1
[2013] FWCFB 4000
DECISION
Fair Work Act 2009
s.285—Annual wage review
Annual Wage Review 2012–13
(C2013/1)
JUSTICE ROSS, PRESIDENT
SENIOR DEPUTY PRESIDENT WATSON
COMMISSIONER SPENCER
COMMISSIONER HAMPTON
MR VINES
PROFESSOR RICHARDSON
MR DWYER MELBOURNE, 3 JUNE 2013
CONTENTS
Page Paragraph
1. The Decision 4 1
2. The Statutory Framework 15 63
3. The Parties’ Proposals 23 103
4. The Economy 27 123
5. Superannuation 91 333
6. Relative Living Standards and the Needs of the Low Paid 97 361
7. Promoting Social Inclusion through Increased Workforce
Participation
117 429
8. Encouraging Collective Bargaining 124 465
9. The Principle of Equal Remuneration for Work for Equal or
Comparable Value
127 478
10. Exceptional Circumstances/Special Circumstances Claims 129 486
11. Other Matters 140 550
12. Conclusion 147 596
Appendix 1—Proposed Minimum Wages Adjustments 149
AUSTRALIA FAIR WORK COMMISSION
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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 Amendment Act Superannuation Guarantee (Administration) Amendment Act 2012
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
AIRC Australian Industrial Relations Commission
ANRA Australian National Retailers Association
ANZSIC Australian and New Zealand Standard Industrial Classification
APCSs Australian Pay and Classification Scales
ARA Australian Retailers Association
ARTIO Australian Road Transport Industrial Organisation
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
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DEEWR Department of Education, Employment and Workplace Relations
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
Manufacturing Award Manufacturing and Associated Industries and Occupations Award
2010
LCI Living Cost Index
MGA Master Grocers Australia
MPMSAA Master Plumbers and Mechanical Services Association of Australia
NAPSA Notional Agreement Preserving State Awards
NFF National Farmers’ Federation
NMW national minimum wage
NRA National Retail Association
NTWS National Training Wage Schedule
OECD Organisation for Economic Co-operation and Development
OTE Ordinary Time Earnings
Panel Minimum Wage Panel
R&CA Restaurant and Catering Australia
RBA Reserve Bank of Australia
Review Annual Wage Review 2012–13
RNNDI Real net national disposable income
SGC Acts Superannuation Guarantee Charge Act 1992 and the Superannuation
Guarantee (Administration) Act 1992
SG rate Superannuation guarantee rate
Statistical Report Statistical Report—Annual Wage Review 2012–13
SWSS Supported Wage System Schedule
Transitional Act Fair Work (Transitional Provisions and Consequential Amendments)
Act 2009
VACC Victorian Automobile Chamber of Commerce
VECCI Victorian Employers’ Chamber of Commerce and Industry
WPI Wage Price Index
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4 Chapter 1—The Decision
1. The Decision
[1] The Fair Work Act 2009 (the Act) requires the Minimum Wage Panel (the
Panel) of the Fair Work Commission (the Commission) 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
2012–13 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 21 and 22 May 2013, or both.
The Minimum Wage Research team of the Commission also conducted a number of
research projects for the purpose of the Review. The timetable for the Review and all
of the submissions, transcript, research reports, and some additional economic data
were published on the Commission’s 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, with a more detailed discussion 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 increase in award rates of pay in
the 2011–12 annual wage review overcompensated workers for a projected increase in
inflation which did not eventuate2 and that the Panel should factor in the extent of this
overcompensation in its determination on the basis that actual inflation was lower than
expected.3 A number of parties also contended that we should simply deduct the 1 July
2013 increase in the superannuation guarantee contribution rate (the SG rate) of
0.25 percentage points from any wage adjustment we otherwise determine. Finally, a
number of parties proposed an award-by-award approach to the fixation of modern
award minimum wages.
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Chapter 1—The Decision 5
[6] We deal with the substance of these submissions later, but note here that each of
these proposals appears to assume a particular approach to the task of this Panel.
[7] In assessing the various economic considerations the Panel takes into account
both actual economic indicators and those that are forecast at the time of each
decision. Of these, the actual indicators tend to be the primary consideration, because
they are by definition more reliable than forecasts. However, it is also appropriate to
have regard to future projections that cast some light on the economic circumstances
that are expected to apply during the period when any adjustment will operate.
[8] To the extent that the forecast economic indicators do not ultimately reflect the
actual performance of the economy, this forms part of our broad assessment and our
consideration of the actual indicators in subsequent reviews. Importantly, when
considering both actual and forecast indicators, the Panel pays particular attention to
trends, because of the volatility in some of the economic indicators.
[9] It is also important to recognise that the range of matters the Act requires us to
take into account is not limited to economic considerations. In particular we are also
required to take into account relative living standards and the needs of the low paid.4
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.
[10] There is often a degree of tension between the economic and social
considerations which we must take into account. A substantial wage increase may
better address the needs of the low paid and improve the living standards of award-
reliant employees relative to those employees who are not award reliant; but it may
(depending upon the prevailing economic circumstances) reduce the capacity to
employ the marginalised and hence reduce social inclusion. It is this complexity which
leads us to reject a mechanistic approach to wage fixation—such as the adoption of
real wage maintenance as a decision rule or reducing the increase we would otherwise
determine by the quantum of any increase in the SG rate. The real wages of award-
reliant employees and increases in the SG rate are relevant to our task, but are not
determinative. While we have taken the 0.25 per cent increase in the SG rate into
account in determining the level of increase in minimum wages in the Review, we
have not applied a direct, quantifiable, discount to the minimum wage increase, as
proposed by some parties. 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.
[11] As to the proposed award-by-award approach, it is important to appreciate that
the framework for workplace relations established by the Act is predicated on a
guaranteed safety net which underpins enterprise level collective bargaining. The
safety net of fair, relevant and enforceable minimum wages and conditions is provided
through modern awards, national minimum wage orders and the National Employment
Standards. Collective bargaining at the enterprise level is underpinned by that safety
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6 Chapter 1—The Decision
net. This is evident from the fact that enterprise agreements must pass the “better off
overall test” in s.193 of the Act5 and the terms of an enterprise agreement may
supplement, but cannot exclude, any provision of the National Employment Standards
(ss. 55 and 186(2)(c)).
[12] In Chapter 2 we deal with the statutory framework in more detail and confirm a
number of general observations made by the Panel in the Annual Wage Review 2011–
12 decision (2011–12 Review decision).6 In particular we endorse the following
observations:
“the legislative framework reveals a preference for consistent variation determinations
across all modern awards…[t]he notion of a fair safety net of minimum wages
embodies the concepts of uniformity and consistency of treatment.”7
[13] The award-by-award approach to minimum wage fixation, based on sectoral
considerations, advocated by some parties in these proceedings is inimicable to the
safety net nature of modern award minimum wages. Enterprise level collective
bargaining is the primary means by which the statutory framework envisages
differential treatment based on the circumstances in particular enterprises, which
would be influenced by relevant sectoral considerations. That the system does function
in this way is evidenced by the sectoral variation in actual wage outcomes.
[14] 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
[15] Economic conditions over the past year have remained reasonably strong,
particularly in the context of conditions in other Organisation for Economic Co-
operation and Development (OECD) countries. Real gross domestic product (GDP)
grew by 3.1 per cent over the year to the December quarter 2012 and labour market
conditions softened but remained sound, with continuing low levels of unemployment.
Employment grew by 1.4 per cent over the year to April 2013, but more slowly than
the labour force, resulting in a slight increase in the unemployment rate. Some softness
in the labour market is reflected in the fact that the growth in total hours worked
(0.8 per cent) was less than the growth in employment; in continuing high levels of
youth unemployment; and in the decline in the full-time employment of adult males.
[16] Following earlier volatility, annual inflation has been subdued over the past
year, at around 2.5 per cent on all Consumer Price Index (CPI) based measures over
the year to the March quarter 2013 and lower still using the Living Cost Index (LCI)
measure. Inflation remains comfortably within the Reserve Bank of Australia (RBA)
target range of 2–3 per cent. Wages growth, reflected in the Wage Price Index (WPI)
and bargaining outcomes, has moderated, growing at their lowest rate for a decade
(excluding the global financial crisis impact in 2008). Profits in the non-mining part of
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Chapter 1—The Decision 7
the economy have risen as have real unit labour costs, but the rise in real unit labour
costs is a result of a fall in the price index rather than higher rates of compensation of
employees.
[17] On all measures, labour productivity increased over the year to the December
quarter 2012. Labour productivity, as measured by GDP per hour worked in trend
terms, was 2.9 per cent higher; gross value added in the market sector per hour worked
increased by 2.4 per cent; and GDP per capita increased by 1.2 per cent.8
[18] This economic performance has occurred against the background of continuing
structural change within the Australian economy, evident in the strong growth in the
resources and related sectors and more modest outcomes in other sectors of the
economy. We have had regard to the aggregate economic data and to available sectoral
information, with specific consideration of the circumstances of the most award-reliant
industries and small business.
[19] There is continuing evidence that, while creating difficulties for some
employers, the economy has responded relatively well to the significant structural
change evident in recent years, with a continuing low aggregate unemployment rate;
the absence of increased variation in the unemployment rates across the country; the
accommodation of variation in labour demand through labour mobility and changes in
relative wages; and the absence of inflationary or wages pressures in the non-resources
sectors of the economy.
[20] The most award-reliant sectors of the economy continued to have a mixed
experience over the past year. Most have had a fall in hours worked and in
employment, although rises in profitability and output have been stronger. The Retail
trade industry in particular has improved both sales and profitability, while wages
growth and employment in this sector has been below the average for all industries.
The diversity in outcomes in respect of output, profits, employment, and wages
between and within the award-reliant industries suggests that factors other than recent
minimum wage increases have driven outcomes within those industries.
[21] The outlook for the Australian economy remains favourable and global
conditions are expected to gradually improve as growth in emerging market economies
picks up and the United States continues to recover, although continuing risks from the
euro zone remain.
[22] GDP growth is expected to be slightly below trend, at 2¾ per cent in 2013–14,
reflecting the approaching peak in mining investment, ongoing fiscal consolidation
and the high value of the Australian dollar. The terms of trade are expected to rise in
the June quarter 2013 before resuming its recent decline. Mining investment is
expected to remain elevated, while business investment outside the resources sector is
expected to be modest.
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[23] Employment is forecast to increase as growth in the non-resources sector picks
up and the participation rate is expected to remain around 65 per cent. But the
unemployment rate is forecast to increase slightly due to the high Australian dollar and
the transition to a less labour intensive production phase in the resources sector. Wages
growth is expected to be subdued and slightly below trend and inflation is forecast to
be in the bottom half of the RBA’s target band of 2–3 per cent.
[24] Employer groups submitted that businesses will be facing higher costs due to
the next phasing and transitioning to modern awards, beginning 1 July 2013, and the
impact of the carbon price and rising energy costs were noted in many submissions.
[25] The award modernisation process was governed by Part 10A of the Workplace
Relations Act 1996. In making the modern awards the Australian Industrial Relations
Commission (AIRC) could not, save in limited circumstances, differentiate between
states9 and had the task of balancing the interests of employees and employers
throughout Australia after examining both federal awards and Notional Agreements
Preserving State Awards (NAPSAs). By the end of 2009, the AIRC had reviewed
more than 1500 federal awards and NAPSAs and created 122 industry and occupation
based modern awards. In relation to penalty rates and other conditions, the AIRC
adopted a “swings and roundabouts” approach where the most common provisions
were often adopted.
[26] We accept that some employers, most directly affected by minimum wage
increases, continue to face increases in labour costs arising from the transition to
modern awards. Others will experience falls in minimum rates, especially penalty rates
and casual loadings, as these are harmonised across the states. Further, the increased
costs resulting from award modernisation were taken into account by the AIRC in
deciding upon the transitional provisions and operative dates in modern awards.10 The
impact will vary between awards and between states and specific provisions within a
particular award. There is no clear evidence before us as to a pattern and the extent to
which the transition to modern awards is imposing additional costs on some
employers. We have had regard to the fact that the transition to modern awards will
impose additional costs on some employers, but in fixing minimum wages at an
aggregate level it is appropriate to take a broader view of the circumstances facing
employers.
[27] The Panel considered the impact on the CPI of the introduction of a price on
carbon and assistance to employees to compensate those price effects in its decision in
the 2011–12 Review, deciding:
“We agree with the proposition that this Review should not provide any additional
assistance to compensate for the anticipated price effects associated with the
introduction of a price on carbon. Compensation has already been provided through tax
cuts and transfer payments and further compensation by minimum wage adjustments
would amount to double dipping. It follows that we will, in effect, abstract the
projected 0.7 per cent increase in the CPI from our deliberations.”11
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Chapter 1—The Decision 9
[28] We have not been persuaded to change the position taken by the Panel in the
2011–12 Review decision. We have had regard to the effect of the carbon price on the
CPI in 2012 in arriving at our decision in this Review.
[29] In summary, the economic outlook remains favourable, notwithstanding some
easing of growth and an increase in unemployment forecast in 2013–14. However, the
outlook for growth remains uneven, with continuing pressures on the businesses in the
trade-exposed sectors of the economy outside of the resources sector. With some
exceptions, the most award-reliant industries are generally not in the trade-exposed
sectors.
Social considerations
[30] 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. We turn first to relative living standards.
[31] Over the past decade, all award rates of pay have fallen relative to all measures
of median and average earnings. The NMW as a proportion of the median full-time
wage has fallen from 57.5 per cent in 2002 to 52.7 per cent in 2012. It fell by
0.9 percentage points in the past year. Award rates have grown more slowly over the
past decade than the WPI, average weekly ordinary time earnings (AWOTE), average
weekly earnings (AWE) and bargained rates, although growth in the C14 classification
rate of the Manufacturing and Associated Industries and Occupations Award 2010
(Manufacturing Award)12 and the NMW have remained close to that of the WPI.
[32] All of the evidence before the Panel indicates that the earnings of award-reliant
workers have been falling behind the earnings of the rest of the workforce. The NMW
and award wages are rates of pay for the job. We are conscious that there is a broad
shift in the economy toward higher-skilled jobs and that this is affecting measures of
average and even median earnings. Even the WPI will be affected if the pay rates of
the higher skilled are rising more rapidly as a result of the increased relative demand.
For this reason, we would not expect award rates, especially for the lower-skilled jobs,
to rise as fast as the average. Nonetheless, the average or “typical” wage influences
typical living standards and norms about how the households of employees live. In this
way it is relevant to our task of considering relative living standards. It remains one of
a number of considerations that we must take into account.
[33] An assessment of the needs of the low paid is more challenging. There is no
single contemporary measure available to assess either the needs of the low paid or the
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10 Chapter 1—The Decision
extent to which those needs are being met. We accept the point that if the low paid are
forced to live in poverty then their needs are not being met. We also accept that our
consideration of the needs of the low paid is not limited to those in poverty, as
conventionally measured. 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.
[34] As to the definition of the “low paid”, there is a level of support for the
proposition that the low paid are those employees who earn less than two-thirds of
median full-time wages.13 The Panel has addressed this issue previously in considering
the needs of the low paid, and has paid particular regard to those receiving less than
two-thirds of median adult ordinary-time earnings and to those paid at the C10 and
C14 (NMW) rates in the Manufacturing Award.14 Nothing put in these proceedings
has persuaded us to depart from this approach. We do not include the owners of small
businesses in our assessment of the circumstances of the low paid for the reasons given
at paragraphs [269]–[275], but have separately considered the circumstances of small
businesses at paragraphs [260]–[266].
[35] We acknowledge that both the relative living standards and the needs of those
on lower award rates are assisted substantially by the tax-transfer system, but despite
this assistance there is evidence of poverty and a rise in levels of financial stress
among some low-paid families.
[36] While the needs of the low paid are not identical to the extent of poverty among
low-paid families, they are sufficiently close to provide a useful indicator of changes
in the needs of the low paid. A commonly used “poverty line” is 60 per cent of median
household disposable income. The data shows that the disposable income of most
award-reliant households exceeded this 60 per cent benchmark.
[37] The Australian Council of Social Service (ACOSS) submitted that while the
risk of poverty is low for full-time minimum wage earners in Australia, a high
proportion of income-poor families include at least one wage earner.15 The submission
referred to a report ACOSS recently commissioned from the Social Policy Research
Centre at the University of New South Wales which examined the most recent ABS
Income and Expenditure Survey (2009–10) (Poverty in Australia 2012).16 Poverty in
Australia 2012 analyses the risk and profile of poverty amongst a range of household
types using the international standard benchmarks of 50 per cent and 60 per cent of
median income, although it differs from the OECD methodology by taking into
account people’s housing costs as well as their incomes. The report found that in 2010:
When a poverty line of 50 per cent of median disposable income was used (a
relatively low poverty benchmark used by the OECD), 29 per cent of all
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Chapter 1—The Decision 11
people with incomes below this benchmark lived in households for which
wages were the principle source of income.
5.2 per cent of households whose main source of income was wages were
below the poverty benchmark of 50 per cent of median income. The figure
was 8.8 per cent when measured against 60 per cent of median income.
[38] There is imperfect information about the levels of financial stress and
deprivation of low-paid employee households (and none about award-reliant
households). Despite this, the information that is available shows that such households
experience higher levels of difficulty in meeting their needs than the average employee
household. Further, there has been some increase in levels of financial stress among
low-paid households between the years 2009 and 2011 (the latest years for which data
are available).
[39] For the purpose of conducting an annual wage review, s.284(1)(b) provides that
the Panel must take into account promoting social inclusion through increased
workforce participation. 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 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”.
[40] 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.
Bargaining
[41] In the period 2000–12, the proportion of award-reliant employees has trended
downwards (from 23.2 per cent to 16.1 per cent), while the proportion of employees
on collective agreements has increased (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 on awards 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).
[42] Recent data from the Employee Earnings and Hours (EEH) survey highlights
the continuing gap between average wages for employees covered by collective
agreements and for award-reliant employees. In May 2012, average weekly total cash
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12 Chapter 1—The Decision
earnings for full-time award-reliant employees were $933.40, compared with $1518.50
for full-time employees covered by collective agreements.17 In May 2010, the average
weekly total cash earnings for full-time award-reliant employees were $753.80,
compared with $1386.20 for full-time employees covered by a collective agreement.18
[43] The current evidence indicates that the level of increases in minimum award
wages which have occurred over the last decade are compatible with the continuing
encouragement of enterprise bargaining.
The decision
[44] 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 small improvement in
the real value of modern award minimum wages in 2013–14. As to the form of the
increase, the flat dollar increases in award minimum rates over the last 20 years 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. In the Annual Wage
Review 2010–11 decision (2010–11 Review decision)19 these considerations led the
Panel to determine a uniform percentage increase and we have reached the same
conclusion in this Review, for the same reasons. The increase in modern award
minimum wages we have decided on is 2.6 per cent. Weekly wages will be rounded to
the nearest 10 cents.
[45] The national minimum wage is currently set at the minimum wage for the C14
classification.20 We have not been persuaded to depart from that relationship. The
national minimum wage will be $622.20 per week or $16.37 per hour. The hourly rate
has been calculated on the basis of a 38 hour week for a full-time employee. This
constitutes an increase of $15.80 per week or 41 cents per hour.
[46] The determinations and order giving effect to our decision will come into
operation on 1 July 2013.
[47] A number of considerations have led us to award a lower increase than that
determined in last year’s review. While the economic outlook remains favourable,
GDP growth is expected to ease to slightly below trend in 2013–14 and the
unemployment rate is expected to increase slightly. Inflation is expected to remain
comfortably within the RBA target range of 2–3 per cent. In addition to these
considerations, the SG rate increase to apply from 1 July 2013 has also been a
moderating factor in our assessment of the adjustment that should be made to
minimum wages. As a result, although it would not be appropriate to quantify its
effect, the increase in modern award minimum wages and the NMW we have
determined in this Review is lower than it otherwise would have been in the absence
of the SG rate increase. We have also had regard to the effect of the carbon price on
the published CPI figures and the lower than forecast recent inflation outcome (when
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Chapter 1—The Decision 13
abstracting the estimated 0.7 per cent carbon price effect) in considering past inflation
for the purpose of the current review.
[48] A number of parties sought differential treatment in respect of any variation
determination arising from this Review being applied to certain modern awards.
[49] For the reasons given in Chapter 10, those advocating differential treatment
have not persuaded us that their proposals have sufficient merit. The diversity of
experience within these sectors tells strongly against the grant of a general exemption.
The evidence does not support a conclusion that, as a whole, these industries are
suffering economic circumstances which would warrant the differential treatment
sought. The general matters relied upon relate to the economy as a whole and do not
support differential treatment for the modern awards that have been raised with the
Panel. We have, however, taken these matters into account in our consideration of the
economy and in the decision more generally.
[50] In relation to incapacity arguments more generally, in Chapter 2 we have again
drawn 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.
[51] The Panel drew attention to these issues in the 2011–12 Review decision and
noted that the review of the Act provided an opportunity to address them. No
legislative amendments have been made and as a consequence the practical difficulty
created by the legislative framework remains.
[52] There is a final matter we wish to raise.
[53] 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. While some modern award minimum wages (namely at and below the C10
level), have increased in real terms over the past decade, they have not kept pace
with the level of wage increases generally. Relative to all measures of median and
average earnings, modern award minimum wages have fallen over the past decade.
The NMW has fallen as a proportion of full-time adult median earnings from
57.5 per cent in 2002, to 52.7 percent in 2012. The decline in the relative living
standards of award-reliant employees is also relevant to our assessment of the needs of
the low paid—needs being a relative concept.
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14 Chapter 1—The Decision
[54] It is apparent that while real earnings have generally increased over the past
decade, earnings inequality is increasing. Changes in the overall levels of earnings
inequality show 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.
[55] If not addressed, these trends may have broader implications both for our
economy and for the maintenance of social cohesion in Australia.
[56] As noted in the Annual Wage Review 2009–10 decision (2009–10 Review
decision),21 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.”22
[57] But we acknowledge that increases in minimum wages are a blunt instrument
for addressing the needs of the low paid.23 A significant proportion of low-paid adult
employees live in middle to high income households. An analysis of 2011 Household
Income and Labour Dynamics in Australia (HILDA) Survey data showed that about
30 per cent of low-paid adult employees live in households in the top four income
deciles. The tax-transfer system can provide more targeted assistance to low-income
households and is a more efficient means of addressing poverty.
[58] The tax-transfer system plays a significant role in alleviating the impact of
earnings inequality and supporting the living standards of low-paid workers, and the
evidence suggests that the tax-transfer system has been effective in increasing the real
level of disposable incomes for lower paid award-reliant families.
[59] The way in which changes in the tax-transfer system are taken into account in
minimum wage fixation remains a matter of contention and we would be assisted if
this matter was given some consideration by the parties in the 2013–14 annual wage
review. As the Panel did in the 2011–12 Review decision, we would also encourage
the Australian Government to discuss such matters with the major parties in an effort
to arrive at a consensus as to the specific effect any future tax-transfer changes may
have on the variation of minimum wages in the 2013–14 review.
[60] We are aware however that the tax-transfer system has its own limitations,
including its impact on incentives to work. It is for this reason, among others, that
minimum wages must play their part in meeting the needs of the low paid.
[2013] FWCFB 4000
Chapter 1—The Decision 15
[61] Our productivity performance as a nation underpins our standard of living. In
this context labour productivity is relevant. As we have noted, there has recently been
an increase in labour productivity. Short-term variations in productivity should be
interpreted with some caution and whether the recent increase is sustainable remains to
be seen. It is for that reason that we have not given greater weight to recent
productivity outcomes in deciding to only award a modest increase in minimum wages
in this Review. 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.
[62] The matters we have identified raise substantive issues which need to be
addressed in the 2013–14 review, together with a consideration of the capacity to
redress the decline in the relative living standards of award-reliant employees. We
invite further submissions on widening dispersion in earnings and the declining
relative position of employees reliant on award wages in the 2013–14 review.
2. The Statutory Framework
[63] As we have noted, 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
[2013] FWCFB 4000
16 Chapter 2—The Statutory Framework
(e) providing a comprehensive range of fair minimum wages to junior
employees, employees to whom training arrangements apply and
employees with a disability.”
[64] 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), but only insofar
as the matters specified relate to the setting, varying or revoking of modern award
minimum wages. 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
(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.”
[65] A third set of considerations the Panel must take into account is found in
the general objects of the Act.24 The minimum wages objective, modern awards
objective and objects of the Act contain some common elements. As we indicated in
the 2011–12 Review decision,25 the matters of direct relevance to the Review can also
be understood by grouping them into three broad categories: economic;26 social;27 and
collective bargaining.28
[2013] FWCFB 4000
Chapter 2—The Statutory Framework 17
[66] We have considered these matters in making our decision and specifically
address them in Chapters 4–8 of this decision. Chapter 3 discusses the proposals of the
parties to the Review.
[67] Three particular aspects of the statutory framework have been the subject of
submissions in this Review.
[68] The first issue concerns the approach to be taken to annual wage reviews, in
particular the scope for differential treatment as between modern awards.
[69] In the 2011–12 Review decision, the Panel made a number of general
observations about the legislative framework. Relevantly, for present purposes, the
Panel said:
“the legislative framework reveals a preference for consistent variation determinations
across all modern awards…[t]he notion of a fair safety net of minimum wages
embodies the concepts of uniformity and consistency of treatment.”29
[70] In these proceedings the Australian Chamber of Commerce and Industry
(ACCI) disagreed with the above observations. ACCI submitted that the minimum
wage objective and the objects of the Act suggest that there must be cogent evidence
to warrant an increase to minimum wage rates for “each modern award” and that there
is no statutory presumption or requirement that the Panel flow on any increase to all
classification levels and/or for all modern awards. ACCI relied on s.284(4) which
states, relevantly:
“varying modern award minimum wages is varying the current rate of one or more
modern award minimum wages.”
(emphasis added)
[71] ACCI submitted that s.284(4) indicates that Parliament intended that the Panel
retain a discretion to vary one or more modern award minimum wages and that, had
Parliament intended that all wages in every modern award should be increased, it
could have done so.
[72] ACCI concluded its submission on this issue in these terms:
“73. Clearly, had Parliament intended that all wages in every modern award should be
increased, it could have done so. On the contrary, Parliament has indicated that the
Panel retains discretion to vary one or more modern award minimum wages.
74. As a result of the award modernisation process, there are now 122 modern awards
which have replaced thousands of pre-reform federal awards and NAPSAs.
[2013] FWCFB 4000
18 Chapter 2—The Statutory Framework
75. Given that these modern awards are predominantly structured along an industry or
occupational basis, it is now possible to distinguish and target decisions on an industry
by industry basis.
76. Therefore, it is open to the Panel, should it be satisfied, to only vary (or not vary)
particular minimum wages in one or more modern awards, which may not have been
practical in the past due to the number of disparate and overlapping award
instruments.”30
[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. In that regard we are not
persuaded that ACCI’s submission warrants any reconsideration of the observations
made by the Panel in the 2011–12 Review decision.
[76] At the outset it is important to appreciate that the Act was legislated against the
background of a long-standing approach to minimum wage fixation. Parliament may
be presumed to have known of the historical approach taken to such claims.31 The
concepts of uniformity and consistency of treatment have underpinned the fixation of
minimum wages in modern awards and date back to the establishment of consistent
minimum rates within and across awards endorsed in the National Wage Case
February 1989 Review32 and implemented in the National Wage Case August 1988
decision.33 The principle of consistent minimum rates across awards was maintained
through the award simplification process;34 the Paid Rates Review;35 and award
modernisation.36
[77] As to the current legislative framework, the minimum wages objective requires
us to establish and maintain “a safety net of fair minimum wages” and the modern
awards objective requires us to ensure that modern awards (together with the National
Employment Standards) provide a fair and relevant minimum safety net of terms and
conditions. The modern awards objective also speaks of the need to ensure a “stable
and sustainable modern award system”. In our view, considerations of fairness and
stability tell against an award-by-award approach to minimum wage fixation. If
differential treatment was afforded to particular industries this would distort award
relativities and lead to disparate wage outcomes for award-reliant employees with
[2013] FWCFB 4000
Chapter 2—The Statutory Framework 19
similar or comparable levels of skill. In this regard, we note that in its submission,
Australian Business Industrial (ABI) “fully accepts that there is a presumption of
uniformity in the Fair Work Act and compelling reasons for the system of modern
awards for awards to be treated equally in Division 3 Part 2-6 reviews”.37 Similarly, in
its oral submission during the 22 May 2013 consultations, the Australian Industry
Group (Ai Group) referred to the need for consistent relativities within and between
modern awards. It is also relevant that in establishing and maintaining the minimum
wages safety net, the Panel must take into account the principle of equal remuneration
for work of equal or comparable value. Such a principle supports the determination of
consistent minimum rates for work of equal or comparable value. The maintenance of
consistent minimum wages in modern awards and the need to ensure a stable and
sustainable modern award system would be undermined if the Panel too readily
acceded to requests for differential treatment.
[78] At a broader, conceptual, level it is important to appreciate that the framework
for workplace relations established by the Act is predicated on a guaranteed safety net
which underpins enterprise level collective bargaining. The safety net of fair, relevant
and enforceable minimum wages and conditions is provided through modern awards,
national minimum wage orders and the National Employment Standards. Collective
bargaining at the enterprise level is underpinned by that safety net. This is evident
from the fact that enterprise agreements must pass the “better off overall test” in s.193
of the Act38 and the terms of an enterprise agreement may supplement, but cannot
exclude, any provision of the National Employment Standards (ss. 55 and 186(2)(c)).
[79] The award-by-award approach to minimum wage fixation, based on sectoral
considerations, advocated by some parties in these proceedings is inimicable to the
safety net nature of modern award minimum wages. Enterprise level collective
bargaining is the primary means by which the statutory framework envisages
differential treatment based on the circumstances in particular enterprises, which
would be influenced by relevant sectoral considerations. That the system functions in
this way is evidenced by the sectoral variation in actual wage outcomes.
[80] Three other points support the observations of the Panel in the 2011–12 Review
decision.
[81] First, in an annual wage review, the Act directs the Panel’s attention to a range
of macroeconomic and general factors including: the performance and competitiveness
of the national economy; inflation; employment growth; relative living standards; the
promotion of social inclusion; and the needs of the low paid. The nature of these
factors directs the Panel’s attention to matters which are relevant to the variation of all
modern awards.
[82] The second point is the legislative preference for consistent operative dates for
variation determinations made in an annual wage review. Sections 286 and 287
provide that all such determinations must come into operation on 1 July in the next
financial year. A party seeking a later operative date must satisfy the Panel that there
[2013] FWCFB 4000
20 Chapter 2—The Statutory Framework
are exceptional circumstances which justify a later date. It would be an odd outcome if
a lower threshold applied in relation to claims for a different quantum to the threshold
which applies to claims for a later operative date.
[83] Finally, it is also relevant to observe that s.154 of the Act operates as a
prohibition on awarding interstate wage differentials. This is a further indication of a
legislative preference for consistent, national, minimum wage rates.
[84] ACCI’s submission relies on one subsection within the Act. But the search for
Parliament’s intention depends upon an analysis of the Act as a whole. Such an
analysis supports the observations made by the Panel in the 2011–12 Review decision.
[85] The second issue raised in this Review concerns the supplementary exemption
process proposed by the Chamber of Commerce and Industry Queensland (CCIQ), The
Australian Retailers Association (ARA) and Business SA, and supported by ACCI.
CCIQ submitted that if the Panel decided to increase modern award minimum wages
then:
“Particular industry specific employers should be exempt from any increase where they
are determined to be facing significant challenges, or failing an exemption, the Panel
should establish a supplementary hearing process to determine whether part or all of an
increase should flow-on to those industry specific modern awards.
i. It is within the statutory discretion of the Panel to differentiate its
decisions based on the 122 modern awards that now exist and to grant a
differential increase (or no increase) for one or more modern awards, where it
is warranted. This would allow the Panel to provide an exemption from any
increase for modern awards in designated industry sectors which are in
significant difficulty and would be most affected by an increase to minimum
wage. These include: tourism, manufacturing, retail, hospitality and residential
building and construction.”39
[86] The ARA submitted that the Panel “should consider an award-by-award basis
and provide an interim decision or statement prior to handing down a final decision”.40
[87] Business SA submitted:
“[p]ursuant to s286 and s287 of the Fair work Act 2009, the FWA should ‘facilitate’
industry sectors such as Retail and Hospitality to apply for a lesser amount of any
wage increase and/or a delay in the commencement date of any wage increases arising
from the Review.” 41
[88] In the 2011–12 Review decision the Panel rejected a similar proposition
advanced by ACCI for the establishment of a brief “supplementary determination
process”. The reasons given by the Panel were as follows:
[2013] FWCFB 4000
Chapter 2—The Statutory Framework 21
“[281] The parties seeking an exemption have had an opportunity to make submissions
in support of their position, both in writing and orally at the consultations. We are not
persuaded that any further opportunity is either necessary or practical.
[282] As we have noted, the Act requires that this Review be completed by 30 June
2012 and, absent exceptional circumstances, any modern award minimum wage
variation determined by the review must come into operation on 1 July 2012. A
practical consequence of these legislative restrictions is that the Panel is obliged to
hand down its decision in early June to provide a sufficient period for parties to
comment on draft variation determinations to give effect to our decision. These
temporal limitations also tell against the process proposed by ACCI.”42
[89] In this year’s review we invited the parties to answer a number of questions.
Relevantly, question 5.1 was in the following terms:
“Noting the observations of the Panel about the legislative context for the consideration
of exceptional circumstances in the Annual Wage Review 2011-12 Decision, how
would the supplementary exemption process proposed by the [CCIQ], ARA and others
operate in practice given the terms of the Fair Work Act 2009 and the timeframes
involved?”
[90] It is notable that none of the parties advocating the supplementary exemption
process (i.e. CCIQ, ARA and Business SA) provided any response to the question
posed nor did they attend the public consultation hearings to advance any oral
submissions in support of their proposal. ACCI also did not submit a written response
to the question, but during the public consultation on 21 May 2013, ACCI submitted
that it believed that a supplementary hearing process “was practical”. However, the
basis for that belief was unstated and ACCI did not advance any suggestions as to how
such a process may operate in practice.
[91] The practical impediments to the adoption of a supplementary determination
process are evident from the chronology below:
14 May 2013—Commonwealth Budget
17 May 2013—Post-Budget submissions filed
21–22 May 2013—Panel public consultations
3 June 2013—Decision
1 July 2013—Operative date of variations
[92] Two points may be made about this chronology. The first is that it is not
feasible for the Panel to publish its decision (either in final or draft form) prior to early
June. The time between the Budget and early June is the minimum period required in
order to provide the parties with an opportunity to file supplementary submissions in
relation to the Budget; hold consultations; and finalise the Panel’s decision.
[93] The second point is that there is a statutory requirement that variation
determinations arising from annual wage reviews come into operation on 1 July in the
[2013] FWCFB 4000
22 Chapter 2—The Statutory Framework
next financial year, absent exceptional circumstances (s.286). In order to meet the
1 July requirement, the Panel must, as a matter of practicality, issue its decision in
early June in order to provide sufficient time for draft variation determinations to be
prepared and commented upon, prior to final variation determinations being issued
prior to 1 July.
[94] The parties seeking an exemption have had an opportunity to make submissions
in support of their position, both in writing and orally at the consultations. We are not
persuaded that any further opportunity is either necessary or practical. None of those
parties took advantage of the public consultation process on 21 and 22 May 2013, to
advance any further submissions in support of their exemption applications. In this
regard, we note that in its written submission ABI stated that:
“It does seem reasonable that applicants for an exemption do avail themselves of the
Panel’s consultation process to assist the [Panel] to better understand the nature of
[the] impact which has given rise to the claim. It would seem useful for the [Panel] to
remake the point more strongly in its decision so there would be no doubt in future
years.”43
[95] We agree with ABI’s observation. Parties seeking an exemption or deferral
should utilise the public consultation process to update the Panel on the circumstances
pertaining to their application.
[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.
[2013] FWCFB 4000
Chapter 2—The Statutory Framework 23
[98] The Panel drew attention to these issues in the 2011–12 Review decision and
noted that the review of the Act provided an opportunity to address them. No
legislative amendments have been made and as a consequence the practical difficulty
created by the legislative framework remains.
[99] We now turn to the third aspect of the statutory framework which was the
subject of submissions in this Review, namely the proper construction of s.284(1)(b).
[100] ACCI submitted that past decisions of the Panel have wrongly concluded that
“social inclusion”, within the context of s.284(1)(b), encompasses both the obtaining
of employment and the pay and conditions attaching to the job concerned. ACCI
argued that the Panel’s conclusions in this regard ignore the conjunctive qualification
in s.284(1)(b), that is, social inclusion is a concept to be promoted exclusively
“through increased workforce participation”.
[101] There is considerable force in ACCI’s submission. 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.
[102] 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)).
3. The Parties’ Proposals
[103] The Panel received submissions from a wide range of parties, including the
Australian and state governments, collective bodies representing employees and
employers and other organisations. The submissions addressed both the quantum and
form of any increases to modern award minimum wages and the NMW, as well as
claims for exemptions from any increases determined by the Panel. Some submissions
identified issues for consideration without proposing a particular outcome. Others
submitted that there should be no increase to the NMW or to minimum wages in
modern awards.44 A summary of the submissions made in relation to the proposed
[2013] FWCFB 4000
24 Chapter 3—The Parties’ Proposals
minimum wages adjustments is provided at Appendix 1 and the claims for exemptions
and differential outcomes are dealt with 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
[104] While the majority of submissions recommended flat dollar increases, the
quantum of increase proposed varied widely.45 ACCI, supported by the Australian
Federation of Employers and Industry (AFEI), Business SA, the Victorian Employers’
Chamber of Commerce and Industry (VECCI), the ARA, and the Master Plumbers and
Mechanical Services Association of Australia (MPMSAA), proposed an increase of
not more than $5.80 per week to the NMW and modern award wages. These parties
contended that the increase in award rates of pay in the 2011–12 Review decision
overcompensated workers for a projected increase in inflation which did not eventuate
46 and that any increase awarded by the current review should be reduced to the extent
of this overcompensation. It was argued that an increase of $5.80 would both take
account of such overcompensation and maintain the real value of the minimum wage
as at 1 July 2011, after expectations for inflation and the increase in the
superannuation guarantee levy are taken into account.47 ACCI submitted that:
“Fair Work Australia’s decision in the 2012 Annual Wage Review to award a +2.9 per
cent increase in the minimum rates of pay on 1 July 2012 considerably exceeded that
necessary to offset the rise in the cost of living over the preceding year. The consumer
price index rose by only +2.0 per cent over the twelve months to the September quarter
2012. The effect of last year’s decision was to increase the real value of the minimum
wage, at the expense in many instances of the livelihoods of small business operators.
ACCI believes it is appropriate for the Fair Work Commission to factor in the extent of
this overcompensation in the 2013 Annual Wage Review, especially in light of the
marked divergence between actual inflation and expectations for inflation at the time
of the decision.”48
[105] CCIQ submitted that the Panel should make no increase in this Review, but if
the Panel decided to award an increase, then it should be no more than $5.80 per
week.49
[106] The Australian National Retailers Association (ANRA) and the National Retail
Association (NRA) argued that a flat dollar increase to award rates was consistent with
past practice50 and both raised concerns about the impact of applying a percentage
increase to modern awards. The NRA nominated an increase of not more than $4.75
per week,51 the lowest of the proposed flat dollar increases, while the ANRA proposed
an increase of $9.10 per week.52
[2013] FWCFB 4000
Chapter 3—The Parties’ Proposals 25
Proposals for a percentage increase
[107] All proposals for a percentage increase came from employer groups. Ai Group
proposed a 1.75 per cent increase for both the NMW and modern awards.53 This figure
represents a notional wage increase of around 2.0 per cent, reduced by 0.25 per cent to
take account of the increase in the superannuation guarantee levy.54
[108] The Accommodation Association of Australia (AAA) proposed an increase of
not more than 1.5 per cent to both the NMW and modern awards, and ABI supported
an increase of 1.2 per cent.55
[109] The Australian Hotels Association (AHA) recommended a 1.0 per cent increase
be applied to the Hospitality Industry Award 201056 and made no proposal in respect
of the NMW or in relation to minimum wages in other modern awards.
Proposals for a tiered approach
[110] Two submissions put forward a tiered approach.57 The Australian Council of
Trade Unions (ACTU) recommended a flat dollar increase of $30.00 per week to the
NMW and to modern award wages up to and including the C10 level,58 and a 4.2 per
cent increase to all modern award minimum wages above that level. The ACTU
submitted that a percentage increase at the higher classification levels would prevent
further compression of award-based wage relativities and also improve the extent to
which award wages operate as a fair and relevant safety net for employees “at the
middle and upper levels”.59
[111] The flat dollar component is equivalent to an increase at the C10 level of
approximately 4.2 per cent. An increase of $30.00 per week represents larger
percentage increases over the classifications below the C10 level, ranging from around
4.5 per cent at the C11 level to 4.9 per cent at the NMW and C14 level.
[112] Drawing on unpublished data obtained from the Australian Bureau of Statistics
(ABS) EEH Survey 2012, the ACTU estimated that, in May 2012, around 48.5 per
cent of non-managerial award-reliant employees had hourly earnings equal to or less
than the C10 rate.60 The analysis also estimated that 18.6 per cent of non-managerial
award-reliant employees had hourly earnings greater than the C2(b) classification
wage rate (the highest classification in the Manufacturing Award).61
[113] The ACTU argued that these findings supported the “hybrid structure” of its
proposal and that an increase incorporating both a flat dollar and a percentage
component would balance “the needs of the lowest paid with the need to maintain a
relevant safety net for award-reliant workers on higher classifications.”62
[114] A tiered approach was also submitted by the Australian Catholic Council for
Employment Relations (ACCER). The primary focus of its proposal was not pay
[2013] FWCFB 4000
26 Chapter 3—The Parties’ Proposals
relativities between classifications in modern awards, but rather the value of safety net
wages relative to community wage levels.63
[115] ACCER proposed that modern award minimum wages above the C10 level be
increased by an amount equivalent to the CPI increase from the March quarter 2012 to
the March quarter 2013, less 0.8 per cent for compensation provided in respect of the
carbon price, plus another 1 per cent for productivity increases. 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. It argued that a flat dollar increase for employees at
these classifications would counter the “emerging gap at the lower end of the wage
scale.”64
[116] In respect of the NMW, ACCER proposed an increase commensurate to the flat
dollar increase for employees below the C10 level, plus a further $10.00 per week, to
assist low-paid employees, and their families, who live in poverty.65 In its submission
in reply, Ai Group opposed ACCER’s proposal for a further $10.00 increase to the
NMW on the basis that it would interfere with the outcome of the structural efficiency
principle which is reflected in the modern award classification structures, and may
lead to disputes during bargaining negotiations.66
Other Proposals
[117] The submissions of the Australian Government and the various state
governments were generally silent on the quantum of any change to the NMW or
modern award minimum wages.
[118] The Australian Government supported “a fair and economically responsible
increase” in modern award wage rates and the NMW and submitted that any increase
should take account of changes in living costs and the economic environment since the
last review, as well as the domestic and global economic outlook in the short to
medium term.
[119] The New South Wales, Victorian and Queensland Governments all urged the
Panel to take a “cautious approach” to the Review. The New South Wales and
Victorian Governments submitted that any increase must have regard to prevailing
economic conditions and ensure that incentives to employ entry level employees are
not diminished. The Queensland Government took a similar position and submitted
that there was “limited scope” for wage increases in light of: the deterioration of the
economic outlook over the course of 2012–13; the likelihood of softening global
demand; the continuation of a high Australian dollar; low inflation; and an
underperforming labour market.
[120] The Western Australian Government supported a “reasonable and equitable
adjustment” that balanced “economic and labour market considerations; the need for
an employee safety net; and the capacity for employers to pay for wage adjustments”.
[2013] FWCFB 4000
Chapter 3—The Parties’ Proposals 27
[121] The South Australian Government submitted that the Panel should increase
minimum wages taking into account the current economic context and the need to
ensure that the real value of minimum wages is maintained over time.
[122] The HR Nicholls Society Inc. submitted that there should be no increase in the
NMW, because it was both ineffective and inefficient as a welfare measure to assist
low-wage earners, and that the Panel should recommend to the Australian Government
that the NMW be scrapped. In relation to the latter submission, our role is to give
effect to Parliament’s intention as set out in the Act, and legislative changes of the type
advocated by the HR Nicholls Society Inc. involve policy considerations which are a
matter for Parliament, not the Panel.
4. The Economy
[123] As part of the minimum wages objective, the Commission must establish and
maintain a safety net of fair minimum wages and must take into account the
performance and competitiveness of the national economy, including productivity,
business competitiveness and viability, inflation and employment growth.
[124] The modern awards objective requires the Commission 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.
[125] In this Chapter, we consider:
recent economic performance of the Australian economy:
economic growth, at an aggregate level and at an industry level;
productivity and real unit labour costs;
business competitiveness and viability;
inflation;
wages growth; and
labour market activity, at an aggregate level and at an industry level;
small business;
the award-reliant industries;
the economic outlook; and
structural change in the Australian economy
[126] In paragraphs [153]–[159] we have set out a number of key statistical concepts
and their relationships to each other, which are important in understanding the
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28 Chapter 4—The Economy
measures of productivity and real unit labour costs and which are relevant to the
concepts when considered in other parts of this Chapter.
Recent economic performance67
Economic growth
[127] GDP grew at 3.1 per cent over the year to the December quarter 2012. This was
a little less than the 4 per cent growth to the December quarter 2011. Real net national
disposable income (RNNDI) experienced stronger growth relative to real GDP over
the decade to the December quarter 2012, mainly due to growth in the terms of trade
(Chart 4.1). However, a decline in the terms of trade since the September quarter 2011
has reduced the cumulative gap between real GDP and RNNDI. Since mid 2011,
RNNDI has barely changed, while GDP has grown by 5 per cent.68
Chart 4.1: RNNDI, real GDP and the terms of trade69
[128] The Australian economy has outperformed the average of the OECD major
seven countries in terms of quarterly GDP growth since the second quarter of 2011.
This was particularly evident in the December quarter 2012, when GDP across the
OECD major seven countries fell by 0.1 per cent, with output declining in Germany,
France, Italy and the United Kingdom (Chart 4.2).
100
110
120
130
140
150
160
170
180
190
200
Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12
Index (Dec-02 =
100)
RNNDI Real GDP Terms of trade
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Chapter 4—The Economy 29
Chart 4.2: International comparisons of quarterly GDP growth70
Note: Data for Japan measure real gross national product.
[129] There was some debate about the extent to which aggregate growth was driven
by the mining sector and the extent of growth in output in other sectors of the
economy. 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 2012. The
industries with the highest growth over the year to the December quarter 2012 were
Mining (10.2 per cent); Administrative and support services (7.8 per cent); Health care
and social assistance (6.4 per cent); and Wholesale trade (6.4 per cent). In contrast,
gross value added fell in Agriculture, forestry and fishing (–9.5 per cent);
Manufacturing (–2.2 per cent); Information media and telecommunications (–2.1 per
cent); and Arts and recreation services (–1.9 per cent). Over the year to the December
quarter 2012 growth in gross value added across more award-reliant industries was
mixed.
-1.5
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0.0
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1.5
US Japan Germany France Italy UK Canada OECD
Major 7
Australia
Per cent
Mar-12 Jun-12 Sep-12 Dec-12 Mar-13
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30 Chapter 4—The Economy
Chart 4.3: Average annual change in gross value added by industry—
December quarter 2002–December quarter 2012 (Percentage)71
[130] 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.
[131] The impact of the resources boom is discussed in a paper by the Reserve Bank
of Australia, The Resources Boom and the Australian Economy: A Sectoral Analysis
(the RBA Bishop et al Paper).72 The RBA Bishop et al Paper noted the genesis of the
resources boom in the rapid urbanisation and industrialisation of emerging economies
in Asia (particularly China) which led to a dramatic increase in the global demand for
commodities and, given short-term supply constraints, significant increases in
commodity prices.
[132] The rapid increase in commodity prices from 2003–04, which peaked in late
2011, is reflected in Chart 4.4.
-12 -9 -6 -3 0 3 6 9 12
Manufacturing
Other services
Electricity, gas, water and waste services
Rental, hiring and real estate services
Administrative and support services
Accommodation and food services
Education and training
Public administration and safety
Information media and telecommunications
Transport, postal and warehousing
All industries
Retail trade
Wholesale trade
Mining
Agriculture, forestry and fishing
Arts and recreation services
Professional, scientific and technical services
Health care and social assistance
Construction
Financial and insurance services
Per cent
Year to December quarter 2012 Ten years to December quarter 2012
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Chapter 4—The Economy 31
Chart 4.4: RBA Index of Commodity Prices73
[133] The resources boom was characterised in the RBA Bishop et al Paper in three
overlapping phases:
Rising commodity prices, resulting in Australia’s terms of trade increasing
significantly over a number of years, accompanied by a sizeable appreciation
of the exchange rate. The terms of trade had risen by 82 per cent from
2003–04 to reach its highest level on record in September 2011.74 The
nominal exchange rate has appreciated by around 25 per cent in trade-
weighted terms since 2003–04.75 The phase of strongly rising commodity
prices has passed, with the terms of trade having peaked in late 2011; although
it still remains at a high level, as is evident from Chart 4.4.
The surge in investment in the resources sector which has been in progress for
some years and still has some way to run, with resource investment expected
to peak as a share of GDP sometime over the course of this year, but remain
quite high for a time.76
Increased production and export of resources has also commenced but has
much further to run, especially in the case of liquefied natural gas, for which
investment takes place over a number of years before production comes on
stream.77
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32 Chapter 4—The Economy
[134] The RBA Bishop et al Paper examined the impact of the resources boom on the
Australian economy in terms of three broadly defined sectors:
the resources sector (resource extraction sector and “resource-related”
activity);
the “other tradeable” sector (significantly exposed to international trade but
not directly related to the resources sector—agriculture, manufacturing,
transport, wholesale trade and accommodation and food services); and
the “non-tradeable” sector (which does not have a significant exposure to
international trade, and in which production is not directly linked to the
resources sector).
[135] The other tradeable sector includes only one of the five industries with the
highest proportion of award-reliant employees—Accommodation and food services.
The Administrative and support services; Retail trade; Other services; and Rental,
hiring and real estate services industries are within the non-tradeable sector.
[136] The RBA Bishop et al Paper concluded that the overall process of
macroeconomic adjustment to the rise in the terms of trade since 2003–04 has
occurred relatively smoothly, with inflation remaining consistently within the RBA
target band, unemployment remaining relatively low and output growing at close to
trend rates. However, it identifies differential outcomes between the three broad
sectors identified, noting that those parts of the tradeable sector not directly exposed to
the terms of trade boom have experienced a reduction in competitiveness due to the
exchange rate appreciation, and all industries have faced increased domestic cost
pressures due to competition for domestic factors of production.78
[137] The differential impact, in respect of growth in real gross value added between
the resources, other tradeable and non-tradeable sectors, is reproduced from the RBA
Bishop et al Paper in Chart 4.5.
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Chapter 4—The Economy 33
Chart 4.5: Real gross value added growth by sector—Three-year-centred
moving average79
Productivity and real unit labour costs
[138] GDP per capita, labour productivity, the wage/profit share and unit labour costs
are aspects of the Australian economy that are routinely considered by the Panel in
annual wage review proceedings. Many parties also provided data and discussion on
these measures. The recent data related to these measures are included in the
Commission’s Statistical Report—Annual Wage Review 2012–13 (Statistical Report).
[139] We make two general observations about productivity and related measures.
[140] First, the term productivity, as used in the Act, is directed to the economic
concept of the quantity of output relative to the quantity of inputs.80 Considerations of
the price of inputs, including the cost of labour, raise separate statutory considerations
relating to the performance and competitiveness of the national economy and other
economic considerations, such as inflation.
[141] Second, the various productivity, factor share and unit labour cost series mostly
have a settled relationship with each other and with other measures of economic
prosperity and real wage growth. But the large rise (and volatility) in the terms of trade
associated with the resources boom has disturbed many of these relationships, adding
further complexity to issues concerning productivity. This requires us to examine more
closely how and why the measures are diverging and what the preferred measures are
in terms of setting minimum wages.
[142] Productivity and related measures require consideration in minimum wage
fixation for several reasons.
Per cent Per cent Resources 8 8 6 6 Non-tradable 4 4 2 2 Other tradable 0 0 -2 -2 2011 1995 1999 2003 2007
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34 Chapter 4—The Economy
[143] First, the modern awards objective requires the Panel to take into account the
likely impact of its decision on business, including on productivity, and the minimum
wages objective requires the Panel to take into account the performance and
competitiveness of the national economy, including productivity. These statutory
requirements have a different focus. In the first instance the focus is on the effect of
the review outcome on business and in the second instance, the focus is on
consideration of the performance of the national economy.
[144] Second, in the medium to long term, growth in real income, including real
wages, depends largely on productivity growth. Whilst the historically high terms of
trade in recent years has supported increased real national incomes, over time real
wages growth is underpinned by productivity growth. To the extent that productivity
growth is reflected in average real wages growth, it will be a relevant consideration for
minimum wage fixation because of the requirement in both the modern awards and
minimum wages objectives to take into account the relative living standards and needs
of the low paid.81
[145] Third, productivity has been the subject of submissions made in the current
review. The ACTU and ACCER in particular have contended that those paid modern
award minimum rates have not shared in productivity growth over the past decade and
they have proposed increases, in part, directed to ensuring that award-reliant workers
benefit from Australia’s productivity growth.82 Further, the ACTU submitted that:
the labour share of national income was roughly steady in the 1990s, and has
fallen since 2000;83
the fall in labour’s share means real hourly labour income has not kept pace
with labour productivity over the period—wages and productivity have
“decoupled”84 and this is ongoing;85 and
the increase in minimum and award wages it supports will ensure that low-
paid workers receive some benefit from productivity growth and will help to
maintain their relative living standards.86
[146] ABI submitted that inadequate attention has been given in the past to the role of
capital deepening in causing changes in productivity, factor incomes and unit labour
costs.87 Capital deepening (or capital intensity) entails an increased stock of capital per
worker.
[147] Before considering the arguments of the parties, it is useful to begin with an
account of what these key concepts measure, and how they are related. We have done
so because they are relevant for our purpose, they are used by the parties, and they are
not always clearly understood.
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Chapter 4—The Economy 35
[148] GDP measures the volume of goods and services produced. It is a real measure.
That is, the gross value added of each component of the economy is deflated by a price
index constructed for that component. These price indices capture the prices paid and
received by producers, including exporters. They are “producer prices”.
[149] A weighted value of the price indices is used to construct the “GDP deflator”,
which therefore is also a measure of producer prices.
[150] RNNDI measures the purchasing power of the income generated by domestic
production. It is the best measure of the incomes available to Australians arising from
their productive efforts in the year in question. It adjusts GDP to include the increased
purchasing power arising from improvements in the terms of trade (or declines arising
from falls in the terms of trade). It also deducts depreciation of the capital stock and
net income flowing overseas.88 In recent times, most of the divergence between GDP
and RNNDI has arisen from changes in the terms of trade, although there has been
some increase in amounts of depreciation.
[151] Chart 4.6 provides a comparison of quarterly movements in trend GDP
and RNNDI. During the December 2012 quarter, seasonally adjusted RNNDI
decreased –0.1 per cent. Growth over the past four quarters was 0.3 per cent, compared
with 3.1 per cent for GDP. The chart shows that RNNDI is considerably more volatile
than GDP.
Chart 4.6: GDP and RNNDI—Quarterly percentage changes89
Note: Trend measures are presented.
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Dec-2002 Nov-2004 Nov-2006 Nov-2008 Nov-2010 Nov-2012GDP RNNDI
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36 Chapter 4—The Economy
[152] Chart 4.7 shows the cumulative growth in GDP and RNNDI, both expressed in
per capita terms. RNNDI has increased by 9.4 percentage points more than GDP over
the past decade, which is the equivalent of almost three years of average growth in
GDP.
Chart 4.7: RNNDI per capita and GDP per capita, index90
Note: 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.
Australian Bureau of Statistics, Catalogue No. 5206.0 - Real net national disposable income - a new national accounts
measure, Feature Article, in Australian National Accounts: National Income, Expenditure and Product, Dec 2001.
[153] Gross value added measures the difference between the value of the output of
enterprises and the costs of the inputs of goods and services that they use to produce
this output. Gross value added is paid out as wages to the labour and returns to the
capital employed in the enterprise. GDP is the sum of gross value added across the
economy, and is a real, or volume, measure. That is, it is calculated after taking
account of any changes in prices. For the purposes of measuring the performance of
the economy, the sum of gross value added for enterprises operating in the market
sector is often used.
[154] Productivity is the quantity of GDP produced per unit of labour and/or capital
used. Productivity is a real, or volume, measure.
[155] Labour productivity is total GDP divided by total hours worked (by employees
and the self-employed and employers).
95
100
105
110
115
120
125
130
Dec-02 Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12
RNNDI per capita GDP per capita
Index (Dec-02 = 100)
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Chapter 4—The Economy 37
[156] Multi-factor productivity is a measure of the market sector and uses gross value
added rather than GDP as the denominator. It is total GVA divided by a weighted
measure of hours worked plus capital used.
[157] Unit labour costs is a measure of the total compensation paid to employed
persons divided by GDP and includes costs such as employer contributions to
superannuation, bonuses and occasional payments, in addition to wages and salaries. It
includes all employees (managerial and non-managerial). It also includes a value
imputed to the hours worked by the self-employed, which is imputed as the average
wage for the industry they are in. Unit labour costs will remain constant if the average
cost of labour (in current dollars) rises at the same rate as productivity. If unit labour
costs is rising then the costs of employing labour are rising faster than productivity,
and there is pressure on employers to raise their prices.
[158] Real unit labour costs is the total compensation paid to the employed, divided
by the nominal value of GDP (i.e. GDP multiplied by the implicit GDP deflator). If
real unit labour costs remains constant, then the labour share of output will remain
constant and the real cost of a unit of labour is rising at the same rate as labour
productivity.
[159] Real wages (measured as WPI, AWE, or AWOTE) are calculated by adjusting
nominal wages (derived from surveys) by the CPI. This differs from the price index
used in calculating productivity and unit labour costs (i.e. the implicit GDP price
deflator and its components).
[160] In understanding changes in productivity, labour’s share of income and the
costs of employing labour, we need to keep in mind that:
RNNDI has been moving differently than GDP for at least the past decade, as
the terms of trade first rose then, in the last 18 months, fell; and
the prices facing producers (on which measures of GDP, labour productivity
and real unit labour costs are based) have been moving differently than the
prices facing consumers (on which real wage measures are based). In
particular, producers of mineral resources have seen large rises in the prices
that they receive while consumers (and producers) have seen falls, or low
rates of increase, in the prices they pay for imported goods. In summary, until
mid 2011, real incomes in Australia have been rising faster than real output,
and producer prices have risen faster than consumer prices. Both of these
differences arose from the rise in the price of exports compared with
imports—the terms of trade.
[161] It is against this background that we assess the ACTU submission that the
labour share of national income has fallen since 2000, with the decoupling of wages
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38 Chapter 4—The Economy
and productivity, which in part supports its claim that low-paid workers should receive
some benefit from productivity growth.
[162] In our view, it is not sufficient to identify a decoupling of wages and
productivity, particularly in the context of the extraordinary increase in Australia’s
terms of trade. It is necessary to ascertain the relevant implications for minimum wage
fixation.
[163] In assessing the ACTU contention it is important to recognise that the recent
relationship between wages and productivity is a complex story, given:
the divergence between producer prices and consumer prices associated with
the significant recent escalation in Australia’s terms of trade;
the implications of capital deepening and changes in the ratio of capital and
labour inputs (where profitability rather than profit shares may provide better
guidance as to the returns to capital);
the widespread incidence of declining labour shares of the national incomes in
developed economies and the implications of capital widening and deepening
over the recent decades;91 and
productivity, factor share and unit labour costs series, both in aggregate or by
sector, are measured across the workforce as a whole rather than simply for
award-reliant employees.
[164] The Panel posed a number of questions in the consultations in relation to these
productivity issues, including seeking comments on an article by Mr Dean Parham.92
In the article, Mr Parham set out some of the complications in assessing real wage
growth over the past decade, arising from the strong rise (and recent fall) in the prices
of resources exports. He noted that real wage growth has not kept pace with growth in
labour productivity, and that “it matters for both equity and Australia’s economic
performance that labour shares proportionately in the gains from growth in
productivity and prosperity”. However, he also contended that, while the labour share
of income has fallen, the real purchasing power of wages has risen. The key to this
apparently contradictory combination is that the prices faced by wage earners for the
goods and services they purchase (consumer prices) have risen more slowly than the
prices received by producers (especially by minerals exporters). He argues that
expected future falls in the international prices of minerals will cause the “real
(product) wage-productivity gap [to] narrow”.
[165] The ACTU, in response to those questions, conceded that part of the gap is
explained by divergence between price indices but argued that labour had not been
fully compensated for the growth gap when measured by its preferred consumer price
measure (the Living Cost Index)93 and that when the 1990s are included the size of the
gap is the same whether consumer or producer prices are used.94 Further, whilst the
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Chapter 4—The Economy 39
ACTU agreed that at least some of the fall in the labour share in the past decade came
about due to the mining boom, it submitted that it is explained predominantly by falls
of the labour share within particular industries.95
[166] A number of other responses, those of Ai Group and ABI in particular,
highlighted the complexity of the relationship between productivity and factor shares
and cautioned against drawing firm conclusions as to that relationship and the
implications for minimum wage fixation on the basis of the information before us.
[167] We appreciate that a gap exists between increases in modern award wages and
productivity growth over the past decade which is a relevant consideration in fixing
minimum wage rates. However, we are not confident that the forces behind that
phenomenon, or the effect on factor shares in the event of a reversal of the divergence
between consumer and producer prices in the future, have been adequately explored
nor have the implications for minimum wage fixation been clearly identified.
However, we have considered recent movements in productivity and the relative living
standards of the low-paid in adjusting minimum wages in the current review. We do
not propose, on the information currently before us, to draw conclusions about that gap
for the purpose of our current determination. In the 2013–14 annual wage review, we
will invite further submissions on the implications of the fall in the labour share of
national income over the last decade for minimum wage fixation within the statutory
parameters applying to the review.
[168] Ai Group urged the Panel to pay greater attention to the recent rise in real unit
labour costs, submitting that “[r]eal unit labour costs is the measure that needs to
improve [i.e. fall], if we are to see a lift in the relative value of output per worker and
therefore a lift in Australia’s international competitive position.”96 We are not
persuaded that it is logical to imply that economic progress in Australia depends upon
a continuing fall in the labour share of income (as their submission appears to do)—the
end result of this would be that nearly all of GDP goes to capital. Further, Ai Group
provided no evidence that real unit labour costs (and labour’s share of income) are too
high. The productivity of both labour and capital can rise without a change in the share
of income between wages and profits. Rising productivity is only one of a number of
factors—the most prominent being the exchange rate—that can influence “Australia’s
international competitive position”.
[169] Chart 4.8 presents the annual changes in productivity from the December
quarter 2002 to the December quarter 2012 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.
[170] Over the year to the December quarter 2012, labour productivity increased by
2.9 per cent, as measured by GDP per hour worked in trend terms (1.4 per cent over
the year to the December 2011 quarter). As measured by gross value added in the
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40 Chapter 4—The Economy
market sector per hour worked, labour productivity rose by 2.4 per cent over the year
to the December 2012 quarter (2.2 per cent over the year to the December quarter
2011). As measured by GDP per capita, labour productivity rose 1.2 per cent over the
year to the December 2012 quarter (1.4 per cent over the year to the December 2011
quarter). Annual growth in each measure fell in the December 2012 quarter, although
added caution is required in considering quarterly movements.
Chart 4.8: Measures of productivity—Annual growth rates97
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.
[171] 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. Limited submissions and evidence
were put to us in relation to this specific consideration.
[172] A report to the United Kingdom’s Low Pay Commission98 examined the
longitudinal impact of the United Kingdom national minimum wage on firm
productivity. The report found that the introduction of the national minimum wage in
the United Kingdom resulted, overall, in an improvement in total factor productivity in
low-paying sectors, with substantial heterogeneity across and within sectors, including
firm-size groups, with stronger effects in larger firms.99
[173] OECD research across OECD countries100 concluded that a higher minimum
wage is likely to encourage greater investment in labour-saving innovations and firm-
sponsored training in the long run,101 although the impact is small.
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3
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5
Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12
Per cent
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[174] The evidence before us is limited and is not directed to the impact of minimum
wage increases arising in the context of the annual wage review in Australia. The
United Kingdom research, for example, assesses the impact of the introduction and
adjustment of the national minimum wage in the United Kingdom, rather than
incremental increases in long established minimum wages through (currently) the
annual wage review in Australia.
[175] 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.
Business competitiveness and viability
[176] 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 2012, the profits share decreased by 0.8 percentage points while the
wages share increased by 0.5 percentage points (Chart 4.9). The profits share fell by
2.3 percentage points over the year to December 2012, to be 26.3 per cent. The wages
share increased by 2.2 percentage points over the year, to be 54.8 per cent.
Chart 4.9: Profits and wages shares of total factor income102
Note: Total factor income represents the value added by labour and capital in the process of producing GDP.
17
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29
32
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53
56
59
62
65
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Per centPer cent
Wages share (LHS) Profits share (RHS)
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42 Chapter 4—The Economy
[177] Gross mixed income, which is the return to unincorporated enterprises, is the
third element in total factor income (in addition to the wages and profit share shown in
Chart 4.9). As defined by the ABS, gross mixed income “includes elements of both
compensation of employees (returns on labour inputs) and operating surplus (returns
on capital).”103 The share of gross mixed income will vary if there are changes in the
level of incorporation of enterprises and this in turn will affect the wage and profit
shares. The ACTU and ACCI have disagreed in their submissions about how shifts in
the share of gross mixed income will affect the wage/profit share. The ABS definition
supports the ACTU proposition that a distribution of the returns to labour and capital
within gross mixed income is necessary in assessing changes in the distribution of
national income between labour and capital, in the context of changing levels of
incorporation of business. A simple way to resolve this debate is to concentrate on real
unit labour costs. These are calculated by the ABS as total compensation of employees
divided by nominal GDP. The ABS includes an imputed wage to proprietors of
unincorporated enterprises in the measure of compensation of employees. Changes in
real unit labour costs are virtually the same as changes in the wage/profit share in the
case where all of factor income is allocated to either wages or profits.
[178] Chart 4.14 (at paragraph [226]) shows the changes in nominal and real unit
labour costs over the 10 years to December 2012. Real unit labour costs fell for much
of the period, reaching a low in mid 2011 of around 94 per cent of its value at the start
of the decade. Since then they have risen by 3 per cent. We note that part of the rise in
2012 was caused not by an increase in wage costs, but by a decline in the GDP
deflater, of –1.5 per cent, that is used to produce nominal GDP. A lower value of the
GDP price index leads to nominal GDP falling relative to real GDP and a fall in the
nominal GDP value that is the denominator in the real unit labour cost calculation. It
does not reflect rises in the cost of employing labour, but rather a reduction in the
nominal value of the output they produce.
[179] For the non-mining industries, company gross operating profits rose by 2.4 per
cent over the year, although they increased by only 0.1 per cent in the December
quarter. For all industries, including Mining, quarterly growth in company gross
operating profits was negative across all quarters of 2012 to be 7.6 per cent lower over
the year (Chart 4.8). Company gross operating profits in Mining fell by 3.7 per cent in
the December quarter 2012 to be 26 per cent lower over the year.
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Chapter 4—The Economy 43
Chart 4.10: Change in annual company gross operating profits—All and non-
mining industries104
[180] Ai Group noted that manufacturing corporate profits fell 6.3 per cent in the
December quarter 2012, to be 13.3 per cent lower than a year earlier, even though
output volumes were relatively steady, with manufacturing profits falling since June
2010.105 The ACTU attributed the decline in profitability in the Manufacturing
industry to pressure for structural change arising from the elevated exchange rate.
Further, it submitted that the Manufacturing industry is not representative of the more
award-reliant industries and that profits as a proportion of sales for the Retail trade and
Accommodation and food services industries were higher in 2012 than in the mid
2000s and have been more or less stable for several years.106
[181] The Victorian Automobile Chamber of Commerce (VACC) submitted that there
is an “alarming trend of business closures within the automotive industry”107 and also
noted the “record high” levels of insolvencies over the past 12 months.108 Similarly,
Restaurant and Catering Australia (R&CA) argued that business viability “remains
difficult”, noting that business-related bankruptcies experienced an “alarming
increase”.109 In its reply submission, the ACTU submitted that the increased number of
companies entering insolvency in the year to November 2012 reflects a steady decade-
long trend, rather than an unusual occurrence.110
[182] Business bankruptcy rates are 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 2011–12 these rates fluctuated between 0.3 and
0.4 per cent, before increasing to a peak of 0.44 per cent in 2011–12.111
-20
-10
0
10
20
30
40
Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12
Per cent
All industries Non-mining
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44 Chapter 4—The Economy
[183] The limited evidence before us in relation to business closures and bankruptcies
does not suggest deterioration in economic conditions. The information relied on by
the VACC as to the number of business closures in the automotive industry, drawn
from the 2013 Automotive Environmental Scan Survey,112 does not suggest changed
levels of business closures in the sector. Nor does it relate closures to economic
conditions, with the rate of business closures expected to escalate over the coming
years as a result of the ageing profile and retirement intentions of many business
operators.113 The VACC submission in relation to insolvencies in the broader economy
did not provide evidence of the trend in the level of insolvencies over time. Whilst
economic conditions are cited as the main reason for business-related personal
insolvency (in 40 per cent of cases), there are a range of reasons given, including
personal reasons such as ill health and lack of business ability.114
[184] ABS business survival data show that while the number of businesses declined
in 2008–09, the number of businesses grew by 3.6 per cent in 2009–10 and 0.4 per
cent in both 2010–11 and 2011–12.115 Survival rates for businesses operating in the
Accommodation and food services industry remains the lowest of all private sector
types,116 but this reflects the “churn”117 of business within the industry evident in
relatively high entry and exit rates,118 rather than evidence of more difficult economic
conditions for the industry. The entry rate exceeded the exit rate in the
Accommodation and food services industry in each of the past three years.119 The exit
rate in the Accommodation and food services industry of 15.8 per cent in 2011–12 is
the lowest level recorded in any of the past four years.120
[185] Submissions by employer organisations raised a range of cost pressures for
businesses to which we were urged to have regard in determining increases in the
NMW and minimum award rates. Many submissions from employer organisations
listed a range of competitive circumstances which they contended warrant no or a
limited increase in modern award minimum wages. For example, Master Grocers
Australia Limited (MGA) recommended that the Panel make no increase to minimum
wage rates for award-reliant employees on the basis that it is not economically feasible
for the independent supermarkets and liquor stores to sustain a further increase to
minimum wage rates on the basis of a range of factors impacting upon the commercial
environment in which smaller independent retailers operate.121
[186] Such issues were raised at two levels: as a relevant consideration in determining
general outcomes; and as one consideration in the context of submissions advocating
an award-by-award approach to the adjustment of minimum wages in modern awards.
We have dealt with the latter aspect in Chapters 2 and 10.
[187] Before addressing some of the specific matters raised, we make some general
observations about the identification of particular matters affecting the
competitiveness and viability of employers in particular sectors of the economy.
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Chapter 4—The Economy 45
[188] First, specific factors will impact differently on different sectors of the economy
and on different employers within them. As an example, whilst the structural change
associated with the resources boom has impacted adversely on the trade-exposed non-
resources sectors, it has brought benefits to some non trade-exposed sectors which
benefit from the favourable impact of increasing national income.
[189] Second, the focus upon the negative impact of specific circumstances on
particular sectors provides only a partial perspective. For example, whilst ARA
submitted that personal savings are at record levels122 and the ANRA submitted that
the household savings rate remains at historically high levels, having a prolonged
negative impact on retailers,123 no reference was made to the favourable impact of the
relatively high terms of trade on national income and its beneficial effect on
consumption. The increase in household saving, from around zero since the mid 2000s
to around 10 per cent over recent years, occurred at a time when the terms of trade was
driving significant increases in national incomes so that, despite higher levels of
saving out of income, consumer spending remained at similar levels.
[190] It should also be noted that the proposition that personal savings are at record
levels and remain at historically high levels is not accurate, as is clear from Chart 4.9.
Chart 4.11: Household saving ratio—March quarter 1970–December quarter
2012124
Note: Data are seasonally adjusted. As defined by the ABS, household saving ratio is the ratio of household net saving to
household net disposable income. Household net saving is calculated as household net disposable income less household
final consumption expenditure. Household net disposable income is calculated as household gross disposable income less
household consumption of fixed capital.
-5
0
5
10
15
20
25
Mar-70 Mar-76 Mar-82 Mar-88 Mar-94 Mar-00 Mar-06 Mar-12
Per cent
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46 Chapter 4—The Economy
[191] As noted by RBA Governor Glenn Stevens, and cited in the 2011–12 Review
decision,125 to the extent that there is an historical norm in respect of the household
saving ratio, it is much more likely to be 10 per cent or more rather than the zero level
it reached in 2004, and spending is growing in line with income. Indeed, the
exceptionally low household saving ratio of the mid 2000s was abnormal. Reinforcing
our point about the selective focus upon the negative impact of specific circumstances
in some submissions, we are unable to identify any submissions from retail
organisations to the Safety Net Reviews or Wage & Allowances Reviews of the mid
2000s which drew attention to the abnormally low level of saving of that time and its
favourable effect on retail demand, despite growth in real gross value added in the
Retail trade industry exceeding growth in real GDP in the early-to-mid 2000s. In this
context, we note that the latest retail data show that turnover rose 3.2 per cent in the
year to March 2013—faster than the rate of inflation.126
[192] In our view, for the purpose of determining general minimum wage outcomes,
the economic impact of industry specific factors will best be reflected in the aggregate
economic indicators—such as economic growth, labour market outcomes, and
profitability—both at an aggregate and industry level. The broader economic data
reflect the effects of the many relevant factors on economic conditions. Better
guidance as to recent retail demand is found from the growth in gross value added of
3.2 per cent over the year to the December quarter 2012 for Retail trade and the
information showing variation in growth in output between sectors in the industry.
[193] ABS retail sales data recorded growth in retail turnover of 3.2 per cent over the
year to the month of March 2013, and 3.7 per cent between the March quarters of 2012
and 2013.127 Growth in turnover varied between sectors within the retail sector, from
1.1 per cent for other retailing through to 5.2 per cent for food retailing on the
quarterly data. Retail turnover reflects both price and volume changes. Quarterly
volume estimates showed growth of retail turnover of 3.6 per cent between the March
quarters of 2012 and 2013, using seasonally adjusted data, ranging from 1.8 per cent in
the cafes, restaurants and takeaway food services sector, to 5.6 per cent in the
household goods sector.
[194] Employer groups noted that businesses will be facing higher costs due to the
next phasing and transitioning to modern awards, beginning on 1 July 2013. The
Australian Government also submitted that the current review of modern awards may
affect wage rates in awards.128 ACCI noted that the transition to modern awards has
the greatest effect for award-reliant businesses in services industry sectors.129
[195] At the aggregate level, we accept that some employers, most directly affected
by minimum wage increases, continue to face increases in labour costs arising from
the transition to modern awards. However, the increased costs resulting from award
modernisation have been taken into account by the AIRC in deciding upon the
transitional provisions and operative dates in modern awards.130 Further, the impact
will vary between awards and between states and specific award provisions within a
particular award, with minimum award conditions in respect to some states and some
[2013] FWCFB 4000
Chapter 4—The Economy 47
particular provisions reduced through the transitional provisions. There is no clear
evidence before us as to a pattern or the extent to which the transition to modern
awards is imposing additional costs on some employers. Whilst we are cognisant of,
and will have regard to, the fact that the transition to modern awards is incomplete and
will impose additional costs on some employers most directly affected by any outcome
from the current modern awards review, in fixing minimum wages at an aggregate
level we are required to take a broader view of the circumstances facing employers.
[196] A number of employer organisations131 referred to the Modern Awards Review
2012—Apprentices, Trainees and Juniors proceedings.132 The Housing Industry
Association (HIA), for example, submitted that the combined effect of a minimum
wage increase with any increase in the percentage of the tradesperson rate payable to
an apprentice will have an impact on the financial viability of engaging new
apprentices and retaining existing apprentices.133 The applications concerning
apprentices, trainees and juniors are presently before a Full Bench of the Commission
and no presumption can be made as to the outcome for the purposes of this Review. As
Ai Group noted:
“The applications are being appropriately dealt with by a Full Bench of the FWC and
there is nothing that the Minimum Wage Panel needs to do in this year’s Annual Wage
Review regarding these applications.”134
[197] The impact of the carbon price and rising energy costs were noted by many
submissions. The Victorian Government submitted that the carbon price had a greater
than expected negative impact on profitability and production costs for some
sectors.135 For example, the AHA, R&CA and MGA noted that, as a result of the
carbon price, businesses incurred increased energy costs.136 R&CA submitted that
some businesses faced much higher cost increases (up to 75 per cent) due to the carbon
price’s effect on energy costs, refrigerant maintenance and sundry supplier costs.137
The AHA argued that the carbon price had a significantly greater impact on costs and
profitability in the hotel industry than estimated by Treasury.138
[198] We accept that the carbon price introduced as part of the Clean Energy Future
package has increased energy costs for employers. We deal with the increase in prices
associated with the carbon price at paragraphs [211]–[219]. 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.”139 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
[2013] FWCFB 4000
48 Chapter 4—The Economy
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.
[199] Some employer groups highlighted the trend towards online shopping, which
exposes businesses to increased competition and adversely affects the competitiveness
and viability of businesses unable to cater for online shopping.140 Whilst the NRA
focussed on the greater exposure to global competition,141 the MGA focussed on the
inability of many independent supermarkets to provide for online shopping facilities
when larger competitors, such as Coles and Woolworths, have implemented these
facilities.142
[200] Increased exposure to international competition arising from online shopping
affects different retailers differently. Employers in sectors such as household goods
retailing; clothing, footwear and personal accessories; department stores; and other
retailing are more likely to face competition from overseas online retailers.143 Others,
such as grocery and liquor retailing, are unlikely to face competition from retailers
overseas. Further, online retailing will benefit those Australian employers able to sell
their products overseas online.
[201] In respect of online grocery sales, the MGA acknowledged that online
purchases represent an extremely small portion of overall grocery sales.144 The MGA
concern is about the effect of online shopping as between their members (smaller
independent grocers) and other domestic competitors who are benefitting from their
entry into online sales. Again, online retailing impacts differently on different retailers.
In addition, online retailing provides an enhanced and cheaper means for domestic
producers (e.g. wineries) to sell directly to their customers.
[202] Online shopping is no doubt one element of the commercial environment in
which the retail industry (and other industries) operate which affects their
competitiveness. The growth in online retailing, as one element of the broader
commercial environment, does not warrant particular consideration, in itself, in
determining minimum wage outcomes, particularly given its varying effect upon
different employers. The impact of online transactions, together with many other
matters, will be reflected in various economic indicators to which we have regard in
reaching our decision.
[2013] FWCFB 4000
Chapter 4—The Economy 49
Inflation
[203] There are several measures which can be used to identify the nature of
consumer price movements. 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.145 Both measures assist with
understanding the general trend in inflation.
[204] 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.146 Chart 4.12 includes the LCI for employee households, for whom the principal
source of income is wages and salaries.
[205] Growth in the LCI tended to slightly exceed CPI growth between 2002 and
2008 before the two series diverged, reflecting greater volatility in the LCI. The ABS
attributes much of the difference between the measures to the fall in interest charges
on mortgage debt and consumer credit—expenses which are not captured in the CPI
for conceptual reasons.147 Employee households have a relatively higher proportion of
expenditure on financial and insurance services than the average household, making
the LCI more sensitive than the CPI to price changes in these items. In the decade to
2012, the LCI rose by 3.7 per cent more than the CPI.
[206] The CPI and the LCI each provides relevant information about changes in the
purchasing power of wages. The LCI is specifically designed to measure changes in
living costs of specific groups in the community including those for whom the
principal source of income is wages and salaries, while the CPI is designed to measure
inflation for the household sector as a whole. The LCI more directly focuses 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. However, it is more volatile measure. We think it is appropriate to
have regard to each measure of inflation, noting the conceptual differences.
[207] The CPI increased by 0.4 per cent in the March quarter 2013 to be 2.5 per cent
higher over the year. Some of the more significant contributors to CPI growth over the
year to the March quarter 2013 were price increases in electricity (17.1 per cent);
medical and hospital services (9.3 per cent); and rents (3.5 per cent). Annual changes
in underlying inflation have remained within the RBA’s medium-term target band of
2–3 per cent since the June quarter 2010.148
[208] The LCI for employee households increased by 0.2 per cent in the March
quarter 2013 and by 1.7 per cent over the year, after increasing by 0.1 per cent in the
December quarter 2012.
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50 Chapter 4—The Economy
[209] Inflation was subdued over the year to the December quarter 2012, falling
within the lower half of the RBA’s medium-term target band of 2–3 per cent. This is
most clearly seen in the measures of underlying inflation in Chart 4.12.
Chart 4.12: Measures of inflation149
Note: Underlying inflation is the average of the trimmed mean and weighted median.
[210] The quarterly and annual movements in the CPI based measures in Table 4.1
show volatility on a quarterly basis in the headline CPI measure, evident in the very
low quarterly movements in late 2011 and early 2012, with the passing of the impact
of adverse weather conditions in early 2011 on fruit and vegetable prices and in the
jump in the September 2012 quarter increase, reflecting the impact of the Clean
Energy Future package. That volatility is not evident in the weighted median and
trimmed mean measures which remove the impact of the outlying price changes.
-2
-1
0
1
2
3
4
5
6
7
Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13
Per cent
CPI (quarterly) CPI (annual) Underlying inflation (annual) LCI - Employee (annual)
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Chapter 4—The Economy 51
Table 4.1: Consumer Price Index and other consumer price measures150
Quarter Consumer Price Index Underlying inflation measures
All groups Excluding
volatile items
Weighted median Trimmed mean
Quarterly Percentage Change
Sep-11 0.6 0.7 0.4 0.5
Dec-11 0.0 0.3 0.7 0.6
Mar-12 0.1 0.4 0.4 0.4
June-12 0.5 0.4 0.7 0.6
Sep-12 1.4 1.3 0.8 0.7
Dec-12 0.2 0.3 0.6 0.6
Mar-13 0.4 0.4 0.5 0.3
Year Ended Percentage Change
Sep-11 3.4 2.3 2.8 2.6
Dec-11 3.0 2.6 2.9 2.8
Mar-12 1.6 2.0 2.5 2.3
June-12 1.2 1.8 2.2 2.1
Sept-12 2.0 2.4 2.6 2.3
Dec-12 2.2 2.4 2.5 2.3
Mar-13 2.5 2.4 2.6 2.3
[211] ACCI and Business SA noted that the introduction of the carbon price in July
2012 resulted in a significant increase in consumer prices in the September quarter
2012.151 The Australian Government submitted that:
“The September and December quarter CPI outcomes provide evidence that there has
been no significant broad-based increase in consumer prices following the introduction
of the carbon price on 1 July 2012. The results are consistent with Treasury modelling,
which forecasts the CPI to increase by 0.7 per cent over 2012–13 due to the
introduction of the carbon price, with much of the impact occurring in the September
quarter 2012.”152
[212] A number of submissions contended that the increase in award rates of pay in
the 2011–12 Review decision overcompensated workers for a projected increase in
inflation which did not eventuate. ACCI, AFEI and ABI submitted that households
were overcompensated for the projected increase in inflation caused by the carbon
price and that the Panel should factor in the extent of this overcompensation, arguing
that actual inflation was below that expected.153 The ACTU argued that inflation
would have been lower in the absence of the carbon price, but added that it is not
possible to calculate the precise difference that the carbon price has made to the rate of
inflation.154 The Australian Government submitted that minimum wages should not be
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52 Chapter 4—The Economy
used as an avenue to provide assistance for the carbon price in 2013 due to the specific
compensation provided through the Household Assistance Package.155
[213] The Panel considered the impact on the CPI of the introduction of a price
on carbon and assistance to employees to compensate for those price effects in the
2011–12 Review decision.156 The Panel decided not to provide additional assistance to
compensate for the anticipated price effects associated with the introduction of a price
on carbon in light of the compensation provided through tax cuts and transfer
payments, abstracting the projected 0.7 per cent increase in the CPI from its
deliberations. Nothing has been put to us in the current proceedings which causes us to
alter our view. We have abstracted the carbon price effect from the published figures
in considering past inflation for the purpose of the current review.
[214] It was contended that the increase in award rates of pay in the 2011–12 Review
decision overcompensated workers for a projected increase in inflation which did not
eventuate.157 It was argued that any increase awarded by the current annual wage
review should be reduced to the extent of this overcompensation. Such a reduction was
factored into the $5.80 increase advocated by ACCI and several other employer
organisations.
[215] In this respect ACCI submitted that:
“Fair Work Australia’s decision in the 2012 Annual Wage Review to award a +2.9 per
cent increase in the minimum rates of pay on 1 July 2012 considerably exceeded that
necessary to offset the rise in the cost of living over the preceding year. The consumer
price index rose by only +2.0 per cent over the twelve months to the September quarter
2012. The effect of last year’s decision was to increase the real value of the minimum
wage, at the expense in many instances of the livelihoods of small business operators.
ACCI believes it is appropriate for the Fair Work Commission to factor in the extent of
this overcompensation in the 2013 Annual Wage Review, especially in light of the
marked divergence between actual inflation and expectations for inflation at the time
of the decision.”158
[216] Business SA supported this proposition, adding that the approach advocated
was consistent with what it described as the 2009–10 Review decision159 “granting an
increase to ‘catch up’ with the zero increase from the 2009 Wage-Setting Review and
to maintain real wages”, effectively providing “for overcompensation having regard to
March 2010 CPI data on the basis of maintaining real wages”.160
[217] We, and past Panels, have taken into account both actual economic indicators
and those that are forecast at the time of each decision. Of these, the actual indicators
as reported tend to be the primary consideration because they are more reliable for the
purpose of our statutory charter. However, it is also prudent and necessary to have
regard to future projections that cast some light on the circumstances that are expected
to apply during the period when any adjustment will operate, and beyond.
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Chapter 4—The Economy 53
[218] We observe that, to the extent that the projections do not ultimately reflect the
actual outcome, this forms part of the broad assessment and will be part of any
consideration of the actual indicators at subsequent reviews. Importantly, when
considering both actual and forecast indicators, the Panel pays particular attention to
trends, rather than simply the reported rates at the time.
[219] Further, there is no basis for the underlying proposition that the Review should
simply adjust minimum wages on the basis of maintaining real wages. Such an
approach would not properly give effect to the Act. Putting aside the other statutory
matters for a moment, the approach which underlies the submission of ACCI and
others, ignores the fact that 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.161
Wages
[220] Various measures of wages growth are available:
Wages Price Index (WPI): The methodology used to construct the WPI is
similar to that used for other price indexes such as the CPI. The WPI is
compiled using information collected from a representative sample of
employee jobs, unaffected by changes in the quality or quantity of work
performed, within a sample of employing organisations. As such, the WPI
does not reflect composition change as employees move between jobs.162
Average weekly ordinary time earnings (AWOTE): AWOTE statistics
represent average gross (before tax) earnings of employees and do not relate
to average award rates or to the earnings of the “average person”. AWOTE
measures earnings of full-time adult employees, attributable to award,
standard or agreed hours of work (hence ordinary time earnings). Changes in
the averages may be affected not only by changes in the level of earnings of
employees but also by changes in the overall composition of the wage and
salary earner segment of the labour force.163
Average annualised wage increases (AAWI) in collective agreements from the
Trends in Federal Enterprise Bargaining report is based on data drawn from
the Workplace Agreements Database, which is maintained by the Department
of Education, Employment and Workplace Relations (DEEWR). The data
cover federal enterprise agreements that provide quantifiable wage increases
over the life of the agreement, calculated by summing the percentage wage
increases to give a total percentage wage increase for each agreement and
annualising the total percentage wage increase by dividing it by the effective
duration. AAWI per employee is calculated by weighting AAWI per
agreement by the number of employees covered by that agreement.164
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54 Chapter 4—The Economy
[221] Each of the measures of wages growth is considered in Chart 4.13. The
different basis of each measure should be borne in mind, with each measure showing
different perspectives of wages growth. For example, the WPI shows wages growth for
a given set of jobs and does not reflect changes in average wages resulting from
compositional change. AWOTE incorporates changes in wages, on average, resulting
from compositional change, for example, a greater incidence of higher paying jobs as
well as increases in wages paid for a given job.
[222] The seasonally adjusted WPI increased by 0.7 per cent in the March quarter
2013 to be 3.2 per cent higher over the year. For the award-reliant industries, over the
year to the March quarter 2013 the WPI increased by 3.3 per cent in Administrative
and support services, 2.7 per cent in Retail trade and 2.4 per cent in both
Accommodation and food services and Rental, hiring and real estate services.
[223] Annual growth in AWOTE, in original terms, ranged from 2.9 per cent to
6.1 per cent over the decade to the November quarter 2012.165 AWOTE increased by
3.5 per cent in the six months ending November 2012 and by 5.0 per cent over the
year. Given the changes occurring in the Australian labour market, with a general shift
to higher paying occupations, AWOTE (which reflects these shifts) usually rises faster
than the WPI. This is apparent in Chart 4.13.
Chart 4.13: Measures of nominal wages growth, quarterly and cumulative
percentage change166
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.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
100
110
120
130
140
150
160
170
180
Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12
Per centIndex (Dec-02 =
100)
WPI (quarterly) (RHS) WPI (LHS) AWOTE (LHS)
AAWI (LHS) C14 (LHS) C10 (LHS)
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Chapter 4—The Economy 55
[224] The AAWI under new collective agreements lodged in the September quarter
2012 was 3.6 per cent and in the December quarter 2012 was 3.4 per cent. These
outcomes were below the average of 4.1 per cent over the 10 years to the December
quarter 2012. For the private sector, the AAWI for new collective agreements was
3.9 per cent in the September quarter and 3.4 per cent in the December quarter. For the
public sector, the AAWI was 2.8 per cent in the September quarter and 3.3 per cent in
the December quarter.167
[225] For the award-reliant industries, the AAWI for new collective agreements in the
December quarter 2012 was 3.8 per cent in Administrative and support services,
3.4 per cent in Accommodation and food services, 3.0 per cent in Retail trade and
2.5 per cent in Rental, hiring and real estate services.
[226] Nominal unit labour costs increased by 3.1 per cent annually, on average,
between the December quarter 2002 and the December quarter 2012. More recently,
nominal unit labour costs fell by 1.0 per cent in the September quarter 2012 before
increasing by 0.9 per cent in the December quarter 2012 to be 0.8 per cent higher over
the year (Chart 4.14). Between the December quarter 2002 and December quarter
2012, real unit labour costs fell by 2.9 per cent. Real unit labour costs increased by
0.9 per cent in the December quarter 2012 to be 1.9 per cent higher over the year.
Chart 4.14: Nominal and real unit labour costs, index168
93
94
95
96
97
98
99
100
101
100
105
110
115
120
125
130
135
140
Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12
Index (Dec-02=100)Index (Dec-02=100)
Nominal unit labour cost (LHS) Real unit labour cost (RHS)
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56 Chapter 4—The Economy
Labour market
[227] Employment increased by 1.4 per cent and aggregate monthly hours worked
increased by 0.8 per cent over the year to April 2013 (Chart 4.15). Annual growth in
employment peaked at 3.0 per cent over the year to November 2010 and has remained
relatively subdued since late 2011.169
Chart 4.15: Employment levels170
[228] Some parties argued that growth in aggregate employment over 2012 and early
2013 overstated the strength of labour demand, with employment growth over the year
to February 2013 concentrated in part-time employment rather than full-time
employment.171 This is reflected in the faster growth of employment compared with
hours worked that is apparent in Chart 4.15, and directly illustrated in Chart 4.16.
[229] Full-time employment increased by 1.2 per cent (96 200 people) and part-time
employment increased by 2.0 per cent (68 000 people) over the year to April 2013
(Chart 4.16).
9.0
9.5
10.0
10.5
11.0
11.5
12.0
1350
1425
1500
1575
1650
1725
1800
Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13
MillionsMillions
Aggregate monthly hours worked (LHS) Employed (RHS)
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Chapter 4—The Economy 57
Chart 4.16: Full-time and part-time employment levels172
[230] Average annual employment growth across all industries was 2.1 per cent over
the decade to February 2013 (Chart 4.17). Some of the industries that experienced
relatively high average annual employment growth between February 2003 and
February 2013 were Mining (10.8 per cent); Health care and social assistance (4.3 per
cent); Professional, scientific and technical services (4.2 per cent) and Electricity, gas,
water and waste services (4.0 per cent). Average annual growth in employment
declined over the decade to February 2013 in Manufacturing (–1.4 per cent);
Agriculture, forestry and fishing (–0.7 per cent); and Information, media and
telecommunications (–0.7 per cent).
2.6
2.8
3.0
3.2
3.4
3.6
6.5
7.0
7.5
8.0
8.5
9.0
Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13
MillionsMillions
Full-time (LHS) Part-time (RHS)
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58 Chapter 4—The Economy
Chart 4.17: Average annual change in employment by industry—February
2003–February 2013 (Percentage)173
[231] The average annual growth in the number of employed persons by industry over
the decade to February 2013 was highest in Health care and social assistance (47 600
people); Professional, scientific and technical services (31 000 people); Construction
(26 500 people); and Education and training (22 300 people) (Chart 4.18). Of the
award-reliant industries, average annual growth in the number of employed persons
over the decade was highest in the Accommodation and food services (16 500 people)
and Retail trade (8 900 people) industries. We note that while mining stands out as the
industry with the fastest growth in employment, it ranks only fifth in terms of the
number of additional persons employed over the decade (and sixth over the past year).
[232] Over the year to February 2013, employment growth was highest in Wholesale
trade (65 500 people); Accommodation and food services (58 700 people);
and Education and training (58 000 people). Over the same period, employment
fell in 10 of the 19 industry classifications, with the highest falls in Manufacturing
(–28 900 people); Rental, hiring and real estate services (–25 500 people); and Other
services (–23 700 people).
-2 0 2 4 6 8 10 12
Manufacturing
Agriculture, forestry and fishing
Information media and telecommunications
Other services
Retail trade
Administrative and support services
Financial and insurance services
Wholesale trade
Public administration and safety
Total
Accommodation and food services
Rental, hiring and real estate services
Education and training
Transport, postal and warehousing
Construction
Arts and recreation services
Electricity, gas, water and waste services
Professional, scientific and technical services
Health care and social assistance
Mining
Per cent
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Chapter 4—The Economy 59
Chart 4.18: Change in employment by industry—February 2003–February 2013
(‘000s)174
[233] The RBA Bishop et al Paper, to which we refer at paragraph [131], shows
shares of total employment between the resources, the other tradeables and the non-
tradeables sectors (Chart 4.19). Whilst the rapid growth in the share of employment in
the resources sector and the flattening of the share in the non-tradeables sector over the
last decade coincide, it can be seen that the declining share of employment in the other
tradeables sector, whilst affected by the resources boom, predates the rapid rise in
commodity prices in 2003–04. It should be noted that the shares shown are shares of
increasing total employment over the period shown.
-30 -20 -10 0 10 20 30 40 50 60 70
Manufacturing
Agriculture, forestry and fishing
Information media and telecommunications
Other services
Electricity, gas, water and waste services
Rental, hiring and real estate services
Administrative and support services
Financial and insurance services
Arts and recreation services
Wholesale trade
Retail trade
Public administration and safety
Transport, postal and warehousing
Accommodation and food services
Mining
Education and training
Construction
Professional, scientific and technical services
Health care and social assistance
Year to February 2013 Average annual change February 2003 to February 2013
'000s
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60 Chapter 4—The Economy
Chart 4.19: Employment by sector175
[234] Annual growth in aggregate hours worked was positive across most months
over the decade to March 2013. Annual changes in hours worked fell during 2009 and
in the second half of 2012. Monthly hours worked increased by 0.7 per cent in April
2013 and by 0.8 per cent over the year (Chart 4.20).
Chart 4.20: Monthly hours worked—Annual percentage change176
-3
-2
-1
0
1
2
3
4
5
Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13
Per cent
Per cent Per cent Other tradable (LHS) 20 80 Non-tradable (RHS) 10 70 Resources (LHS) 0 60 1992 1996 2000 2004 2008 2012
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Chapter 4—The Economy 61
[235] Table 4.2 shows that employment growth over the year to February 2013 was
highest in Wholesale trade (16.5 per cent) and Transport, postal and warehousing
(10.1 per cent). Hours worked over the year was also highest in these industries
(14.3 per cent and 9.1 per cent, respectively). Relatively large falls in employment
occurred in Electricity, gas, water and waste services (–11.6 per cent) and Rental,
hiring and real estate services (–11.4 per cent). Hours worked also fell markedly in
Electricity, gas, water and waste services (–16.2 per cent). Of the award-reliant
industries, Accommodation and food services recorded the highest growth in
employment (7.9 per cent) and hours worked (4.8 per cent) over the year.
Table 4.2: Change in employment and hours worked by industry—February
2012–February 2013 (Percentage)177
Industry Employment Hours worked
(%) (%)
Wholesale trade 16.5 14.3
Transport, postal and warehousing 10.1 9.1
Accommodation and food services 7.9 4.8
Education and training 6.7 8.4
Mining 6.0 4.9
Professional, scientific and technical services 3.6 5.2
Health care and social assistance 3.4 1.8
Construction 1.4 2.5
Retail trade 0.9 –0.7
Arts and recreation services –0.6 1.6
Administrative and support services –2.0 –1.4
Public administration and safety –2.6 –2.7
Information media and telecommunications –2.7 –-2.1
Financial and insurance services –2.8 –5.5
Manufacturing –3.0 –1.4
Agriculture, forestry and fishing –4.6 –2.7
Other services –5.0 –6.5
Rental, hiring and real estate services –11.4 –6.9
Electricity, gas, water and waste services –11.6 –16.2
Note: Employment data are seasonally adjusted and hours worked data are in original terms. Industries are ranked by
employment growth rate.
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62 Chapter 4—The Economy
[236] The unemployment rate was 5.5 per cent in April 2013, falling 0.1 percentage
points from March 2013. The participation rate for persons aged 15+ has dropped from
its peak of 65.9 per cent in November 2010 to be 65.3 per cent in April 2013 (Chart
4.21).
Chart 4.21: Unemployment and participation rates178
Note: The unemployment rate and participation rate for ages 15+ are in seasonally adjusted terms. The participation rate for
ages 20–64 years is in original terms.
[237] Young people and lone parents are relatively more likely to be low paid. Chart
4.22 shows the unemployment rates for young people aged 15–24 and lone parents,
and shows that they have been higher than the aggregate unemployment rate over the
10 years to April 2013. The unemployment rate for both groups declined until 2009.
The unemployment rate for 15–24 year olds increased as a result of the global
financial crisis and has remained around that higher level. In April 2013, the
unemployment rate for 15–24 year olds was 11.7 per cent—higher than in April 2012.
The unemployment rate for lone parents was affected to a lesser extent by the global
financial crisis. The unemployment rate for lone parents was 10.5 per cent in April
2013, after peaking at 11.0 per cent in February 2013.
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
61
63
65
67
69
71
73
75
77
79
81
Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13
Per centPer cent
15+ Participation rate (LHS) 20-64 Participation rate (LHS) Unemployment rate (RHS)
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Chapter 4—The Economy 63
Chart 4.22: Unemployment rates—15–24 year olds and lone parents179
Note: The unemployment rate for lone parents is in original terms. Unemployment rates for 15–24 year olds and aggregate
unemployment are seasonally adjusted.
[238] The Australian Government cited ABS data which show that 18.0 per cent of
unemployed persons had been unemployed for 12 months or more in February 2013,
up 2200 (or 1.9 per cent) over the year, whilst the number of very long-term
unemployed (those unemployed for 104 weeks or more) declined over the year to
February 2013, by 8100 (or 12.9 per cent), to stand at 54 200.180 It submitted that the
long-term unemployed, on average, face greater difficulty finding subsequent work
due to skill depreciation, the “discouraged worker effect” and marginalisation from the
labour market.181 ACOSS submitted that evidence of entrenched labour market
disadvantage among many of the long-term unemployed suggests that lowering real
minimum wages is unlikely to greatly improve their job prospects.182
[239] The rise in the labour force participation rate over the year to February 2013
was noted in a number of submissions.183 The Australian Government observed that
the participation rate in February 2013 was well above the OECD average and second
only to Canada out of the major seven economies.184 ACCI and Ai Group indicated
that the fall in labour force participation over the past two years had contributed to the
relative stability in the unemployment rate,185 providing evidence of the discouraged
worker effect.186 ACCI and Ai Group estimated that, had the participation rate
remained at its November 2010 level, the unemployment rate would be well in excess
of 6 per cent.187
[240] According to the Australian Government, there were various reasons for the fall
in the participation rate:
0
2
4
6
8
10
12
14
Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12
Per cent
15-24 year olds Aggregate unemployment Lone parents
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64 Chapter 4—The Economy
“The decline in the participation rate over the last two years reflects a number of factors,
including the impact of population ageing, with a growing proportion of the population
reaching retirement age.”188
[241] The ACTU submitted that a small part of the slight decline in the participation
rate over the past two years reflects a softening in labour market conditions, with most
of the decline in the participation rate resulting from changes to the demographic
structure, particularly the increase in older people as a share of the population (the
ageing population).189 To support this proposition, the ACTU decomposed the fall in
the participation rate into the two components, finding that 0.46 points of the
0.56 percentage point decline in the participation rate between February 2011 and
February 2013 was due to the ageing population.190
[242] In its reply submission, the ACTU provided a graph illustrating the effect of the
ageing population on the participation rate.191 The Australian Government provided a
similar “age-adjusted” chart of the participation rate for the period March 2008–March
2013, which showed a similar impact of ageing on overall participation rates and no
fall in the age adjusted participation rate (shown as the “counterfactual”) from its
recent highs.192 It is reproduced at Chart 4.23.
Chart 4.23: Effect of the ageing population on the participation rate193
[243] In an October 2012 speech, RBA Deputy Governor Philip Lowe supported the
role played by an ageing population in the recent decline in the participation rate:
“On the supply side, demographic changes are potentially an important factor. As with
many other countries, the Australian population is ageing. This tends to reduce labour
64.0
64.5
65.0
65.5
66.0
66.5
67.0
Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13
Per cent
Counterfactual Actual LFPR
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Chapter 4—The Economy 65
force participation, as older people are less likely to have a job, or be looking for a job,
than are younger people. Our estimate is that this ageing effect, by itself, has reduced
the participation rate by around 1 percentage point since the mid 2000s.”194
[244] We think that the proposition that the recent decline in the participation rate,
when measured by reference to those aged 15 or over, is largely explained by the
ageing population is correct. The effect of softer labour market conditions, particularly
for males seeking full-time employment has been offset by the trend rise in female
participation. In the context of an ageing population, with the baby boomer generation
increasingly moving out of the labour force, the participation rate of those aged 20–64
is a better measure for the purposes of assessing labour market conditions. This group
excludes the older group who are less likely to have or be seeking work, and the
school-aged group, with its high and rising levels of enrolment in education.
Participation rates are published in this form in the Statistical Report—Annual Wage
Review 2012–13 and are shown at Table 4.3, with the addition of data for all
employees. The restriction of the participation rate measure to the age group where
most people seek work (i.e. aged 20–64) is a simple method by which to take account
of the impact of ageing. A full “age-adjusted” calculation of the participation rate, as
done by the ACTU and the Australian Government, is a more complete, but more
complex, way to come to a similar measure.
Table 4.3: Participation rates—By gender, rates and percentage change
(persons aged 20–64 years)195
Month Male Change
over year
(ppts)
Female Change
over year
(ppts)
Total Change
over year
(ppts)
Dec-02 85.5 68.0 76.7
Dec-03 85.3 –0.2 67.5 –0.5 76.4 –0.3
Dec-04 85.2 –0.1 68.3 0.8 76.7 0.3
Dec-05 86.0 0.8 69.6 1.3 77.8 1.1
Dec-06 86.2 0.2 70.8 1.2 78.5 0.7
Dec-07 86.5 0.3 71.3 0.5 78.9 0.4
Dec-08 86.3 –0.2 71.6 0.3 78.9 0.0
Dec-09 86.1 –0.2 71.5 –0.1 78.8 –0.1
Dec-10 87.0 0.9 72.1 0.6 79.5 0.7
Dec-11 85.9 –1.1 72.0 –0.1 78.9 –0.6
Dec-12 86.4 0.5 72.0 0.0 79.2 0.3
Apr-13 85.8 0.2 72.3 0.6 79.1 0.4
Note: The participation rate is the number of persons in the labour force expressed as a percentage of the civilian population.
The percentage point change (ppt) change calculates the ppt from the corresponding month in the previous year. All data are
in original terms.
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66 Chapter 4—The Economy
[245] The data in Table 4.3, for those aged 20–64 years, shows continuing high
participation rates. For all employees, the participation rate is at its highest level over
the past decade, save for the December 2010 level. The aggregate participation rate
remains close to that historical high and has increased slightly since December 2011,
rising by 0.3 percentage points over the year to December 2012. The participation rate
for females aged 20–64 has increased consistently over the past decade and has been
stable over the past 12 months. The participation rate for males aged 20–64 remains
historically high, although slightly below its highest point of 2010. It has remained
stable over the year to March 2013.
[246] A different perspective on the state of the labour market is given by the
employment to population ratio. This shows the proportion of all people in the relevant
age group that is 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 4.4 shows the employment to population ratios for people
aged 20–64 and the disaggregation for males and females. Between December 2002
and December 2012, the employment to population ratio for males has risen by
1.6 percentage points, while for females the ratio has increased by 4.1 percentage
points. There has been no real change in this ratio, either for gender or in total, in the
year to December 2012.
Table 4.4: Employment to population ratio—Total and by gender (20–64 year
olds)196
Month Male Female Total
(%) (%) (%)
Dec-02 81.1 64.6 72.8
Dec-03 81.5 64.2 72.9
Dec-04 81.8 65.6 73.7
Dec-05 82.5 66.8 74.7
Dec-06 83.4 68.1 75.7
Dec-07 83.8 68.8 76.3
Dec-08 83.1 68.9 76.0
Dec-09 82.4 68.4 75.3
Dec-10 83.9 69.1 76.5
Dec-11 82.7 68.8 75.7
Dec-12 82.7 68.7 75.7
Apr-13 81.6 68.6 75.1
Note: All data are in original terms.
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Chapter 4—The Economy 67
[247] Several submissions highlighted the rate of underemployment197 and
underutilisation. Underutilised workers comprise both underemployed and
unemployed workers.
[248] Underemployment is measured by the ABS as:
part-time workers who would prefer to work more hours and were available to
start work with more hours, either in the reference week or in the four weeks
subsequent to the survey; and
full-time workers who worked part-time hours in the reference week for
economic reasons (such as being stood down or insufficient work being
available). It is assumed that these people would have preferred to work full-
time in the reference week and would have been available to do so.198
[249] The underutilisation rate is the sum of the unemployed and the underemployed,
expressed as a proportion of the labour force.
[250] The number of underemployed workers and the underemployment rate peaked
in the November quarter 2009, as did the number of underutilised persons and the
underutilisation rate. The underemployment rate was 7.1 per cent and the
underutilisation rate was 12.5 per cent in the February quarter 2013 (Table 4.5).
Table 4.5: Unemployment, underemployment and underutilisation199
Month Unemployment rate Underemployment
rate Underutilisation rate
(%) (%) (%)
Nov-02 6.2 6.8 13.0
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 4.6 6.3 10.9
Nov-07 4.5 6.2 10.6
Nov-08 4.5 6.5 11.0
Nov-09 5.6 7.8 13.4
Nov-10 5.1 7.1 12.3
Nov-11 5.2 7.3 12.5
Nov-12 5.3 7.2 12.5
Feb-13 5.4 7.1 12.5
Note: Data are seasonally adjusted. Underemployment and underutilisation are measured quarterly.
[2013] FWCFB 4000
68 Chapter 4—The Economy
[251] Table 4.5 shows a broadly consistent picture of the labour market between the
unemployment rate, the underemployment rate and the underutilisation rate, with each
declining from 2003 through to the global financial crisis, reflected in the November
2009 data, with a slight improvement immediately thereafter. In all cases the labour
market position in 2013 is better than that shown in 2003. A softening in labour market
conditions in the past two years has been more evident in the unemployment rate than
in the underutilisation rate.
[252] Underemployment is, by definition, mainly confined to people who work part-
time (and want to work more hours). There has been a trend in Australia to part-time
employment for a mixture of reasons. It is a preferred form of employment for many
mothers of young children, full-time students and older people who are approaching
retirement, but not for most adult men. The mixture of reasons why people work part-
time, together with the fact that underemployment as a concept is mainly confined to
those who work part-time, means that there is no straightforward link between changes
in underemployment and overall strength or weakness of labour demand.
[253] ABI and ACCI submissions noted that higher than average rates of
underemployment are found within award-reliant industries.200 ACCI submitted that
the higher than average rates of underemployment in the most award-reliant industries
suggests that award rates have negatively impacted on the capacity of employees to
obtain sufficient hours of work. 201
[254] There is no basis advanced for the impact of award rates on underemployment
suggested by ACCI, other than the fact of the high relative incidence of
underemployment in the four industries identified by ACCI as being award reliant. It is
more likely that the high relative underemployment in these industries is explained by
the relatively high levels of part-time employment within these industries. Full-time
employees make up only a very small portion of the underemployed (around 6 per
cent) so underemployment is essentially a measure of part-time workers who would
prefer more work.202
[255] Whilst ACCI submitted that “[o]ver 55 per cent of all underemployed persons
are working in the four industries that employ the largest number of award dependent
employees”,203 it is equally true that 53 per cent of part-time employees and 57 per
cent of part-time casual employees are working in those industries.204 It is more
probable that the high relative incidence of underemployment in the four industries
identified by ACCI as being award reliant is explained by the relatively high incidence
of part-time workers in those industries than by award rates.
[256] Industries with a higher proportion of part-time employment are more likely to
have higher rates of underemployment. Chart 4.24 shows a clear positive correlation
between the underemployment rate and the proportion of part-time employment by
industry for February 2013. The Accommodation and food services industry had the
highest proportion of part-time employment and the highest underemployment rate for
February 2013, followed by the Retail trade industry. Mining and Electricity, gas,
[2013] FWCFB 4000
Chapter 4—The Economy 69
water and waste services employed the lowest proportion of part-time workers and
also had the lowest underemployment rate.
Chart 4.24: Underemployment rate and the proportion of part-time employment
by industry—February 2013205
Note: All data are in original terms.
[257] Whilst the ABS underemployment rate provides an added piece of information
in assessing labour market conditions, it does not provide direct evidence as to the
impact of minimum wages on those conditions. Whilst reasons related to the
availability of additional work such as no vacancies in a line of work, no vacancies at
all and too many applicants for available jobs are cited most often by part-time
employees as the main difficulty in finding work with more hours, they relate
generally to the demand for labour. Furthermore, in most cases, the reasons cited relate
either to perceptions about the employees themselves, such as their age, skills or
education and work experience, or personal constraints on accepting additional work,
such as family responsibilities or suitability of hours.206 Part of the difficulty for part-
time employees in obtaining additional work reflects frictions in the labour market—a
mismatch of labour demand and supply, illustrated by the co-existence of persons who
prefer to work additional hours and persons who prefer to work fewer hours.207
Although dated, the following ABS information suggests that overemployment
exceeds underemployment:
“Between April and July 2007, the ABS surveyed Australian workers aged 15 years and
older about their employment arrangements. At that time, around two-thirds (65%) felt
they were working close to their preferred number of hours. While 1.4 million workers
(14%) wanted to work more hours, about 2.2 million (21%) preferred to be working
fewer hours.”208
0
4
8
12
16
20
0 10 20 30 40 50 60
U
nd
er
em
pl
oy
m
en
t r
at
e
(p
er
c
en
t)
Proportion employed part-time (per cent)
Accommodation and food services
Retail trade
Health care and social assistance
Administrative and support services
Other services
Mining
Electricity, gas, water
and waste services
[2013] FWCFB 4000
70 Chapter 4—The Economy
Small and medium-sized businesses
[258] Although there is no specific reference to small and medium-sized business in
the minimum wages and modern awards objectives, the general object of the Act is
directed to providing a balanced framework for cooperative and productive workplace
relations that promotes national economic prosperity and social inclusion for all
Australians by, amongst other things, acknowledging the special circumstances of
small and medium-sized businesses.209
[259] 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 for two reasons.
[260] First, small businesses are a significant part of the Australian economy. A
research paper by the RBA, Small Businesses: An Economic Overview (RBA research
paper),210 which mainly defines small businesses as those employing fewer than 20
employees, reports that:
around 95 per cent of the two million actively trading businesses in Australia
in 2011 were small businesses;
around two-thirds had no employees, one-quarter had up to four employees
and one-tenth had between five and 19 employees; and
small businesses accounted for almost half of employment in the private non-
financial sector in 2009–10 and accounted for 35 per cent of production, with
the difference indicating relatively high labour intensity.
[261] Second, award reliance is higher in those small businesses with employees than
for businesses generally. In May 2012, 38.2 per cent of employees of businesses with
less than 20 employees were paid by award only, compared with 16.1 per cent of all
employees.211 A high proportion of small-business employees work in the award-
reliant industries, although the largest numbers work in the low award-reliant
industries of Construction and Professional, scientific and technical services.
[262] The RBA research paper noted some characteristics of small business:
owners of small businesses use a range of different legal structures for their
businesses—in order of prevalence: companies, sole proprietors, partnerships
and trusts;
small businesses are slightly more prevalent in regional areas, with 35 per cent
of small businesses based outside of capital cities, compared to 33 per cent for
medium to large businesses;
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Chapter 4—The Economy 71
there is significant turnover in the population of small businesses, with the
rate of entry and exit steadily declining with business size;
small businesses tend to have a higher risk/return profile than larger
businesses, reflected in a wide variation in revenue and profitability; and
small businesses are less likely to have debt than large businesses.
[263] The RBA research paper also noted that over recent years small businesses
appear to have found economic conditions more challenging than large firms, partly
reflecting differences in the industries in which they operate. It also suggested that an
inability to take up opportunities associated with the mining investment boom due to
inadequate scale and the lack of growth in business credit over recent years might
partly explain the relatively weaker conditions for small business reported in business
surveys over recent years.
[264] Very little direct evidence was put to us in relation to the economic
circumstances confronting small business and the extent and manner in which they
operate differently in respect to them. ACCI relied on evidence drawn from its 2013
Minimum Wage and Small Business Surveys and the RBA research paper. AFEI
relied on National Australia Bank survey results.212 ACCI, ABI and R&CA also
submitted ABS data in relation to the income of small business owners. However,
there is no evidence to suggest that the economic conditions for small business are
materially different for businesses generally within the industries in which they
operate, as reflected in aggregate and sectoral economic data.
[265] As discussed at paragraph [438], given the methodology of the ACCI surveys,
to the extent it is explained, we see the survey material as anecdotal information for
those ACCI members who chose to respond to the survey, rather than of evidence
representative of employers within the economy generally. In any case, the
information provided by small business members is limited. The results are not
disaggregated for award-reliant businesses.
[266] The ACCI small business survey results compared 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. Similar comparative
information was contained in the AFEI submissions by reference to National Australia
Bank surveys213 and a research paper by the RBA relied on by ACCI in respect to
National Australia Bank and Sensis surveys.214 They show a slightly less positive
response by small business respondents. Less positive responses by small-business
respondents appears to be a consistent outcome of the survey since 2009 (and over a
longer period in respect to some variables considered in the ACCI survey). This
suggests that the less positive response reflects particular features of small business
and differences in the industries in which they operate215 rather than differences in the
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72 Chapter 4—The Economy
impact of the changed general economic conditions on small businesses over the past
year.
[267] The RBA research paper also noted ABS data216 which show that turnover of
businesses is significant within the population of small businesses, with the rate of
entry and exit steadily declining with business size. The relatively high turnover of
small businesses has occurred over many years and is not a sign of a recent
deterioration of economic conditions. The ABS data show more businesses employing
1–4 employees at the start than the end of each of the past four years, and more
businesses employing 5–19 employees at the start than the end of each of the past two
years, with more entries than exits in these categories of small businesses.
[268] R&CA, ACCI and ABI argued that the Panel’s consideration of the needs of the
low paid should include small business employers217 and “the impact of a pay increase
on low-paid business owners and their family.”218 Small business employers were said
to be receiving take-home pay significantly below wage and salary earners219 or to be
subject to an income distribution that is not that different from the income distribution
for employees.220
[269] We do not accept that low-paid business owners are low paid for the purpose of
assessing the relative living standards and needs of the low paid.221 It is clear from the
statutory context that the requirement to take into account the relative living standards
and the needs of the low paid is for the purpose of maintaining a safety net of fair
minimum wages (s.284(1)) and providing a fair and relevant minimum safety net of
terms and conditions (s.134(1)). In that context, the requirement to have regard to the
relative living standards and the needs of the low paid is directed to employees subject
to award minimum wages or the NMW. Small business employers are not, in that
capacity, subject to the minimum award rates determined by the annual wage review
and are not appropriately considered as amongst the low paid whose needs and relative
living standards the Panel are required by the modern awards and minimum wages
objectives to consider. However, we are required to have regard to the likely impact of
our decisions on small-business employers, as businesses, under other elements of the
modern awards and minimum wages objectives.
[270] We would indicate, in any case, that the information put to us in relation to the
incomes of small business employers does not permit an accurate comparison with
minimum wages.
[271] Various data sources were relied on by the R&CA, ABI and ACCI:
R&CA relied on the ABS Estimates of Personal Income for Small Areas222
publication which disclosed average income from wages and salaries in excess
of that from own unincorporated business.
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The ABI submission used 2011 Census data to show that the income
distribution for owner-managers is not that different from the income
distribution for employees.223
ACCI relied on the ABS Data from the Counts of Australian Business
Operators224 publication for 2006 and submitted that it shows that the
individual incomes of roughly 40 per cent of small business operators are
actually below or only just above the NMW.225
ACCI also relied on the ABS Persons with Main Source of Income from Own
Unincorporated Business publication,226 and submitted that the average
personal income derived from an individual’s own unincorporated business
was only $38 259 in the 2005–06 financial year.
ACCI, in their submission in reply, cited data from a 2012 Reserve Bank of
Australia report on the profitability of small businesses in 2009–10.
[272] The data relied upon by R&CA and the second source of data relied on by
ACCI “excludes the income of working directors/owners of incorporated businesses
who are classified as employees and consequently their income is included under wage
and salary income.”227 The data drawn from census information (the ABI data and the
first source of data relied on by ACCI) relates to persons aged 15 years or more who
were asked if they had a full-time or part-time job at any time in the week leading up
to the Census,228 and included both junior and part-time employees. In order to make
the employee and the owner-manager income distributions comparable, it would be
necessary to ensure that each includes only adult full-time workers.
[273] The ACCI submission, based on the Counts of Australian Business Operators
publication for 2006, proposed that the individual incomes of roughly 40 per cent of
small business operators are actually below or only just above the NMW. However,
the proposition is flawed because it involves a comparison of 2006 census data with
the current minimum wage of $606.40, rather than with the minimum wage of $484.40
that prevailed at the time of the census.
[274] The various data have serious limitations as indicators of the relative and
absolute income of small-business employers. They do not distinguish between those
who have employees and owner-operators who do not (and hence would not be
affected by changes to minimum wages). None of the information identifies the
individual income of award-reliant wage and salary earners. Finally, it cannot be relied
upon by itself to assess the income of small-business employers relative to that of
award-reliant wage and salary earners.
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74 Chapter 4—The Economy
[275] Further, even if data was available that permitted valid comparisons of the
relative living standards and needs of award-reliant employees and the self-employed,
there remain questions about the equivalence of these two forms of employment for
our purposes. People choose self-employment for a variety of reasons including: a
desire for autonomy; the possibility of making substantial profit if successful; control
over the total and timing of hours worked; and the scope for creativity and
inventiveness. It is likely that quality of life considerations play a substantial role in
the decision to become and to remain self-employed for a subset of this group. In this
case, lower incomes are offset by other advantages. The self-employed also have a
capacity to build up and draw on their business assets in order to offset fluctuations in
current income. Some self-employed people (for example many farmers) also have
substantial wealth even if their current income might be low. The self-employed have
also chosen a form of employment that involves greater variability in income than
does wage employment. At any moment in time, this implies that some will have
relatively high incomes and others will have relatively low incomes. A proper
comparison would require data for individual business owners that shows their income
over a number of years.
The award-reliant industries
[276] This section considers the circumstances of industries that employ a relatively
high proportion of award-reliant workers based on the Australian and New Zealand
Standard Industrial Classification (ANZSIC) 2006. The specific consideration of these
industries does not diminish the importance and influence of minimum wages on other
industries.
[277] 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 EEH
publication,229 conducted in May every two years. It is a relevant measure in assessing
the impact of annual wage review decisions because they will impact directly on the
wages paid to award-reliant employees.
[278] The proportion of employees earning the award rate of pay has fallen over time,
with estimates showing this proportion decreasing steadily from 67 per cent in 1990 to
around 16.5 per cent in 2008.230 Table 4.6 shows the proportion of award-reliant
employees within each industry in 2008, 2010 and 2012. The proportion of award
reliance has been fairly steady over this time and was 16.1 per cent in 2012 (Table
4.6).
[279] The levelling out of the decline in the aggregate level of award reliance since
2008 most probably reflects the approaching or reaching of a residual level of award
reliance, although it is a little too early to reach such a conclusion with conviction. The
industry level information also suggests that it is too early to draw a firm conclusion.
In those industries in which the highest proportion of employees are award reliant,
such as Accommodation and food services, the proportion of award-reliant employees
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continued to fall in 2012, although at a lower rate (Table 4.6). In the Administrative
and support services industry, the decline in award reliance has continued at the same
rate over each of the last two year periods. In the Retail trade and Health care and
social assistance industries, the level of award reliance increased over the two years to
2012, following a fall in the two years to 2010. In a further variant, in the Rental,
hiring and real estate services and Manufacturing industries, award reliance rose in the
two years to 2010, but declined in the two years to 2012.
Table 4.6: Award reliance by industry—2008, 2010 and 2012231
2008 2010 2012
(%) (%) (%)
All industries 16.5 15.2 16.1
Mining 1.2 1.9 0.6
Manufacturing 12.2 14.6 11.3
Electricity, gas, water and waste services 5.4 3.1 4.3
Construction 9.1 10.0 10.6
Wholesale trade 9.0 10.9 8.1
Retail trade 28.9 22.3 25.6
Accommodation and food services 50.3 45.2 44.8
Transport, postal and warehousing 8.3 8.0 7.3
Information media and telecommunications 5.6 5.7 5.7
Financial and insurance services 2.2 2.1 4.7
Rental, hiring and real estate services 20.2 22.8 20.9
Professional, scientific and technical services 5.4 4.2 6.0
Administrative and support services 33.9 31.4 29.0
Public administration and safety 3.6 1.9 6.9
Education and training 8.4 5.1 6.8
Health care and social assistance 17.2 17.1 19.0
Arts and recreation services 14.2 15.1 19.7
Other services 25.4 27.2 24.6
Note: EEH data using ANZSIC 2006 begins from 2008. Award reliance is the proportion of employees in an industry that
are paid the award rate.
[280] Unpublished ABS data provided by the ACTU232 also show:
a disproportionately high number of community and personal services
workers, sales workers and labourers occupations are award reliant;233
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76 Chapter 4—The Economy
the occupational subgroups that account for the largest proportion of award-
reliant workers are sales assistants and sales persons (15.2 per cent of the
total), hospitality workers (10.3 per cent), cleaners and laundry workers (7 per
cent) and carers and aides (5.7 per cent). Eight occupational subgroups
account for 54.5 per cent of all award-reliant employees; and
over 10 per cent of award-reliant workers work as professionals (8.8 per cent)
or managers (1.8 per cent).
[281] The award-reliant industries are differently identified in the submissions before
us, reflecting two broad approaches:
Identification of those industries within which the highest number of award-
reliant employees (and the highest proportion of all award-reliant employees)
are found. This is the position taken by the ACTU and ACCI who identify the
industries as the Accommodation and food services; Retail trade; Health care
and social assistance; and Administrative and support services industries.234
Identification of those industries in which the highest proportion of employees
are award reliant—an approach taken by the Australian Government, AFEI
and ACCER.235 These identify the Accommodation and food services;
Administrative and support services; Retail trade; Other services; and Rental,
hiring and real estate services industries. Although the Australian Government
and AFEI identify a smaller number of industries (excluding the Rental, hiring
and real estate services industries) as does ACCER (which also excludes the
Other services industry).
[282] There is substantial overlap between the two approaches: the Accommodation
and food services; Retail trade; and Administrative and support services industries are
included within the award-reliant industries on either approach.
[283] Both approaches are valid, each providing a different perspective depending on
the purpose of the enquiry. The industries within which the highest proportion of all
award-reliant employees are found provides a focus for considering those industries in
which the minimum wage outcomes will directly affect the largest numbers of
employees. The industries in which the highest proportion of employees are award
reliant provide a better focus for considering the impact of review decisions and
minimum rate increases on employers in those industries, given that any impact would
be expected to be more pronounced within industries where a greater proportion of
employees are award reliant.
[284] Consistent with the approach taken by the Panel in its 2011–12 Review
decision, we have identified the award-reliant industries for the purpose of Table 4.7
on the basis of the five industries within which the highest proportion of employees,
within the industry, are reliant on award rates of pay—Accommodation and food
services; Administrative and support services; Retail trade; Other services; and Rental,
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hiring and real estate services. Data is shown in respect of output, profitability, wages
growth and employment. We believe that if the industry specific information is to shed
light on the impact of minimum wage increases, it is in these industries where the
greatest practical effect on economic outcomes such as employment growth and
profitability might be found.
Table 4.7: Economic indicators by award-reliant industries (data for 2011–12
in brackets)236
Accommodation
and food
services
Administrative
and support
services
Other
services
Retail
trade
Rental,
hiring and
real estate
services
All
Industries
Percentage of
employees reliant
on award wages
2012
44.8
(45.2)
29.0
(31.4)
24.6
(27.2)
25.6
(22.3)
20.9
(22.8)
16.1
(15.2)
Gross value added:
percentage growth
over the year to
December quarter
2012
0.0
(2.8)
3.7
(–5.9)
–6.2
(4.2)
3.1
(1.8)
4.2
(1.9)
2.5
(2.7)
Company gross
operating profits:
percentage growth
over the year to
December quarter
2012
–0.8
(12.8)
–19.0
(–58.3)
12.7
(–44.3)
3.1
(7.3)
–0.3
(16.1)
–7.6
(2.2)
Wage Price Index:
percentage growth
over the year to
March quarter 2013
2.4
(3.4)
3.3
(3.4)
3.4
(3.9)
2.7
(3.0)
2.4
(4.2)
3.2
(3.6)
Percentage annual
wage growth under
new collective
agreements
December quarter
2012
3.4
(3.3)
3.8
(4.4)
3.7
(4.4)
3.0
(3.6)
2.5
(4.0)
3.4
(3.7)
Employment:
percentage increase
over the year to
February 2013
7.9
(–7.4)
–2.0
(–1.2)
–5.0
(6.4)
0.9
(–2.8)
–11.4
(11.5)
1.7
(0.2)
Hours worked:
percentage increase
over the year to
February 2013
4.8
(–7.8)
–1.4
(–2.2)
–6.5
(7.6)
–0.7
(–1.4)
–6.9
(13.5)
1.4
(0.1)
[285] An observation which arises from the table is that the outcomes between the
industries for any one indicator and the outcomes for different indicators within an
industry show considerable volatility from year to year, particularly for gross value
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78 Chapter 4—The Economy
added, gross operating profits and employment and hours worked. No clear or
consistent picture is evident. We have included in Table 4.7, in brackets, the figures
for the equivalent table in the 2011–12 Review decision.237 They show that the
volatility extends between years, with marked fluctuation between the two years in
some indicators for a particular industry.
[286] With respect to the most recent year, the table shows that over the most recent
12 months:
three of the five industries had annual growth in gross value added above the
all industries average of 2.5 per cent, namely Administrative and support
services (3.7 per cent); Retail Trade (3.1 per cent); and Rental, hiring and real
estate services industries (4.2 per cent);
growth in all industry company gross operating profits was strongly
influenced by a decline in mining industry profits. For non-mining industries,
the average growth was 2.4 per cent. Both Other services and Retail trade
industries had higher growth rates than this non-mining average, while the
other industries had falls in their profits;
growth in the WPI in the Other services and Administrative and support
services industries was above the all industry average of 3.2 per cent, with
lesser growth in each of the other three industries;
growth in bargained wage outcomes was at or above that of the all industry
average of 3.4 per cent in the Accommodation and food services;
Administrative and support services; and Other services industries and below
that rate in the Retail trade and Rental hiring and real estate services
industries;
employment growth, measured by persons employed or hours worked, was
weaker than average for all industries except Accommodation and food
services, where it has grown significantly in excess of that average level on
both measures; and
in the Accommodation and food services industry, output and gross operating
profits have been weak, but employment outcomes were strong on either basis
and bargained wage outcomes matched the economy-wide average. In
contrast, in Retail trade output and gross operating profits growth were
relatively strong, whilst wage growth was relatively low, and employment
growth, on an hours worked basis, was weak.
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[287] The diversity in outcomes between the award-reliant industries, and within the
Accommodation and food services, Retail trade and Other services industries, suggests
that the most award-reliant industries do not face a uniformly difficult economic
environment, although it is clearly challenging for some. It also suggests that factors
other than recent minimum wage increases have driven outcomes within those
industries. There is no pattern of outcomes which suggests that recent minimum wage
increases have significantly impacted on the economic performance of the award-
reliant industries.
Outlook
[288] The 2013–14 Budget forecasts global conditions to gradually improve as
growth in emerging market economies picks up and the United States continues to
recover. Recent growth in China is expected to have continuing spillover effects to the
rest of Asia, with ongoing growth in emerging economies leading to robust growth for
Australia’s major trading partners. Forecasts are for global growth to continue to be
below trend in 2013, before improving to around trend in 2014. A key risk to the
international forecasts is for a re-escalation of the euro area crisis, with a recovery
expected to be delayed and weaker than previously anticipated.
[289] Table 4.8 shows that the economic growth rate of Australia’s major trading
partners is expected to increase and outpace world GDP growth over the forecast
period, reflecting growth in emerging Asian countries. In contrast, the International
Monetary Fund is forecasting continuing subdued growth in the advanced economies.
The growth in Australian GDP is expected initially to approximately match that for the
world, and exceed that for the advanced economies, before dropping off slightly in
later years.
Table 4.8: Budget forecasts—International GDP growth238
2012 2013 2014 2015
(outcomes) (forecasts) (forecasts) (forecasts)
World 3.2 3¼ 4 4
Major trading partners 4.1 4½ 4¾ 4¾
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.
[290] Australian GDP is forecast to increase by 3 per cent in 2012–13, 2¾ per cent in
2013–14 and 3 per cent in 2014–15,239 in excess of GDP growth for other advanced
economies. The International Monetary Fund anticipates real GDP growth for
advanced economies of 1.2 per cent in 2012 and 2013, increasing to 2.2 per cent in
2014.240
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80 Chapter 4—The Economy
[291] The 2013–14 Budget forecasts the future solid Australian economic growth to
be driven mainly by non-rural commodity exports and household consumption. The
terms of trade are expected to decline in 2013–14 and 2014–15 as global supply
increases, placing downward pressure on non-rural commodity prices. Investment in
resources is expected to peak at a record high in 2013–14 and remain elevated.
Although it is anticipated to detract from growth after it reaches its peak, this
investment will support an expansion in production and exports.
[292] Outside of the resources sector, an increase in growth is expected to be
underpinned through growth in household consumption, a recovery in the housing
sector and a modest recovery in business investment. Strong growth in Asia is also
expected to create new export opportunities as a growing Asian middle-class increases
its demand for goods and services. However, conditions are anticipated to remain
uneven, reflecting the magnitude of the structural change task facing the Australian
economy.
[293] The 2013–14 Budget forecasts the profit share to decline due to falling
commodity prices and competitive pressures from the high Australian dollar. The
gross operating surplus is forecast to decline in 2012–13 before increasing in the
following years, although remaining below its 20-year average growth rate of 7 per
cent. Growth in the compensation of employees over 2013–14 and 2014–15 is
expected to reflect the below-trend outlook for wage and employment growth.
[294] Employment growth is expected to increase as growth in the non-resources
sector picks up and the participation rate is expected to remain around 65 per cent.
However, the unemployment rate is forecast to increase slightly due to the high
Australian dollar and the transition to a less labour intensive production phase in the
resources sector. As a result, wages growth is expected to be subdued and slightly
below trend and inflation is forecast to be contained in the bottom half of the RBA’s
target band of 2–3 per cent.
[295] A key risk to the domestic economy is that the transition to the new drivers of
growth will be less than seamless, with the high Australian dollar weighing on firms in
the trade-exposed sectors of the economy. Domestic economic forecasts from the
2013–14 Budget are provided in Table 4.9.
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Table 4.9: Domestic economy forecasts—Growth rates(a) 241
2011–12
outcomes(b)
2012–13
forecast
2013–14
forecast
2014–15
forecast
Demand and output(c)
Household consumption 3.2 2½ 3 3
Private investment
Dwellings –3.6 ½ 5 5½
Total business investment(d) 20.8 10½ 4½ 1
Non-dwelling construction(d) 37.6 18½ 5 –2½
Machinery and equipment(d) 10.1 1½ 2½ 5
Private final demand(d) 6.2 4 3½ 2¾
Public final demand(d) 2.3 –½ 0 ½
Total final demand 5.3 3 2¾ 2¼
Change in inventories(e) –0.1 0 0 0
Gross national expenditure 5.2 3 2¾ 2¼
Exports of goods and services 4.7 7 6½ 7
Imports of goods and services 11.8 5 6 3
Net exports(e) –1.3 ½ 0 1
Real gross domestic product 3.4 3 2¾ 3
Non-farm product 3.3 3 2¾ 3¼
Farm product 9.0 –8 4 0
Nominal gross domestic product 5.0 3¼ 5 5
Other selected economic measures
External accounts
Terms of trade 0.4 –7½ –¾ –1¾
Current account balance (per cent of GDP) –2.7 –3½ –3¾ –3¼
Labour market
Employment(f) 1.2 1¼ 1¼ 1½
Unemployment rate (per cent)(g) 5.1 5½ 5¾ 5¾
Participation rate (per cent)(g) 65.3 65 65 65
Prices and wages
Consumer Price Index(h) 1.2 2½ 2¼ 2¼
Gross non-farm product deflator 1.7 0 2 1¾
Wage price index(f) 3.7 3½ 3½ 3½
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 78 and a United States dollar exchange rate of around 103 US cents. Interest
rates are assumed to move broadly in line with market expectations. World oil prices (Malaysian Tapis) are assumed to
remain around US$106 per barrel. The farm sector forecasts are based on an assumption of average seasonal conditions.
(a) Percentage change on preceding year unless otherwise indicated.
(b) Calculated using original data unless otherwise indicated.
(c) Chain volume measures except for nominal gross domestic product which is in current prices.
(d) Excluding second-hand asset sales between the public sector and the private sector.
(e) Percentage point contribution to growth in GDP.
(f) Seasonally adjusted, through-the-year growth rate to the June quarter.
(g) Seasonally adjusted rate for the June quarter.
(h) Through-the-year growth rate to the June quarter.
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82 Chapter 4—The Economy
[296] The RBA expects growth over 2013 to be below trend (Table 4.10) which
reflects the approaching peak in mining investment, ongoing fiscal consolidation and
the high Australian dollar. The terms of trade is expected to rise in the June quarter
2013 before resuming its decline. Mining investment is expected to remain elevated,
while business investment outside the resources sector is expected to be modest.
Economic growth in 2013 in Australia’s major trading partners is expected to be
around the average of the last decade before picking up.
Table 4.10: RBA economy forecasts, per cent242
Dec
2012
Jun
2013
Dec
2013
Jun
2014
Dec
2014
Jun
2015
GDP growth 3.1 2½ 2½ 2–3 2½–3½ 2½–4
Non-farm GDP growth 3.4 2¾ 2½ 2–3 2½–3½ 2½–4
CPI inflation 2.2 2¼ 2 2–3 2–3 2–3
Underlying inflation 2½ 2¼ 2¼ 2–3 2–3 2–3
Note: Underlying inflation is calculated by taking the average of the RBA’s weighted median and trimmed mean measures
of inflation. Percentage change for the year-ended shown. Technical assumptions include A$ at US$1.02, Trade Weighted
Index at 77, Brent crude oil price at US$103 per barrel.
[297] Employment and wages growth is expected to continue to moderate and the
unemployment rate is forecast to increase until the middle of 2014. Consumption
spending is forecast to grow at around its long-run average and broadly in line with
real income growth. Inflation is forecast to be subdued in the near term, with headline
inflation expected to be above underlying inflation due to the introduction of the
carbon price, before falling below underlying inflation.
[298] The RBA considers risks to the forecasts to be roughly balanced across most
economies. Given the forecast for moderate employment and wages growth, growth in
labour income and spending could be weaker than expected. Lower inflation could
eventuate if wages turn out to be more responsive to a weaker labour market. Further
falls in the participation rate and less spare capacity could lead to a build-up of wage
and inflationary pressures later in the forecast period.
[299] The DEEWR Monthly Leading Indicator of Employment is based on the
weighted average of a select number of economic and employment indicators. The
indicator was broadly unchanged in May 2013 after falling for three consecutive
months to April 2013 (Chart 4.25). Cyclical employment fell in May 2013 after rising
for three consecutive months.
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Chart 4.25: DEEWR monthly leading indicator of employment243
Structural change in the Australian economy
[300] The economic outcomes noted above have occurred against the background of
continuing structural change within the Australian economy, evident in the strong
growth in the resources and related sectors and more modest outcomes in other sectors
of the economy.
[301] In an October 2012 speech, RBA Deputy Governor Phillip Lowe identified
some of the forces reshaping the Australian economy as:
growth in Asia resulting in high prices for Australia’s commodity and food
exports and a higher exchange rate;
expansion in the resource sector;
change in people’s propensity to borrow to buy assets, especially houses; and
growth in demand for services as incomes grow and the population ages. 244
[302] Most submissions addressed aspects of that structural change.
[303] The ACTU noted large differences between turnover growth in various retail
sub-sectors over the past five years, submitting that the structural change in the pattern
of retail spending helps explain the relatively low rate of growth in overall turnover.245
The ACTU also submitted that the rise in the employment share of the Health care and
social assistance industry, and the falling share of the Retail trade industry is caused by
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
May-03 May-04 May-05 May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13
Cyclical employment Leading indicator
Standard deviations from trend
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84 Chapter 4—The Economy
structural change in the economy, and the timing of the change in these shares is
uncorrelated to changes in minimum wage arrangements.246
[304] The Australian Government noted an ongoing structural shift toward a more
highly skilled and service-based economy, with employment growth driven by more
highly skilled occupations.247
[305] Ai Group submitted that the distribution of employment reflects recent demand
trends more generally within the Australian economy, with manufacturing and retail
coming under intense pressure from the high Australian dollar and changing spending
preferences among Australian consumers; and that the industries that offer the largest
number of low-paid and minimum wage opportunities are showing weak employment
growth or contraction.248
[306] AFEI submitted that the disparity in economic performance and employment
growth continued throughout the past year, with the average employment growth rate
for industries with above 20 per cent award reliance growing by 1.5 per cent,
compared with the all industries average of 2.5 per cent over the decade ending
November 2012.249
[307] ACCI acknowledged the transitional difficulties that will be associated with
managing structural change, with significant segments of industry bearing a
disproportionate burden of the adjustment cost, in some cases to the extent of being
forced to exit from operations that are no longer commercially viable. ACCI noted that
it is futile and expensive to resist the pressures for structural change and contrary to
the broader national interest. ACCI submitted that, whilst structural adjustment in the
economy in response to higher export prices will lead to higher living standards and
expanded opportunities for business in growing industries, at the same time, it is
important to ensure that employment opportunities for the low paid are not limited by
artificially elevated award rates of pay.250
[308] In its reply submission, the ACTU responded that there has never been a
12-month period in which some industries were not contracting in employment terms
and the dispersion in employment growth across industries is around its typical
level.251
[309] In his October 2012 speech, Deputy Governor Lowe discussed how structural
change has been affecting the operation of the Australian labour market. He noted that:
the aggregate unemployment rate remains low, with Australia’s
unemployment rate being one of the lowest among the advanced economies
and the current rate remaining relatively low, having been below its current
5¼ per cent in only four of the past 30 years;
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Chapter 4—The Economy 85
underneath this low and steady unemployment rate, there is a great deal of
movement at the individual worker level, either voluntary or involuntary. In
February 2012, around 2.3 million people—almost one-fifth of the total
number of employed people—were newly employed, having been in their
current job for less than a year. While a little under half of these were starting
work for the first time or were not previously working, 1.2 million people
moved from one job to another;
there is some evidence that the changes taking place have led to a higher rate
of job turnover in recent times than has been the case for the past two decades;
for a number of years now, there has been a high dispersion in employment
growth across industries, with especially strong percentage growth in the
mining sector. Since 2007, around 300 000 net new jobs have been created in
the healthcare sector, 200 000 jobs in professional and scientific services and
around 130 000 jobs in each of the mining and education sectors, whilst the
number of manufacturing jobs has declined by around 70 000, and the number
of jobs in retailing is largely unchanged;
the significant variation in employment growth across industries has not led to
greater variation in the unemployment rates across the country; and
the structural changes that have taken place across the economy have also
altered the relative wages in different industries.252
[310] The disparate growth in employment by industry is illustrated by Chart 4.26.
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86 Chapter 4—The Economy
Chart 4.26: Employment growth for selected industries—Cumulative growth
since February 2007253
Note: Chart re-produced and updated to include data since published.
[311] The Deputy Governor concluded that:
“The overall impression from these various facts and figures is that the labour market
has coped reasonably well with the significant changes taking place in the Australian
economy. While there have been shortages of skilled workers in some areas, these
have been fairly limited. Workers have moved in large numbers to the industries that
are benefiting from growth in Asia and the increasing domestic demand for services.
They have done this at a time of close to full employment and larger divergences in
unemployment rates across the country have been avoided. The adjustment of relative
wages has helped, and this adjustment has occurred without igniting the type of
economy-wide wages blowout that contributed to the derailment of previous mining
booms.”254
[312] A paper by Gruen, Li and Wong255 examined how the dispersion of
unemployment across regions has changed over time, concluding that unemployment
dispersion in Australia has narrowed as the aggregate level of unemployment has
declined, as has occurred in the United Kingdom and the United States.256 They found
that this relationship has held up in Australia over the past 20 years amid significant
structural changes in the economy. They found that unemployment dispersion in
Australia narrowed over the past decade and, while the dispersion picked up
moderately during the global financial crisis, it remained low and has declined
since.257
-100
-50
0
50
100
150
200
250
300
350
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13
'000s
Mining
Manufacturing
Retail trade
[2013] FWCFB 4000
Chapter 4—The Economy 87
[313] In a March 2013 speech, Deputy Governor Lowe observed that the flexible
exchange rate and high value of the Australian dollar, and the increase in household
saving, whilst creating challenges for many businesses, have helped maintain domestic
balance during the once-in-a-century investment boom. The Deputy Governor stated:
“So, somewhat ironically, two of the factors that have created difficult challenges for
many businesses over recent years—the high exchange rate and increased household
savings—are the very same factors that have been critical to Australia's good
macroeconomic performance. Importantly, these factors have helped Australia to
digest a huge investment boom without generating substantial imbalances in the
economy. At the same time, these factors have prompted significant structural change
which, while difficult, is critical to achieving higher overall productivity and higher
living standards.”258
[314] He concluded that:
“the Australian economy has adjusted pretty well to some very large shocks in the
global economy over recent years. We have been able to maintain a high degree of
internal balance, while at the same time accommodating significant change in the
structure of the economy. Businesses right across the spectrum, including in the
manufacturing sector, are adjusting to the new realities. This adjustment is often
difficult, but it does hold out the prospect of higher productivity and higher living
standards.”259
[315] The RBA Bishop et al Paper, examines the impact of the resources boom on the
Australian economy, finding that:
“The overall process of macroeconomic adjustment to the rise in the terms of trade has
occurred relatively smoothly compared with previous episodes; inflation has been
consistent with the target, unemployment has remained relatively low and output has
grown at close to trend rates. One critical element to the adjustment this time around
has been the appreciation of the nominal exchange rate as the terms of trade were
rising. The adjustment has also been helped by the anchoring of inflation expectations
and the operation of the labour market, whereby wage pressures in industries or
regions experiencing strong conditions associated with the resources boom have not
spilled over to parts of the economy experiencing weaker conditions.”260
[316] It remains necessary to have regard to structural change occurring with the
Australian economy when viewing aggregate and sectoral economic performance in
the recent past and into the future. In this context, it is appropriate to recognise that
some sectors in the Australian economy face more difficult trading conditions than
aggregate data suggest. Equally, it is necessary to note that the process of adjustment
to structural change and, in particular, the rise in the terms of trade has occurred
relatively smoothly, with the aggregate unemployment rate remaining at historically
low levels and without unusual divergences in unemployment rates across the country
or inflationary pressures. The view of the Deputy Governor of the Reserve Bank, as
cited above, that changes in relative wages have assisted the process of adjustment to
structural change is a relevant factor for the Panel to take into account.
[2013] FWCFB 4000
88 Chapter 4—The Economy
[317] In giving effect to the various statutory considerations which we must take into
account, we have had regard to the aggregate economic data and to available sectoral
information, with specific consideration of the circumstances of the award-reliant
industries. We have also taken into account the different circumstances between
industries, and sectors within industries, and the differential impact upon them of
structural change. But it is important to appreciate that the fixation of minimum wages
cannot be based principally on the position of those sectors facing the most difficult
economic circumstances, given the range of statutory considerations which we are
required to take into account and the inevitable differential impact of structural
change.
[318] Whilst care should be taken to avoid minimum wage increases at a level which
might seriously exacerbate the difficult circumstances of those businesses adversely
affected by structural change, it is not appropriate to fix minimum wages with a view
to sheltering such businesses from the process of, and pressures for, structural change
within the economy. Such an approach would be futile in any case. The modest impact
of minimum wage increases at the levels arising from the annual wage review is not a
major force in the process of structural change within the economy. Other forces are
far more significant in that regard than modest changes in minimum wages.
[319] In the context of structural change within the economy, minimum wage fixation
cannot focus primarily on those sectors whose economic performance is below
aggregate outcomes. There are sound economic reasons to avoid such a focus, in
addition to the preference for consistent minimum rates across all modern awards
within the legislative framework.261 Consideration of differential increases or timing of
minimum wage increases in relation to individual employers or specific industry
sectors in exceptional circumstances should be directed to addressing temporary issues
and temporary relief from minimum wage increases, rather than to seek to impede the
ongoing process of structural change in the economy.
Conclusion
[320] Economic conditions over the past year have remained reasonably strong,
particularly in the context of economic conditions in other OECD countries. The
outlook remains favourable, with the Australian economy expected to continue
outperforming most of the developed world, albeit with some moderation of growth
forecast over the next year. The rapid growth and evolution of the resources sector and
the continuing shift to demand for services will continue to cause strains for other parts
of the economy.
[321] Real GDP grew by in excess of 3 per cent over the past year. Labour market
conditions, although softer, remain sound, with continuing low levels of
unemployment and continuing high levels of labour force participation. Employment
grew by 1.4 per cent over the year to April 2013, but more slowly than the labour
force, resulting in a slight increase in the unemployment rate. Some softness is
[2013] FWCFB 4000
Chapter 4—The Economy 89
reflected in the lesser growth in total hours worked (0.8 per cent) than employment,
continuing high levels of youth unemployment and a decline in the full-time
employment of adult men.
[322] Following earlier volatility, annual inflation has been subdued over the past
year, at around 2.5 per cent per annum on all CPI based measures over the year to the
March quarter 2013 and lower still using the LCI measure. Inflation remains
comfortably within the RBA target range. Wages growth, reflected in the WPI and
bargaining outcomes, has moderated, growing at their lowest rate for a decade
(excluding the global financial crisis impact in 2008). There was a substantial lift in
labour productivity and profits in the non-mining economy have risen. Real unit labour
costs have risen, as a result of a fall in the price index, rather than higher rates of
compensation of employees.
[323] On all measures, labour productivity increased over the year to the December
quarter 2012. Although short-term measures of productivity should be interpreted with
some caution, the recent improvement in labour productivity, if sustained, could
provide the capacity to address the declining relative position of the low paid and for
them to share in increasing community living standards.
[324] Looking beyond the aggregate position, structural change continued to exert a
major effect on economic outcomes, with considerable variation in economic
indicators between industry sectors. That variation is reflected in differential output
and employment growth, with particular pressures evident in relation to trade-exposed
sectors not benefitting from strong growth in the resources sector. The diversity in
outcomes in respect of output, profits, employment and wages between and within the
award-reliant industries suggests that factors other than recent minimum wage
increases have driven outcomes within those industries.
[325] There is continuing evidence that, whilst difficult for some employers, the
economy has responded relatively well to the significant structural change evident in
recent years. There has been a continuing low aggregate unemployment rate, an
absence of increased variation in the unemployment rates across the country, the
accommodation of variation in labour demand through labour mobility and changes in
relative wages, and an absence of inflationary pressures or wages pressures in the non-
resources sectors of the economy.
[326] The outlook for the Australian economy remains favourable, with solid growth,
relatively low unemployment and continuing moderate inflation anticipated in the near
future. Global conditions are expected to gradually improve as growth in emerging
market economies picks up and the United States continues to recover, although
continuing risks from the euro zone remain.
[327] GDP growth is expected to ease to slightly below trend growth of 2¾ per cent
in 2013–14, before resuming at 3 per cent growth in 2014–15. Nominal GDP growth is
expected to remain subdued, reflecting the falling terms of trade and the effect of the
[2013] FWCFB 4000
90 Chapter 4—The Economy
persistently high Australian dollar on profits and prices in many sectors of the
economy, particularly those that are trade-exposed.
[328] The impetus to growth from business investment, largely driven by the
resources sector, although remaining strong and contributing to aggregate growth, is
expected to ease over the coming two financial years, as the resources boom shifts
from the investment phase into the production and export phase. Greater impetus for
economic growth is expected from housing investment, household consumption and
non-rural commodity exports.
[329] A risk to the domestic economy is that the transition to the new drivers of
growth in the context of a transition away from the investment phase towards
production and exports will be less than seamless, with continuing pressures on
businesses in the trade-exposed sectors of the economy from the high Australian dollar
and some mismatch between employee skills and the skills wanted by employers,
leading to increased structural and/or frictional unemployment.
[330] The labour market is expected to remain sound with employment growing at
recent levels of around 1¼ per cent in 2013–14 and unemployment remaining at
historically low levels, although forecast to rise from the current level of 5½ per cent
to 5¾ per cent in 2013–14. Inflation, which has been at the lower end of the RBA
target range of 2–3 per cent over the past year, abstracting for the carbon price, is
expected to remain subdued at 2¼–2½ per cent in the immediate future. Wages growth
is expected to remain at current subdued levels.
[331] The most award-reliant sectors of the economy continue to have a mixed
experience. Most have had a fall in hours worked and in employment, although rises in
profitability and output have been stronger. The Retail trade industry in particular has
improved in both sales and profitability, while wages growth and employment in this
sector have been well below average.
[332] In summary, the economic outlook remains favourable, notwithstanding some
easing of growth and increase in unemployment in 2013–14. However, the outlook for
growth remains uneven, with continuing pressures on businesses in the trade-exposed
sectors of the economy outside of the resources sector.
[2013] FWCFB 4000
Chapter 5—Superannuation 91
5. Superannuation
[333] During the 2011–12 review a number of parties submitted that we should
announce our intention to take the proposed increases in the Superannuation Guarantee
Levy into account in subsequent reviews. We were not persuaded to adopt such a
course at that time as the proposed increases had not been passed by the Parliament
and, in any event, were not proposed to take effect until 1 July 2013. We indicated that
these matters could be the subject of further consideration in this Review.
The superannuation legislation
[334] The Superannuation Guarantee (Administration) Amendment Act 2012 (2012
Amendment Act) amends the Superannuation Guarantee (Administration) Act 1992 to
increase the superannuation guarantee rate from 9 per cent to 12 per cent. The increase
will 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 2019262
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
[335] The 2012 Amendment Act also amends 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.263
[336] The changes introduced by the 2012 Amendment Act will provide a benefit to
around 8.4 million employees, enabling them to enjoy higher standards of living in
retirement.264 The central issue for the Panel is the extent to which these changes are to
be taken into account in our determination of the level of increase to minimum wages.
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92 Chapter 5—Superannuation
[337] The 0.25 percentage point increment to take effect from 1 July 2013 is the first
increase in the SG rate since the contribution rate reached 9 per cent on 1 July 2002.
The superannuation guarantee scheme commenced in 1992 with the introduction of the
Superannuation Guarantee Charge Act 1992 and the Superannuation Guarantee
(Administration) Act 1992 (the SGC Acts). The SGC 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. At that time, the then AIRC
considered the relationship between mandatory superannuation contributions and wage
setting in national wage case decisions. These decisions were made in the context of a
specific legislative provision (s.90A of the Industrial Relations Act 1988, and later
s.90A of the Workplace Relations Act 1996) that required the AIRC to take the SGC
Acts into account in making a national wage case decision. We consider those
decisions after we set out the views of the parties to these proceedings.
Views of the parties
[338] Many of the submissions made to the Review proposed that the Panel take the
SG rate increase into account in determining the level of increase in minimum award
wages and in the national minimum wage order.265
[339] The Australian Government submitted that “the Panel should have regard to the
0.25 percentage point increase in the SG rate on 1 July 2013 in its AWR decision”. In
the context of the whole economy, the expectation of the Australian Government was
that the SG rate will be “absorbed into future wages growth”.266 Its submission noted
that at the time when the SG rate was increased from 3 per cent to 9 per cent over a
10 year period, commencing in 1992, wages did not increase significantly during the
same period, implying that the cost of the SG rate increases was absorbed into the
overall wage cost, and not borne by employers. In this context, the Australian
Government referred to the average growth in AWE (3.2 per cent over the 10 year
period from 1992; compared to 5.7 per cent in the five years prior to 1992) and to
movements in the wage share of total factor income.267 In its reply submission, the
ACTU noted a number of factors that affected the pace of wages growth during this
period, such as the recession in 1992268 and that AWOTE for full-time adults rose by
an average of 4.1 per cent per annum over the 10 year period that the SG rate increased
from 3 per cent to 9 per cent.269 For our part we acknowledge that a range of factors
impact on wages growth over time.
[340] While Ai Group “welcomed” the view of the Australian Government that the
Panel should “have regard to” the SG rate increases in its annual wage review
decision, Ai Group submitted that “a more direct approach to offsetting the SGR
increase is warranted”270 and proposed that the Panel reduce the “notional wage
increase” it determines by 0.25 per cent to arrive at this year’s minimum wage
increase.271 The National Farmers’ Federation (NFF) advanced a similar proposition. It
proposed that a notional wage increase of $9 per week be discounted by $1.50 on
account of the increase in the SG rate.272
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Chapter 5—Superannuation 93
[341] The ACTU submitted that the Panel should not award a lower increase in
minimum wages than it would have in the absence of the SG rate increase. The ACTU
argued that reducing the minimum wage increase because of the SG rate increase
would be unfair to low-paid workers. It pointed out that non-wage labour costs (in the
private sector) have fallen as a share of total labour costs since 2002–03, with the
largest fall being in worker’s compensation premiums (which fell from 2.3 per cent to
1.7 per cent of labour costs), as shown in Table 5.2 below.
Table 5.2: Labour costs in 2002–03 and 2010–11273
Year Earnings
Non-wage labour costs
Total
labour
costs
Superannuation Payroll
tax
Workers’
compensation
Fringe
benefits
tax
Total
non-
wage
labour
costs
2002–03 233 955.8 20 086.4 7 708.3 6 276.3 2 302.7 36 373.7 270 329.6
86.5% 7.4% 2.9% 2.3% 0.9% 13.5% 100.0%
2010–11 418,055.1 34 956.2 14 982.0 8 244.6 2 730.0
5
60 913.4 478 968.4
87.3% 7.3% 3.1% 1.7 0.6% 12.7% 100.0%
Note: ACTU calculations based on data from ABS, Labour Costs, Australia 2010–11, Catalogue No. 6348.0.
[342] On the basis of this material the ACTU submitted that:
“non-wage labour costs declined between 2002-03 and 2010-11…Award-reliant
workers have received no additional wage increase as a result of the fall in workers’
compensation and other non-wage labour costs. Instead, employers of the low paid
have enjoyed the benefits of this decline in costs…it is unfair to expect low-paid
workers to receive no benefit when non-wage labour costs fall, and yet suffer a
diminution in wage increases when non-wage labour costs rise.”274
[343] Similarly, ACCER argued that it would be:
“unfair and inconsistent with the legislation to discount safety net wage increases on
account of the superannuation changes…this kind of discounting should not be
considered unless it can be demonstrated at a future review that wage increases in the
public sector and in collective bargains in the private sector have been based on the
discounting of increases in superannuation.”275
[344] It is not clear to us how the proposition advanced by ACCER would operate in
practice. As noted in Chapter 8, there has been a gradual decline in wage outcomes in
federal agreements, falling to 3.4 per cent per annum in the December quarter of last
year. But there may be many reasons for such a decline and we doubt it would be
possible to establish a causative relationship of the type proposed by ACCER.
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94 Chapter 5—Superannuation
[345] There was some divergence in the characterisation of the increase in the SG
rate. Some submissions, particularly from employer groups, characterised
superannuation as an employment cost,276 or “impost”,277 with ABI noting that the
Australian Government has acknowledged that increases in compulsory
superannuation contributions are equivalent to real wage increases.278 Ai Group
however characterised superannuation as “part of the social safety net”,279 with the
Australian Road Transport Industrial Organisation (ARTIO) also noting that the
“underlying objective” of superannuation is to ensure all Australians contribute
increasingly to fund their own retirement and in turn reduce the reliance on
pensions.280 Both Ai Group and ABI cited a statement by the Minister for Employment
and Workplace Relations in which the Minister characterised superannuation as a
“deferred wage increase”:
“The truth is that superannuation is part of an employee’s total remuneration. So an
increase in super means an increase in remuneration – or wages by another name. And
so by taxing this portion of wages concessionally, an increase in the super guarantee
from 9 to 12% really means that worker’s receive a deferred wage increase. And they
are better off overall because they pay less tax on the increased portion of their income
that is superannuation.”281
[346] For our part we broadly agree with Ai Group’s characterisation of
superannuation as part of the social safety net. 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”.282 The SG Acts are also an important component of a broader
retirement incomes policy.
[347] We also note that the CCIQ submitted that the Act should be amended “to
require that the phased annual instalment increases to the mandatory superannuation
guarantee levy are offset in any future increase to the NMW”.283 We do not propose to
comment on this proposal. The range of legislated considerations which the Panel is
required to take into account are a matter for parliament.
Minimum wages and superannuation—AIRC decisions
[348] As we have noted, the AIRC considered the relationship between wage fixation
and compulsory superannuation contributions in the national wage cases that followed
the introduction of the SG rate in 1992. At that time there was a specific legislative
requirement that the AIRC have regard to the SGC Acts in making a national wage
case decision.284 There is no similar requirement in the Act in relation to the annual
wage review.
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Chapter 5—Superannuation 95
[349] It is apparent from the AIRC decisions between 1993 and 2002 that the tribunal
had regard to the labour cost increases resulting from increases in the SG rate in
determining the level of increase in minimum wages. This was so even after the
legislative amendments arising from the Industrial Relations Reform Act 1993, which
consolidated the shift to a decentralised wages system. After these changes, minimum
wage fixation took the form of “safety net adjustments”, rather than national wage
cases. As the AIRC noted in its Safety Net Adjustments and Review September 1994
decision:
“While this case is not a National Wage Case, in the sense that term has generally been
understood in the past, it involves a claim for increases in the award safety net of
wages. Accordingly we will treat s90A of the Act as applicable in this case.” 285
[350] The AIRC took increases in the SG rate into account in the September 1994
decision286 and in subsequent safety net adjustment cases.287 In those years when an
arbitrated safety net increase did not coincide with an increase in the SG rate, the
AIRC made an observation to that effect.288
[351] In two of its decisions over this period, the AIRC quantified the increase in
labour costs flowing from an increase in the SG rate. In the Safety Net Review—Wages
April 1998 decision the AIRC said:
“Section 90A requires us to have regard to the operation of the [SGC Acts]. Any
increase in average earnings arising from a safety net increase now will occur at
around the same time that superannuation guarantee contributions will increase by one
percentage point (to 7 percent). The Joint Governments estimated that this increase
will add about 0.4 percent to the national accounts measure of average earnings in
1998 - 1999…”289
[352] A similar observation is made in the Safety Net Review—Wages May 2002
decision:
“We are conscious that the minimum employer superannuation contributions required
by legislation is to rise from 8 percent to 9 percent on 1 July 2002. The impact on
growth in aggregate wages costs is substantially less than 1 percent given that some
employees already enjoy superannuation contributions of this level and the application
of the change to OTE. The increase in superannuation is a factor we have taken into
account in deciding the present applications.”290
[353] While the labour cost impact of a SG rate increase was occasionally quantified,
it is important to observe that at no time did the AIRC specify a direct, quantifiable,
discount in the increase in minimum wages awarded on account of an increase in the
SG rate. The AIRC decisions in the period following the introduction of the SGC Acts
provide no support for the proposition advanced by Ai Group and the NFF that there
should be a direct, quantifiable, trade-off between the level of minimum wage increase
and the increase in the SG rate.
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96 Chapter 5—Superannuation
[354] In its reply submission, the ACTU acknowledged that the legislative framework
at the time required the AIRC to take into account superannuation guarantee
contributions, but argued that it “did not prevent the then-AIRC from awarding
increases in minimum wages that did not result in a large erosion in the relative
earnings of low-paid workers”.291
[355] Ai Group and the NFF submitted that, while currently there is no specific
legislative requirement to take into account the increase in the SG rate, this should not
prevent the Panel from making it a consideration in its deliberations.292 Ai Group also
argued that the objects of the Act, the modern awards objective and the minimum
wages objective, 293 support the view that such increases must be taken into account.
[356] We agree with Ai Group’s submission. Consistent with the objects of the Act,
the modern awards objective and the minimum wages objective, we have had regard to
the SG rate increase which takes effect from 1 July 2013 in our determination of the
level of increase in minimum wages.
[357] While the effect of superannuation legislation on employers and employees is
not specifically identified in the Act as a matter the Panel must consider, we have had
regard to the increase in the SG rate to take effect from 1 July in coming to our
decision in this Review. 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:
the special circumstances of small and medium-sized businesses (s.3(g));
the likely impact of any exercise of modern award powers on business,
including on productivity, employment costs and the regulatory burden
(s.134(1)(f)); and
the performance and competitiveness of the national economy, including
productivity, business competitiveness and viability, inflation and
employment growth (s.284(1)(a)).
[358] In addition to the public benefit achieved by supporting retirement incomes
through the superannuation system, SG contributions also constitute a deferred benefit
to employees and a cost to employers. As we have mentioned, our characterisation of
SG contributions distinguishes them from other non-wage labour costs. It follows that
we do not accept the premise of the ACTU submission. Not every movement in non-
wage labour costs will have a consequential effect on the level of minimum wage
increase determined in a review.
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Chapter 5—Superannuation 97
[359] While we have taken the 0.25 per cent increase in the SG rate into account in
determining the level of increase in minimum wages in the Review, we have not
applied a direct, quantifiable, discount to the minimum wage increase, as proposed by
Ai Group and the NFF. As we have noted, the AIRC decisions following the
introduction of the SGC Acts provide no support for such an approach. Nor does the
current legislative framework support such an approach. In reviewing modern award
minimum wages and the NMW the Act requires us to have regard to a range of
considerations. As we note in Chapter 2, there is a degree of overlap between the
matters specified in the modern awards objective, the minimum wages objective and
the objects of the Act. To the extent that these matters are of direct relevance to the
Review, they may be grouped into three broad categories: economic; social; and
collective bargaining. 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.
[360] 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.
6. Relative Living Standards and the Needs of the Low Paid
[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.
[362] There is a level of support for the proposition that the low paid are those
employees who earn less than two-thirds of median full-time wages.294 This group was
the focus of many of the submissions. The Panel has addressed this issue previously in
considering the needs of the low paid, and has paid particular regard to those receiving
less than two-thirds of median adult ordinary-time earnings and to those paid at or
below the C10 rate in the Manufacturing Award.295 Nothing put in these proceedings
has persuaded us to depart from this approach.
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98 Chapter 6—Relative Living Standards and the Needs of the Low Paid
[363] We note that measures of the low paid that rely on particular points in the
earnings distribution, such as the median, require data on the full distribution of
earnings to calculate. Such distribution is provided by the ABS on an annual basis in
the Employee Earnings, Benefits and Trade Union Membership (EEBTUM) and every
two years in the EEH surveys. These ABS data vary in their sources and definitions in
ways that affect the absolute values of average and median wages (and hence of two-
thirds of these values). Table 6.1 shows the relationship between them.
Table 6.1: Two-thirds of median weekly earnings296
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.
[364] The data show that two-thirds of median full-time wages, on both measures, is
above the C8 rate. We note that two-thirds of AWOTE equates to approximately the
C3 rate.
[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.
[366] The definition of the low paid set out above excludes a substantial proportion of
workers who are paid at the higher levels of award rates.297 In taking into account
relative living standards we are directed to consider the position of award-reliant
employees across the full range of award rates.
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Chapter 6—Relative Living Standards and the Needs of the Low Paid 99
[367] An assessment of the needs of the low paid is more challenging. 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. We accept the point that if the low paid are
forced to live in poverty then their needs are not being met. We also accept that our
consideration of the needs of the low paid is not limited to those in poverty, as
conventionally measured. 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.
[368] We turn first to the characteristics of the award reliant before considering
relative living standards.
Characteristics of the award reliant
[369] The ACTU used unpublished data from the ABS Employee Earnings and Hours
survey (EEH data) for May 2012 to provide further information about the
characteristics of the award reliant.298 The EEH data show:
in excess of 1.5 million employees, or 16.1 per cent of employees, are award
reliant. One third of the award-reliant employees are full-time employees and
two-thirds are part-time employees;
while award-reliant employees are more likely than others to be employed by a
small business or to be casual, almost half are employed in businesses with at
least 50 employees and a majority are in permanent or fixed-term
employment;299 and
award-reliant employees in smaller businesses were more likely to be employed
as casual employees.300
[370] The ACTU301 matched the EEH data to classifications and wage rates in the
Manufacturing Award to provide a distribution of award-reliant employees, by
classification level, as shown in Chart 6.1.
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100 Chapter 6—Relative Living Standards and the Needs of the Low Paid
Chart 6.1: Non-managerial award-only workers by classification level, imputed
using hourly earnings302
[371] Chart 6.1 shows 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, and about half of
award-reliant workers are employed on rates above the C10 level.
[372] The ACTU analysis of award reliance by occupation shows that there were
163 800 managers and professionals employed at award rates in 2012 (10.6 per cent of
all award-reliant employees)303 and of these, 40 per cent were health professionals.
These health professionals are likely to account for a significant portion of those
employed on award rates above the C2(b) rate.
[373] Although caution is required in drawing conclusions as to the precise extent of
award reliance at higher classification levels,304 the ACTU’s analysis suggests a
significant incidence of award reliance higher up the classification scale. Given the
context of this Review, in which we are reviewing modern award minimum rates of
pay, it is appropriate that we take into account the relative living standards of all
award-reliant employees.
254.27
32.18
81.66
124.45
136.27
117.30
73.39
62.83
114.00
29.83
56.37
61.22
33.34
43.29
32.04
285.56
0 50 100 150 200 250 300
Sub-C14
C14
C13
C12
C11
C10
C9
C8
C7
C6
C5
C4
C3
C2(a)
C2(b)
Over C2(b)
Thousands
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Chapter 6—Relative Living Standards and the Needs of the Low Paid 101
Real and relative earnings
Real earnings
[374] 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. We start with an examination of
how the wages of award-reliant employees have changed relative to prices.
[375] Although subject to year-to-year variation, the NMW has increased in real
terms over the past decade. The real value of the NMW increased by 1.5 per cent over
the five years to December 2012, and by 6.9 per cent over the 10 years to December
2012.
Table 6.2: Real minimum wages and percentage changes—2002–2012305
Year Real minimum wage Change
($) (%)
2002 567.05 1.4
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
Note: Real minimum wage calculated from the national minimum wage/federal minimum wage and CPI (original data) from
the December quarter of each year.
[376] ACCER examined outcomes for higher award rates of pay and submitted that it
demonstrated that the “real wages of many safety net workers have fallen since 2000,
with the greatest falls being at the higher end of the low-paid spectrum”.306 ACCER
noted that real wages declined substantially in the period from the December quarter
2005 to the December quarter 2012307 and that the minimum wage freeze of 2009
contributed significantly to this decline over the period.308
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102 Chapter 6—Relative Living Standards and the Needs of the Low Paid
[377] Chart 6.2, taken from the Statistical Report, 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 Award, and the L4
classification rate in the Professional Employees Award 2010.309 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 2009,
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 6.2: Real value of selected minimum wage rates, December quarter
2002–March quarter 2013310
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.
Relative earnings—an international perspective
[378] Ai Group submitted that, corrected for differences in prices and nominal wages,
Australia’s NMW was the third highest in the OECD. It submitted that this supported
the proposition that low-paid employees in Australia had “a relatively high standard of
living compared with those in other rich countries”.311
[379] Ai Group also provided a comparison of minimum wages relative to average
wages (the minimum wage bite), across OECD countries which is shown at Chart
6.3.312
85
90
95
100
105
110
Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12
Index (Dec-02 =
100)
C14 C10 C4 C1 (b) (to Dec-09) L4 (from Mar-10)
Real wage increase
Real wage decrease
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Chapter 6—Relative Living Standards and the Needs of the Low Paid 103
Chart 6.3 Comparison of OECD minimum wage levels relative to average
wages—2012313
[380] Ai Group noted that the NMW is closer to the average wage in Australia than in
all but three other OECD countries, and on this basis it submitted that Australia’s
NMW provides “high relative standards of living in comparison with those of the
broader domestic workforce.”314
[381] In addressing the OECD comparative data, the ACTU focussed on changes in
the relative value of the minimum wage over time. The ACTU submitted that whereas
in 2000, Australia had the second highest “bite” in the OECD, by 2011 this had fallen
to seventh,315 with the fall in the minimum wage bite in Australia being the second
largest of the 24 OECD countries for which data is available.316 It submitted that the
6.9 per cent real rise in Australia’s NMW between 2000 and 2012 was the sixth
smallest increase of the 25 OECD countries for which data is available.317
[382] In our view, data about the Australian minimum wage bite relative to the other
OECD countries is of limited significance in evaluating the relative living standards
45.2
43.0
40.1
28.7
32.1
48.0
34.7
36.3
43.8
33.3
33.5
34.5
18.4
41.6
50.6
36.3
38.8
35.7
47.2
34.7
37.8
38.2
28.4
42.8
36.3
32.9
0 10 20 30 40 50 60
Australia
Belgium
Canada
Czech Republic
Estonia
France
Greece
Hungary
Ireland
Japan
Korea
Luxembourg
Mexico
Netherlands
New Zealand
Poland
Portugal
Slovak Republic
Slovenia
Spain
Turkey
United Kingdom
United States
Latvia
Lithuania
Romania
Per cent
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104 Chapter 6—Relative Living Standards and the Needs of the Low Paid
supported by award wages. However, the minimum wage bite is relevant in relation to
the competitiveness of businesses that pay award rates and compete in global markets.
Relative earnings in Australia
[383] In the context of fixing minimum wages, the requirement to take into account
“relative living standards” requires a focus on the living standards of the award reliant
relative to others in the Australian workforce. The Australian Government noted that
while the NMW has been increasing in real terms (that is above the CPI), the average
earnings of full-time employees has grown at a faster pace.318
[384] Any evaluation of changes in the real and relative level of minimum
classification rates in modern awards must be informed by the fact that prior to the
2010–11 annual wage review, adjustments to award rates of pay had generally been
flat dollar increases or tiered increases. The form of the adjustments awarded has
resulted in a lower percentage rate of growth in higher award rates of pay relative to
lower award rates. This has meant that the higher the rate of pay the more likely it is to
have fallen in real terms and wage relativities in awards have become more
compressed. Generally, the awarding of flat dollar increases has reflected a greater
benefit for the lowest paid arising from a choice between a percentage increase
benefiting the higher levels and a dollar amount benefiting the lower levels,319 most
often in circumstances where no party sought a percentage increase.
[385] Parties were invited to comment on data put forward by the ACTU which
showed that between the June quarter 2005 and the December quarter 2012:
the purchasing power of the NMW/C14 rate fell by 0.3 per cent;
the purchasing power of the C10 rate fell by 2.74 per cent;
the purchasing power of AWOTE rose by 11.7 per cent; and
labour productivity rose by 9.9 per cent.
Note: Purchasing power was measured against the LCI.
[386] No party disputed the above data but several questioned the inferences to be
drawn from it. Ai Group, for example, reiterated its view that capital deepening was a
substantial cause of the rise in labour productivity and there should be no assumption
that wages rise commensurately. They also submitted that the large rise in AWOTE
was due mainly to sharp increases in the wages in selected high-skill areas, and in
mining, and as such this is not relevant to the appropriate level of award wages.
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Chapter 6—Relative Living Standards and the Needs of the Low Paid 105
[387] 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.320 The annual movements in the C14 rate
relative to median weekly earnings of full-time employees is shown in Table 6.3,321
which shows a fall in the minimum wage bite 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 employees322
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.
[388] The Australian Government submitted that this “increasing earning inequality
between employees on the minimum wage and those earning an average income is
likely to lead to a divergence in living standards between these two groups”323 and that
income inequality has increased over the last decade. The ACTU used the Panel’s
statistical report modelling to demonstrate the “large gap between living standards of
workers on average wages and those on minimum wages”.324
[389] Chart 6.4 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
December 2012. 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. Given the flat rate nature of most past increases to
award rates, all rates above C10 have fallen further behind average pay increases than
is displayed for the C10 rate, this was the trend up until the uniform percentage
increases in the 2010–11 and 2011–12 annual wage reviews.
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106 Chapter 6—Relative Living Standards and the Needs of the Low Paid
Chart 6.4: Growth in C14 and C10 relative to AWOTE, AWE and WPI,
cumulative percentage change325
[390] 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
6.5326 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 growth in the real
earnings of even the lowest decile.
100
110
120
130
140
150
160
170
Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12
WPI AWOTE AWE C14 C10
Index (Dec-02 = 100)
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Chapter 6—Relative Living Standards and the Needs of the Low Paid 107
Chart 6.5: Real weekly total earnings (full-time adult non-managerial
employees) by percentile—2002–2012327
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.
[391] In reflecting on the rise in inequality of earnings, the Australian Government
drew attention to the fact that it can have a number of causes and particularly noted the
“significant shift towards higher skilled occupations and rising skill levels in the
workforce over recent decades, reflecting stronger demand for higher skilled
workers.”328
[392] The NMW and modern award minimum rates are rates of pay for the job. In an
economy with a changing structure of jobs, including towards the higher skilled, we
would not expect minimum rates of pay to rise as fast as average earnings.
Nonetheless, the evidence is clear that even the lowest award rates have barely kept
pace with growth in rates of pay for the job 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. The changing structure of earnings has meant 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.
100
105
110
115
120
125
130
135
140
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Index (2002 = 100)
10th percentile 25th percentile 50th percentile
75th percentile 90th percentile Mean earnings
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108 Chapter 6—Relative Living Standards and the Needs of the Low Paid
The tax-transfer system
[393] 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.”329
[394] 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 2008 and 1 January 2013.330 They show increases for each family
type modelled over that period—ranging from 2.8 per cent to 7.7 per cent. Both full-
time singles and full-time two-income couples earning the NMW recorded an increase
of 4.1 per cent. That information is shown at Table 6.4 below.
Table 6.4: Changes in real disposable income by selected household types—
1 January 2008–1 January 2013, selected household types331
Household type Change
(%)
Single person (age 21–54) on NMW 4.1
Two income couple (both NMW) 4.1
Two income couple (both 50% of NMW). Income support is
Newstart allowance
6.1
Single parent on NMW (age 21–54; child age 2). Income support is
Parenting Payment Single
7.7
Single income couple on NMW (ages 21–54; child age 2). Income
support is Parenting Payment Partnered
2.8
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Chapter 6—Relative Living Standards and the Needs of the Low Paid 109
[395] ACCER provided a longer term perspective over the period 2000 to 2012.332 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 (incorporating the
Schoolkids bonus as announced in the 2012–13 budget). Table 6.5 summarises their
key results and shows that tax-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 6.5: Rise in components of income between safety net-dependent and
AWOTE families (couple or sole parent with two children
families)—2000–2012333
NMW C10 AWOTE
Rise in pre tax and transfer wages
% wage increase—pre tax and transfer 51.4 43.5 74.4
Rise in components of disposable income
% wage increase—net of tax 60.6 56.2 75.4
% increase in transfers 84.3 84.3 203.6
% increase in disposable income 67.7 63.9 88.8
[396] The effect of tax-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 (mean) incomes.
[397] 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.
[398] The Australian Government submitted that the NMW should not be used as an
avenue to provide assistance for the carbon price in 2013 due to the specific
compensation provided with the Household Assistance Package.334 ACOSS advanced
a similar view. 335 Some employer group submissions referred to “the
overcompensation” this package provided low-income households.336
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110 Chapter 6—Relative Living Standards and the Needs of the Low Paid
[399] The Panel considered the impact on the CPI of the introduction of a price
on carbon and assistance to employees to compensate for those price effects in the
2011–12 Review decision in which it said:
“We agree with the proposition that this Review should not provide any additional
assistance to compensate for the anticipated price effects associated with the
introduction of a price on carbon. Compensation has already been provided through tax
cuts and transfer payments and further compensation by minimum wage adjustments
would amount to double dipping. It follows that we will, in effect, abstract the
projected 0.7 per cent increase in the CPI from our deliberations.”337
[400] We adopt the same position in this Review.
The needs of the low paid
[401] The needs of the low paid can be assessed by reference to the income of the low
paid considered against an income-based measure of the needs of the low paid.
[402] In the absence of robust contemporary poverty line or budget standards data,
many submissions focussed on measures of the income of the low paid expressed as a
proportion of overall median or average (mean) household disposable income, which
provides, at best, a broad indicator of the extent to which needs of award-reliant
employees are met. Such information is provided in the Statistical Report in the form
of a comparison of disposable income of selected households earning various wage
rates with a benchmark of 60 per cent of median income.338
[403] Several submissions noted the issue of income inequality in the context of
relative living standards. The Australian Government submission, using the latest
available ABS data for real household equivalised income, noted that income
inequality has increased over the last decade (1999–00 to 2009–10), although it
remained relatively constant between 2007–08 and 2009–10.339
[404] The ACTU, ACOSS and ACCER submitted that single-earner couple
households fall below a relative poverty line, adopting the measure of 60 per cent of
median household disposable income. The ACTU submitted that the data show that
whilst minimum wage-reliant households consisting of a single adult or a two-income
couple generally have net incomes that exceed this poverty line by somewhere
between 13 and 27 per cent, single-earner minimum wage-reliant couple households,
with or without children, have net incomes that are around this poverty line.
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Chapter 6—Relative Living Standards and the Needs of the Low Paid 111
[405] The statistical reporting for this year’s annual wage review included data
comparing disposable income for selected household types earning award rates of pay
and AWOTE with a (equivalised) poverty line based on 60 per cent median household
disposable income.340 The ACTU submission used this data pertaining to the C14
worker households and presented it as a chart showing their net household incomes as
a proportion of this poverty line.341 The ACTU pointed out that most households
reliant on minimum wages have an income only slightly above this relative poverty
line (or below it in the case of single-earner couples).342
[406] ACOSS submitted that while the risk of poverty is low for full-time minimum
wage earners in Australia, a high proportion of income-poor families include at least
one wage earner.343 The submission referred to a report ACOSS recently
commissioned from the Social Policy Research Centre at the University of New
South Wales which examined the most recent ABS Income and Expenditure Survey
(2009–10) (Poverty in Australia 2012).344
[407] Poverty in Australia 2012 analyses the risk and profile of poverty amongst a
range of household types using the international standard benchmarks of 50 per cent
and 60 per cent of median income, although it differs from the OECD methodology by
taking into account people’s housing costs as well as their incomes. Housing costs
(rent, mortgage payments and rates) are deducted from income before calculating the
median income on which the poverty lines are based (which reduces the poverty lines)
and deducts each household’s housing costs from their income (which reduces
household incomes). In this way, it compares different households’ ability to meet
their basic living costs apart from housing.345 The report found that in 2010:
When a poverty line of 50 per cent of median disposable income was used (a
relatively low poverty benchmark used by the OECD), 29 per cent of all
people with incomes below this benchmark lived in households for which
wages were the principle source of income.
5.2 per cent of households whose main source of income was wages were
below the poverty benchmark of 50 per cent of median income. The figure
was 8.8 per cent when measured against 60 per cent of median income.
[408] The data in Poverty in Australia 2012 show that of all people with disposable
incomes below 60 per cent of the median, 20.5 per cent were employed full-time,
13.5 per cent were employed part-time and 5.9 per cent were unemployed—the
remainder were not in the labour force. 346 Low-paid employment appears to contribute
more to the total numbers in poverty than does unemployment.
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112 Chapter 6—Relative Living Standards and the Needs of the Low Paid
[409] ACCER reiterated its concern that the modelling shows the “dire position” of
low-income working families.347 Based on ACCER calculations using348 figures for
disposable income of selected households earning at the C14 level from the Statistical
Report, ACCER estimated that in December 2012, a family of four is very much
below the widely recognised 60 per cent of median income relative poverty line, being
only 53.2 per cent of that level.349 We did not receive any evidence as to how many
people might actually be in that position.
[410] We note that ACCER provided a range of information which was either
restricted to a comparison of the position in 2000 and 2012350 or, whilst providing data
for each year from 2000 to 2012, focussed its submissions on a comparison of changes
in the measures shown between 2000 and 2012.351 Whilst such a long-term perspective
is one relevant consideration, a greater focus on and analysis of more recent
information would better assist us in our task.
[411] As noted earlier, many of the submissions addressed the relative poverty line
based on the measure of 60 per cent of median household disposable income, using
data presented in the Statistical Report for this year’s annual wage review in respect of
a range of hypothetical households. Table 6.6 (taken from the Statistical Report)
confirms that when measured against the 60 per cent of median income benchmark, in
December 2012:
The disposable income of most households exceeded the 60 per cent
benchmark, at every award level.
The exception was single-earner couples on the lower award rates, with and
without children, who had disposable incomes near to or even below the
threshold.
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Chapter 6—Relative Living Standards and the Needs of the Low Paid 113
Table 6.6: Comparison of 60 per cent median income poverty lines with
disposable income as a proportion of poverty lines, selected
households earning various wage rates, December 2012352
60% median
income poverty
line
($pw)
Disposable income as proportion of poverty line
(%)
Household type C14 C13 C10 C4 AWOTE
Single adult 488.10 1.14 1.17 1.30 1.49 2.22
Single parent,
one child 634.52 1.27 1.29 1.39 1.52 1.94
Single parent,
two children 780.95 1.17 1.19 1.27 1.38 1.71
Single-earner couple,
no children* 732.14 1.00 1.00 1.02 1.03 1.48
Single-earner couple,
one child 878.57 1.04 1.04 1.06 1.10 1.40
Single-earner couple,
two children 1025.00 1.00 1.00 1.02 1.05 1.30
Single-earner couple,
two children (no NSA) 1025.00 0.89 0.90 0.97 1.05 1.30
Dual-earner couple,**
no children 732.14 1.20 1.21 1.35 1.56 2.34
Dual-earner couple,**
one child 878.57 1.20 1.22 1.31 1.43 1.95
Dual-earner couple,**
two children 1025.00 1.14 1.15 1.23 1.33 1.72
Note: * From 1 July 2011, taxpayers with a dependent spouse born on or after 1 July 1971 were no longer eligible for the
dependent spouse tax offset (DSTO). This measure did not affect dependent spouses with children as they are eligible for
Family Tax Benefit B. This household is assumed to not qualify for DSTO. ** One partner earns 100% of the specified wage
rate, the other earns 50% of this rate. The C14, C13, C10 and C4 are minimum award rates set under the Manufacturing and
Associated Industries and Occupations Award 2010. AWOTE data are expressed in original terms. Poverty lines (PLs) are
based on estimates of median equivalised household disposable income for 2009–10, updated for movements in household
disposable income per head as calculated by the Melbourne Institute of Applied Economic and Social Research, and adjusted
for household composition using the modified OECD equivalence scale.
Assumptions: Tax-transfer parameters as at December 2012. C14 = $606.40 pw, C13 = $624.00, C10= $706.10 and C4 =
$848.20 AWOTE=$1396.00. Children aged 8–12. Disposable income includes all available income transfers (including, for
example, clean energy payments and the Schoolkids Bonus) unless otherwise specified. Households paying sufficient rent to
receive maximum Rent Assistance, where applicable. Single parent households are non-pensioners i.e. not in receipt of
Parenting Payment (Single). Couples on C14, C13 and C10 are eligible to receive proportional rates of Newstart Allowance
(NSA), unless otherwise specified.
[412] A longer term perspective on this information is shown for C14-reliant
households in Table 6.7.
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114 Chapter 6—Relative Living Standards and the Needs of the Low Paid
Table 6.7: Disposable income of selected C14-reliant households as a
proportion of 60 per cent median income poverty lines—December
2008–2012
Disposable income as proportion of poverty line
(%)
Household type 2008 2009 2010 2011 2012
Single adult 1.09 1.16 1.14 1.13 1.14
Single parent, one child 1.20 1.28 1.27 1.26 1.27
Single parent, two children 1.10 1.18 1.17 1.16 1.17
Single-earner couple,
no children* 0.97 1.06 1.03 1.00 1.00
Single-earner couple,
one child 0.99 1.07 1.05 1.03 1.04
Single-earner couple,
two children 0.94 1.02 1.00 0.99 1.00
Single-earner couple,
two children (no NSA) 0.84 0.90 0.89 0.88 0.89
Dual-earner couple,**
no children 1.16 1.24 1.21 1.20 1.20
Dual-earner couple,**
one child 1.14 1.22 1.21 1.19 1.20
Dual-earner couple,**
two children 1.07 1.15 1.14 1.13 1.14
Financial stress and deprivation
[413] Financial stress and deprivation measures involve an element of subjectivity,
and measure the degree to which needs are not being met, rather than directly
measuring needs. However, 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. In this regard, we note that the
authors of the HILDA Survey cautioned that they are not a good overall measure of
living standards.
[414] The Australian Government submission presented financial stress data from
Wave 11 (2011) of the HILDA Survey at the individual adult employee level. It found
that at every level of income, both individuals and households experience financial
stress and that the incidence of financial stress is higher for low-income individuals
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Chapter 6—Relative Living Standards and the Needs of the Low Paid 115
and households than for their high-income counterparts. However, the submission also
pointed out that low income does not necessarily cause financial stress,353 and
provided a table showing that around 64 per cent of low-paid adults354 reported not
experiencing any financial stress based on a summary of the indicators.355 Further, the
submission cited the ABS Household Expenditure Survey (HES) 2009–10 data as
evidence that up to three-quarters of households in the bottom three deciles of
household equivalised disposable income did not report experiencing financial
stress.356
[415] ACOSS suggested that financial stress indicators are a source of data on living
standards, but noted that respondents have different perceptions of the meaning of the
questions used.357 Citing HILDA Survey data presented in the Statistical Report,
ACOSS noted an increase in levels of stress for both low-paid and all employee
households between 2007 and 2011,358 and that in 2011, 33 per cent of low-paid
employees experienced financial stress compared with 17 per cent of all employees.
Seventeen per cent of low-paid employees experienced moderate to high financial
stress compared to 5 per cent of all employees. In both groups, and across most
measures of financial stress, the levels of stress reported have increased between 2007
and 2011.
[416] Information from the HILDA Survey, the ABS General Social Survey and the
ABS HES359 are included in the Statistical Report.360 The data show that:
across each survey, financial stress (as variously measured) is higher for low-
income individuals and households than their high-income counterparts;
the level of financial stress has risen both for all households and for low-paid
households across most measures over the most recent four or five years,
more so for low-income households than for households generally; and
households with only low-paid adult employees showed substantially higher
levels than all households of inability to afford normal family and social
activities (chosen by the ABS as indicators of deprivation).361 These indicators
of social deprivation increased between 2003–04 and 2009–10 for all
households and for low-paid households.
Expenditure
[417] The Statistical Report includes data on expenditure patterns of households with
low-paid workers, using ABS HES data for 2009–10.362 The data show that there is
very little difference in the pattern of spending between all households and those with
only low-paid employees. And while the total income of the two groups differed
substantially (by $745 per week), the total expenditure did not (the difference being
$164).363 When the comparison is confined to households whose principal source of
income is wages and salaries, the absolute differences in income and expenditure
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116 Chapter 6—Relative Living Standards and the Needs of the Low Paid
between the average and the low-income households is higher, but the patterns of
expenditure remain very similar.
Conclusion
[418] In excess of 1.5 million employees, or 16.1 per cent of employees, are award
reliant. One-third of the award-reliant employees are full-time employees and two-
thirds are part-time employees. Many other employees have their pay rates influenced
by reference to award rates.
[419] In assessing the needs of the low paid, we have given particular attention to
those paid at or below the C10 rate ($706 in 2012–13) and those receiving less than
two-thirds of median earnings ($767 in mid 2012). We do not include the owners of
small businesses in our assessment of the circumstances of the low paid, for the
reasons set out at paragraphs [269]–[275] of this decision.
[420] Over the past decade, all award rates of pay have fallen relative to all measures
of median and average earnings. The NMW as a proportion of the median full-time
wage has fallen from 57.5 per cent in 2002 to 52.7 per cent in 2012. It fell by
0.9 percentage points in the past year. Award rates have grown more slowly over the
past decade than have the WPI, AWOTE, AWE and bargained rates, although growth
in the C14 rate has remained close to that of the WPI.
[421] Broader changes in the overall levels of earnings inequality show 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.
[422] Analysis from a different perspective, provided by ACOSS, found that in 2010
some 30 per cent of all people with incomes below either the 50 per cent or 60 per cent
of median disposable income benchmark were in households for which wages were the
main source of income. This figure exceeds the number of people who lived in
unemployed households.
[423] All of the evidence at our disposal indicates that the earnings of award-reliant
workers have been falling behind the earnings of the rest of the workforce.
[424] We are conscious that there is a broad shift in the economy toward higher-
skilled jobs and that this is affecting measures of average and even median earnings.
Even the WPI will be affected if the pay rates of the higher skilled are rising more
rapidly as a result of the increased relative demand. For this reason, we would not
expect award rates, especially for the lower-skilled jobs, to rise as fast as the average.
Nonetheless, the average or “typical” wage influences typical living standards and
norms about how the households of employees live. In this way it is relevant to our
task of considering relative living standards. It remains one of a number of
considerations that we must take into account.
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Chapter 6—Relative Living Standards and the Needs of the Low Paid 117
[425] If not addressed, increasing earnings inequality and the persistent decline of
modern award minimum wages relative to wage increases generally may have broader
implications, both for our economy and for the maintenance of social cohesion.
[426] The tax-transfer system plays a significant role in alleviating the impact of
earnings inequality and supporting the living standards of low-paid workers, and the
evidence suggests that the tax-transfer system has been effective in increasing the real
level of disposable incomes for lower paid award-reliant families.
[427] The way in which changes in the tax-transfer system are taken into account in
minimum wage fixation remains a matter of contention and we would be assisted if
this matter was given some consideration by the parties in the 2013–14 Review.
[428] 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.
7. Promoting Social Inclusion through Increased Workforce
Participation
[429] For the purpose of conducting an annual wage review, s.284(1)(b) of the Act
provides that the Panel must take into account “promoting social inclusion through
increased workforce participation”. As we state in Chapter 2, our consideration of
social inclusion in this context is limited to increased workforce participation.
Minimum wages, employment and the demand for labour
[430] The Australian Government submitted that “minimum wages can affect
employment…through their impacts on labour supply and demand”,364 although it
noted the Research Report 2/2010 finding that there is no consensus on either the
magnitude or direction of the impact.365 It again submitted that national minimum
wages should not be “set so high as to place undue financial burden on businesses,
discouraging them from employing those low skilled marginal workers”.366 The
Victorian Government submitted that, despite varying findings as to the magnitude of
the impact, it is widely accepted that an increase in minimum wages has an adverse
impact on employment levels.367 The NSW Government submitted that “any
unnecessary increase to minimum wages that does not reflect productivity
improvements may…have a deleterious impact on employment growth”.368
[431] A number of industry specific employer organisations alluded to minimum
wage increases leading to a loss of employment in their industries. For example, the
NRA claimed that there is “a natural and unavoidable trade off between higher
minimum wage levels and the number of jobs in the national retail sector.”369
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118 Chapter 7—Promoting Social Inclusion through Increased Workforce Participation
[432] Some submissions presented research into the employment effects of minimum
wage increases. The ACTU referred to research either not available or not presented
for consideration in previous reviews. That research mostly focussed on the experience
of minimum wage increases in the United Kingdom and United States in sectors such
as retail and hospitality. In some cases, estimates provided different results depending
on the geographic area considered. For example, while some estimates reported a
negative employment effect, when geographic trends were controlled for, there was
little evidence of disemployment effects.370
[433] The ACTU noted the Panel’s concerns about the applicability of findings from
overseas studies on the relationship between minimum wage increases and
employment in Australia, however suggested that these studies are not irrelevant.371
[434] The ACTU also referred to an Australian study by Lee and Suardi372 which
analysed the teenage employment to population ratio using data from the Labour Force
Survey. The model tests the 11 minimum wage increases from April 1997 to June
2007 in Victoria, the Northern Territory and the Australian Capital Territory.
[435] The study found no significant negative employment effects for teenagers when
testing for single and multiple structural breaks in a times series model between 1992
and 2008. However, Lee and Suardi noted that:
“It is worth keeping in mind that examining any effects of the introduction of the
Australian federal minimum wage in 1997 is made relative to the system that was in
place before that—one that comprised of a complex web of award wages for different
occupational categories. The comparison is not relative to a labour market where there
are no wage floors.”373
[436] Based on their review of the literature in their submission, the ACTU claimed
that “[t]here have been no studies since the 2011-12 Review that should cause the
Panel to modify its view that a modest rise in minimum wages has a very small or zero
effect on employment”.374
[437] ACCI’s submission cited findings from Australian studies, however it did not
present any new research published since the 2011–12 Review decision. Overall,
ACCI concluded that:
“studies have shown that a minimum wage increase will cause disemployment effects,
especially amongst low skilled workers, with the magnitude of disemployment
depending on the wage increase and the wage elasticity of labour demand…”375
[438] A number of employer associations including ACCI, AHA, R&CA and MGA
drew on the results of member surveys in their submissions, maintaining that any
minimum wage increase may reduce labour demand in the form of lower employment
or fewer hours worked.376 In the 2011–12 Review decision, the Panel discussed the
validity of conclusions derived from these surveys and noted that:
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Chapter 7—Promoting Social Inclusion through Increased Workforce Participation 119
“the surveys cannot be relied on for any conclusions about the aggregate effects either
from an industry or an economy-wide perspective. The survey respondents are small in
number, self-selected and not representative of employers generally.”377
[439] Despite our previous comments, ACCI argued that these surveys provide useful
insights into how the Panel’s decisions affect award-reliant employees and
employers.378 However, the ACTU submitted in reply that ACCI’s survey was
unscientific and self-selecting, and urged the Panel to disregard any findings from it.379
[440] In this Review, the Panel has not been given cause to alter its position and
remains cautious about using the findings from these surveys to form a view about the
effect of minimum wage increases on employment.
[441] We appreciate the additional relevant material that some parties, ACCI in
particular, seek to put to us, based on their own collection of data. This material can
add detail and depth to our understanding. However, if we are to rely on such material,
we need to be confident that it is a reliable representation of the issues at hand. There
are well-understood rules about the conduct of surveys that need to be followed if the
results of a survey of a sample of a particular population are to accurately represent the
picture that you would get if you obtained the same information from that entire
population. These rules include that the sample size or proportion sampled must be
large enough. Most important, the sample for the survey must be selected on a random
basis. If a membership list is used as the basis for a survey, then it is essential that
those that respond are properly representative of the entire membership base (e.g. by
firm size, form of ownership, industry sector, geographic location). Where this is not
the case, then the responses become more like case studies or anecdotes—accounts of
the situation of those who did respond, but not to be taken as representative of the
survey population (e.g. the membership) as a whole. Even where the survey is
representative of the membership, it needs additional evidence to show that it is
representative of, for example, employers more broadly. A valuable step in assessing
the representativeness of the respondents is to check the answers against other data
that is known to be reliable, such as those from the ABS, where possible. It is good
practice to include in such surveys one or more questions that match those in a
relevant ABS or other reliable survey, so that this test may be applied. As an example,
the collection of information about the industry of the employer and the numbers of
persons employed would provide information allowing a comparison with ABS data
for employment by industry.
[442] In evaluating the extent to which we can rely on survey evidence that is
submitted to us, we would look for an account of the nature of the survey population,
the method of collecting responses, the response rate and total number, evidence that
the respondents are a true random sample (or close enough) of the survey population,
and testing of findings against comparable aggregates produced by the ABS or other
known reliable sources. It would also assist to provide a record of the questions asked.
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120 Chapter 7—Promoting Social Inclusion through Increased Workforce Participation
Work incentives and labour supply
[443] Research Report 2/2013 (Labour supply responses to an increase in minimum
wages: An overview of the literature) provided a literature review of studies that
examined labour supply responses to an increase in minimum wages. This report
concluded that very few studies have investigated labour supply responses to increases
in minimum wages, both in Australia and overseas. The studies outlined in the report
generally found that the overall effect of an increase in minimum wages was relatively
small.380 Estimated labour supply responses varied for different sub-groups, with
females (particularly partnered females) and single parents more likely to respond to
wage changes.381
[444] The research report also found that the literature identified many factors that
can influence the labour supply decision. Wages and other financial benefits of work
were only one aspect of the decision to seek employment, or seek additional hours of
work.382 Other factors, including disincentives created by the tax-transfer system, non-
financial benefits of work, costs of work and individual characteristics, were potential
influences on an individual’s labour supply decision.
[445] The ACTU commented that the literature suggests that “the labour supply
response to minimum wage increases is positive”.383 ACCI noted that, while minimum
wages may have a positive impact on labour supply incentives, a number of studies
examined in the report assumed increases in the minimum wage did not affect labour
demand,384 or found that higher minimum wages reduce the probability of an
individual finding employment due to the entry of new job seekers.385
[446] ACOSS drew attention to the particular situation of the long-term unemployed.
They argued that even a large decrease in the real value of the minimum wage would
not increase their job prospects, as “many long-term unemployed people are a
considerable distance from employment at the levels of productivity now expected by
employers”.386
[447] Several submissions highlighted the role of demographic changes in shifts in
the composition of labour force participation in Australia.387 Ai Group noted that the
ageing profile of the workforce highlighted the “weak and fragile nature” of the labour
market from a supply perspective.388 ACOSS reiterated the view that Australia’s
ageing population will require increasing reliance on income-support recipients and
women outside the workforce as potential sources of labour.389
[448] A discussion on participation rates is included in Chapter 4. It is explained that
the participation rates for 20–64 year olds, which better reflects the working-age
population by excluding the older and younger age groups who are less likely to search
for work, are near record high levels. In recognition of the importance of employment
as to social inclusion, the data indicates that there has been a 2.8 percentage point
increase in workforce participation among the working age population over the past
decade.390
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Chapter 7—Promoting Social Inclusion through Increased Workforce Participation 121
[449] A number of submissions provided the results of model simulations to show the
impact of employment in a minimum wage job on effective marginal tax rates and
household disposable income. The Australian Government discussed modelling from
DEEWR, which indicated that all households were in a better financial position from
having a household member find a job at the current NMW after tax and transfer
payments, although the proportional improvement in their financial position varied.
Among single-earner households modelled, this ranged from a 122 per cent gain for
single adults taking up a full-time NMW job than living on income support, to a 35 per
cent gain for the non-employed couple households in which one member takes up a
full-time NMW job.391 The gains are also positive when one non-employed member
accepts a part-time NMW job, although as might be expected, the gains are smaller.392
However, the submission noted there remains “strong incentives”, for example a single
adult who takes a 15-hour NMW job is almost 50 per cent better off.393 The two-
couple households modelled, in which a second member of the household secures a
full-time NMW job, are also financially better off (by 65 and 38 per cent)394 although
when the job is part-time, the disposable income of the households modelled increased
by 19 and 11 per cent.395
[450] Drawing on research from the Australian Government, ACOSS submitted that
high effective marginal tax rates can create acute disincentives to undertake part-time
employment, particularly for Newstart Allowance recipients and secondary earners
(usually mothers) in low and middle-income households.396
Labour market transitions
[451] The Australian Government provided data on labour market transitions from the
HILDA Survey, incorporating all waves of data currently available (2001–11). The
submission suggested the data showed that “low paid employment serves as an
important entry point into the workforce and is a stepping stone to higher paid work.
However, low paid work can also be highly persistent.”397 Averaging results over ten
years showed that those who enter employment disproportionately earn lower wages:
23.6 per cent of those previously unemployed and 22.5 per cent previously not in the
labour force commenced work in a low-paid job, compared with 11 per cent of all
employees who are low paid.398
[452] Close to half (49.3 per cent) of those in low-paid employment in a given year
were in higher paid employment the next year (Table 7.1). Those in low-paid
employment were more likely to be in employment and higher paid employment the
following year, than someone who was unemployed.399 The Australian Government
argued that the “stepping stone effect” suggests the level of the NMW should not
inhibit job opportunities for potential low-paid workers seeking employment.400
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122 Chapter 7—Promoting Social Inclusion through Increased Workforce Participation
Table 7.1: Year-on-year transitions of employment/low pay status (row
percentage)401
Employment status, year t+1
(%)
Sample
size (n)
Not in
labour
force
Unemployed Low
paid
Higher
paid
Total
employed
Employment
status,
year t
Not in labour
force 90.6 3.4 1.4 4.7 6.0 37 250
Unemployed 32.7 31.4 8.5 27.4 35.9 3 264
Low paid 9.4 3.6 37.7 49.3 87.0 5 357
Higher paid 4.8 1.5 5.1 88.6 93.7 45 081
[453] The NSW Government and ACCI highlighted the potential benefits of low-paid
work for new entrants into the labour market, particularly young people, noting that
minimum wage jobs and apprenticeships can provide opportunities for these workers
to gain skills and experience.402 While ACOSS commented on the difficulties in
school-to-work transitions for many young people, it submitted that there was no
“convincing evidence” linking current minimum wages levels to the likelihood of a
young person being employed.403
[454] Limited submissions have been made to us in past reviews about the groups of
people most likely to cycle between labour force states (not in the labour force,
unemployment and employment). The 2010–11 Review decision cited research,
relying on evidence given to previous wage reviews about earnings mobility,
suggesting that women, older workers, workers with a low level of education and
workers in small firms have poorer prospects of moving from low pay to higher rates
of pay.404 The characteristics of those who transition between labour force states would
be a useful area for further research.
[455] The Panel invited comment on the United Kingdom’s Low Pay Commission
Report 2013 and Mission Australia’s Youth Survey 2012. The Low Pay Commission
Report 2013 provides evidence and background for the Commission’s
recommendations for changes in the United Kingdom’s national minimum wage.405
Mission Australia’s Youth Survey 2012 of some 15 000 Australians aged 15–19
(conducted annually since 2002) explored attitudes, values and issues of concern to
young people and also collected data about forms of participation.406
[456] The Australian Government noted that the minimum wages objective in the Act
and the criteria of the Low Pay Commission are different,407 while the ACTU
remarked that the view of the Low Pay Commission is that the creation of the national
minimum wage and increases in its rate has not negatively affected employment.408
The Australian Government submitted that Mission Australia’s Youth Survey
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Chapter 7—Promoting Social Inclusion through Increased Workforce Participation 123
reinforces its position “that young people can be disadvantaged in the labour market,
and are especially vulnerable in periods of labour market softness.”409 The ACTU
cautioned against drawing firm conclusions from the survey results due to the sample
not being randomly selected or representative. It noted that Mission Australia’s results
show a much smaller proportion of full-time workers than the ABS Labour Force
survey and a higher proportion of unemployed 15–19 year olds.410
[457] For our part we generally agree with the observations of the ACTU on the
Mission Australia survey and note that we have made a number of comments about
such matters in paras [438] and [442] of this Chapter. In terms of the United Kingdom
Low Pay Commission report, it deals with a different statutory context, although we
note its findings that minimum wage increases in the United Kingdom have not
negatively impacted upon employment.
Conclusion
[458] As we have mentioned, promoting social inclusion through increased workforce
participation can be particularly complex in the context of an annual wage review due
to the competing considerations of strengthening incentives to work and minimising
distortions in labour demand. The probability of employers reducing labour demand in
response to higher minimum and award wages has implications for social inclusion.
We were mostly referred to international studies that showed that an increase in the
minimum wage has minimal disemployment effects, and an Australian study that
found no statistically significant negative employment effects.
[459] Employer groups again submitted their own surveys as evidence of the effects
of increases in minimum wages on employment and hours. These surveys are not
representative of the populations surveyed or employers more generally. If we are to
rely on such material provided by any party, it must meet the accepted standards for
survey reliability referred to earlier in this chapter.
[460] A literature review in the research report found that very few studies have
investigated labour supply responses to increases in minimum wages, with only one
study conducted in the Australian context. Although the findings were that labour
supply would increase from a rise in the minimum wage, the response was relatively
small and varied for different groups, with other factors coming into consideration. We
believe that future research involving modelling of the impact of increases in
Australian minimum wages for different population groups would be of benefit in
informing the wage-setting process.
[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.411
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,
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124 Chapter 7—Promoting Social Inclusion through Increased Workforce Participation
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.
[462] Data on the dynamics of labour market mobility show that low-paid
employment is an important entry point into the workforce and a stepping stone to
higher paid work, however, for some individuals for whom low pay can be highly
persistent, increases in minimum wages are particularly important in maintaining
living standards.
[463] There is limited evidence about the characteristics of those more likely to
transition between labour force states and employment paid at low and higher rates of
pay. This would be a useful area for further research and, given that multiple waves of
HILDA data are available to produce what may now be sufficient sample sizes to
disaggregate labour force dynamics by characteristics, this area for research may now
be a practicable one.
[464] 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.
8. Encouraging Collective Bargaining
[465] 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.
[466] As illustrated in Chart 8.1 below, ABS data show that, from 2000 to 2012, the
proportion of award-reliant employees has trended downwards (from 23.2 per cent to
16.1 per cent), while the proportion of employees on collective agreements has
increased (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 award-reliant employees has
marginally increased (from 15.2 per cent to 16.1 per cent), while the proportion of
employees on collective agreements has marginally declined (from 43.4 per cent to
42.0 per cent).
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Chapter 8—Encouraging Collective Bargaining 125
Chart 8.1: Method of setting pay412
Note: As defined by the ABS, individual arrangements include registered or unregistered individual agreements and owner
managers of incorporated businesses.
[467] The Australian Government’s submission presented data from DEEWR’s
Workplace Agreements Database to illustrate the indirect effects of minimum wage
increases on the quantum of increases sought in collective agreement negotiations,
without specifically addressing the “need to encourage collective bargaining”. Data
drawn from the submission showed that:
“As at December 2012, 31.6 per cent (7338) of wage increases in current federal
enterprise collective agreements (CAs) covering 24.3 per cent (566 000) of 2 332 100
employees on federal enterprise agreements are linked in some way to AWR
outcomes. However, only 12.7 per cent (2940) of 23 236 federal CAs, covering 5.5 per
cent (128 800) of 2 332 100 employees on federal enterprise agreements, automatically
flow on AWR decisions. This is more common in smaller workplaces – with 14.9 per
cent of small business CAs automatically linked to AWR decisions.”413
[468] The Victorian Government and AFEI noted that the Commission should
consider the potential indirect effects of annual wage review decisions on enterprise
agreement negotiations.414
[469] Some submissions cautioned that an increase to minimum wages may act as a
disincentive to bargain. For example, Ai Group and the AAA argued that “the
National Minimum Wage Order 2013 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”.415
[470] Similarly, ACCI warned that minimum wage increases should not discourage
employers and employees from engaging in collective bargaining and that any
significant increase in award-based minimum wages will discourage bargaining.416
0
5
10
15
20
25
30
35
40
45
50
2000 2002 2004 2006 2008 2010 2012
Per cent
Awards Collective agreements Individual arrangements
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126 Chapter 8—Encouraging Collective Bargaining
Furthermore, ACCI noted that the reported increase in award reliance, from 15.2 per
cent in May 2010 to 16.1 per cent in May 2012, is a “cautionary note”, suggesting that
the increase in award reliance has had an impact on over-award bargaining and the
ability of employers to fund over-award wages.417
[471] The Victorian Government also cautioned that the effect of an increase in
minimum wages on the incentives to bargain may be different in weak economic
conditions, and noted that:
“While a measured approach to minimum wages may not reduce incentives for
bargaining at times when the economy and labour market are robust, when economic
conditions are softer, it is particularly important that space for bargaining outcomes
that reward flexible and productive work practices is maintained. This enables the
objective of promoting flexible modern work practices and the efficient and productive
performance of work to be met more effectively.”418
[472] The New South Wales Government noted that the Commission should set
minimum wages that “maintain incentives for enterprise bargaining that rewards
flexible and productive work practices”.419 ACCER observed that “wage rates and
other terms of employment in the bargaining sector are intended to be, and are able to
be, more responsive to changing the operational needs of the firm than safety net
rates.”420
[473] ACCER also noted that award-reliant workers do not have the power to bargain
and do not receive the benefits that come from bargaining.421 In addition, the ACTU
submitted that since the relative living standards of low-paid workers are low, there are
significant incentives in place to bargain for higher wages and acquire more skills and
experience through stable employment.422 Based on data obtained from the DEEWR
report Trends in Federal Enterprise Bargaining December quarter 2012, the ACTU
indicated that the gap between the wages of award-reliant workers and those on
collective agreements continues to widen.423 In its submission in reply, the ACTU
maintained that:
“There are large and growing gaps in the wages paid to award-reliant workers and
those paid to workers on collective agreements. Strong incentives to bargain remain.
Awarding our claim will in no way undermine these incentives.”424
[474] For the December quarter 2012, wage increases for federal enterprise
agreements continued its decline, falling to their lowest level (3.4 per cent) since late
1999. In the Trends in Federal Enterprise Bargaining December quarter 2012, the
Australian Government attributed this result to the “recent slight softening in labour
market conditions”.425
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Chapter 8—Encouraging Collective Bargaining 127
Conclusion
[475] Recent EEH data highlights the continuing gap between average wages for
employees covered by collective agreements and for award-reliant employees. In May
2012, average weekly total cash earnings for full-time award-reliant employees was
$933.40, compared with $1518.50 for full-time employees covered by collective
agreements.426 In May 2010, the average weekly total cash earnings for full-time
award-reliant employees was $753.80, compared with $1386.20 for full-time
employees covered by a collective agreement.427
[476] The current evidence indicates that the level of increases in minimum award
wages which have occurred over the last decade are compatible with the continuing
encouragement of enterprise bargaining.
[477] Research on minimum wages and their role in the process and incentive to
bargain is currently being undertaken for the Commission by the Workplace Research
Centre, University of Sydney, and is due for completion in late 2013. This research
examines the impact of minimum wage increases on over-award and agreement rates
of pay, as well as the incentives to bargain, using a combination of quantitative and
qualitative data. This research may go some way to assisting the Panel’s future
consideration of minimum wage effects on bargaining.
9. The Principle of Equal Remuneration for Work of Equal or
Comparable Value
[478] We are required by the minimum wages and modern awards objectives to take
into account the principle of equal remuneration for work of equal or comparable
value.428
[479] The parties’ submissions differed in how the principle of equal remuneration
should be considered and on the effect of minimum wage adjustments on gender pay
equity.
[480] The ACTU and ACOSS submitted that the principle of equal remuneration
requires the Panel to consider adjustments to minimum wages to address pay equity
with the ACTU arguing that such adjustments maintain the real value of wage
increases awarded through other mechanisms:
“Indeed, minimum wage increases are inextricably linked to bargaining outcomes both
as a ‘floor’ for negotiations and as a means of maintaining the value and protecting the
integrity of improvements to gender pay equity achieved though alternative
mechanisms such as equal remuneration or low paid bargaining orders.”429
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[481] The Australian Government submitted that although there were a number of
mechanisms available within the Act to address equal remuneration (such as equal
remuneration orders and bargaining provisions) the Panel’s review decisions also
assisted in improving wage outcomes for low-paid women.430
[482] Ai Group submitted that minimum wage increases may assist to some measure
in promoting pay equity, however, mechanisms in the Act, such as collective
bargaining had proved more effective in addressing pay equity. 431 ACCI submitted
that, although the Panel must take into account the principle of equal remuneration in
setting minimum wages, the provision does not require the Panel to increase minimum
wages.432 The NFF submitted that other mechanisms in the Act should be used to
address pay equity.433
[483] Several submissions, including from the Australian Government and ACOSS,
which addressed the Panel’s consideration of the principle of equal remuneration, also
referred to the impact of the Equal Remuneration Case434 as an example of how
mechanisms in the Act were effective in dealing with equal remuneration matters.435
ACCER however argued that the case highlighted the inequalities in wages which
exist for certain low-paid workers436 and Business SA indicated that the case
highlighted the increased costs business needed to absorb in 2013.437
Conclusion
[484] We adopt the conclusion of the Panel in the 2011–12 Review decision:
“Given women are disproportionately represented amongst the low paid, an increase in
minimum wages is likely to promote pay equity, although moderate changes in award
rates of pay would be expected to have only a small effect on the overall differences in
earnings between males and females.”438
[485] We also note that there are other mechanisms within the Act, such as bargaining
and equal remuneration provisions, which provide more direct means of addressing
pay equity. However, we accept that minimum wage increases play a part in the
promotion of pay equity.
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10. Exceptional Circumstances/Special Circumstances Claims
The approach taken to date
[486] In each of the last three annual wage review decisions, a uniform increase was
applied to modern award minimum wages and the NMW contained in the national
minimum wage order.439
[487] As was the case in the 2011–12 Review decision, a number of employer parties
have sought that certain awards not be subject to an increase, or be subject to a
particular increase applicable only to those awards, as part of this Review. Although
the precise grounds do vary, these requests were generally based upon the proposition
that the circumstances applying in the relevant award or sector are such that there is no
capacity, or a reduced capacity, to pay any increase in award wages.
[488] In order to understand the current submissions, it is necessary to consider
certain propositions from the parties and the determination of the Panel on those
matters from the last Review.
[489] In the 2011–12 Review proceedings, ACCI with the support of some other
parties submitted that the Panel should adopt a different process to that taken in
previous cases and conduct a modern award by modern award review of minimum
wages. It also submitted that the Panel should provide reasons to justify any increases
determined in respect of each modern award.
[490] In that case, ACCI advanced two general propositions in relation to the
provision of differential treatment. First, it was submitted that employers in receipt of
natural disaster assistance or who operate in a relevant declared geographical area
should receive a deferral of up to 12 months of any increase granted. Such a deferral
was said to be justified on the basis of “exceptional circumstances” within the meaning
of s.286(2) of the Act. The second proposition advanced by ACCI was that there
should be an exemption from any increase in modern awards in designated industry
sectors which are in significant difficulty and will be most affected by an increase to
minimum wages including: trade exposed industry sectors, and manufacturing,
tourism, general retail, food, accommodation, hospitality, residential building and
construction industries.
[491] We have dealt with this proposition as further advanced before us, and the
related suggestion that we should establish a “brief supplementary determination
process”, in Chapter 2 of this decision.
[492] In its 2011–12 Review decision, the Panel relevantly indicated as follows:
“[239] The Act provides that the Panel must ‘maintain a safety net of fair minimum
wages’ and to this end s.285(1) provides that an annual wage review must be
‘conducted and completed’ in each financial year. Further, a determination made in an
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annual wage review which varies minimum wages in one or more modern awards must
come into operation on 1 July in the next financial year, unless there are exceptional
circumstances justifying why a variation should come into operation on a later date. A
national minimum wage order that is made in a review also comes into operation on 1
July of the next financial year, unless there are exceptional circumstances justifying
why a variation should come into operation on a later date. In each case, however, the
later date of operation must be confined to the particular situation to which the
exceptional circumstances relate.”
[493] In terms of the capacity for the Panel to accommodate the various proposals, the
Panel found that:
“[245] As to the deferral claims, we accept that we may make a variation
determination in respect of one or more modern awards that comes into operation on a
day later than 1 July 2012, provided we are satisfied that there are exceptional
circumstances justifying such a course. We also accept that a deferral claim may be
granted in respect of a particular region(s) covered by a modern award, again provided
that there are exceptional circumstances justifying such a result.
[246] However, we doubt that the Panel has power to defer the operation of a
variation determination by reference to state or territory boundaries (as opposed to a
particular region), because of the prohibition in respect of interstate wage differentials
in s.154 of the Act. But it is not necessary for us to reach a concluded view in respect
of this matter as none of the claims before us seeks a state-wide deferral of a variation
determination.
[247] As to those claims that sought differential treatment in terms of the quantum of
any variation (as opposed to a different date of operation) 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).
[248] Further, s.284(4) defines varying modern award minimum wages as ‘varying
the current rate of one or more modern award minimum wages’.
[249] 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 question then becomes
the basis upon which the Panel should exercise that discretion.”
[494] In terms of the threshold to be met in order to warrant an exemption from a
general determination in an annual wage review, the Panel considered both the
historical approach to such matters and the present statutory context and concluded440
that the following approach remained relevant:
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;441
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an incapacity claim needs to be supported by oral and/or documentary
evidence capable of analysis and evaluation; and442
incapacity 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.443
The proposals advanced as part of this review
[495] As we have already noted, a number of parties sought to further develop
proposals for the specific treatment of certain awards and sectors in this Review. The
specific outcomes proposed by the various employer organisations with respect to
“their” relevant awards have been outlined in Chapter 2 and are summarised at
Appendix A.
[496] ACCI again contended that there should be an ability for industry and
employers to argue for differential treatment in the form of a different quantum of
increase or a deferral from any increase for modern awards in designated services
industry sectors which are experiencing significant difficulties. Industry sectors which
were said to be in significant difficulty and would be most affected by an increase to
minimum wages again include: trade exposed industry sectors, manufacturing,
tourism, general retail, food, accommodation, hospitality, residential building and
construction.444
[497] Business SA also contended that, pursuant to s.286 and s.287 of the Act, the
Panel should “facilitate” industry sectors such as retail and hospitality “applying for a
lesser amount of any wage increase and/or a delay in the commencement date of any
wage increases arising from the Review.”445
[498] CCIQ proposed that particular industry specific employers should be exempt
from any increase where they are determined to be facing significant challenges.446
[499] VECCI supported the ACCI position and referred to the Full Bench in the
Transitional Review Penalty Rates Decision447 and its recognition that the current
economic conditions are impacting in particular industries and that this was a relevant
consideration in this Review.448
[500] R&CA contended that, where an industry or sector can demonstrate that
profitability and economic difficulties are being experienced, it is incumbent on the
Panel to provide relief in the form of wage exemptions or wage freeze periods to
ensure businesses remain commercially viable.449
[501] The NRA submitted that the Panel’s power included the “legal capacity” to
make “specific determinations for individual awards in the broader retail space”.450
While the submission did not seek an exemption or deferral directly, the NRA was of
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the view that it was open to the Panel to make specific determinations for individual
awards, such as the General Retail Industry Award 2010451 and the Fast Food Industry
Award 2010.452
[502] In terms of particular industry or award specific outcomes that have been
advanced by the parties it is convenient to consider these on the following sector basis.
Hospitality and services sectors
[503] The AHA submitted that the Panel should give special consideration to there
being a “moderate wage increase” of 1 per cent in wages for the Hospitality Industry
(General) Award 2010,453 noting the additional increase in the superannuation levy. It
contended that the impact of the carbon pricing (said to have led to hotel profit
reductions of up to 11.8 per cent for which no compensation was provided for the
employers),454 the increasing costs of utilities, the increase in real wages and the poor
trading conditions for hotels meant that a moderate wage adjustment was appropriate
in order to sustain business and the overall hours for employees.
[504] The AAA contended that should the Panel “be minded to award an increase in
the minimum wages in modern awards and the NMW, such an increase should not
exceed 1.5 per cent.” Amongst other considerations, the AAA relied upon the effect of
last year’s increase, increases to the superannuation guarantee charge, the downturn in
the tourism industry, the impact of the various floods and fires in New South Wales
and Queensland and some other regional areas, and predicted low occupancy and
revenue rates for the accommodation industry, particularly due to an increase in
outbound tourism. The AAA emphasised the contribution of the tourism industry to
GDP, and national employment, and sought that the Panel take into account the
pressures on this industry in terms of the steady decrease in profit margins in the
accommodation sector.
[505] R&CA submitted that in performing its functions the Panel should:
refrain from applying a one-size-fits-all approach across all industries when
applying the annual wage review—industries experiencing little or no
financial growth should be exempt from modern award minimum wage
increases;
recognise the structural changes in the Australian economy and review
modern awards on a case-by-case or sector-by-sector basis;
recognise that payroll of businesses will be increased by 0.25 per cent in line
with the Superannuation Guarantee contributions increasing to 9.25 per cent
of salary and wages, effective from 1 July 2013;
detail the rationale for establishing any quantum granted; and
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have regard to the special circumstances of small and medium-sized
enterprises.455
[506] In relation to the Restaurants industry, R&CA contended that the Panel “should
not increase wages in service sector modern awards as part of this year’s annual wage
review as exceptional economic circumstances exist.”456
Retail sectors
[507] The ANRA submitted that the NMW be increased by $9.10 per week and that
this be applied as a flat dollar increase to all classifications in the General Retail
Industry Award 2010. It contended that the Panel should take into account the fact that
most award-dependent retail employees will also be receiving a scheduled wage
increase on 1 July 2013, as part of the fourth and final phase of the modern awards
transition process, the increase in the superannuation guarantee contributions and what
it described as the soft trading conditions in the retail sector.
[508] The ANRA further contended that the retail sector had faced another tough year
of trading in 2012 with employment, prices and profits falling in the sector and wages
growth slower than the nationwide average. This combination means that “an
excessive increase in the national minimum wage is highly likely to result in a further
decline in retail employee numbers in the year ahead.”457
[509] The ARA proposed that the Panel “hand down a realistic and manageable
minimum wage increase of no more than $5.80 (per week) for the retail sector.”458
This, it contended, was justified on the basis that previous increases had been generous
(in terms of a comparison with CPI and industry earnings), the faltering economy and
slow pace of growth across key sectors, rising unemployment, a weak jobs market,
global risks, rising business costs, and increased global competition through the rising
dollar. In terms of the retail industry, the ARA submitted that there were historically
difficult trading conditions with flat or negative employment growth, low consumer
confidence and high personal savings.459
[510] MGA contended that there should be a “nil increase” to minimum wage rates
for award-reliant employees, in particular those in the retail sector. Amongst other
considerations, it referred to the impact of the award modernisation process on
employment costs, the low productivity levels and a declining market as major
impediments to financial prosperity for independent supermarkets. MGA further
contended that the nature of the supermarket sector in Australia (with primarily small
businesses with limited resources operating in a sector where 80 per cent of the market
share is controlled by Coles and Woolworths); the impending changes to
superannuation legislation; rising energy and refrigerant gas costs due to the
introduction of the carbon tax; price war campaigns by Coles and Woolworths; and the
detrimental effect of tobacco plain packaging legislation all combined to justify its
position.460
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[511] The NRA submitted that the Panel increase the NMW by no more than $4.75
for a 38 hour week, with that increase being applied across all award classifications. In
support of its position, the NRA referred to increases scheduled to affect the incomes
and benefits of minimum wage earners in areas such as increases in base rates and
other rates (such as penalty rates) scheduled to occur on 1 July 2013 under the modern
award transition process; the upcoming increases in superannuation entitlements; and
increases in government payments and benefits applicable to low income earners. It
contended that these increases were scheduled to occur irrespective of this decision
and should be offset against considerations of inflation, living standards and cost of
living issues.
[512] The NRA also submitted that the Panel should make adjustments in its
calculations to “correct for any previous under- or over-estimation of the impacts of
inflation and increases in the cost of living in the previous year’s determination”.461 It
also referred to what it described as the limited capacity for small businesses to pay for
any increases, particularly in light of the changes in the retail industry and consumer
behaviour—a “natural and unavoidable trade off between higher minimum wage levels
and the number of jobs in the national retail sector” and the gap between domestic and
international wage levels.462
[513] VACC contended that should this Review grant an increase in award wages,
this amount should be less than $10 per week.463 It relied upon:
scheduled or potential major cost burdens that are about to be imposed on
employers this year, including the increase in compulsory superannuation
contributions and the “imminent increase to apprentice wages”;
the current economic climate, which was said to be leading to the
consolidation of existing workforces and, in some regions, very high rates of
unemployment;
the loss of jobs in the automotive industry when considered aver a full
12 months; and
business closures each year within the automotive industry and that most of
these are small businesses.464
Wine industry
[514] The South Australian Wine Industry Association submitted that any wage
increase should be no greater than the CPI less 0.25% to allow for the superannuation
guarantee levy.465 It contended that the wine industry was facing many challenges in
2013, including: the impact of carbon pricing, increased energy costs and the effects of
water restrictions; the declining of Australian export and domestic wine sales values;
the steady increase of wine imports to Australia; and what it described as increased
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labour costs resulting from complying with the increase in regulatory requirements in
relation to employment conditions, including the relevant modern award.
Rural sectors
[515] The NFF proposed that the NMW and award minimum wages relevant to this
sector be increased by $7.50, operative from 1 July 2013.466 This amount involved a
discount to take into account the increase in superannuation contributions and was said
to be recognise the circumstances facing the rural industry. The circumstances relied
upon by the NFF included the sharp divergences in agricultural conditions across the
country and across different sectors, the nature and profile of those sectors and the
economic conditions and outlook for rural industries.
[516] In terms of the economic conditions, the NFF relied in particular upon the
Australian Farm Survey Results 2010–11 to 2012–13.467
The positions of other parties
[517] The ACTU contended that no party had made a cogent case in this Review for
the Panel to deviate from its approach in previous reviews in awarding an increase that
is consistent in both quantum and date of operation across all modern awards. It
further contended that the material provided showed that the degree of dispersion in
economic activity (in such measures as real output, wages growth, and employment
growth) was no greater than is typical.468 The ACTU emphasised the underpinning
necessity of the fixing of minimum wages in modern awards to provide for uniformity
and consistency of treatment to provide consistent minimum rates within and across
modern awards.
[518] The ACTU further contended that the current annual wage review process
provides ample opportunity for interested parties to make contributions to the process
and that to establish a mechanism for any kind of post-decision review (including the
issuing of an interim decision) would allow parties to have “two bites of the cherry”,
create uncertainty and instability and greatly reduce the effectiveness of the process.
[519] Although not contending for different outcomes in relation to particular modern
awards, Ai Group urged the Panel to take account of “the triple blow” employers are
being subject to this year in terms of the combination of the fourth phase increase to
modern award wages (under the transitional provisions) any annual wage increase
combined with the Superannuation Guarantee increase (which they stated is on its own
a safety net increase).
[520] Additionally Ai Group contended that the Panel should recognise the significant
increases in labour costs brought about by the implementation of the modern award
process for employers, particularly in the glass and fast food industries. In this regard
they drew attention to the 35 per cent increase to the afternoon shift loading, payable
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136 Chapter 10—Exceptional Circumstances/Special Circumstances Claims
by employers in the glass industry under the Joinery and Building Trades Award
2010469 and the impact of increased weekend penalty rates facing fast food employers.
[521] ABI also did not pursue differential outcomes but submitted that the existence
of sector or economy-wide considerations should not be applied in an absolute way to
deny exceptional circumstances. Further, it contended that structural change is an
economy-wide phenomenon, but that change impacts differently on different locations
and sectors of the economy and individuals.470
Consideration
[522] We have comprehensively dealt with the statutory framework and the context
for the consideration of these matters in Chapter 2 of this decision.
[523] Given our statutory charter, it is necessary to consider proposals to adopt
particular outcomes in various awards or sectors, or to delay the introduction of any
wage adjustment, as part of the current review process. Further, it is not within the
scheme of the Act to allow individual employers or sectors within awards to seek
exemptions after any wages adjustments have been determined and have commenced
to apply.
[524] In addition, given the timeframes established by the Act, it is, in practical terms,
necessary for parties to advance relevant material against which any exceptional
circumstances considerations might be advanced as part of the current review.
[525] Finally, given the safety net role of the NMW and the wages within the modern
awards, cogent evidence of different circumstances would be required to warrant a
different outcome in terms of the application of the increases we have otherwise
determined.
[526] 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, remains a relevant consideration for any economy-
wide outcomes.
[527] It is against that background that we now consider the various proposals
advanced by the parties.
[528] In Chapter 4, we assessed both aggregate economy-wide material and the
specific indicators of business competitiveness and viability applicable to many of the
sectors seeking differential treatment. Those findings are directly relevant to the
positions being considered here. We have also considered the material advanced by the
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parties pertaining to sectors where parties have sought a specific outcome in relation to
nominated modern awards, including no increase in wages.
[529] Further, as cited by some of the parties, we note that a Full Bench of the
Commission, when considering penalty rates in the retail and hospitality sectors, found
that:
“[225] There is some indication that the general economic climate is having an impact
in the particular industries under review. Trading conditions are tight and this is having
an impact upon margins and employment levels. While these matters are relevant to
our consideration of the modern award objective they can also be considered as part of
the Annual Wage Review.”471
[530] The sector specific material advanced as part of this Review was of limited
evidentiary value. At its highest, it suggests that some sectors are facing challenges as
a result of various factors including structural changes in the economy, the impact of
the high Australian dollar, seasonal or weather related events and other matters. This
material also demonstrates that within each of these sectors there is a variety of
economic performance and circumstances and that some of these factors are being
experienced across the economy.
[531] As part of the consultation process, we put the following question to the parties:
“Given the number and coverage of those sectors seeking differential outcomes as part
of this Review (including in some cases no adjustment), what would be the
implications of such an approach for adjustments in other sectors where no particular
outcomes have been sought?”
[532] Very limited responses were provided and none of those parties who were
actually supporting a differential outcome took the opportunity to address this aspect
in any detail.
[533] The ACTU, in its response to this and a related question, contended that any
deviation in a common outcomes had the very real potential to create subclasses of
workers depending on the industry in which they work, or which entity employs them.
Further, it argued that such an approach would undermine the consistency, fairness and
coherence of the safety net and distort award relativities.472
[534] The Australian Government contended that a strong case would have to be
made to justify increasing the differentials between award pay rates, given the equity
implications of providing different minimum wage increases across different sectors
and the complexity of determining appropriate wage increases at the sector level.
Further, it submitted that the contention that there may be some sectors that have not
sought differential outcomes despite having similar claims to such outcomes. In that
context, it suggested that the extent of any differentiation between different sectors and
pay rates in this decision was a matter for the Panel to determine having regard to
s.285(2)(b) of the Act.473
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[535] The combination of sectors seeking some form of differential outcome
represents a significant proportion of the award-reliant industries. This means that any
attempt to carve out these sectors would have an impact upon the scope and nature of
the considerations applying to the balance of the workforce subject to this Review.
[536] Further, given that many of the factors relied upon by the parties seeking
differential outcomes are structural and ongoing, rather than temporary, a decision to
depart from a general adjustment would lead to an ongoing fracturing of the modern
award wages scheme.
[537] A number of the parties described the nature of small business operations and
the elements affecting them relevant to their industry sector. This is a relevant
consideration given the objects of the Act, and s.3(g) in particular, which cites
“acknowledging the special circumstances of small and medium-sized businesses” as
part of the broader object to promote national economic prosperity and social inclusion
for all Australians.
[538] Many employer organisations in the retail, hospitality, service and rural sectors
submitted, in effect, that the Panel should take into account the “capacity to pay” of
small businesses. They contended that the high degree of award reliance of many small
businesses meant that they would be disproportionately exposed to any increase that
may result from the Panel’s decision.474
[539] As with many other elements of the material provided by the parties touching
upon this aspect, this material addressed national trends, conditions and insights into
some of the pressures said to be causing an impact on small business. However, the
material and evidence provided was not sufficient to support the contentions being
advanced.
[540] We have discussed the material relating to small business and the circumstances
of the award-reliant industries more generally as part of our earlier considerations in
Chapter 4. In particular, we have considered the economic performance, profitability
and employment within those sectors. This discussion reveals that many of the
contentions advanced by the parties seeking a differential outcome were not supported
by the evidence. For example, contrary to some of the positions advanced, annual
growth in gross value added for some of the award-dependant industries was
significant. Further, company gross operating profits increased by 2.4 percent on
average for the non-mining industries, with both the Other services and Retail trade
industries having higher growth rates.
[541] However, there is a diversity in outcomes between the award-reliant industries,
and within the Accommodation and food services, Retail trade and Other services
industries. This suggests that the most award-reliant industries do not face a uniformly
difficult economic environment, although it is clearly challenging for some.
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Conclusions
[542] The Panel has had regard to the range of submissions seeking consideration of
differential treatment of any wage increase. The submissions generally sought the
provision of either an exemption, deferral or variation of any wage increase in
connection with particular industry circumstances.
[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.475
[544] Nothing has been put to us to alter this approach.
[545] The parties have had the opportunity to raise economic and business conditions
with the Panel to demonstrate the case for exemptions or differential outcomes and we
must deal with those circumstances based upon the material before us.
[546] In this case, the material provided in the submissions was predominately in the
form of reference to broad economic conditions said to be affecting the industry
concerned. There was no evidence setting out particularised, current, acute and
definable circumstances (relevant to an industry or sector) that would justify different
treatment in the particular sectors drawn to our attention.
[547] We are not persuaded that those parties supporting a deferral have established
that there are “exceptional circumstances” which justify an operative date later than
that prescribed in s.286(1). The reasons given for rejecting similar claims in the 2011–
12 Review remain apposite.
[548] We are also not persuaded to grant a general exemption or differential outcomes
to the modern awards which operate in the retail, hospitality, services and rural sectors,
or otherwise. The diversity of experience within these sectors tells strongly against the
grant of a general exemption. Further, given the scheme of the Act, the nature of the
material before the Panel does not support a conclusion that these industries are
suffering economic or other circumstances which would warrant an exemption or
differential treatment from the wage increases arising from our decision.
[549] 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, 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 and the impact of the
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transitional arrangements in most of the modern awards. 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.
11. Other Matters
Transitional Australian Pay and Classification Scales, Division 2B
State awards and other transitional instruments
[550] The Panel is required to review and, if appropriate, make one or more
determinations varying a number of transitional instruments as part of its review.476
The majority of these instruments have ceased to operate or have been terminated in
accordance with the Fair Work (Transitional Provisions and Consequential
Amendments) Act 2009 (Transitional Act).477 The remaining instruments continuing to
operate in the system include, but are not limited to, instruments which cover:
employees also covered by enterprise instruments;478
employees also covered by State reference public sector transitional awards;479
or
employees also covered by the Social, Community, Home Care and Disability
Industry Award 2010.480
[551] Three categories of instruments will continue to operate regardless of the
Commission’s termination of instruments process. The first category of instruments
flow from state referrals of power, and include:
Division 2A State reference transitional enterprise awards;
Division 2A State reference public sector transitional awards;
Division 2B State reference transitional enterprise awards;
Division 2B State reference public sector transitional awards; and
Division 2A and 2B State reference awards not terminated by the Fair Work
Commission as they cover employees who are also covered by enterprise
instruments or State reference public sector transitional awards.
[552] These instruments are terminated either when the Commission makes a modern
enterprise or public sector award or on 31 December 2013, whichever comes first.481
Where they continue to operate, these instruments remain subject to review and, if
appropriate, adjustment by the Panel.
[2013] FWCFB 4000
Chapter 11—Other Matters 141
[553] The second category of transitional instruments are Transitional Australian Pay
Classification Scales (APCSs), State reference transitional instruments and Division
2B State awards preserved by the Fair Work (Transitional Provisions and
Consequential Amendments) Regulations 2009 and transitional pay equity orders
created by the Transitional Act. These can be divided into two groups.
[554] The first group relates to competency-based wage arrangements for trainees or
apprentices, or provisions relating to the provision of tools for trainees or apprentices
(principally in Queensland). They are excluded from the termination arrangements that
generally apply under the Transitional Act and must be considered as part of the
Panel’s review.482
[555] The second group are a new category of transitional instruments created or
varied by operation of modifications to the Transitional Act, called “transitional pay
equity orders”.483 The Panel must review, and may make a determination varying
aspects of one of the transitional pay equity orders.484 This transitional pay equity
order relates to Division 2B State awards for which base rates of pay were determined
by a pay equity order made by a state Industrial Relations Commission, to the extent it
is derived from certain Queensland awards.485
[556] The third category of instruments came into existence in December 2012, when
the Act was amended to provide for the continued operation of certain state awards 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.486 When this occurs, a copied State award is created which contains the same
terms as the original state award at that point in time.487 The Panel is required to
review, and, if appropriate, make a determination varying minimum wages in copied
State awards.488
[557] A small number of parties addressed the issue of how transitional instruments
should be adjusted. The ACTU and ABI supported a flow-on of increases applied to
modern awards. The ACTU and Queensland Government made submissions
specifically in relation to apprentices and trainees, supporting the continued flow-on of
increases for instruments preserved in Queensland subject to competency-based wage
progression. Business SA highlighted that, from 1 February 2012, South Australian
employers previously subject to Division 2B State awards would now be subject to
largely higher modern award provisions.
[558] In relation to the adjustment of new transitional instruments (being the
transitional pay equity order and copied State awards) the Australian Government,
ACTU and the AAA provided additional submissions to the Panel in May 2013. In
relation to the adjustment of the transitional pay equity order, the Australian
Government and ACTU submitted that the Panel is required to review and may adjust
the order to the extent that it relates to Division 2B State awards that are not derived
from the Queensland Community Services and Crisis Assistance Award—State
2008.489 The Australian Government identified that certain groups of disability support
[2013] FWCFB 4000
142 Chapter 11—Other Matters
workers, dental assistants and employees engaged in the provision of children’s
services would be affected by any adjustment.490 The AAA submitted that it did not
oppose the transitional pay equity order being adjusted in line with modern award
minimum wages.491
[559] In terms of the copied State awards, the Australian Government submitted that
these instruments may be varied in the same way as Division 2B State awards.492 The
ACTU noted that there is no information available as to the number of copied State
awards (if any) in operation however it submitted that the Panel should still vary these
rates.493 The ACTU however submitted that any increase to these rates should be
differentiated on the basis of when they came into effect (as some copied State awards
may include rates of pay that have been increased as a result of state Industrial
Relations Commission minimum wage determinations in the previous 12 months). The
ACTU therefore submitted that a flow on of the increase awarded in this decision
should only apply to those copied State awards that do not include a minimum wage
increase awarded by a state Industrial Relations Commission in the past 12 months,
with those that include a state increase awarded in the second half of 2012 to receive
50 per cent, and those awarded in the first half of 2013 to receive no increase.494 The
AAA submitted that it did not oppose the transitional copied State awards being
adjusted in line with modern award minimum wages.495
[560] We have decided that for copied State awards currently in operation, in order to
limit the impact of any “double-dipping” as a result of this decision and minimum
wage increases previously awarded by state Industrial Relations Commissions, a tiered
increase will be applied to these instruments in the following terms:
an increase of 2.6 per cent applies to wage rates in copied State awards that
were not the subject of a state minimum wage decision that commenced after
1 July 2012 and before 1 July 2013;
an increase of 1.3 per cent applies to wage rates in copied State awards that
were the subject of a state minimum wage decision that commenced after 1
July 2012 and before 1 January 2013; and
no increase applies to wage rates in copied State awards that were the subject
of a state minimum wage decision that commenced on or after 1 January 2013
and before 1 July 2013.
[561] For all other transitional instruments, we have decided that the increase we have
awarded in modern award minimum wages should also apply to those transitional
instruments which remain in operation. There is no requirement to publish the
variations.496
[2013] FWCFB 4000
Chapter 11—Other Matters 143
Modern award minimum wages for junior employees, employees to
whom training arrangements apply, employees with disability and
piece rates
[562] As part of this Review, the Panel is required to review minimum wages for
junior employees, employees to whom training arrangements apply, employees with
disability, and piece rates.497
[563] The ACTU, ACCI, ACOSS, CCIQ and Business SA submitted that any
minimum wage increases awarded as part of this Review should flow on to junior
wages in modern awards.498 The South Australian Government supported the
elimination of sub-minimum wage rates for employees under 21499 and, although
supporting a flow on, the ACTU also argued for the elimination of all junior rates:
“the removal of discounted wage rates for 20 year olds is necessary to ensure this group
of workers is provided with a fair and relevant safety net.”500
[564] The Victorian Government and AFEI recommended the Panel exercise caution
in light of current levels of youth unemployment,501 while CCIQ submitted that
minimum engagement periods in a number of awards restricted the capacity of
employers to employ junior staff.502
[565] Conversely, ACCI, MGA and CCIQ submitted that employers were
increasingly engaging junior employees over adult employees due to the lower cost of
their engagement.503 ACCI referred to the findings of its 2013 National Minimum
Wage survey and submitted that:
“In summary, the latest survey shows the impact of the 2013 decision resulted [in]:
…Employers increasing the number of junior employees.”504
[566] MGA opposed increasing junior wage rates, citing reasons of compromised
service and competency.505 ACOSS submitted that present minimum wages for junior
employees did not adversely affect their employment levels.506
[567] We have decided to allow the increase we have granted to flow through to
junior rates through the operation of provisions for calculating junior rates in modern
awards.
[568] The ACTU, ACCI, ACOSS, CCIQ and Business South Australia submitted that
any minimum wage increases awarded as part of this Review should flow on to the
modern award wages of employees to whom training arrangements apply. 507
[569] ACOSS noted the decline in general apprenticeships, but submitted that there
had not been a decline in adult apprentices, despite their higher wages.508 ACOSS also
proposed differentiating the adjustment of modern award apprentice and trainee wages
in accordance with differing labour force conditions.509
[2013] FWCFB 4000
144 Chapter 11—Other Matters
[570] ACCI noted in its submission the economic difficulties employers of training
wage employees faced,510 while CCIQ submitted that compliance with the Act had
increased costs of operation for businesses.511 VACC noted the current reluctance of
employers to hire trainees and apprentices.512 Although the Motor Trade Association
of South Australia supported a moderate increase in apprentice wages, they warned
that substantial increases could jeopardise the feasibility of training schemes.513
[571] In relation to the adjustment of the National Training Wage Schedule (NTWS)
for trainees which is attached to most modern awards, the ACTU expressed support for
a continuation of the Panel’s approach in the past two annual wage reviews:514
“We submit that it is appropriate to adjust the rates contained in NTWS by a uniform
percentage that is equivalent to the increase in the NMW in order to maintain the
relativity of trainee wage rates to the NMW. The ACTU’s flat dollar claim with respect
to the NMW equates to approximately 4.95 per cent.”515
[572] We have also decided to flow through that percentage increase 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.
[573] A number of submissions to this Review raised the potential effects of the
outcomes of the current modern awards review of junior, trainee and apprentice award
rates.
[574] The South Australian Government supported the Modern Awards Review into
juniors, trainees and apprentices, in particular noting their support as part of that
review for increases to first year apprentice rates.516
[575] VACC, HIA and AFEI expressed concerns about the effects of a potential
double increase of subsidiary wages as a result of both the Annual Wage Review and
any potential Modern Award Review 2012 decision; warning that this may potentially
act as a disincentive for employers to engage trainees, juniors or persons with
disability.517 AFEI submitted that:
“The loss of teenage job opportunities is a factor which should be considered by the
Panel in determining the minimum wage level. This is particularly the case in the
2012-2013 Review where apprentice rates are currently the subject of significant wage
claims in Fair Work Commission. Any increase resulting from those matters will
inevitably flow to other junior rates in modern awards.”518
[576] We have noted the parties’ submissions in relation to the potential effects of any
decision arising from the Modern Awards Review into junior, trainee and apprentice
award rates.519 However, in the absence of any decision by the Full Bench, we must
proceed on the basis of the current wages and the arrangements for the determination
of these other rates.
[2013] FWCFB 4000
Chapter 11—Other Matters 145
Employees with disability
[577] For employees with disability, the ACTU, ACCI, ACOSS, CCIQ and Business
SA submitted that any minimum wage increases awarded as part of this Review should
flow on through the Supported Wage System Schedule (SWSS) attached to most
modern awards.520
[578] ACOSS supported the extension of the supported wage system to more
employees with disability, but noted that the various wage instruments could be further
standardised:
“The extension of the Supported Wage System makes careful monitoring of the
reliability and equity of the various instruments used to assess productivity essential.
On equity grounds, it would be desirable to standardise the instruments to a greater
degree than at present.”521
[579] ACOSS also expressed concerns about the rate of the minimum payment in the
SWSS attached to a number of modern awards being set at the income test-free area
for the Disability Support Pension.522
[580] We have decided that the adjustment will flow through to employees with
disability through the operation of the SWSS and that the minimum payment in the
SWSS should be adjusted in accordance with past practice.
Piece rates
[581] The ACTU directly supported a flow on of any minimum wage increase
awarded as part of this Review to piece rates.523 In response to the Panel’s questions
for consultations document, the Australian Government and the NFF also supported
this flow on,524 although the NFF requested that the Commission provide exceptional
circumstances exemptions should future circumstances prove necessary.525
[582] We have decided to flow on the increase we have determined to modern award
employees engaged in piece work.
Casual loadings under modern awards and the casual loading for
award/agreement free employees
[583] 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.526
[2013] FWCFB 4000
146 Chapter 11—Other Matters
[584] The ACTU, Ai Group, and ABI supported increasing the casual loading for
award/agreement free employees to 24 per cent527 and submitted that the casual
loading in modern awards should be maintained at 25 per cent.528
[585] A number of submissions outlined the costs to employers associated with casual
loadings, but few specified whether this should be taken into account in relation to the
adjustment of casual loadings in modern awards or minimum wage adjustments more
generally.529
[586] We have decided to increase the casual loading for award/agreement free
employees to 24 per cent in line with approach adopted in the 2009–10 Review
decision.530 We have also determined that it is appropriate not to make any alteration
to the standard casual loading in modern awards, noting the transitional arrangements
applying in those instruments.
Special national minimum wages
[587] The Panel is required by s. 294 of the Act to set a national minimum wage 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.
[588] For junior award/agreement free employees, the Panel in 2010–11 Review
decision decided to adopt the junior wage percentage scale in the Miscellaneous
Award 2010531 as the special national minimum wage for award/agreement free junior
employees.532
[589] The Ai Group supported the continuation of the Panel’s approach to using the
scale in the Miscellaneous Award 2010 for award/agreement free juniors.533 The
ACTU and ABI also supported the flow on of the Panel’s percentage determination to
junior special national minimum wages.534
[590] We have decided to again adopt the junior wage percentage scale in the
Miscellaneous Award 2010 as the special national minimum wage for
award/agreement free junior employees.
[591] In relation to award/agreement free employees to whom training arrangements
apply, Ai Group supported the Panel’s approach in the last review in which apprentice
and trainee rates were set in accordance with the apprentice provisions and NTWS in
the Miscellaneous Award 2010.535 The ACTU and ABI also supported the flow on of
the Panel’s percentage determination to apprentice and trainee special national
minimum wages.536
[592] We have again 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
[2013] FWCFB 4000
Chapter 11—Other Matters 147
reference, the apprentice and NTWS provisions of that award. The national minimum
wage order will also provide that adult apprentices should not receive less than the
national minimum wage.
[593] The ACTU, Ai Group and ABI supported a twofold approach of separating
national minimum wages for employees with disability whose productivity is not
affected and those whose productivity is affected.537
[594] Ai Group, the ACTU and ABI also supported the flow on of the Panel’s
percentage determination to these wages.538 The ACTU submitted that 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 area
(as is the usual approach).539
[595] We have decided to follow previous years’ approaches 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.
12. Conclusion
[596] This chapter sets out the outcome of the Review and mentions some matters
relevant to the 2013–14 Review.
[597] 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 2013 minimum weekly wages are
increased by 2.6 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 2.6 per cent.
[598] The determinations necessary to give effect to the increase in modern awards
will be made available in draft form shortly after this decision. 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.
[599] In relation to transitional instruments, from the first full pay period on or after
1 July 2013 wages in those instruments, including Division 2B State enterprise awards,
will be varied by 2.6 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
[2013] FWCFB 4000
148 Appendix 1—Proposed Minimum Wages Adjustments
programs will be varied to achieve parity with minimum wages in the corresponding
transitional APCSs and State reference transitional awards.
[600] The national minimum wage order will contain:
(a) a national minimum wage of $622.20 per week or $16.37 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 $622.20 per week or $16.37 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 that adult
apprentices should not receive less than the national minimum wage, and
(e) a casual loading of 24 per cent for award/agreement free employees.
[601] We intend to give consideration to the research program for the Annual Wage
Review 2013–14 as soon as practicable and will invite interested parties to lodge
research proposals. The research program will not necessarily be restricted to the
parties’ proposals.
[602] The timetable for the Annual Wage Review 2013–14 will be announced in the
last quarter of 2013.
[603] We wish to express our appreciation to the parties who participated in the
Review for their contributions and to the staff of the Fair Work Commission for their
assistance.
PRESIDENT
149 Appendix 1—Proposed Minimum Wages Adjustments
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 South
Australia
No quantum specified
New South Wales
Government
No quantum specified
Queensland Government No quantum specified
Victorian Government No quantum specified
Government of Western
Australia
No quantum specified
Australian Council of Trade
Unions
$30.00 pw C10 and below:
$30.00 pw
For above C10:
4.2% pw
Australian Industry Group 1.75% pw, applicable to all
Australian Chamber of
Commerce and Industry
$5.80 pw, applicable to all Consider differential treatment
for service industry sectors
facing significant difficulties.
Australian Council of Social
Service
No quantum specified
Australian Business Industrial 1.2% pw, applicable to all
Australian Federation of
Employers and Industries
Not more than $5.80 pw, applicable to
all
Accommodation Association
of Australia
1.5% pw, applicable to all
Australian Hotels Association 1.0% pw, applicable to the Hospitality
Industry (General) Award 2010
Australian National Retailers
Association
$9.10 pw, applicable to all
Australian Retailers
Association
Not more than $5.80 pw for the retail
sector, considered on an award-by-award
basis
Consider differential treatment
for specific industries based
on particular circumstances.
Australian Road Transport
Industrial Organisation
No quantum specified
Business SA $5.80 pw, applicable to all Consider differential treatment
for industry sectors facing
significant difficulties.
Chamber of Commerce and
Industry Queensland
Supports no increase.
In the event of an increase, not more
than $5.80 pw, applicable to all. Increase
considered on an award-by-award basis
Exemption or differential
treatment for industry sectors
facing significant challenges.
Victorian Employers’
Chamber of Commerce and
Industry
$5.80 pw, applicable to all Consider differential treatment
for specific industries based
on particular circumstances.
Growcom Between $10.00
and $15.00 pw,
applicable to all
No quantum
specified
Housing Industry Association No quantum specified
HR Nicholls Society No increase
Master Grocers Australia No increase
[2013] FWCFB 4000
150 Appendix 1—Proposed Minimum Wages Adjustments
Submission Proposal
National
minimum wage
Modern award
minimum wages
Exemption/deferral
sought
Master Plumbers and
Mechanical Services
Association of Australia
$5.80 pw, applicable to all
Motor Trade Association of
South Australia Inc
No quantum specified
National Farmers’ Federation $7.50 pw, applicable to all
National Retail Association Not more than $4.75 pw, applicable to
all
Consider specific
determinations for individual
awards in the broader retail
space.
Restaurant & Catering
Australia
No quantum specified No increase to Modern
Awards in the service sector
due to exceptional economic
circumstances.
South Australian Wine
Industry Association
Incorporated
No greater than CPI less 0.25% to
compensate for the superannuation
guarantee levy.
Victorian Automobile
Chamber of Commerce
Less than $10.00 pw, applicable to all
Australian Catholic Council
for Employment Relations
$10.00 pw plus the
equivalent of the
C10 increase as a
dollar amount as
calculated in the
next column.
C10 and higher:
per cent increase
equivalent to the
change in CPI for
the year to the
March qtr 2013,
(adjusted for
carbon price
compensation of
0.8%), plus 1% for
productivity
increases.
For below C10:
the equivalent of
the C10 increase
as a dollar amount
United Voice $30.00 pw No quantum
specified
Printed by authority of the Commonwealth Government Printer
Price code T, PR002013
[2013] FWCFB 4000
151
1 Australian Bureau of Statistics, Catalogue No. 6306.0 - Employee Earnings and Hours, Australia, May 2012.
2 AFEI submission at p. 3, para. 7.
3 ACCI submission at p. 12, para. 45; pp. 59–60, para. 201; AFEI submission at p. 3, para. 7; ABI submission at p. 4, paras
2.7–2.8; p. 8, para. 3.11.
4 S.134(1)(a) and 294(1)(c).
5 See s.186(2)(d); the Commission may approve an enterprise agreement that does not pass the ‘better off overall test’ if
satisfied that, because of exceptional circumstances, the approval of the agreement would not be contrary to the public
interest - s.189.
6 [2012] FWAFB 5000.
7 [2012] FWAFB 5000 at paras 257 and 258.
8 See Chart 4.6.
9 Section 576T(2) of the WR Act permitted State based differences as part of the award modernisation process but only for a
limited period designed to allow for transitional arrangements.
10 [2009] AIRCFB 800, at paras 29 and 30.
11 [2012] FWAFB 5000, at para 166.
12 MA000010.
13 ACTU submission at p. 118, para. 360, ACOSS submission at p. 19 and ACCI submission at p. 25, para. 116, Australian
Government submission, p. 42, para 192.
14 [2010] FWAFB 4000 at para 237.
15 ACOSS submission at pp. 26-27
16 ACOSS (2012) Poverty in Australia, ACOSS Paper 194.
17 Australian Bureau of Statistics, Catalogue No. 6306.0 - Employee Earnings and Hours, Australia, May 2012.
18 Australian Bureau of Statistics, Catalogue No. 6306.0 - Employee Earnings and Hours, Australia, May 2010.
19 [2011] FWAFB 3400.
20 MA000010; This is the lowest level in the Manufacturing Award.
21 [2010] FWAFB 4000.
22 [2010] FWAFB 4000.
23 Safety Net Review—Wages May 2004.
24 s.3
25 [2012] FWCFB 5000.
26 Annual Wage Review 2011–12 Decision [2012] FWAFB 5000 at p. 12, 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)).
27 Annual Wage Review 2011–12 Decision [2012] FWAFB 5000 at p. 12, 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
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)).
28 Annual Wage Review 2011–12 Decision [2012] FWAFB 5000 at p. 12, para. 41: For example, the need to encourage
collective bargaining (s.134(1)(b); see also s.3(f)).
29 [2012] FWAFB 5000 at para 257 and 258.
30 ACCI submission March 2013 at paras 73 - 76.
31 April 1997 Safety Net Review—Wages decision (1997) 71 IR 1 at 17.
[2013] FWCFB 4000
152
32 (1989) 27 IR 196 at 201.
33 (1988) 25 IR 170.
34 (1997) 75 IR 268 at 297–9.
35 (1998) 123 IR 240 at 253.
36 For example see [2009] AIRCFB 50 at paras 46–8 and [2009] AIRCFB 345 at paras 43 and 94.
37 ABI Submission at paragraph 2.15.
38 See s.186(2)(d); the Commission may approve an enterprise agreement that does not pass the ‘better off overall test’ if
satisfied that, because of exceptional circumstances, the approval of the agreement would not be contrary to the public
interest - s.189.
39 CCIQ submission at p7 para 15(b).
40 ARA submission at p13.
41 Business SA submission at p7 para 2.4.
42 [2012] FWAFB 5000 at paras 281–282
43 ABI submission at para. 11.10.
44 Chamber of Commerce and Industry Queensland submission, p. 7 at paras 14–15; HR Nicholls Society submission at p. 1;
Master Grocers Australia submission at pp. 4, 6.
45 Australian Chamber of Commerce and Industry submission, p. 32 at para. 147; Australian Federation of Employers and
Industry submission , p. 8 at para. 19; Victorian Employers’ Chamber of Commerce and Industry submission at pp. 1–2;
Master Plumbers and Mechanical Services Association submission, p. 4 at para. 3.6; Australian Retailers Association
submission at p. 5; Business SA submission, p. 5 at para. 2.3; National Farmers’ Federation submission, p. 17 at
para. 6.2; Australian National Retailers Association submission, p. 4 at paras 1.1–1.2; National Retailers Association
submission, p. 13 at para. 56; CCIQ submission, p. 7 at paras 14–15; Growcom submission at p. 7; Victorian Automobile
Chamber of Commerce submission at pp. 5, 16; Master Grocers Australia submission at p. 4; Restaurant and Catering
Australia submission, p. 13 at para. 39.
46 AFEI submission at p. 3, para. 7.
47 ACCI submission, p. 12 at para. 45; AFEI submission , p. 8 at para. 19; Business SA submission, p. 5 at paras 2.3–2.4;
VECCI submission at pp. 1–2; ARA submission at pp. 5–6; MPMSAA submission, p. 4 at paras 3.6–3.7.
48 ACCI submission at p. 60, para. 203.
49 CCIQ submission, p. 7 at paras 14–15.
50 NRA submission, p. 13 at para. 57; ANRA submission, p. 4 at para. 1.2.
51 NRA submission, p. 13 at para. 56.
52 ANRA submission, p. 4 at paras 1.1–1.2.
53 Ai Group submission at pp. 3, 55.
54 Ai Group submission at p. 55.
55 ABI submission, p. 4 at para. 2.1; AAA submission at p. 2.
56 AHA submission at p. 2.
57 ACTU submission, pp. 4–5 at paras 16–20; ACCER submission, pp. 142–143 at para. 458.
58 The C10 level refers to the rate of pay for an employee classified as an Engineering/ Manufacturing Tradesperson—Level I
under the Manufacturing Award, and equivalent levels within other modern awards.
59 ACTU submission, p. 7 at para. 28.
60 ACTU submission, p. 20 at para. 74.
61 ACTU submission, p. 21 at para. 75.
62 ACTU submission, p. 8 at para. 34.
63 ACCER submission, p. 61 at para. 197.
64 ACCER submission, p. 143 at para. 461.
65 ACCER submission, p. 34 at para. 98.
66 Ai Group submission in reply, at pp. 3–4.
67 All data are seasonally adjusted unless otherwise noted.
68 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
[2013] FWCFB 4000
153
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. Australian Bureau of Statistics - Catalogue No. 5206.0, ‘Real net national disposable income - a new
national accounts measure’, Australian National Accounts: National Income, Expenditure and Product, Dec 2001,
Feature Article.
69 ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2012, Catalogue No. 5206.0.
70 OECD, Economics: Key Tables from OECD, Table No. 13, OECD iLibrary.
71 ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2012, Catalogue No. 5206.0.
72 Bishop J, Kent C, Plumb M and Rayner V (2013) The Resources Boom and the Australian Economy: A Sectoral Analysis,
RBA Bulletin, March Quarter, p. 40 as cited in ACCI submission at p.41, para. 168.
73 Source: RBA, Index of Commodity Prices, April 2013.
74 op cit., Bishop et al at p.40.
75 Ibid, p.44.
76 Ibid, p.44–7.
77 Ibid, p.47–8.
78 Ibid, p.48.
79 Bishop J, Kent C, Plumb M & Rayner V (2013), The resources boom and the Australian economy: a sectoral analysis,
RBA Bulletin, March Quarter.
80 Schweppes Australia Pty Ltd v United Voice - Victoria Branch [2012] FWAFB 7858, paras 38 - 45.
81 ss.134(1)(a) and 284(1)(c).
82 ACTU submission, page 6, para 26 and ACCER submission, pp.6 and para 41 at pp. 20–21.
83 ACTU submission p.52, para 160.
84 ACTU submission, p.55, para 169.
85 ACTU submission, p.57-8, paras 172 and 173.
86 ACTU submission, p.58, para 174.
87 ABI submission, p.15, para 8.1
88 Australian National Accounts: National Income, Expenditure and Product, 5206.0, December 2012: Analysis and
comments
89 ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2012, Catalogue No. 5206.0.
90 ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2012, Catalogue No. 5206.0.
91 OECD Employment Outlook 2012, Chapter 3, Labour Losing to Capital: What Explains the Declining Labour Share.
92 ‘Productivity boost first, then labour can share’. Australian Financial Review, Friday 18 January 2013.
93 ACTU Post-Budget Submission, p.14, para 56.
94 ACTU Post-Budget Submission, p.15, para 59.
95 ACTU Post-Budget Submission, p.15, paras 60 and 61.
96 Ai Group submission, pp. 26–7, para 2.8
97 ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2012, Catalogue No. 5206.0.
98 Rizov M. and Croucher R., The impact of the UK national minimum wage on productivity by low-paying sectors and firm-
size groups, Report to the Low Pay Commission, London, March 2011.
99 Ibid, p.24.
100 OECD Employment Outlook 2012, Chapter 3, Labour Losing to Capital: What Explains the Declining Labour Share.
101 Ibid, pp.111 and 145.
102 ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2012, Catalogue No. 5206.0.
103 Australian National Accounts, 5206, as cited in footnote to Table 3.1 of the Statistical Report.
104 ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2012, Catalogue No. 5206.0.
105 Ai Group submission, p.7.
106 ACTU reply submission, at p.20, para. 86.
107 VACC submission at p. 14.
108 VACC submission at p. 15.
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109 R&CA submission at pp. 4,5.
110ACTU reply submission, at p. 21, para 88.
111 Insolvency and Trustee Service Australia, June 2012; Australian Bureau of Statistics, Labour Force, Australia, Detailed
Quarterly, Nov 2012, Catalogue No. 6291.0.55.003. Business bankruptcy rate adopted from Bickerdyke, I, Lattimore, R,
and Madge, A, 2000, Business Failure and Change: An Australian Perspective, Productivity Commission Staff Research
Paper, Ausinfo, Canberra.
112 Automotive Skills Australia, February 2013, Automotive Environmental Scan 2013, ASA, Australia.
113 VACC submission at p. 14.
114 Business Related Bankruptcies under the Bankruptcy Act 1966 - Insolvency and Trustee Service Australia Annual Report
2011/12 , Table 38.
115 ABS Cat. No. 8165; Counts of Australian Businesses Including Entries and Exits June 2007 - June 2012,
116 ABS Cat. No. 8165; Counts of Australian Businesses Including Entries and Exits June 2007 - June 2012, Summary of
results , p.6.
117 ABS Cat. No. 8165; Counts of Australian Businesses Including Entries and Exits June 2007 - June 2011, Summary of
Findings, p.6.
118 During the 2011–12 financial year, the 'Accommodation and Food Services' and 'Administrative and Support Services'
industries had the highest entry rates of 16.7% and 16.4% respectively. ABS Cat. No. 8165; Counts of Australian
Businesses Including Entries and Exits June 2007 - June 2012, Summary of Findings, p.6.
119 ABS Cat. No. 8165; Counts of Australian Businesses Including Entries and Exits June 2007 - June 2012, table 1.
120 ABS Cat. No. 8165; Counts of Australian Businesses Including Entries and Exits June 2007 - June 2012, table 1.
121 MGA submission, p.5.
122 ARA Submission, p.9.
123 ANRA Submission p.7. para 2.10.
124 ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2012, Catalogue No. 5206.0.
125 [2012] FWAFB 5000, at para 277
126 Australian Bureau of Statistics 8501.0 - Retail Trade, Australia, Mar 2013.
127 Australian Bureau of Statistics, Catalogue No. 8501.0 - Retail Trade, Australia, March 2013.
128 Australian Government submission at p. 17, para. 63.
129 ACCI submission at p. 13, para. 47.
130 [2009] AIRCFB 800, at paras 29 and 30.
131 VACC submission at p. 8, MTASA submission, p.5 at para. 2.33 and HIA submission, at p.6, para 3.4.1.
132 AM2012/18 and others.
133 HIA submission, at p.6, para 3.4.1.
134 Ai Group submission, p.58.
135 Victorian Government submission at pp. 12–13, para. 2.30.
136 AHA submission at p. 6; MGA submission at p. 16, para. 7.5.1; RCA submission at p. 12, para. 34.
137 R&CA submission at p. 12, para. 34.
138 AHA submission at p. 5.
139Australian Government, Strong Growth, Low Pollution, Modelling A Carbon Price,
http://archive.treasury.gov.au/carbonpricemodelling/content/report.asp, Chapter 5, p. 85.
140 MGA submission at p. 13, paras 7.2.1–7.2.2; CCIQ submission at p. 22, para. 49; NRA submission at p. 11, paras 46–48.
141 NRA submission at p. 11, para. 46.
142 MGA submission at p. 13, para. 7.2.2.
143 MGA submission, p. 13 at para. 7.2.2; Productivity Commission (2011), Economic Structure and Performance of the
Australian Retail Industry, Report No. 56, Canberra, released 9 December, p. 98.
144 Around 1 per cent; Productivity Commission (2011), Economic Structure and Performance of the Australian
Retail Industry, Report No. 56, Canberra, released 9 December, p. 102.
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145 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.
146 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.
147 ABS, Selected Living Cost Indexes, Australia, Dec 2012 - Explanatory notes, Catalogue No. 6467.0.
148 RBA, Inflation Target, http://www.rba.gov.au/inflation/inflation-target.html.
149 ABS, Consumer Price Index, Australia, Mar 2013, Catalogue No. 6401.0; ABS, Selected Living Cost Indexes, Australia,
Mar 2013, Catalogue No. 6467.0.
150 ABS, Consumer Price Index, Australia, Mar 2013, Catalogue No. 6401.0.
151 ACCI submission at p. 59, para. 200; Business SA submission at p. 17, para. 6.3.2.1.
152 Australian Government at p. 23, para. 102.
153 ACCI submission at p. 12, para. 45; pp. 59–60, para. 201; AFEI submission at p. 3, para. 7; ABI submission at p. 4, paras
2.7–2.8; p. 8, para. 3.11.
154 ACTU submission at p. 45, para. 136.
155 Australian Government submission, p. 11, para. 14.
156 [2012] FWAFB 5000, at para 166.
157 ACCI submission at p. 12, para. 45; pp. 59–60, para. 201; AFEI submission at p. 3, para. 7; ABI submission at p. 4, paras
2.7–2.8; p. 8, para. 3.11.
158 ACCI submission at p. 60, para. 203.
159 [2010] FWAFB 4000
160 Business SA submission at p. 6.
161 [2010] FWAFB 4000, para. 241.
162 ABS, Wage Price Index, Australia, Dec 2012, Catalogue No. 6345.0..
163 ABS, Average Weekly Earnings, Australia, Nov 2012, Catalogue No. 6302.0
164 DEEWR, Trends in Federal Enterprise Bargaining, December quarter 2012;
http://www.deewr.gov.au/WorkplaceRelations/Pages/Reports.aspx
165 Estimates of AWOTE are published on a biannual basis for May and November. The transition to biannual frequency has
resulted in a new seasonally adjusted and trend series which commenced for May 2012. Therefore, original data are used
to present a longer time period.
166 ABS, Average Weekly Earnings, Australia, Nov 2012, Catalogue No. 6302.0; ABS, Wage Price Index, Australia, Mar
2012, Catalogue No. 6345.0; DEEWR, Trends in Federal Enterprise Bargaining, December quarter 2012,
http://www.deewr.gov.au/WorkplaceRelations/Pages/Reports.aspx; Metal, Engineering and Associated Industries Award
1998; Manufacturing and Associated Industries and Occupations Award 2010 (from 1 January 2010).
167 DEEWR, Trends in Federal Enterprise Bargaining, December quarter 2012,
http://www.deewr.gov.au/WorkplaceRelations/Pages/Reports.aspx
168 Australian National Accounts: National Income, Expenditure and Product, Dec 2012, Catalogue No. 5206.0.
169 ABS, Labour Force, Australia, April 2013. Catalogue No. 6202.0
170 ABS, Labour Force, Australia, Apr 2013, Catalogue No. 6202.0.
171 Ai Group submission at p. 15; AFEI submission at p. 11, para. 27 and ACCI submission at p. 46, para. 177.
172 ABS, Labour Force, Australia, Apr 2013, Catalogue No. 6202.0.
173 ABS, Labour Force, Australia, Detailed, Quarterly, Feb 2013, Catalogue No. 6291.0.55.003.
174 ABS, Labour Force, Australia, Detailed, Quarterly, Feb 2013, Catalogue No. 6291.0.55.003.
175 Bishop J, Kent C, Plumb M & Rayner V (2013), The resources boom and the Australian economy: a sectoral analysis,
RBA Bulletin, March Quarter.
176 ABS, Labour Force, Australia, Apr 2013, Catalogue No. 6202.0.
177 ABS, Labour Force, Australia, Detailed, Quarterly, Feb 2013, Catalogue No. 6291.0.55.003.
178 ABS, Labour Force, Australia, Apr 2013, Catalogue No. 6202.0; ABS, Labour Force, Australia, Detailed—Electronic
Delivery, Apr 2013, Catalogue No. 6291.0.55.001.
179 ABS, Labour Force, Australia, Apr 2013, Catalogue No. 6202.0; ABS, Labour Force, Australia, Detailed—Electronic
Delivery, Apr 2013, Catalogue No. 6291.0.55.001.
180 Australian Government submission at p. 32, paras 133 and 135.
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181 Australian Government submission at p. 32, para. 137.
182 ACOSS submission, at pp. 41–42.
183 Australian Government submission at p. 30, para. 126; Victorian Government submission at p. 11, para. 2.20.
184 Australian Government submission at p. 30, para. 128.
185 ACCI submission at pp. 48–49, para. 181; Ai Group submission at p. 16.
186 ACCI submission at p. 48, para. 180.
187 ACCI submission at pp. 48–49, para. 181; Ai Group submission at p. 16.
188 Australian Government submission at p. 30, para. 127.
189 ACTU submission, p.69, para 209.
190 ACTU submission, p.69, para 211-12.
191 ACTU submission in reply at p. 6, Figure 1.
192 Australian Government Response to Consultation Questions, p. 13.
193 Australian Government responses to questions for consultations at p.13.
194 Lowe P (2012), The Labour Market, Structural Change and Recent Economic Developments, Speech to the Financial
Services Institute of Australasia (Finsia) Leadership Event, Hobart, 9 October 2012, RBA Bulletin, December Quarter,
pp. 108–109.
195 ABS, Labour Force, Australia, Detailed—Electronic Delivery, Apr 2013, Catalogue No. 6291.0.55.001.
196 ABS, Labour Force, Australia, Detailed—Electronic Delivery, Apr 2013, Catalogue No. 6291.0.55.001.
197 ACCI submission at pp. 51–55, paras 186–193, Ai Group submission at pp. 36–41; ABI submission at p. 13, para. 7.5.
198 ABS, Labour Force, Detailed, Quarterly, Feb 2013, Catalogue No. 6291.0.55.003.
199 ABS, Labour Force, Australia, Apr 2013, Catalogue No. 6202.0.
200 ABI submission at p. 13, para. 7.5; ACCI submission at p. 53, para 190.
201 ACCI submission at pp. 53–4, para. 191.
202 ABS, Underemployed Workers, Sep 2012, Catalogue No, 6265.0.
203 ACCI submission at p. 54, para. 192.
204 ABS, Labour Force, Detailed, Quarterly, Feb 2013, Catalogue No. 6291.0.55.003; and ABS, Forms of Employment,
Australia, November 2011, Catalogue No. 6359.0 .
205 ABS, Labour Force, Australia, Detailed, Quarterly, Feb 2013, Catalogue No. 6291.0.55.003.
206 ABS, Underemployed Workers, September 2012, Catalogue No, 6265.0.
207 ABS, Australian Social Trends, June 2011, Catalogue No. 4102.0.
208 ABS, Australian Social Trends, Jun 2011, Catalogue No. 4102.0.
209 Section 3(g).
210 Connolly E, Norman D and West T, "Small Businesses: An Economic Overview, ACCI Submission, Annexure C.
211 ABS Cat. No.6306.0 - Employee Earnings and Hours, Australia, May
2012. http://www.abs.gov.au/Ausstats/abs@.nsf/0/6F2D45E3B453FE4DCA25782300135880
212 AFEI Submission, p.31, at para 76 and Charts 21 and 22.
213 AFEI Submission, p.31, at para 76 and Charts 21 and 22.
214 Connolly E, Norman D and West T, "Small Businesses: An Economic Overview, ACCI Submission, Annexure C.
215 Connolly E, Norman D and West T, "Small Businesses: An Economic Overview, ACCI Submission, Annexure C.
216 ABS Cat. No.8165.0 - Counts of Australian Businesses, including Entries and Exits, June 2008 to June
2012. http://www.abs.gov.au/Ausstats/abs@.nsf/0/9C55E8A8764320D0CA257838000EE8FD
217 R&CA submission at para 32, pp. 10–11; ABI submission at para 10.1, p. 19; ACCI reply submission at para 17, p. 7
218 ABI submission at p. 19, para. 10.1.
219 R&CA at para 32, pp. 10–11.
220 ABI submission at p. 19, para. 10.1.
221 Sections 134(1)(a) and 284(1)(c).
222 ABS Cat No 6524.0.55.002: 2009-10.
223 ABI submission at p. 19, para. 10.1.
[2013] FWCFB 4000
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224 ABS Cat. No. 8175.0, Counts of Australian Business Operators 2006–2007.
225 ACCI Reply Submission, p.8 at para 20.
226 Estimates for Small Areas - Data Cubes, 2004-05 to 2005-06, February 2009, ABS Cat No 6225.0.55.001.
227 ABS Cat No 6524.0.55.002; Explanatory Note 24 and ABS 6225.0.55.001, Explanatory Note 14.
228 ABS Cat No 8175.0 - Counts of Australian Business Operators, 2006 to 2007, Explanatory note 49.
229 ABS, Employee Earnings and Hours, Australia, various, Catalogue No. 6306.0.
230 An overview of compositional change in the Australian labour market and award reliance, Fair Work Australia Research
Report 1/2010, at pp. 51–52.
231 ABS, Employee Earnings and Hours, Australia, various, Catalogue No. 6306.0.
232 ACTU submission, in table 5.
233 ACTU submission, in table 5.
234 ACTU submission at p. 15, para. 61; ACCI submission at p. 54, para. 192.
235 Australian Government submission at p. 13, para. 39; AFEI submission at p. 13, para. 31 and ACCER submission at p. 31,
para. 85.
236 ABS, Employee Earnings and Hours, Australia, May 2012, Catalogue No. 6306.0; ABS, Australian National Accounts:
National Income, Expenditure and Product, Dec 2012, Catalogue No. 5206.0; ABS, Business Indicators, Australia, Sep
2012, Catalogue No. 5676.0; ABS, Labour Force, Quarterly, Feb 2013, Catalogue No. 6202.0; ABS, Wage Price Index,
Australia, Mar 2013, Catalogue No. 6345.0; DEEWR, Trends in Federal Enterprise Bargaining, December quarter 2012.
237 [2012] FWAFB, Table 4.5.
238 Australian Government, Budget Paper No. 1: Budget Strategy and Outlook 2013–14, Canberra, 2013, p. 2-16.
239 Australian Government 2013/14 Budget Paper Budget Paper No. 1: Budget Strategy and Outlook 2013–14, Statement 2:
Economic Outlook, Table 2.
240 IMF, World Economic Outlook, April 2013.
241 Australian Government, Budget Paper No. 1: Budget Strategy and Outlook 2013–14, Canberra 2013, p. 2–14.
242 RBA, Statement on Monetary Policy, May 2013, Table 6.1.
243 DEEWR, Monthly Leading Indicator of Employment, May 2013; http://deewr.gov.au/deewr-leading-indicator-
employment-latest-release.
244 Lowe P (2012), The Labour Market, Structural Change and Recent Economic Developments, Speech to the Financial
Services Institute of Australasia (Finsia) Leadership Event, RBA Bulletin, December Quarter 2012, Hobart, 9 October
2012.
245 ACTU submission, at p. 34, paras 107–108.
246 ACTU submission, at p. 75 para. 221.
247 Australian Government submission at p.33, para. 142.
248 Ai Group submission at p. 19.
249 AFEI submission at p. 13, paras 30–31.
250 ACCI submission at p. 41, para. 167.
251 ACTU submission in reply, p. 12, para. 47.
252 Lowe P (2012), The Labour Market, Structural Change and Recent Economic Developments, Speech to the Financial
Services Institute of Australasia (Finsia) Leadership Event, RBA Bulletin, December Quarter 2012, Hobart, 9 October
2012 at pp. 104–6.
253 ABS, Labour Force, Australia, Detailed, Quarterly, Feb 2013, Catalogue No. 6291.0.55.003.
254 Lowe P (2012), The Labour Market, Structural Change and Recent Economic Developments, Speech to the Financial
Services Institute of Australasia (Finsia) Leadership Event, RBA Bulletin, December Quarter 2012, Hobart, 9 October
2012, p. 106.
255 Gruen D, Li B and Wong T (2012), Unemployment disparity across regions, Treasury Economic Roundup Issue 2,
August.
256 Ibid , at p.74.
257 Ibid , at p.70.
258 Lowe P, (2013), Internal Balance, Structural Change and Monetary Policy, address to the Australian Industry Group 13th
Annual Economics Forum, 19 March.
259 ibid.
[2013] FWCFB 4000
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260 ibid. et al at p.48.
261 [2012] FWAFB 5000, at paras 257 and 258.
262 Superannuation Guarantee (Administration) Amendment Act 2012, Schedule 1.
263 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.
264 Australian Government submission, p. 15 at paras 47–50.
265 Australian Government submission, p. 16 at para. 54; Victorian Government submission, p. 15 at para. 2.44; Ai Group
submission at pp. 51–53; ABI submission, p. 5 at para. 2.10; AAA submission, p. 6 at para. 20 and p. 12; AHA
submission at p. 4; ANRA submission, p. 4 at para. 1.5; NFF submission, p. 15 at para. 5.16; MGA submission, p. 14 at
para 7.3.1; VACC submission at p. 6.
266 Australian Government submission, p. 16 at para. 51.
267 Australian Government submission, p. 16 at para. 51.
268 ACTU submission in reply, p. 19 at para. 82.
269 ACTU submission in reply, p. 19 at para. 82.
270 Ai Group submission in reply at p. 3.
271 Ai Group submission at p. 3.
272 NFF submission, p.17 at para. 6.2.
273 ACTU submission at p. 127, Table 14.
274 ACTU submission at p. 128, paras 400-402.
275 ACCER submission in reply, p. 2 at para. 3.
276 ACCI submission, pp. 29–30 at para. 138; Ai Group submission at p. 3; CCIQ submission at pp. 4–5 and p. 24; AFEI
submission, p. 7 at para. 17; AHA submission at p. 4; AAA submission at p. 2; ANRA submission, p. 4 at para. 1.5;
ARTIO submission at p. 3.
277 Victorian Government submission, p. 15 at para. 2.4.4; NFF submission, p. 16 at para. 5.18.
278 ABI submission, p. 12 at para. 6.3.
279 Ai Group submission at p. 53.
280 ARTIO submission at p. 3.
281 Shorten B (2012), ‘A more comfortable retirement for working Australians’, The Australian, 22 March 2012, page 28,
cited in Ai Group submission at p. 50; ABI submission, p. 12 at para. 6.3.
282 May 2002 Safety Net Review - Wages (2002) 112 IR 411 at 454.
283 CCIQ submission, p. 27 at paras 61–62.
284 Industrial Relations Act 1988, s.90A; Workplace Relations Act 1996, s.90A.
285 (1994) 56 IR 114 at 127.
286 ibid.
287 October 1995 Third Safety Net Adjustment Section 150A Review decision (1995) 61 IR 236 at 278; April 1998 Safety Net
Review (1998) 79 IR 37 at 60 and 70; May 2000 Safety Net Review Wages (2000) 95 IR 64 at 65, 76, 91 and 95; May
2002 Safety Net Review - Wages (2002) 112 IR 411 at 444.
288 April 1999 Safety Net Review - Wages (1999) 87 IR 190 at 191 and 203; 2001 Safety Net Review - Wages (2001) 104 IR
314 at 335.
289 (1998) 79 IR 37 at 60.
290 (2002) 112 IR 411 at 444.
291 ACTU submission in reply at p. 18, para. 78.
292 Ai Group submission at pp. 49–50; NFF submission, p. 15 at para. 5.16.
293 Ai Group submission at pp. 49–50.
294 ACTU submission at p. 118, para. 360, ACOSS submission at p. 19 and ACCI submission at p. 25, para. 116, Australian
Government submission, p. 42, para 192.
295 [2010] FWAFB 4000 at para 237.
[2013] FWCFB 4000
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296 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; ABS, Average Weekly Earnings, Australia,
Nov 12, Catalogue No. 6302.0.
297 The ACTU estimated that about 10% of award-reliant workers were managers or professionals and among non-managerial
workers , over half were paid above the C10 rate. ACTU submission, p 18 and p.20.
298 ACTU submission at pp. 15–19, paras 61–70.
299 ACTU submission, p. 13 at para. 55.
300 ACTU submission at p. 19, para 70 and Table 6.
301 The ACTU imputed the classification levels of award-only workers based on their hourly ordinary time cash earnings,
with classification levels and wage rates drawn from the Manufacturing and Associated Industries and Occupations
Award 2010 as at May 2012. Employees were assigned to the ‘C14’ category if they had earnings between $15.51 and
$15.96 (one cent below C13), and so on for higher levels. These calculations were based on separate percentile
distributions of the hourly ordinary time cash earnings of permanent/fixed term and casual award-only employees. These
distributions are unpublished data from the 2012 ABS Employee Earnings and Hours survey. The earnings of intra-
percentile workers were estimated using interpolation of the percentile data. The ACTU reduced casuals’ earnings by a
fifth to remove a loading, assumed to be 25%.
302 ACTU calculations based on ABS 6306 (unpublished). Classifications imputed based on average hourly ordinary time
cash earnings. Casual employees’ earnings have been deflated by a fifth to remove an assumed 25 per cent casual
loading. Each classification level includes employees employed at the relevant minimum wage and those earning up to
and including one cent below the minimum for the classification above.
303
304 ACTU submission, p.21, para 75.
305 Fair Work Commission; ABS, Consumer Price Index, Australia, Mar 2013, Catalogue No. 6401.0.
306 ACCER submission at p. 84, para. 269(b).
307 ACCER submission at p. 89, para. 283.
308 ACCER submission at p. 89, para. 281
309 MA000065.
310 ABS, Consumer Price Index, Australia, Mar 2013, Catalogue No. 6401.0; Metal, Engineering and Associated Industries
Award 1998; Manufacturing and Associated Industries and Occupations Award 2010; Professional Employees Award
2010.
311 Ai Group submission at p. 31.
312 Ai Group submission at pp. 34, 35.
313 Ai Group submission at p. 35, Chart 22.
314 Ai Group submission at pp. 34–36.
315 ACTU submission at p. 98, para.290.
316 ACTU reply submission at p. 30, para.123.
317 ACTU submission in reply p. 32, para. 124.
318 Australian Government submission at p. 55, para. 275.
319 See, for example, [2010] FWAFB 4000, at para 337.
320 Fair Work Australia, Statistical Report—Annual Wage Review 2012–13, Table 8.1.
321 Fair Work Australia, Statistical Report—Annual Wage Review 2012–13, Table 8.1.
322 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).
323 Australian Government submission at p. 55, para. 275.
324 ACTU submission at pp. 102/3, para 302.
325 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 (AWE) is the gross (before tax) earnings
[2013] FWCFB 4000
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of employees (excluding salary sacrifice). 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. 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. ABS, Average Weekly Earnings, Australia, Nov
2012, Catalogue No. 6302.0; ABS, Wage Price Index, Australia, Dec 2012, Catalogue No. 6345.0; Metal, Engineering
and Associated Industries Award 1998; Manufacturing and Associated Industries and Occupations Award 2010 (from 1
January 2010).
326 Fair Work Commission, Statistical Report—Annual Wage Review 2012–13, Table 8.2.
327 ABS, Consumer Price Index, Australia, Mar 2013, Catalogue No. 6401.0; ABS, Employee Earnings and Hours,
Australia, various, Catalogue No. 6306.0.
328 Australian Government submission, p. 57, para 287
329 [2010] FWAFB 4000 at para 242; [2011] FWAFB 3400 at para 205; [2012] FWAFB 5000 at para 161.
330 Australian Government submission at p. 53, Table 5.6.
331 DEEWR modelling.
332 ACCER submission, p.120, Table 17.
333 Calculation of wages net of tax takes into account exemptions granted from the Medicare Levy where applicable (for
example, at the NMW, the full Medicare Levy exemption adds $9.10 per week to the net wage). Family transfers in 2012
include the equivalent weekly value from the FTB A and FTB B and the Schoolkids Bonus which is calculated on the
basis that one child is in primary school and the other is in secondary school. See ACCER submission at p. 120.
334 Australian Government submission, p.14.
335 ACOSS submission at pp. 8–9.
336 National Retailers Association submission at p. 6, para. 22; ABI, at para 2.8 (in respect to overcompensation)
337 [2012] FWAFB 5000, at para 166.
338 Statistical Report, in Table 8.2.
339 Australian Government submission at p. 57, para. 289.
340 Fair Work Commission, Statistical Report—Annual Wage Review 2012–13, pp. 29–30, Table 8.2, March 2013.
341 ACTU submission at p. 103, Figure 109.
342 ACTU submission at p. 103, para. 303.
343 ACOSS submission at pp. 26–7.
344 ACOSS (2012), Poverty in Australia, ACOSS Paper 194.
345 ACOSS submission at pp. 27–29.
346 ACOSS submission at pp. 27–28.
347 ACCER submission at p. 136, para. 438.
348 Statistical Report Annual Wage Review—2012–13, Table 8.2.
349 ACCER submission at p. 135, para. 436.
350 For example, ACCER submission, p. 111, table 13.
351 For example, ACCER submission, p. 103, para 334 and table 13.
352 ABS, Average Weekly Earnings, Australia, Nov 2012, Catalogue No. 6302.0; ABS, Household Income and Income
Distribution, Australia, 2009–10, Catalogue No. 6523.0; Fair Work Commission modelling; Manufacturing and
Associated Industries and Occupations Award 2010; Melbourne Institute of Applied Economic and Social Research
(2013), Poverty Lines: Australia, December Quarter 2012.
353 Australian Government submission at p. 47, para. 235.
354 This section of the submission does not provide a definition of a low-paid employee.
355 Australian Government submission at p. 49, Table 5.2 and p. 51, para. 248.
356 Australian Government submission at p. 48, Table 5.1 and pp. 48–9, para. 239.
357 ACOSS submission at pp. 31–2.
358 ACOSS submission at p. 32; Fair Work Commission, Statistical Report—Annual Wage Review 2012–13, pp. 37–8, Tables
11.1–11.2, March 2013.
359 ABS Catalogue No. 4159.0.30.003.Expanded Confidentialised Unit Record File, 2010.
360 Fair Work Commission, Statistical Report—Annual Wage Review 2012–13, pp. 37-41.
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361 ABS, Household Expenditure Survey Expanded Confidentialised Unit Record File, 2003–04, 2009-10, Catalogue No.
6540.0.: Could not afford holiday for at least one week a year, Could not afford a night out once a fortnight, Could not
afford friends or family over for a meal once a month, Could not afford a special meal once a week, Could only afford
second hand clothes most of the time and Could not afford leisure or hobby activities.
362 Fair Work Commission, Statistical Report—Annual Wage Review 2012–13, pp. 34–36, Tables 10.1–10.2, March 2013.
363 Fair Work Commission, Statistical Report—Annual Wage Review 2012–13, p. 35, Table 10.2
364 Australian Government submission, p. 40 at para. 179.
365 Fair Work Commission, Literature review on social inclusion and its relationship to minimum wages and workforce
participation, Research Report 2/2010, cited in Australian Government submission, p. 40 at para. 180.
366 Australian Government submission, p. 40 at para. 182.
367 Victorian Government submission, p. 14 at para 2.41.
368 NSW Government submission at p. 7.
369 NRA submission, p. 12 at para. 55.
370 For example Dube A, William LT and Reich M (2011), ‘Do minimum wages really reduce teen employment? Accounting
for heterogeneity and selectivity in state panel data’, Industrial Relations, vol. 50, no. 2, pp. 205–240.
371 ACTU submission at p. 110, para. 328.
372 Lee W and Suardi S (2011), ‘Minimum Wages and Employment: Reconsidering the Use of Time Series Approach as an
Evaluation Tool’, British Journal of Industrial Relations, vol. 49, S2.
373 ibid. at pp. s376–s401. The AIRC did not see the introduction of minimum wage legislation per se. In 1997, the AIRC, in
its Safety Net review – Wages- April 1997 (IR) 1 decided to introduce a federal minimum wage of $359.40 into all
awards. The significance of this decision is that it could be seen as a formal introduction of a basic minimum wage in
Federal Awards. From 1993, with the introduction of an enterprise bargaining framework via the Industrial Relations
Reform Act 1993 , awards (other than paid rates awards) were formally defined as safety nets which operated to underpin
the enterprise bargaining process. (See s.7 of the Industrial Relations Reform Act 1993). From this time, although there
was no legislated or uniform minimum wage, the rates provided in awards were essentially minimum wage rates.
374 ACTU submission at p. 106, para. 316.
375 ACCI submission at p. 76, para. 245.
376 ACCI submission, p. 4 at para. 20 and p. 6 at para. 28; Accommodation Association of Australia submission, pp. 7–9 at
paras 1–16; Australian Hotels Association submission at pp. 4–5; Australian Retailers Association submission at p. 12;
Master Grocers Australia submission, p. 9 at para. 5.3; R&CA submission, p. 8 at para. 22; Victorian Automobile
Chamber of Commerce submission at p. 16.
377 [2012] FWAFB 5000 at para. 203.
378 ACCI submission, p. 5 at para. 25.
379 ACTU submission in reply, p. 36 at para. 143.
380 Fair Work Commission, Labour supply responses to an increase in minimum wages: An overview of the literature,
Research Report 2/2013, p. 33.
381 ibid.
382 ibid. at pp. 8–17.
383 ACTU submission, p. 118 at para. 358.
384 ACCI submission, p. 91 at para. 302.
385 ACCI submission, pp. 91–92 at paras 303–304.
386 ACOSS submission at p. 41.
387 ACTU submission at pp. 69–71, paras 208–215; ACOSS submission at p. 51; Ai Group submission at p. 18.
388 Ai Group submission at p. 18.
389 ACOSS submission at p. 8.
390 ABS, Labour Force, Australia, Detailed - Electronic Delivery, Apr 2013, Catalogue No. 6291.0.55.001; original data.
391 Australian Government submission, pp. 63–8, Tables A.1–A.4.
392 Australian Government submission, pp. 66–7, Table A.3.
393 Australian Government submission, p. 41 at para. 193.
394 Australian Government submission at p. 65, Table A.2.
395 Australian Government submission at p. 68, Table A.4.
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396 ACOSS submission at pp. 50–51.
397 Australian Government submission at p. 42, para. 197.
398 Australian Government submission at p. 42, para. 200.
399 Australian Government submission at p. 43, Table 4.2.
400 Australian Government submission at p. 43, para. 206.
401 Australian Government submission at p. 43, Table 4.2.
402 NSW submission at p. 7; ACCI submission, pp. 49–50 at para. 183.
403 ACOSS submission at p. 57.
404 [2010] FWAFB 4000 at para. 268; Healy J (2009) The Wages Safety Net of the Australian Industrial Relations
Commission, 1993–2005, Unpublished PhD thesis, National Institute of Labour Studies, Flinders University, pp. 138–
143.
405 Low Pay Commission, National Minimum Wage: Low Pay Commission Report 2013, viewed 28 May 2013
http://www.lowpay.gov.uk/lowpay/report/pdf/9305-BIS-Low_Pay-Accessible6.pdf
406 Mission Australia, Mission Australia’s Youth Survey 2012, viewed 28 May 2013
http://www.missionaustralia.com.au/document-downloads/category/55-youth-survey-2012
407 Australian Government response to consultation questions at p. 11.
408 ACTU post-budget submission at p. 36, para. 145.
409 Australian Government responses to questions for consultations at p. 10.
410 ACTU responses to questions for consultations at p. 33, paras 132–135.
411 [2010] FWAFB 4000 at p. 65, para. 276.
412 ABS, Employee Earnings and Hours, Australia, various, Catalogue No. 6306.0.
413 Australian Government submission at pp. 14–15, para. 41.
414 Victorian Government submission at p. 20, para. 3.17; Australian Federation of Employers and Industries submission at p.
6, para. 14.
415 Australian Industry Group submission at p. 45; Accommodation Association of Australia submission at p. 6, para. 21.
416 ACCI submission at p. 29, para. 136.
417 ACCI submission at p. 4, para. 18.
418 Victorian Government submission at p. 20, para. 3.14.
419 New South Wales Government submission at p. 7.
420 ACCER submission at p. 23, para. 48.
421 ACCER submission at p. 23, para. 48.
422 ACTU submission, p. 103 at para. 303.
423 ACTU submission, p. 50 at para. 154.
424 ACTU submission in reply, p. 33 at para. 129.
425 DEEWR, Trends in Federal Enterprise Bargaining, December quarter 2012, p. 1,
http://www.deewr.gov.au/WorkplaceRelations/Pages/Reports.aspx.
426 Australian Bureau of Statistics, Catalogue No. 6306.0 - Employee Earnings and Hours, Australia, May 2012.
427 Australian Bureau of Statistics, Catalogue No. 6306.0 - Employee Earnings and Hours, Australia, May 2010.
428 Fair Work Act, ss.284(1)(d) and 134(1)(e).
429 ACTU submission, p. 125 at para. 385.
430 Australian Government submission, p.12 at paras 28–30.
431 Ai Group submission at pp. 45–47.
432 ACCI submission, p. 26 at paras 117 and 120.
433 NFF submission, p. 10 at para 4.2.
434 Matter no. C2010/3131
435 Australian Government submission, p.12 at paras 28–29; ACOSS submission at pp. 16–17.
436 ACCER submission, p. 110 at paras 353–355.
437 Business SA submission, p.11 at para. 4.2.9.
438 [2012] FWAFB 5000 at para. 231.
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439 [2010] FWAFB 4000 at pars 424–6; [2011] FWAFB 3400 at pars 409–13; [2012] FWAFB 5000 at Para 28.
440 [2012] FWAFB 5000 at paras 254–62.
441 1986 National Wage Case decision (1986) 301 CAR 611 at 659; Re Motels Award [Print K2236], Re 1990 Pastoral
Industry Award case [Print J1761] at p. 9.
442 Re Musicians’ Hotels Award 1982 (1983) 289 CAR 351.
443 Re Food Preservers’ Award 1973, (1982) 285 CAR 10; 1990 Pastoral Industry Award Case [Print J1761].
444 ACCI Submission, 28 March 2013 at pg 32.
445 Business SA submission, 28 March 2013 at para 2.4.
446 CCIQ submission, 28 March 2013 at pg 7.
447 [2013] FWCFB 1635.
448 Supra at para 225.
449 R&CA submission, 28 March 2013 at para 15.
450 NRA submission at p. 5, para. 13.
451 MA000004.
452 MA000003, NRA written submission at p. 5, para. 13.
453 MA000009.
454 The AHA cited a March 2013 report by AEC appended to its written submissions, 28 March 2013.
455 R&CA submission, 28 March 2013 at para 35 pg 12.
456 Supra at pg 13.
457 ANRA submission, 28 March 2013 at pg 8, para 2.13.
458 ARA submission, 28 March 2013 at pg 5.
459 Supra at pg 9. The ARA also relied upon some Roy Morgan Research appended to its submissions.
460 MGA submission, 28 March 2013 at pg 5.
461 NRA submission, 28 March 2013 at p. 2.
462 Supra.
463 VACC submission, 28 March 2013 at pg 5.
464 Supra at pg 6.
465 South Australian Wine Industry Association submission, 28 March 2013 at pg 12.
466 NFF submission, 28 March 2012 at pg 6.
467 ABARES 2013, Australian farm survey results 2010 – 11 to 2012 – 13, Australian Bureau of Agriculture and Resource
Economics and Science, Canberra, March 2013.
468 ACTU reply submission, 19 April 2013 at pg3, para 10.
469 MA000029.
470 ABI submission, 28 March 2012 at part 11.
471 Modern Awards Review 2012—Penalty Rates [2013] FWCFB 1635.
472 ACTU Post-Budget Submission pg 26.
473 Supra at pg 7.
474 AAA submission pg 5 par 13, pg 13 par 5; AHA submission pg 4, 8 and 10; ARA submission pg 6, 10; MGA submission
pg 3, 5, 6, 7 at par 4.2; MTASA submission pg 3, 5 par; 2.31 and 2.33, pg 6 par 2.4 and 2.6; NRA submission pg 2, 8 par
30, pg 9 paras 31 to 33; R&CA post budget submission pg 4 par 7, pg 5 par 13; SAWIA submission pg 10.
475 [2012] FWAFB 5000 at para 254.
476 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.
477 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.
478 Fair Work (Transitional Provisions & Consequential Amendments) Act 2009 sch 5, item 3(3)(a).
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479 Fair Work (Transitional Provisions & Consequential Amendments) Act 2009 sch 5, item 3(3)(a).
480 MA000100; Equal Remuneration Order, 22 June 2012, PR52485 at p 16, para 5.
481 Transitional Act, items 5(2) and 9(4) of Sch.6 and item 5 of Sch. 6A.
482 Fair Work (Transitional Provisions & Consequential Amendments) Regulations 2009, Reg. 3A.01. One category of these
instruments, that is Division 2B State awards, state reference transitional awards and transitional APCSs derived from
instruments which covered employees participating in employment schemes in Queensland known as the Community Jobs
Plan and the Green Army, are set to terminate on 30 June 2012 (Regs 3.04 and 3A.01). These instruments will cease to
exist before the determinations that flow from this decision take effect.
483 Pay Equity Orders are a new category of transitional instruments created or varied in 2012 by operation of modifications
to the Transitional Act: Fair Work (Transitional Provisions & Consequential Amendments) Regulations 2009 (Reg
3.03D, 3.03H, 3A.01A, 3A.01B, and sch 1A) modifies the Fair Work (Transitional Provisions & Consequential
Amendments) Act 2009.
484 Fair Work (Transitional Provisions & Consequential Amendments) Act 2009 (item 30D(1) of Sch. 3A,) as modified by
Fair Work (Transitional Provisions and Consequential Amendments) Regulations 2009 (reg 3A.01B).
485 Fair Work (Transitional Provisions & Consequential Amendments) Act 2009 (item 30D(1) of Sch 3A). It is also worth
noting that there is another transitional pay equity order which relates to base rates of pay under Division 2B State
reference transitional awards. While the Panel is not required to review this transitional pay equity order, any minimum
wage adjustment to the Social, Community, Home Care and Disability Services Industry Award 2010 will apply to the
base rate of pay of these transitional pay equity orders. See Fair Work (Transitional Provisions and Consequential
Amendments) Regulations 2009 (Regs 3.03H and 3A.01B).
486 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 Fair Work Act, s. 768AO.
487 Fair Work Act, s. 768AI.
488 The provisions of the Transitional Act dealing with the variation of Division 2B State awards in annual wage reviews also
apply to copied State awards. See Fair Work Act, s.768BY and s.768AW(b).
489 RA140348; ACTU response to panel questions at pp 30–31 and Australian Government response to panel questions at p 9.
490 Australian Government response to panel questions at p 9.
491 Australian Accommodation Association Response to Consultation Questions, p. 8.
492 Australian Government Response to Consultation Questions, p. 10.
493 ACTU Response to Consultation Questions, pp. 31–32, para. 129.
494 ACTU Response to Consultation Questions, pp. 32–33, para. 130.
495 Australian Accommodation Association Response to Consultation Questions, p. 8.
496 Fair Work (Transitional Provisions & Consequential Amendments) Act 2009, item 12A of Sch. 3 and items 10 and 20 of
Sch. 9.
497 Fair Work Act, s. 284(3).
498 ACTU submission, p. 129 at para. 407; ACCI submission, p. 26 at para. 121, pp. 31–32 at para. 147(d); ACOSS
submission, p. 10; CCIQ submission, p. 7 at 15(c); CCIQ submission, p. 7 at para. 15(c); Business SA submission, p. 5 at
para. 2.3.
499 South Australian Government submission, p. 9.
500 ACTU submission, p. 129 at para. 406.
501 Victorian Government submission, p. 26 at para. 4.25; AFEI submission, pp. 14-15 at paras 35-41
502 CCIQ submission, p. 24 at para. 56(e).
503 ACCI submission, p. 4 at para. 22; MGA submission, p. 20 at para. 9.2; CCIQ, p. 26 at para. 60.
504 ACCI submission, p. 4 at para. 22.
505 MGA submission, p. 20 at para. 9.2.
506 ACOSS submission, p. 57.
507 ACTU submission, p. 130 at paras 412–44; ACCI submission, p. 26 at para. 121, pp. 31–32 at para. 147(d); ACOSS
submission, p. 10; CCIQ submission, p. 7 at para. 15(c); Business SA submission, p. 5 at para. 2.3.
508 ACOSS submission, pp. 57–58.
509 ACOSS submission, p. 58.
510 ACCI submission, p. 26–27, para. 123.
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511 CCIQ submission, p. 24 at para. 56(f).
512 VACC submission, p. 18.
513 MTASA submission, p. 5, at para. 2.3.3.
514 ACTU submission, p. 130 at para. 412.
515 ACTU submission, p. 130 at para. 413.
516 South Australian Government submission, p. 8, p. 10.
517 VACC submission at p. 8; HIA submission, p. 6 at para. 3.4.1; AFEI submission, p. 15 at para. 41.
518 AFEI submission, p. 15 at para. 41.
519 AM2012/196, AM2012/18 and others.
520 ACTU submission, p. 129 at para. 407, pp. 130–131 at paras 415–416, p. 133 at para. 426; ACCI submission, p. 26 at
para. 121; ACOSS submission, p. 10; CCIQ submission, p. 7 at para. 15(c); Business SA submission, p. 5 at para. 2.3.
521 ACOSS submission, p. 59.
522 ACOSS submission, p. 59.
523 ACTU submission, p. 131 at para. 419.
524 Australian Government response to Consultation Questions, p. 10; National Farmers’ Federation response to Consultation
Questions, p. 12.
525 National Farmers’ Federation response to Consultation Questions, p. 12.
526 Fair Work Act, s. 295(1)(b).
527 ACTU submission, p. 133 at para. 429; Ai Group submission, p. 60; ABI submission, p. 22 at para. 12.4.1.
528 ACTU submission, p. 131 at para. 420; Ai Group submission, p. 60; ABI submission, p. 23 at para. 12.8.
529 ACCI submission, p. 86 at para. 289, pp. 87–89 at para. 295 and Annexure 1, Table 1; Ai Group submission, p. 48, p. 60;
Business SA submission pp. 9–10 at paras 4.2.7–4.2.8.2; CCIQ submission, p. 26 at paras 59–60; NRA submission, pp.5–
6 at paras 15–18; MGA submission, p. 8 at para. 5.2, p. 20 at para. 9.3; MTASA submission, pp. 5–6 at para. 2.4;
SAWIA submission, p. 5; AAA submission, p. 6 at para. 18 and p. 13 at para. 5.
530 [2010] FWAFB 4000 at pars 397 to 403.
531 MA000104.
532 [2011] FWAFB 3400 at para. 396.
533 Ai Group submission at p. 58
534 ACTU submission, p. 133 at para. 427; ABI submission, p. 22 at para 12.4.2.
535 Ai Group submission, p. 58.
536 ACTU submission, p. 133, para. 427; ABI submission, p. 22 at paras 12.4.3-12.4.4
537 ACTU submission, p. 133 at para. 428.
538 Ai Group submission at p. 59; ACTU submission, p. 133 at paras 426-427; ABI submission, p. 22 at paras 12.4.5–12.4.6.
539 ACTU submission, p. 133 at para. 428.
