Fair work Australia's first minimum wage decision: context, impact and future.

• Author: Healy, Josh
• Position: Invited Paper

On 3 June 2010, the Minimum Wage Panel of Fair Work Australia concluded its Annual Wage Review for 2009-10. Having considered the evidence from written submissions, public consultations and a range of internal and external research, the Panel decided to increase minimum wage rates in modern awards by $26 per week with effect from 1 July 2010. The increase brings the National Minimum Wage for adult employees to $569.90 per week, or $15 per hour for a standard 38-hour week, with proportionate increases for employees paid less than the adult rates.

The decision is important for several reasons relating to: the context in which it was made; the impact it will have on living standards and business costs; and for what it signals about the future of minimum wage adjustment under the Fair Work Act 2009. I review the decision with respect to each of these themes in the following sections.

Context

The Minimum Wage Panel (MWP) that decided the $26 increase is a new authority. None of the five members of its predecessor, the Australian Fair Pay Commission (AFPC), is present on the MWP. Instead, the seven-member Panel consists of four existing members of the Australian Industrial Relations Commission (AIRC;), all of whom have experience in setting minimum wages from Safety Net Review--Wages cases in the pro-2006 period, and three new part-time members from backgrounds in trade unions (Mr Vines), academia (Professor Richardson) and business (Mr Dwyer). Procedurally, the MWP operates more like the AFPC than the AIRC. It is not limited to arbitrating on the material presented by the participants in wage cases, but can seek additional input to its reviews through public consultation, internal staff advice and a program of external research. Between 2006 and 2009, the AFPC sponsored a large quantity of research on matters that remain relevant to the MWP, and the Panel will have to consider carefully how to assimilate and build on this existing body of work.

The wage-setting responsibilities under which the MWP acts are quite different from those of the AFPC and also, although arguably to a lesser extent, the AIRC. The Fair Work Act 2009 defines two statutory objectives which are central to the Annual Wage Review process of the MWP. The 'minimum wages objective' (section 284) has as its purpose the establishment and maintenance of a safety net of fair minimum wages, which is to be achieved by reference both to economic factors, such as productivity, business competitiveness and employment growth, and to broader considerations of social inclusion, equity and the needs of the low paid. The 'modern awards objective' (section 134) requires further that the safety net operate in ways that promote collective bargaining and the use of more efficient and productive work practices.

Of the various wage-setting criteria that now guide the Minimum Wage Panel, two are likely to prove challenging. The first is 'relative living standards and the needs of the low paid'. This requirement, mentioned in both the minimum wages and modern awards objectives, reinstates considerations that were central to the wage-fixing role of the AIRC between 1997 and 2005, but repealed by the WorkChoices legislation of 2005. Among the relevant issues here are how minimum wages should be related to changes in consumer prices, average earnings, poverty benchmarks and social welfare entitlements. The second challenging criterion is 'promoting social inclusion through increased workforce participation'. Although there is nothing new about governments instructing wage-fixing authorities to assess the employment effects of their decisions, the reference to social inclusion presents this obligation in a new way. It implies that the MWP is not only responsible for keeping employment rates high in the aggregate, but also for improving the employment prospects of particular individuals and...