An examination of award wages among Australian apprentices and trainees.

• Author: Oliver, Damian
• Position: Abstract

Abstract

Low rates of award pay for apprentices have been seen as discouraging young people from starting an apprenticeship as well as contributing to low completion rates. This criticism, however, assumes that few apprentices receive above-award payments. Analysis of data from the 2009 Australian Bureau of Statistics (ABS) Survey of Education and Training finds that over-award payments for apprentices are common, especially in the electro-technology, automotive, and engineering trades. Most trainees also receive over-award payments, particularly existing workers, older trainees, and male trainees. In most cases, the relevant award wage for apprentices and trainees is below the national minimum wage. More importantly, the method for determining the apprentice award wage in most cases does not take into account age or level of schooling, even though apprentices are increasingly older and are more likely to have completed Year 12. This has led to a decline in the apprentice award wage, relative to the applicable award wage in alternative employment.

1. Introduction

   It has been often contended that the low level of apprentice pay is a significant barrier to increasing the number of people successfully completing apprenticeships and traineeships. Bittman et al. (2006) identified that the award pay rates for first-year apprentices in six representative occupations were all below the Henderson Poverty Line. In 2010, the Australian government commissioned an expert panel to consider reforms to the apprenticeship system. The Australian Manufacturing Workers Union (AMWU), in its response to the review, called for an increase in apprentice rates of pay. It cited its own research and other surveys that showed that low rates of pay act as a disincentive to commence and complete an apprenticeship (AMWU 2011, p. 15). In 2012, Fair Work Australia (FWA) will conduct a review into apprentice and trainee wages and conditions and, before the review had even begun, there were calls to increase the level of apprentice pay (Lewis 2011).

   Minimum wages contained in awards are however just that--minima--and employers have always been free to pay employees higher wages if they choose (or if enterprise bargaining agreements require it). This paper examines the extent of over-award payments received by Australian apprentices and trainees using data from the Survey of Education and Training (SET), conducted by the ABS in 2009. We match earnings data for individuals to the rate of pay contained in the relevant pre-reform federal award or the notional agreement preserving a state award (NAPSA), taking into account occupation, age, stage of apprenticeship, and highest level of education.

   With these data, we establish that most apprentices in trade occupations receive pay in excess of the relevant federal award rate. We find that above-award payments are most common in trade occupations with strong demand and high levels of collective bargaining by employees--electrical and engineering, and automotive. Where there are higher rates of award dependence by employees, as in the food trades and hairdressing, we find that wages are closer to the award rates. We also find that many trainees receive above-award rates. This, however, is influenced by existing workers who receive well in excess of the relevant training wage. New workers, particularly younger trainees, are more likely to receive close to the relevant award rates.

   Although we find that over-award payments may be common, the level of award wages may send a signal to prospective apprentices about likely wages. We examine award wages for apprentices (using engineering apprentices as a benchmark) relative to award wages in the fast-food industry. We find that the changes in the attributes of apprentices overtime have contributed to a general decline in the relative award wage for apprentices. On the basis of these findings, we offer some conclusions and suggest some implications for further research and policy.

2. Award Reliance among Apprentices and Trainees

   There are two reasons why modern awards are an apt starting point for the analysis of apprentices' and trainees' employment conditions: awards remain the predominant instrument under which apprentices and trainees are employed; and the standards set in awards are also relevant for the apprentices and trainees who have their conditions set by enterprise agreements. Under the Fair Work Act, an enterprise agreement may deviate from the terms included in the relevant award but must leave an employee 'better off overall' (Fair Work Act 2009, s 186). Table I shows the employment arrangements for apprentices and trainees who commenced in 2009 using data extracted from the Training and Youth Information Management System (TYIMS) administered by the Department of Education, Employment, and Workplace Relations (DEEWR). The results indicate that two-thirds of apprentices and trainees who commenced in 2009 were employed under a federal or state award. Awards are even more important for apprentices in the traditional trades areas, covering three-quarters of apprentices who commenced in 2009.

   Award-reliant employees may nonetheless receive above-award payments, although reliable data on the pay rates received by Australian apprentices and trainees are scarce. Bittman et al. (2007) in their report did not examine the incidence of over-award payments. A survey by the Australian Chamber of Commerce and Industry (ACCI) found that a majority of their members who responded to the survey (52 per cent) paid some or all of their apprentices above-award wages (ACCI 2005). The Chamber reported that the median wage premium above the award rate was between 18 and 20 per cent.

3. Award Coverage for Apprentices and Trainees

   Award coverage for apprentices and trainees, as for employees in general, depends on a number of factors including jurisdiction, occupation, and industry, and period in time. Two recent reports (NCVER 2010a; Dunn et al. 2011) set out the current arrangements. With few exceptions, under the Fair Work regime the pay and other employment conditions for trainees are set by a single instrument (the National Training Wage Schedule) (Dunn et al. 2011, pp. 223-5). The precise trainee rate of pay depends on a number of factors including qualification level, training package, the highest level of schooling completed by the trainee, whether the trainee is still at school and, if not, the n u tuber of years since the trainee left school. For apprentices, pay and conditions a re tied to the relevant trade and vary on a n occupational and (or) industry basis. In total, 46 of the 122 modern awards make some provision for apprentices. The rate of apprentice pay is usually calculated as a proportion of the relevant tradesperson rate. The proportion depends on how far the apprentice has advanced. Usually this is a time-based measure, but some awards provide for competency-based wage progression. Depending on the award, a first-year (or stage one) apprentice can expect to be paid, at a minimum, between 37.5 per cent and 55 per cent of the relevant tradesperson rate (NCVER 2010a, p. 31). Apprentices may also be eligible to receive tool allowances or other payments. Special rates of pay may apply to adult apprentices or to apprentices who have completed Year 11 or Year 12. These provisions vary award by award and are discussed in depth in Dunn et al. (2011, pp. 71-114).

   Our first task here is to examine the extent of over-award payments among apprentices and trainees. Income data from the ABS SET relate to May 2009, before the commencement of modern awards. Therefore, we need to consider the regulatory arrangements that were in place at that time, which were those established by the Howard government under the Workplace Relations Amendment (Work Choices) Act 2006, commonly known as the Work Choices regime. Work Choices greatly expanded the coverage of the federal workplace relations system by capturing all employees of constitutional corporations that...