Minimum wage setting under fair work Australia: back to the future?

• Author: Harper, Ian
• Position: Invited Paper

Fair Work Australia (FWA) recently handed down its first minimum wage decision--a $26 per week increase. Although the decision emanated from new legislation, which explicitly references fairness and riving standards of the low paid, both the decision and the process by which it was reached closely resemble those of its predecessor, the Australian Fair Pay Commission (AFPC). It is possible that this resemblance will diminish over time as interpretation of the legislation evolves. But the fundamental need to balance employment and income effects of minimum wage adjustments may lead FWA to deriver similar decisions to the AFPC's notwithstanding the different emphasis in its legislation.

Introduction

Fair Work Australia (FWA) assumed responsibility for setting minimum wages in the federal jurisdiction upon the demise of the Australian Fair Pay Commission (AFPC) on 31 July 2009. In its first Annual Wage Review, FWA announced a $26 per week increase in the National Minimum Wage and all modern award minimum wages. The decision was hailed in certain quarters as one of the 'final nails in the coffin of WorkChoices' and a return to Australia's traditional focus on 'fairness' and the rights of workers in the setting of minimum wages (Lawrence 2010).

The Rudd/Gillard Labor Government was elected in part on a promise to repeal the Howard Government's WorkChoices legislation, and the AFPC was therefore in its sights. While it was unnecessary for changes to the mechanism for setting minimum wages to be included as part of the wider WorkChoices agenda, this was the outcome. As a result, the AFPC was condemned by association with WorkChoices; and yet, as has subsequently emerged, the incoming government was happy to incorporate various aspects of the AFPC's process into its own legislation establishing the Minimum Wage Panel (MWP) of FWA.

For all the rhetoric, the MWP's first determination is not wildly different from what the AFPC might have delivered in similar circumstances. The $26 increase is moderate, essentially raising Australia's National Minimum Wage by a modest premium to inflation over the period since the AFPC's last increase in October 2008. (1) Like the AFPC, the MWP awarded a dollar increase in the various modern award minimum wages, which has the effect of delivering a higher proportional increase at the lower end of the wage spectrum and lower proportional increases at higher wage classifications. Indeed, many of the latter would not have increased in real terms with an up-rating of only $26. While clearly uncomfortable with this aspect of their decision, the MWP acknowledges that many parties supported just such an approach.

More instructive, perhaps, than its inaugural determination will be how the MWP adjusts minimum wages over time. The legislative criteria guiding the MWP's decision are different in key respects from those which governed the AFPC's approach to minimum wage setting. It might be expected that the emphasis on relative living standards and the needs of low-paid workers, rather than providing a safety net for the low paid as the AFPC was required to do, will reflect in the MWP decisions over time. Having said that, there is little evidence of such...