Balancing act on minimum wage as low paid get 3.75pc

Labor and unions welcome pay rises but employers warn extra costs would ‘inevitably’ be passed on to consumers.

Cost-of-living pressures on low-paid workers influenced the decision to grant a 3.75 per cent rise. Picture: istock

More than 2.6 million workers will receive a real wage rise of 3.75 per cent to help with cost-of-­living pressures, but the Fair Work Commission has baulked at a higher increase for the low-paid, citing the impact of looming tax cuts, concerns about productivity, and the less positive outlook for industries such as hospitality that will be most affected by the $33-a-week increase in minimum and award wages.

Employers welcomed the ­rejection of the ACTU’s 5 per cent wage claim and the deferral of the union movement’s bid for an extra 4 per cent rise for award-­reliant workers in female-dominated industries, but said small businesses could be forced to pass on higher labour costs to consumers.

The Albanese government and the union movement welcomed the 3.75 per cent rise, which will lift the national minimum wage from $882.80 to $915.90 per week and from $23.23 to $24.10 an hour, saying it represented a real wage increase for low-paid workers.

Workplace Relations Minister Tony Burke said the combination of tax cuts and the wage rises from July 1 would mean that a full-time retail worker would get an extra $102 a week; cleaners would receive an ­additional $103 a week, hairdressers would get $106 more a week, workers on the minimum wage would receive $120 extra a week, and aged-care workers, who had earlier received separate pay rises, would have an extra $200 a week.

Commission president Adam Hatcher said in determining the 3.75 per cent increase, a primary consideration had been cost-of-living pressures modern-award-reliant employees, particularly those who are low-paid and live in low-income households, continued to experience, despite inflation being considerably lower than last year.

“Modern award minimum wages remain, in real terms, lower than they were five years ago, notwithstanding last year’s increase of 5.75 per cent, and employee households reliant on award wages are undergoing financial stress as a ­result,” he said.

This had influenced the commission not proposing a further ­reduction in real award wage rates.

“At the same time, we consider that it is not appropriate at this time to increase award wages by any amount significantly above the inflation rate, principally because labour productivity is no higher than it was four years ago and productivity growth has only recently returned to positive territory,” he said.

“We have taken into account that the labour market and business profit growth overall remain strong, but the picture is less positive in some of the industry sectors which contain a large proportion of modern-award-reliant employees. We have also taken into ­account that modern-award-­reliant employees will shortly ­receive the benefit of the stage-three tax cuts and the budget cost-of-living measures, which are projected to increase real household disposable incomes over the next 12 months.

“We have treated the forthcoming increase to the Superannuation Guarantee contribution amount as a moderating factor.”

In relation to the ACTU’s separate 4 per cent claim, he said awards and classifications applicable to early childhood education and care workers, disability home care workers and other social and community services workers, dental assistants, medical technicians, psychologists, other health professionals and pharmacists would be the subject of commission-initiated proceedings to examine and ­address gender undervaluation.

We supported a pay rise for Australia’s lowest paid workers.

And today's 3.75% increase to award wages delivers on that.

— Anthony Albanese (@AlboMP) June 3, 2024

Today’s 3.75% increase to award min wages is a win for 2.6M workers. @AustralianLabor’s budget is all about helping people earn more & keep more of what they earn. Strong & sustainable wage growth is part of the solution to cost of living pressures not part of the problem #auspolpic.twitter.com/lDjDevbk62

— Jim Chalmers MP (@JEChalmers) June 3, 2024

The proceedings would commence shortly and “we intend that they will be completed by the time of next year’s review, which will then move on to the consideration of other gender undervaluation”, Mr Hatcher said.

ACTU secretary Sally McManus expressed disappointment that the Fair Work Commission deferred consideration of the separate claim, but commenting on the $33.10-a-week pay rise, said: “Any day working people get a pay rise is a good day. This decision ­allows people to keep up with ­inflation and have a small real wage increase.”

ACTU secretary Sally McManus expressed disappointment that the Fair Work Commission deferred consideration of the separate union claim for a four per cent increase for workers in feminised occupations. Picture: NCA NewsWire / Martin Ollman

Employers said the 3.75 per cent increase in minimum and award wages would “test the ­acceptable limits for businesses”, and it was “inevitable” they would pass on extra costs to consumers.

Australian Chamber of Commerce and Industry chief executive Andrew McKellar said the decision was “not in line with the trajectory needed to shore up the Australian economy, but it does not pose a significant inflation threat so long as productivity is ­addressed”.

Australian Industry Group chief executive Innes Willox said the decision, while moderate compared to the ACTU’s 5 per cent claim, “will expose low-wage employees to greater risks of unemployment and underemployment and will increase the difficulties being faced by many businesses”.