACC submission at p. 16.
110 Reserve Bank of Australia, Financial Stability Review, March 2014 at pp. 40–41.
111 ACTU submission, p. 65 at para 214.
112 Australian Securities & Investment Commission, Corporate insolvencies: December quarter 2013, ASIC Insolvency statistics summary, https://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/Insolvency-stats-summary-Dec-Qtr-2013.pdf.
113 R&CA submission, p. 4 at para 7.
114 ABS, Catalogue No. 8165.0 - Counts of Australian Businesses, including Entries and Exits, Jun 2009 to Jun 2013.
115 ABS, Catalogue No. 8165.0 - Counts of Australian Businesses, including Entries and Exits, Jun 2009 to Jun 2013 at Table 13.
116 Business SA submission at p. 1; VACC submission at p. 16.
117 VACC submission at p. 16.
118 Australian Government, Response to questions for consultations submission, p. 14 at para 23.
119 ACCI, Response to questions for consultations submission at p. 18.
120 ACTU, Response to questions for consultations submission, p. 22 at para 77.
121 R&CA submission, p. 5 at para 11 and p. 6 at para 16; R&CA submission in reply, p. 8 at para 16.
122 See Annual Wage Review 2013–14: Questions for final consultations at Footnote 14.
123 Bolles S ‘Another blow to Sydney's dining scene’ Good Food, 10 March, 2014 <http://www.goodfood.com.au/good-food/food-news/another-blow-to-sydneys-dining-scene-20140310-34ggn.html>.
124 R&CA Post-budget submission at p. 6.
125 R&CA final consultations submission at pp. 6–7.
126 See Annual Wage Review 2013–14: Questions for final consultations at Footnote 14.
127 R&CA submission, p. 6 at para 16.
128 R&CA submission in reply, p. 8 at para 16.
129 Hallock B, ‘First look at Curtis Stone's Maude restaurant in Beverly Hills‘, Los Angeles Times, 10 January 2014, <http://www.latimes.com/food/dailydish/la-dd-curtis-stone-maude-beverly-hills-20140109,0,1041667.story#axzz2z1n1K8IP>; <http://www.curtisstone.com/restaurant> viewed 14 April 2014; <http://www.mauderestaurant.com/about.html> viewed 14 April 2014; Bennet S, ‘It’s easier to get a table at Tetsuya’s, but now you’ll need your passport’, The Sydney Morning Herald, 7 March 2011, <http://www.smh.com.au/entertainment/restaurants-and-bars/its-easier-to-get-a-table-at-tetsuyas-but-now-youll-need-your-passport-20110306-1bjjs.html; http://brunetti.com.au/about/> viewed 14 April 2014; <http://www.toko-sydney.com/> viewed 14 April 2014; Varidel, R, ‘Robert Marchetti set to take on Bali’, InsideCuisine, 30 January 2013, <http://insidecuisine.com/2013/01/30/robert-marchetti-set-to-take-on-bali/>.
130 R&CA Post-budget reply submission at p.9.
131 The trimmed mean is the weighted average of the central 70 per cent of the price change distribution. The weighted median is calculated as the average price change at the 50th percentile by weight of the price change distribution.
132 The CPI and LCI differ in their approach to three areas of expenditure: purchase of dwellings; purchase of durable items; and financial services and the use of credit.
133 Department of Employment, Trends in Federal Enterprise Bargaining, December quarter 2013, <http://employment.gov.au/trends-federal-enterprise-bargaining>.
134 ABS, Catalogue No. 6202.0 - Labour Force, Australia, Apr 2014, Labour Force Commentary April 2014.
135 [2013] FWCFB 4000 at paras 239–246.
136 [2013] FWCFB 4000 at para 244.
137 ACCI submission at p. 22; Reserve Bank of Australia, Statement on Monetary Policy, February 2014 at pp. 35–36.
138 Australian Government submission, p. 41 at para 182; NSW Government submission, p. 17 at para 67; Victorian Government submission, p. 10 at para 1.28; Ai Group submission at pp. 15–16; ACCI submission at p. 22.
139 Ai Group submission at pp. 15–16; ACCI submission at p. 22.
140 Australian Government submission, p. 39 at para 177.
141 Australian Government submission, p. 41 at para 182.
142 ACTU submission, pp. 74–75 at paras 235–236; Ai Group at p. 14; ACCI submission at pp. 22–23.
143 ACTU submission, p. 75 at para 236.
144 ACCI submission at p. 22.
145 [2013] FWCFB 4000 at para 244.
146 See Australian Government submission, pp. 42–43 at paras 184–187; ACCI submission at pp. 23–24.
147 Ai Group submission in reply at p. 10
148 Australian Government submission in reply, p. 9 at para 16.
149 IPA submission at pp. 10 and 11; ACOSS submission at p. 58.
150 ACTU supplementary submission in reply at paras 19–20.
151 AFEI submission, pp. 29–31 at paras 91–96.
152 ACTU submission, p. 71–72 at para 230.
153 Ai Group submission at pp. 32–34; ACCI submission at pp. 25–27; AFEI submission, p. 29 at para 89.
154 ABS, Catalogue No. 6291.0.55.003 - Labour Force, Australia, Detailed, Quarterly, Feb 2014.
155 s. 3(g) of the Act.
156 ACCI submission at Annexure B; Connolly E, Norman D and West T (2012), Small Businesses—An Economic Overview, Small Business Finance Roundtable, Reserve Bank of Australia, 22 May.
157 [2013] FWCFB 4000 at paras 260–262.
158 ACCI submission at Annexure A; AHA submission at p. 4; MGA submission at p. 9–10, Appendix 1; NFF submission, p. 17 at para 4.4; R&CA submission at p. 9.
159 [2013] FWCFB 4000 at paras 438–442.
160 ACCI submission at Annexure A.
161 Ai Group submission at pp. 6–7.
162 Ai Group submission at p. 9.
163 ARA submission at p. 10.
164 ABS, Catalogue No. 6306.0 - Employee Earnings and Hours, Australia, May 2012.
165 An alternative approach to identifying the award-reliant industries is to select the industries in which the highest number of award-reliant employees are employed. The two approaches are legitimate and show slightly different perspectives. See [2013] FWCFB 4000 at paras 281–284.
166 Wright S and Buchanan J (2013), Award reliance, Research Report 6/2013, Fair Work Commission, December at p. 11.
167 Wright S and Buchanan J (2013), Award reliance, Research Report 6/2013, Fair Work Commission, December at p. 5 and Section 2.2.3.
168 Wright S and Buchanan J (2013), Award reliance, Research Report 6/2013, Fair Work Commission, December at p. viii.
169 Wright S and Buchanan J (2013), Award reliance, Research Report 6/2013, Fair Work Commission, December, Appendix F at Figure F5.
170 [2013] FWCFB 4000 at para 285.
171 ACTU Chart-pack for consultations at p.11: ANZ Job Advertisements series, ABS 6202
172 Superannuation Guarantee (Administration) Act 1992, s.27. Schedule 1(4) of the Superannuation Guarantee (Administration) Amendment Act 2012 removes the former s.27(1)(a) which provided for the age limit of 70 for contributions.
173 Australian Government submission (Annual Wage Review 2012–13), p. 15 at paras 47–50.
174 [2013] FWCFB 4000 at para 346.
175 [2013] FWCFB 4000 at paras 359–360.
176 Explanatory Memorandum for the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 at paras 2.54–2.56.
177 Commonwealth of Australia, Senate, Official Hansard, No. 4 of 2014, Tuesday 25 March 2014 at p. 1925.
178 Australian Government submission, p. 14 at para 31 and p. 17 at paras 54–56; New South Wales Government submission, p. 10 at paras 17–20; Western Australia Government submission, p. 5 at para 19 and 21 and p. 11 at para 42; Ai Group submission at pp. 38–41; ACCI submission at p. 49; AAA submission at p. 2, p. 5 at para 29, p. 6 at paras 35–37 and p. 7 at paras 44–46; ABI submission, p. 3 at para 3.10; AFEI submission, p. 9 at para 34; AHA submission at p. 7; ARA submission at p. 4; Business SA submission at p. 1; HIA submission at p. 8; MGA submission, p. 3 at para 2.2, pp. 10–11 at paras 8.1–8.4 and p. 16 at para 14.1; NFF submission, p. 18 at paras 4.9–4.10; National Retail Association submission, p. 3 at para 2 and p. 4 at para 7; South Australian Wine Industry Association submission at p. 4; R&CA submission, p. 11 at para 33; VACC submission at p. 9; VECCI submission at p. 2.
179 ACTU submission, p. 110 at para 354.
180 ACTU submission, pp. 110–111 at para 355.
181 Australian Government (2011) Strong Growth, Low Pollution—Modelling A Carbon Price, Chapter 5 at p. 85 <http://archive.treasury.gov.au/carbonpricemodelling/content/report.asp>.
182 Australian Government submission (Annual Wage Review 2011–12), pp. 12–13 at paras 35–36.
183 Commonwealth of Australia, Senate, Official Hansard, No. 3 of 2014, Thursday 20 March 2014 at p. 1635.
184 Victorian Government submission at p. 3; AAA submission, p. 7 at paras 39–43; AHA submission at p. 2; National Retail Association submission, p. 4 at para 9.
185 ACTU submission in reply, p. 28 at para 101.
186 [2013] FWCFB 4000 at para 198.
187 Australian Government submission, p. 17 at para 53.
188 Australian Government submission, pp. 16–17 at paras 51–53.
189 ACTU submission in reply, p. 27 at para 98.
190 ACOSS submission at pp. 10–11.
191 ACCER submission, p. 10 at para 36.
192 ACCI submission at p. 4.
193 ACCI submission in reply at pp. 6–7.
194 See 1993 Review of Wage Fixing Principles Print K9700 (25 October 1993).
195 (1935) 54 CLR 230 at 253. Also see R v Whiteway; Ex parte Stevenson [1961] VR 168 at 171 per Dean J; Sydney City Council v Ke-Su Investments Pty Ltd [1985] 1 NSWLR 246 at 258 per McHugh JA; Murrumbidgee Groundwater Preservation Association Inc v Minister for Natural Resources [2005] NSWCA 10 at [49] per Spigelman CJ, Beazley and Tobias JJA agreeing; City of Sydney Council v Satara [2007] NSWCA 148 (8 June 2007) at 19–20 per McColl JA, with whom Beazley and Tobias JJA agreed; and D Pearce (2008) ‘Anticipating Legislation’, 58 Australian Institute of Administrative Law Forum 8.
196 In ss.284(1)(c) and 134(1) of the Act.
197 ABS, Catalogue No. 6306.0 - Employee Earnings and Hours, Australia, May 2012.
198 ACTU submission, p. 44 at Table 7.
199 Wright S and Buchanan J (2013), Award reliance, Research Report 6/2013, Fair Work Commission, December, Melbourne at pp. 54–56.
200 Wright S and Buchanan J (2013), Award reliance, Research Report 6/2013, Fair Work Commission, December, Melbourne at p. 5 and section 2.2.3.
201 [2013] FWCFB 4000 at para 362.
202 Australian Government submission, p. 27 at footnote 36.
203 ACTU submission, p. 47 at para 168.
204 Australian Government submission, p. 11 at para 20.
205 Australian Government submission, p. 12 at Table 1.1.
206 Australian Government, Response to questions for consultation, p. 17 at para 34.
207 ACCI submission at p. 39.
208 ACCI submission at p. 39; ACTU submission (Annual Wage Review 2012–13), p. 20 at para 74.
209 ABS, Catalogue No. 6306.0 - Employee Earnings and Hours, Australia, May 2012.
210 ACTU submission, pp. 45–46 at paras 163–164.
211 Wright S and Buchanan J (2013), Award reliance, Research Report 6/2013, Fair Work Commission, December, Melbourne at p. 67.
212 s.134(2).
213 s.134(1)(a).
214 ACOSS submission at p. 8.
215 ACOSS submission at p. 13.
216 [2013] FWCFB 4000 at paras 359–360.
217 ACCER submission, p. 12 at para 37, p. 71 at para 317 and p. 83 at para 355.
218 ACCER submission, p. 71 at para 315.
219 ACTU submission, p. 15 at para 56.
220 ACTU submission, p. 15 at para 55; [2013] FWCFB 4000 at para 206.
221 ACTU submission, p. 15 at paras 55 and 57.
222 ACTU submission, p. 15 at para 58.
223 ACTU submission, p. 15 at para 58.
224 ACTU submission, p. 15 at para 58.
225 Transcript at para 691.
226 [2010] FWAFB 4000 at para 241.
227 Australian Government submission, p. 22 at para 76; ACTU submission, p. 4 at para 26.
228 ACTU submission, p. 4 at para 22.
229 ACTU submission, p. 4 at para 22.
230 Government of Western Australia submission, p. 9 at para 33.
231 ACCER submission, p. 15 at para 53.
232 Australian Government submission, p. 53 at para 250.
233 ACTU submission, p. 20 at para 76 and p. 8 at para 33.
234 Australian Government submission, p. 315 at para 316.
235 ACTU submission, p. 8 at para 33.
236 Transcript at para 434.
237 [2013] FWCFB 4000 at para 269.
238 ACCI submission at p. 43; ABI submission, p. 3 at para 3.9.
239 [2013] FWCFB 4000 at paras 270–275.
240 Ai Group submission at p. 28; IPA submission at p. 6; IPA, Outline of submissions for the preliminary consultations at p. 1.
241 Ai Group submission, p.28 at Chart 22; ACTU submission, p. 21 at Figure 12.
242 Ai Group submission at pp. 28–29.
243 Ai Group submission at p. 29.
244 ACTU submission, p. 1 at para. 2, p. 4 at para 23, p. 4 at para 26 and p. 20 at para 77; ACCER submission, p. 15 at para 53 and p. 40 at para 207.
245 ACTU submission, p. 4 at para 23.
246 ACTU submission, p. 10 at para 40.
247 ACTU submission, p. 8 at para 34.
248 ACTU submission, p. 8 at para 34.
249 ACTU submission, p. 8 at para 34, p. 9 at para 36 and p. 12 at para 44.
250 Australian Government submission, p. 20 at para 74.
251 [2010] FWAFB 4000 at para 242; [2011] FWAFB 3400 at para 205; [2012] FWAFB 5000 at para 161; [2013] FWCFB 4000 at para 393.
252 Australian Government submission, p. 59 at para 275.
253 Australian Government submission, pp. 57–58 at paras 268 and 271–272.
254 [2013] FWCFB 4000 at para 57.
255 Australian Government submission, p. 65 at Table 6.7.
256 ACCER submission, p. 128 at Table 19.
257 Australian Government Post-Budget submission at pp. 9–18.
258 ACOSS submission at p. 29.
259 ACOSS submission at p. 27.
260 ACOSS submission at p. 29.
261 ACCER submission, p. 30 at para 114.
262 ACCER submission, p. 169 at Figure 2.
263 ACCER submission, p. 31 at para 118.
264 ACOSS submission at p. 6.
265 Australian Government submission, p. 70 at Table 6.10.
266 ACOSS submission at pp. 32–33.
267 Fair Work Commission (2014), Statistical Report—Annual Wage Review 2013–14 at Tables 11.1–11.4.
268 [2013] FWCFB 4000 at para 416.
269 Hahn M and Wilkins R (2008), A multidimensional approach to investigation of living standards of the low-paid: Income, wealth and financial stress and consumption, Melbourne Institute of Applied Economic and Social Research, Research Report No. 5/09, Report commissioned by the Australian Fair Pay Commission.
270 ACCI submission at p. 41.
271 Australian Government submission, p. 60 at para 279.
272 Australian Government submission, p. 61 at para 284.
273 Australian Government submission, p. 61 at Table 6.5.
274 ACTU submission, p. 17 at para 62; Fair Work Commission (2014), Statistical Report—Annual Wage Review 2013–14, p. 39 at Table 11.4.
275 ACOSS submission at p. 33; Fair Work Commission (2013), Statistical Report—Annual Wage Review 2012–13, pp. 39–40 at Tables 11.1–11.2.
276 Fair Work Commission (2014), Statistical report–Annual Wage Review 2013–14 at Table11.2.
277 ABS, Catalogue No. 6540.0 - Household Expenditure Survey Expanded Confidentialised Unit Record File, 2009–10.
278 [2013] FWCFB 4000 at para 417.
279 United Voice submission, p. 4 at paras 10–12; Council of Social Service of New South Wales (2014), Cost of living: whos’s really hurting?
280 Council of Social Service New South Wales (2014), Cost of living: whos’s really hurting? at p. 2.
281 Fair Work Commission (2014), Statistical report–Annual Wage Review 2013–14 at Tables 10.1 and 10.2.
282 The utilities group rose by 11 per cent per annum over the five years to the March quarter 2013 and the electricity sub-group by 12.3 per cent per annum.
283 Fair Work Commission (2014), Statistical report–Annual Wage Review 2013–14 at Tables 10.1 and 10.2.
284 United Voice submission at paras 17–19.
285 ACCER submission at p. 153; ACOSS submission at p. 27.
286 Saunders P (2004), Updated Budget Standards Estimates for Australian Working Families in September 2003, Social Policy Research Centre Report 1/04, Social Policy Research Centre, University of New South Wales at Executive Summary.
287 ACCER submission, pp. 26–29 at paras 95–108 and pp. 172–177 at paras 643–657.
288 Fair Work Commission Measuring the Needs of the Low Paid, PR517718 at para 41 (14 December 2011).
289 s.284(1)(b).
290 [2013] FWCFB 4000 at paras 101–102.
291 [2013] FWCFB 4000 at para 464.
292 Australian Government submission, p. 50 at paras 226–227.
293 IPA submission at p. 5.
294 ACTU submission p. 23 at para 88.
295 Olssen A (2011), The Short-Run Effects of Age-Based Youth Minimum Wages in Australia: A Regression Discontinuity Approach, Paper presented at New Zealand Association of Economists Annual Conference, Wellington, 29 June–1 July 2011.
296 ACTU submission, p. 27 at para 110.
297 ACTU submission, p. 27 at para. 111; Olssen A (2011), The Short-Run Effects of Age-Based Youth Minimum Wages in Australia: A Regression Discontinuity Approach, Paper presented at New Zealand Association of Economists Annual Conference, Wellington, 29 June–1 July 2011.
298 ACCI submission at p. 5.
299 IPA submission at p. 12.
300 [2010] FWAFB 4000 at para 246.
301 Annual Wage Review 2013–14: Questions for submissions in reply, p. 2 at Question 5.
302 Australian Government submission in reply, p. 7 at para 10.
303 Australian Government submission in reply, p. 8 at para 13; Ai Group submission in reply at pp. 3–4; ACCI submission in reply at p. 11; R Shaw submission at p. 7.
304 Australian Government submission in reply, p. 8 at para 13.
305 ACTU responses to questions for submissions in reply, p. 7 at para 16.
306 Transcript at para 251.
307 ACTU, Chart-pack for consultations, p. 4 at Figure 15.
308 Transcript at para 250.
309 Transcript at para 284.
310 ACTU submission at pp. 28–35.
311 United Kingdom’s Low Pay Commission Report cited in the ACTU submission, p.34 at para 136.
312 [2013] FWCFB 4000 at para 461.
313 [2013] FWCFB 4000 at para 444.
314 IPA submission at p. 2.
315 IPA submission at p. 11.
316 Australian Government Submission, p. 49 at para 221; HILDA Survey, Release 12 (December 2013), pooled waves 1 to 12.
317 Australian Government submissions, p. 42 at para 186.
318 Victorian Government submission, p. 5 at para 15; New South Wales Government submission, p. 18 at para 74.
319 ACOSS submission at p. 44.
320 ACOSS submission at p. 44.
321 Australian Government submission, p. 18 at para 65 and p. 19 at para 68; New South Wales submission, p. 20 at para 84; Victorian Government submission, p. 4 at para 12; Ai Group submission at p. 36; ACCI submission at p. 49.
322 Australian Government submission, p. 19 at para 68.
323 Australian Government submission, p. 18 at para 66.
324 Australian Government submission, p. 18 at para 65.
325 Australian Government submission, p. 18 at para 64.
326 Australian Government final consultations submission, p. 22 at para 45.
327 ACCI submission at p. 49.
328 ACTU post-budget submission, pp. 23–24 at para 85; see also ACTU submission in reply, pp. 22–23 at para 86.
329 ACTU submission, p. 91 at para 280.
330 New South Wales Government submission, p. 20 at para 84.
331 Ai Group submission at p. 36.
332 Victorian Government submission, p. 4 at para 12.
333 New South Wales submission, p. 20 at para 81.
334 New South Wales submission, p. 19 at para 80.
335 Australian Government submission, p. 26 at paras 93–95.
336 Australian Government submission, p. 28 at para 108.
337 Australian Government submission, p. 28 at para 109.
338 Victorian Government submission, p. 18 at para 2.13; AFEI submission, p. 9 at para 32.
339 [2014] FWCFB 682 at para 4.
340 ACCI submission at p. 49.
341 ACTU, Outline of submissions to the preliminary consultations for the Annual Wage Review 2013–14, p. 8 at para 32.
342 ACTU, Outline of submissions to the preliminary consultations for the Annual Wage Review 2013–14, p. 8 at para 32.
343 ACTU, Outline of submissions to the preliminary consultations for the Annual Wage Review 2013–14, p. 7 at paras 29–30.
344 ACTU, Outline of submissions to the preliminary consultations for the Annual Wage Review 2013–14, p. 8 at para 33.
345 New South Wales Government submission, p. 20 at para 83.
346 New South Wales Government submission, p. 20 at para 84.
347 Ai Group Outline of submissions for the preliminary consultations at p. 4.
348 Transcript at paras 150–151 and 812–814; Ai Group submission, p. 42.
349 AFEI, Submission to the Fair Work Commission Annual Wage Review 2013–14 preliminary consultations, p. 10 at para 35.
350 Buchanan J, Bretherton T, Frino B, Jakubauskas M, Schutz J, Garima V and Yu S (2013), Minimum wages and their role in the process and incentives to bargain, Research Report 7/2013, Fair Work Commission, December, Melbourne at p. xii.
351 Evesson J and Oxenbridge S, Schutz H, Baldwin S, Moensted M & Buchanan J (2011), Enterprise case studies: Effects of minimum wage-setting at an enterprise level, Research Report 7/2010, February, Fair Work Australia.
352 ss.284(1)(d) and 134(1)(e).
353 Australian Government submission, p. 17 at paras 58-59; ACTU submission, p. 88 at para 267.
354 ACTU submission, p. 90 at paras 276–277.
355 AiGroup submission, p. 38.
356 ABS, Catalogue no. 6306.0 - Employee Earnings and Hours - Australia, May 2012
357 ABS, Catalogue no. 6302.0 - Average Weekly Earnings - Australia, Nov 2013
358 Australian Government submission, p. 17 at para 58 (footnote 18).
359 Australian Government submission, p.17 at para 59.
360 ACTU submission, p.88 at para 268 and p. 89 at Table 10 citing ABS Catalogue no. 6302.0 - Average Weekly Earnings - Australia, Nov 2013 and Catalogue no. 6306.0 - Employee Earnings and Hours - Australia, May 2012.
361 Pointon M, Wheatley T, Ellis G and MacDermott K (2012) Award Reliance and Differences in Earnings by Gender, Research Report 3/2012, Fair Work Australia, February, Melbourne.
362 Annual Wage Review 2013–14: Questions for final consultations, p. 13 at para. 9.1.
363 Pointon M, Wheatley T, Ellis G and MacDermott K (2012), Award Reliance and Differences in Earnings by Gender, Research Report 3/2012, Fair Work Commission, February, Melbourne at p. 7.
364 Annual Wage Review 2013–14: Questions for final consultations.
365 Australian Government Response to consultation questions, p. 24 at paras 49–51.
366 ACTU Post-Budget submission and response to consultation questions at para 87.
367 Australian Government submission, p. 17 at para 58.
368 ACTU submission, p. 90 at para 274.
369 ACOSS submission at p.10.
370 Wright S and Buchanan J (2013) Award reliance, Research Report 6/2013, Fair Work Commission, December, Melbourne at Table 4.16.
371 Wright S and Buchanan J (2013) Award reliance, Research Report 6/2013, Fair Work Commission, December, Melbourne at p. 106.
372 Pointon M, Wheatley T, Ellis G and MacDermott K (2012) Award Reliance and Differences in Earnings by Gender, Research Report 3/2012, Fair Work Commission, February, Melbourne at p. 7.
373 Workplace Gender Equality Agency (2013) Gender pay gap taskforce report: Recommendations on calculating, interpreting and communicating the gender pay gap, June, Sydney at p. 5.
374 Except in accordance with s.157(2), which deals with work value reasons, or as part of the 4 yearly review of modern awards.
375 s.143(5) deals with how coverage is expressed in a coverage term.
376 Modern awards may not contain terms that contain state-based differences except in limited circumstances: s. 154.
377 VECCI submission at p. 2.
378 MGA submission, p. 5 at para 3.6.
379 CCIQ submission, p. 6 at para 22.
380 R&CA submission, p. 11 at para 33.
381 ARA submission, p. 7 and p. 11.
382 ACTU submission, p. 2 at para 11.
383 ACTU submission, p. 2 at paras 11–12, citing [2013] FWCFB 4000 at para 13.
384 Transcript at para 376.
385 [2013] FWCFB 4000 at paras 73–75.
386 [2012] FWAFB 5000 at para 253.
387 [2013] FWCFB 4000 at paras 543–544, referring to [2012] FWAFB 5000 at para 254.
388 [2013] FWCFB 4000 at para 526; see also paras 75–84.
389 [2013] FWCFB 4000 at paras 89–90.
390 [2013] FWCFB 4000 at para 98, citing [2012] FWAFB 5000 at paras 280–282.
391 s. 284(1)(d) of the Act.
392 [2013] FWCFB 4000 at para 96–97.
393 CCIQ submission at para 61.
394 CCIQ submission at para 61.
395 CCIQ submission at para 62.
396 CCIQ submission at paras 63–64.
397 NFF submission at para 3.1. A current list of local government areas with drought declarations applied is available at <http://www.daff.qld.gov.au/environment/drought/drought-declarations-and-revocations>.
398 NFF submission, pp. 15–16 at paras 3.8–3.10.
399 [2012] FWAFB 5000 at paras 266–268.
400 CCIQ final consultation submission at p. 2.
401 NFF final consultations submission at p. 1.
402 CCIQ final consultation submission at p. 2.
403 NFF final consultations submission at p. 1.
404 AHA submission at p. 2 and p. 8.
405 AHA submission at p. 4.
406 AHA submission at p. 2.
407 AHA submission at p. 2 and pp. 6–7.
408 AHA submission at p. 2, pp. 5–6 and p. 8.
409 AHA submission at p. 2 and pp. 7–8.
410 AAA submission at p. 2 and p. 5.
411 AAA submission at p. 2 and p. 3.
412 AAA submission at p. 2 and p. 7.
413 AAA submission at p. 2 and p. 5.
414 MGA submission, p. 5 at para 3.7.
415 MGA submission, p. 5 at para 3.4.
416 MGA submission, p. 8 at para 5.5.
417 MGA submission, p. 11 at para 10.3.
418 MGA submission, p. 8 para 6.1.
419 MGA submission, p.9 at para 6.6.
420 MGA submission, pp. 17–41 at Appendix 1.
421 R&CA submission, p. 11 at para 33 and 39.
422 R&CA submission in reply, p. 10 at para 27.
423 R&CA submission at pp. 4–5 at paras 7–11.
424 R&CA submission, pp. 7–8 at paras 19–26.
425 R&CA submission, p. 9 at para 29.
426 R&CA submission, p. 9 at paras 27–28.
429 VACC submission at p. 12.
430 ACTU submission, p. 2 at para 12.
431 ACTU submission in reply, p. 31 at para 113.
432 Question on notice as part of the final consultations.
433 [2012] FWAFB 5000 at para 270.
435 The decision to adjust certain junior rates in the General Retail Industry Award 2010 is subject to a judicial review application to the Federal Court.
436 The transitional provisions providing for the progressive implementation of the modern award rates (from higher or lower wage and penalty rates) will be fully implemented on 1 July 2014.
437 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, items 10(1) and 20(1) of Sch. 9 and item 12A(5) of Sch. 3. The content and coverage of these instruments were addressed in the Panel’s 2009–10 Review decision; more information is contained in Fair Work Australia’s Research Report 6/2010 Minimum wage transitional instruments under the Fair Work Act 2009 and the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009.
438 Fair Work (Transitional Provisions & Consequential Amendments) Act 2009, item 3 of Sch. 5. A small number of these instruments continue to operate and are also subject to review.
439 Wright S and Buchanan J (2013) Award reliance, Research Report 6/2013, Fair Work Commission, December, Melbourne at pp. 181–183.
440 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, items 5(2) and 9(4) of Sch 6.
441 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, Item 5(3), 6 and 10(1) of Sch 6A.
442 For example, employees also covered by the Social, Community, Home Care and Disability Industry Award 2010 were preserved by the Award Modernisation – Termination of Modernisable Instruments, [2010] FWAFB 9916 at para 44. As at the date of this decision, they have not yet been terminated.
443 [2013] FWCFB 4000 at para 553.
444 [2013] FWCFB 4000 at paras 554–559.
445 Fair Work (Transitional Provisions and Consequential Amendments) Regulations 2009, items 10 and 20 of Sch. 9, item 12A(6) of Sch. 3 and item 30D of Sch. 3A.
446 [2013] FWCFB 4000 at para 556.
447 The Fair Work (Transfer of Business) Amendment Act 2012, which commenced on 4 December 2012, introduced a new Part 6.3 into the Act. A copied State award continues to operate under the national system for a period of five years, unless terminated or extended by regulation. See s. 768AO of the Fair Work Act.
448 The provisions of the Fair Work (Transitional Provisions and Consequential Amendments) Regulations 2009 dealing with the variation of Division 2B State awards in annual wage reviews also apply to copied State awards. Sections 768BY and s.768AW(b) of the Fair Work Act.
449 ACTU submission, pp. 109–110 at paras 345–349.
450 ACTU submission, pp. 109–110 at paras 347 and 349; Queensland Government submission, pp. 8–9 at paras 23–28 and p. 10 at para 31(c); HIA submission at p. 7.
451 ACTU submission, pp. 109–110 at para 347 and 349.
452 Queensland Government submission, p. 8–9 at paras 23–28 and p. 10 at para 31(c).
453 Fair Work (Transitional Provisions & Consequential Amendments) Act 2009, item 12A of Sch. 3 and items 10 and 20 of Sch. 9.
454 s.284(3) of the Fair Work Act.
455 Wright S and Buchanan J (2013) Award reliance, Research Report 6/2013, Fair Work Commission, December, Melbourne, p. 69 at para 4.4.1.
456 Wright S and Buchanan J (2013) Award reliance, Research Report 6/2013, Fair Work Commission, December, Melbourne, p. 71 at Table 4.20.
457 ACTU submission, p. 103 at para 320; Ai Group submission at p. 45; ACOSS submission at p. 6; ABI submission, p. 3 at para 4.4.2.
458 ACTU submission, pp. 27–28 at paras 110–111; ACTU Post-Budget submission, pp. 11–12 at paras 36–40.
459 AFEI submission, p. 27 at para 83.
460 ACCI submission at p. 51.
461 Australian Government submission, p. 13 at para 27.
462 Australian Government submission, p. 13 at para 28.
463 Victorian Government submission, p. 21 at para 3.11–3.12 citing Leigh A (2003) ‘Employment Effects of Minimum Wages: Evidence from a Quasi-Experiment’, The Australian Economic Review, vol. 36, no. 4 at pp. 361–373.
464 MGA submission, pp. 12–13 at para 11.4 citing Brotherhood of St Laurence (2014) Australian Youth Unemployment 2014: Snapshot, Melbourne; Wright S and Buchanan J (2013) Award Reliance, Research Report 6/2013, Fair Work Commission, December.
465 South Australian Wine Industry Association submission at p. 4.
466 ACOSS submission at p. 58.
467 ACCER submission, p. 173 at para 645.
468 Wright S and Buchanan J (2013) Award reliance, Research Report 6/2013, Fair Work Commission, December, Melbourne, p. 75 at Table 4.24.
469 Wright S and Buchanan J (2013) Award reliance, Research Report 6/2013, Fair Work Commission, December, Melbourne, p. 77 at Table 4.28.
470 ACTU submission, p. 105 at para 325; Ai Group submission at p. 45; ACOSS submission at p. 6; ABI submission, p. 3 at paras 4.4.3–4.4.4.
471 ACTU submission, p. 106 at para 328.
472 ACCI submission at p. 50.
473 HIA submission at p. 6.
474 ACOSS submission at p. 58.
475 ACOSS submission at p. 59.
476 ACOSS submission at p. 59.
477 ECAQ submission at pp. 6–7.
478 ECAQ submission at p. 8.
479 ECAQ submission at p. 7.
480 ACTU submission, p. 107 at para 331; ABI submission, p. 4 at para 4.5.2.
481 ACTU submission, p. 107 at para 331.
482 Wright S and Buchanan J (2013) Award reliance, Research Report 6/2013, Fair Work Commission, December, Melbourne, p. 81 at Table 4.32.
483 ACTU submission, p. 107 at para 335–337; Ai Group submission at p. 45; ACOSS submission at p. 6; ABI submission at p. 4 at paras 4.4.5–4.4.6.
484 ACTU submission, p. 107 at paras 335–336; Ai Group submission at p. 45; ABI submission, p. 4 at para 4.5.3.
485 ACOSS submission at p. 60.
486 ACTU submission, p. 107 at para 335.
487 ACOSS submission at p. 60.
488 ACTU submission, p. 108 at para 338; Ai Group submission at p. 45.
489 NFF response to answers for consultations at p. 2.
490 s.295(1)(b) of the Fair Work Act.
491 ACTU submission, p. 108 at para 339; Ai Group submission at p. 48; ABI submission, p. 3 at para 4.4.1.
492 ACTU submission, p. 108 at para 339; Ai Group submission at p. 48.
493 CCIQ submission, p. 25–26 at para 57–58; AHA submission at p.4; ARA submission at p.10; MGA submission, p. 9 at para 6.5 and Appendix 1; South Australian Wine Industry Association submission at p.4.
494 AHA submission at p. 5.
495 MGA submission at p. 7 at para 5.1.
496 R&CA submission at p. 3, para 3.
497 Wright S and Buchanan J (2013) Award reliance, Research Report 6/2013, Fair Work Commission, December, Melbourne at pp. 67–68.
498 [2013] FWCFB 4000 at para 588.
499 Ai Group submission at p. 46.
500 ACTU submission, p. 108 at para 343; ACOSS submission at p. 6; ABI submission, p. 3 at para 4.4.2.
501 Ai Group submission at p. 46.
502 ACTU submission, p. 108 at para 343; ACOSS submission at p. 6; ABI submission, p. 3 at para 4.2.
503 PR544268; Transcript at paras 739–740.
504 R&CA Post-Budget submission at p. 17.
505 ACTU Post-Budget submission, p. 24 at para 89.
506 PR537976 at para 9.3; PR062012 at para 9.3 and PR062011 at para 9.3.
507 [2013] FWCFB 5411 at paras 253, 259.
508 ACOSS submission at p. 60.
509 ACTU submission, p. 108 at para 343; ACOSS submission at p. 6; ABI submission, p. 3 at para 4.2 and pp. 3–4 at paras 4.4.5 and 4.4.6.
510 Ai Group submission at p. 45; ABI submission, p. 4 at para 4.5.3.
511 [2013] FWCFB 8514 at Attachment A.
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