The Fair Work Commission has increased the national minimum wage by 2.4% to $672.70 per week ($17.70 an hour).
Employers should be aware that the increase will apply from the first full pay period starting on or after 1 July 2016.
In the Annual Wage Review 2015-16 statement, the Fair Work Work Commission noted the despite some recent improvement in the relative living standards of minimum wage reliant employees, the relative position of low-paid workers has deteriorated over the past decade.
“Many low-paid workers live in households with low or very low disposable incomes. Around two-thirds of low-paid employees are found within the bottom half of the distribution of employee households and have lower living standards than other employees. Some low-paid award-reliant employee households have household incomes which places them below the poverty line.”
The Commission said the level of increase will not lead to inflationary pressure and is unlikely to have any negative impact on employment.
“It will, however, mean a modest improvement in the real wages for those employees who are reliant on the national minimum wage and modern award minimum wages.”
While the Australian Council of Trade Unions (ACTU) says the minimum wage rise is not enough, the Australian Chamber of Commerce and Industry (ACCI) has voiced its disappointment in the decision, claiming it creates a heavy burden for employers operating in a transitioning economy.
The ACCI had been advocating for an increase of no more than $7.90 per week, equivalent to a 1.2% increase that is roughly in line with inflation.
“In comparison to the 2.4% increase granted by the Fair Work Commission, private sector wages grew by just 1.9% in the year to March 2016,” says ACCI CEO James Pearson. “Business profits have actually been falling; with ABS data released on Monday showing a 4.7 point drop in company profits.”
According to Pearson, Australia has one of the highest minimum wages in the world.
“And most people paid under the award system receive much more than the minimum wage,” he adds.
Pearson says it is disappointing that while the Productivity Commission argued that the needs of the unemployed should be given greater weight in the Fair Work Commission’s considerations, this has not occurred.
The ACTU, on the other hand, had called for a $30 a week increase in the minimum wage to $686.90 per week or $18.08 per hour.
“We are disappointed in the missed opportunity to truly narrow the gap between the minimum wage and average earnings – now would have been the ideal time to lift the minimum wage,” says ACTU secretary Dave Oliver.
“This was the right environment for an affordable $30 a week rise – the economy is growing, productivity is up and inflation is low: the perfect time to look after the needs of low paid workers.”