Annual Wage Review 2012–13 - [2013] FWCFB 4000

[2013] FWCFB 4000

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.285—Annual wage review

Annual Wage Review 2012–13
(C2013/1)

JUSTICE ROSS, PRESIDENT
SENIOR DEPUTY PRESIDENT WATSON
COMMISSIONER SPENCER
COMMISSIONER HAMPTON
MR VINES
PROFESSOR RICHARDSON
MR DWYER

MELBOURNE, 3 JUNE 2013

Contents

1.	The Decision
2.	The Statutory Framework
3.	The Parties’ Proposals
4.	The Economy
5.	Superannuation
6.	Relative Living Standards and the Needs of the Low Paid
Promoting Social Inclusion through Increased Workforce Participation
8.	Encouraging Collective Bargaining
9.	The Principle of Equal Remuneration for Work for Equal or Comparable Value
10.	Exceptional Circumstances/Special Circumstances Claims
11.	Other Matters
12.	Conclusion
Appendix 1—Proposed Minimum Wages Adjustments

Abbreviations

2009–10 Review decision	Annual Wage Review 2009–10 decision
2010–11 Review decision	Annual Wage Review 2010–11 decision
2011–12 Review decision	Annual Wage Review 2011–12 decision
2012 Amendment Act	Superannuation Guarantee (Administration) Amendment Act 2012
AAA	Accommodation Association of Australia
AAWI	average annualised wage increases
ABI	Australian Business Industrial
ABS	Australian Bureau of Statistics
ACCER	Australian Catholic Council for Employment Relations
ACCI	Australian Chamber of Commerce and Industry
ACOSS	Australian Council of Social Service
Act	Fair Work Act 2009
ACTU	Australian Council of Trade Unions
AFEI	Australian Federation of Employers and Industries
AHA	Australian Hotels Association
Ai Group	Australian Industry Group
AIRC	Australian Industrial Relations Commission
ANRA	Australian National Retailers Association
ANZSIC	Australian and New Zealand Standard Industrial Classification
APCSs	Australian Pay and Classification Scales
ARA	Australian Retailers Association
ARTIO	Australian Road Transport Industrial Organisation
AWE	average weekly earnings
AWOTE	average weekly ordinary time earnings
AWR	annual wage review
C10	Engineering Tradesperson Level I
C14	Engineering/Production Employee Level 1
CCIQ	Chamber of Commerce and Industry Queensland
Commission	Fair Work Commission
CPI	Consumer Price Index
DEEWR	Department of Education, Employment and Workplace Relations
EEH	Employee Earnings and Hours
GDP	gross domestic product
HES	Household Expenditure Survey
HIA	Housing Industry Association
HILDA	Household Income and Labour Dynamics in Australia
Manufacturing Award	Manufacturing and Associated Industries and Occupations Award 2010
LCI	Living Cost Index
MGA	Master Grocers Australia
MPMSAA	Master Plumbers and Mechanical Services Association of Australia
NAPSA	Notional Agreement Preserving State Awards
NFF	National Farmers’ Federation
NMW	national minimum wage
NRA	National Retail Association
NTWS	National Training Wage Schedule
OECD	Organisation for Economic Co-operation and Development
OTE	Ordinary Time Earnings
Panel	Minimum Wage Panel
R&CA	Restaurant and Catering Australia
RBA	Reserve Bank of Australia
Review	Annual Wage Review 2012–13
RNNDI	Real net national disposable income
SGC Acts	Superannuation Guarantee Charge Act 1992 and the Superannuation Guarantee (Administration) Act 1992
SG rate	Superannuation guarantee rate
Statistical Report	Statistical Report—Annual Wage Review 2012–13
SWSS	Supported Wage System Schedule
Transitional Act	Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
VACC	Victorian Automobile Chamber of Commerce
VECCI	Victorian Employers’ Chamber of Commerce and Industry
WPI	Wage Price Index

1. The Decision

[1] The Fair Work Act 2009 (the Act) requires the Minimum Wage Panel (the Panel) of the Fair Work Commission (the Commission) to conduct and complete a review of minimum wages in modern awards and the national minimum wage (NMW) in each financial year. The Panel may set, vary or revoke modern award minimum wages and must make a national minimum wage order. This decision deals with the 2012–13 annual wage review (the Review) and directly affects over 1.5 million employees in Australia who are award reliant. 1

[2] The Act sets out some important procedural fairness requirements for the Review. The Panel must ensure that all persons and bodies (referred to collectively as parties) are given a reasonable opportunity to make and reply to written submissions. In this Review, a number of parties took up this opportunity by lodging one or more written submissions, participating in consultations on 21 and 22 May 2013, or both. The Minimum Wage Research team of the Commission also conducted a number of research projects for the purpose of the Review. The timetable for the Review and all of the submissions, transcript, research reports, and some additional economic data were published on the Commission’s website to ensure that all parties had a reasonable opportunity to participate. The Panel considered all of the material received from parties and the published research in making its decision.

[3] This chapter summarises the matters we have considered, our reasoning and the increase we have decided upon, with a more detailed discussion provided in the subsequent chapters.

[4] The Act provides that in conducting the Review, the Panel must take into account the general objects in s.3, the modern awards objective in s.134(1) and the minimum wages objective in s.284. We have taken all of these matters into account. These provisions contain some common elements and to a large extent this decision has been structured around the statutory considerations we are required to take into account and we deal with them in Chapters 2–9. We do not repeat all of that material here but the views expressed in this Chapter should be seen in the context of our decision as a whole. We turn first to the nature of the Panel’s task.

[5] A number of submissions contended that the increase in award rates of pay in the 2011–12 annual wage review overcompensated workers for a projected increase in inflation which did not eventuate 2 and that the Panel should factor in the extent of this overcompensation in its determination on the basis that actual inflation was lower than expected.3 A number of parties also contended that we should simply deduct the 1 July 2013 increase in the superannuation guarantee contribution rate (the SG rate) of 0.25 percentage points from any wage adjustment we otherwise determine. Finally, a number of parties proposed an award-by-award approach to the fixation of modern award minimum wages.

[6] We deal with the substance of these submissions later, but note here that each of these proposals appears to assume a particular approach to the task of this Panel.

[7] In assessing the various economic considerations the Panel takes into account both actual economic indicators and those that are forecast at the time of each decision. Of these, the actual indicators tend to be the primary consideration, because they are by definition more reliable than forecasts. However, it is also appropriate to have regard to future projections that cast some light on the economic circumstances that are expected to apply during the period when any adjustment will operate.

[8] To the extent that the forecast economic indicators do not ultimately reflect the actual performance of the economy, this forms part of our broad assessment and our consideration of the actual indicators in subsequent reviews. Importantly, when considering both actual and forecast indicators, the Panel pays particular attention to trends, because of the volatility in some of the economic indicators.

[9] It is also important to recognise that the range of matters the Act requires us to take into account is not limited to economic considerations. In particular we are also required to take into account relative living standards and the needs of the low paid. 4 The submissions of the parties tended to focus, naturally enough, on those statutory considerations which support the outcome for which they contend. But the Act requires the Panel to take into account all of the relevant statutory considerations.

[10] There is often a degree of tension between the economic and social considerations which we must take into account. A substantial wage increase may better address the needs of the low paid and improve the living standards of award-reliant employees relative to those employees who are not award reliant; but it may (depending upon the prevailing economic circumstances) reduce the capacity to employ the marginalised and hence reduce social inclusion. It is this complexity which leads us to reject a mechanistic approach to wage fixation—such as the adoption of real wage maintenance as a decision rule or reducing the increase we would otherwise determine by the quantum of any increase in the SG rate. The real wages of award-reliant employees and increases in the SG rate are relevant to our task, but are not determinative. While we have taken the 0.25 per cent increase in the SG rate into account in determining the level of increase in minimum wages in the Review, we have not applied a direct, quantifiable, discount to the minimum wage increase, as proposed by some parties. The range of considerations we are required to take into account calls for the exercise of broad judgment, rather than a mechanistic approach to minimum wage fixation.

[11] As to the proposed award-by-award approach, it is important to appreciate that the framework for workplace relations established by the Act is predicated on a guaranteed safety net which underpins enterprise level collective bargaining. The safety net of fair, relevant and enforceable minimum wages and conditions is provided through modern awards, national minimum wage orders and the National Employment Standards. Collective bargaining at the enterprise level is underpinned by that safety net. This is evident from the fact that enterprise agreements must pass the “better off overall test” in s.193 of the Act 5 and the terms of an enterprise agreement may supplement, but cannot exclude, any provision of the National Employment Standards (ss. 55 and 186(2)(c)).

[12] In Chapter 2 we deal with the statutory framework in more detail and confirm a number of general observations made by the Panel in the Annual Wage Review 2011–12 decision (2011–12 Review decision). 6 In particular we endorse the following observations:

“the legislative framework reveals a preference for consistent variation determinations across all modern awards…[t]he notion of a fair safety net of minimum wages embodies the concepts of uniformity and consistency of treatment.” 7

[13] The award-by-award approach to minimum wage fixation, based on sectoral considerations, advocated by some parties in these proceedings is inimicable to the safety net nature of modern award minimum wages. Enterprise level collective bargaining is the primary means by which the statutory framework envisages differential treatment based on the circumstances in particular enterprises, which would be influenced by relevant sectoral considerations. That the system does function in this way is evidenced by the sectoral variation in actual wage outcomes.

[14] We now turn to the considerations which we must take into account. The matters of direct relevance to the Review can be grouped into three broad categories: economic; social; and collective bargaining.

Economic considerations

[15] Economic conditions over the past year have remained reasonably strong, particularly in the context of conditions in other Organisation for Economic Co-operation and Development (OECD) countries. Real gross domestic product (GDP) grew by 3.1 per cent over the year to the December quarter 2012 and labour market conditions softened but remained sound, with continuing low levels of unemployment. Employment grew by 1.4 per cent over the year to April 2013, but more slowly than the labour force, resulting in a slight increase in the unemployment rate. Some softness in the labour market is reflected in the fact that the growth in total hours worked (0.8 per cent) was less than the growth in employment; in continuing high levels of youth unemployment; and in the decline in the full-time employment of adult males.

[16] Following earlier volatility, annual inflation has been subdued over the past year, at around 2.5 per cent on all Consumer Price Index (CPI) based measures over the year to the March quarter 2013 and lower still using the Living Cost Index (LCI) measure. Inflation remains comfortably within the Reserve Bank of Australia (RBA) target range of 2–3 per cent. Wages growth, reflected in the Wage Price Index (WPI) and bargaining outcomes, has moderated, growing at their lowest rate for a decade (excluding the global financial crisis impact in 2008). Profits in the non-mining part of the economy have risen as have real unit labour costs, but the rise in real unit labour costs is a result of a fall in the price index rather than higher rates of compensation of employees.

[17] On all measures, labour productivity increased over the year to the December quarter 2012. Labour productivity, as measured by GDP per hour worked in trend terms, was 2.9 per cent higher; gross value added in the market sector per hour worked increased by 2.4 per cent; and GDP per capita increased by 1.2 per cent. 8

[18] This economic performance has occurred against the background of continuing structural change within the Australian economy, evident in the strong growth in the resources and related sectors and more modest outcomes in other sectors of the economy. We have had regard to the aggregate economic data and to available sectoral information, with specific consideration of the circumstances of the most award-reliant industries and small business.

[19] There is continuing evidence that, while creating difficulties for some employers, the economy has responded relatively well to the significant structural change evident in recent years, with a continuing low aggregate unemployment rate; the absence of increased variation in the unemployment rates across the country; the accommodation of variation in labour demand through labour mobility and changes in relative wages; and the absence of inflationary or wages pressures in the non-resources sectors of the economy.

[20] The most award-reliant sectors of the economy continued to have a mixed experience over the past year. Most have had a fall in hours worked and in employment, although rises in profitability and output have been stronger. The Retail trade industry in particular has improved both sales and profitability, while wages growth and employment in this sector has been below the average for all industries. The diversity in outcomes in respect of output, profits, employment, and wages between and within the award-reliant industries suggests that factors other than recent minimum wage increases have driven outcomes within those industries.

[21] The outlook for the Australian economy remains favourable and global conditions are expected to gradually improve as growth in emerging market economies picks up and the United States continues to recover, although continuing risks from the euro zone remain.

[22] GDP growth is expected to be slightly below trend, at 2¾ per cent in 2013–14, reflecting the approaching peak in mining investment, ongoing fiscal consolidation and the high value of the Australian dollar. The terms of trade are expected to rise in the June quarter 2013 before resuming its recent decline. Mining investment is expected to remain elevated, while business investment outside the resources sector is expected to be modest.

[23] Employment is forecast to increase as growth in the non-resources sector picks up and the participation rate is expected to remain around 65 per cent. But the unemployment rate is forecast to increase slightly due to the high Australian dollar and the transition to a less labour intensive production phase in the resources sector. Wages growth is expected to be subdued and slightly below trend and inflation is forecast to be in the bottom half of the RBA’s target band of 2–3 per cent.

[24] Employer groups submitted that businesses will be facing higher costs due to the next phasing and transitioning to modern awards, beginning 1 July 2013, and the impact of the carbon price and rising energy costs were noted in many submissions.

[25] The award modernisation process was governed by Part 10A of the Workplace Relations Act1996. In making the modern awards the Australian Industrial Relations Commission (AIRC) could not, save in limited circumstances, differentiate between states 9 and had the task of balancing the interests of employees and employers throughout Australia after examining both federal awards and Notional Agreements Preserving State Awards (NAPSAs). By the end of 2009, the AIRC had reviewed more than 1500 federal awards and NAPSAs and created 122 industry and occupation based modern awards. In relation to penalty rates and other conditions, the AIRC adopted a “swings and roundabouts” approach where the most common provisions were often adopted.

[26] We accept that some employers, most directly affected by minimum wage increases, continue to face increases in labour costs arising from the transition to modern awards. Others will experience falls in minimum rates, especially penalty rates and casual loadings, as these are harmonised across the states. Further, the increased costs resulting from award modernisation were taken into account by the AIRC in deciding upon the transitional provisions and operative dates in modern awards. 10 The impact will vary between awards and between states and specific provisions within a particular award. There is no clear evidence before us as to a pattern and the extent to which the transition to modern awards is imposing additional costs on some employers. We have had regard to the fact that the transition to modern awards will impose additional costs on some employers, but in fixing minimum wages at an aggregate level it is appropriate to take a broader view of the circumstances facing employers.

[27] The Panel considered the impact on the CPI of the introduction of a price on carbon and assistance to employees to compensate those price effects in its decision in the 2011–12 Review, deciding:

“We agree with the proposition that this Review should not provide any additional assistance to compensate for the anticipated price effects associated with the introduction of a price on carbon. Compensation has already been provided through tax cuts and transfer payments and further compensation by minimum wage adjustments would amount to double dipping. It follows that we will, in effect, abstract the projected 0.7 per cent increase in the CPI from our deliberations.” 11

[28] We have not been persuaded to change the position taken by the Panel in the 2011–12 Review decision. We have had regard to the effect of the carbon price on the CPI in 2012 in arriving at our decision in this Review.

[29] In summary, the economic outlook remains favourable, notwithstanding some easing of growth and an increase in unemployment forecast in 2013–14. However, the outlook for growth remains uneven, with continuing pressures on the businesses in the trade-exposed sectors of the economy outside of the resources sector. With some exceptions, the most award-reliant industries are generally not in the trade-exposed sectors.

Social considerations

[30] The minimum wages objective and the modern awards objective both require us to take into account two particular matters, relative living standards and the needs of the low paid. These are different, but related, concepts. The former, relative living standards, requires a comparison of the living standards of award-reliant workers with those of other groups that are deemed to be relevant. The latter, the needs of the low paid, requires an examination of the extent to which low-paid workers are able to purchase the essentials for a “decent standard of living” and to engage in community life. The assessment of what constitutes a decent standard of living is in turn influenced by contemporary norms. We turn first to relative living standards.

[31] Over the past decade, all award rates of pay have fallen relative to all measures of median and average earnings. The NMW as a proportion of the median full-time wage has fallen from 57.5 per cent in 2002 to 52.7 per cent in 2012. It fell by 0.9 percentage points in the past year. Award rates have grown more slowly over the past decade than the WPI, average weekly ordinary time earnings (AWOTE), average weekly earnings (AWE) and bargained rates, although growth in the C14 classification rate of the Manufacturing and Associated Industries and Occupations Award 2010 (Manufacturing Award) 12 and the NMW have remained close to that of the WPI.

[32] All of the evidence before the Panel indicates that the earnings of award-reliant workers have been falling behind the earnings of the rest of the workforce. The NMW and award wages are rates of pay for the job. We are conscious that there is a broad shift in the economy toward higher-skilled jobs and that this is affecting measures of average and even median earnings. Even the WPI will be affected if the pay rates of the higher skilled are rising more rapidly as a result of the increased relative demand. For this reason, we would not expect award rates, especially for the lower-skilled jobs, to rise as fast as the average. Nonetheless, the average or “typical” wage influences typical living standards and norms about how the households of employees live. In this way it is relevant to our task of considering relative living standards. It remains one of a number of considerations that we must take into account.

[33] An assessment of the needs of the low paid is more challenging. There is no single contemporary measure available to assess either the needs of the low paid or the extent to which those needs are being met. We accept the point that if the low paid are forced to live in poverty then their needs are not being met. We also accept that our consideration of the needs of the low paid is not limited to those in poverty, as conventionally measured. Those in full-time employment can reasonably expect a standard of living that exceeds poverty levels. In assessing the needs of the low paid we rely on a range of measures including comparisons of hypothetical low-wage families with customary measures of poverty, both before and after taking account of the impact of the tax-transfer system, and survey evidence of financial stress and material deprivation among low-paid households.

[34] As to the definition of the “low paid”, there is a level of support for the proposition that the low paid are those employees who earn less than two-thirds of median full-time wages. 13 The Panel has addressed this issue previously in considering the needs of the low paid, and has paid particular regard to those receiving less than two-thirds of median adult ordinary-time earnings and to those paid at the C10 and C14 (NMW) rates in the Manufacturing Award.14 Nothing put in these proceedings has persuaded us to depart from this approach. We do not include the owners of small businesses in our assessment of the circumstances of the low paid for the reasons given at paragraphs [269]–[275], but have separately considered the circumstances of small businesses at paragraphs [260]–[266].

[35] We acknowledge that both the relative living standards and the needs of those on lower award rates are assisted substantially by the tax-transfer system, but despite this assistance there is evidence of poverty and a rise in levels of financial stress among some low-paid families.

[36] While the needs of the low paid are not identical to the extent of poverty among low-paid families, they are sufficiently close to provide a useful indicator of changes in the needs of the low paid. A commonly used “poverty line” is 60 per cent of median household disposable income. The data shows that the disposable income of most award-reliant households exceeded this 60 per cent benchmark.

[37] The Australian Council of Social Service (ACOSS) submitted that while the risk of poverty is low for full-time minimum wage earners in Australia, a high proportion of income-poor families include at least one wage earner. 15 The submission referred to a report ACOSS recently commissioned from the Social Policy Research Centre at the University of New South Wales which examined the most recent ABS Income and Expenditure Survey (2009–10) (Poverty in Australia 2012).16 Poverty in Australia 2012 analyses the risk and profile of poverty amongst a range of household types using the international standard benchmarks of 50 per cent and 60 per cent of median income, although it differs from the OECD methodology by taking into account people’s housing costs as well as their incomes. The report found that in 2010:

When a poverty line of 50 per cent of median disposable income was used (a relatively low poverty benchmark used by the OECD), 29 per cent of all people with incomes below this benchmark lived in households for which wages were the principle source of income.

5.2 per cent of households whose main source of income was wages were below the poverty benchmark of 50 per cent of median income. The figure was 8.8 per cent when measured against 60 per cent of median income.

[38] There is imperfect information about the levels of financial stress and deprivation of low-paid employee households (and none about award-reliant households). Despite this, the information that is available shows that such households experience higher levels of difficulty in meeting their needs than the average employee household. Further, there has been some increase in levels of financial stress among low-paid households between the years 2009 and 2011 (the latest years for which data are available).

[39] For the purpose of conducting an annual wage review, s.284(1)(b) provides that the Panel must take into account promoting social inclusion through increased workforce participation. We accept that our consideration of social inclusion in the context of s.284(1)(b) is limited to increased workforce participation. On that basis it is obtaining employment which is the focus of s.284(1)(b). This involves a consideration of the increased incentives that higher minimum wages can provide to those not in employment to seek paid work, balanced against potential impacts on the demand for low-paid workers and hence the supply of low-paid jobs, from large increases in minimum wages. However, we also accept that the impact of minimum wages upon an employee’s capacity to engage in community life and the extent of their social participation can appropriately be considered in the context of the legislative requirements to “maintain a safety net of fair minimum wages” and to take into account “the needs of the low paid”.

[40] The research presented by parties to this Review has not convinced the Panel to alter its position from previous reviews that a modest increase in minimum wages has a very small, or even zero, effect on employment.

Bargaining

[41] In the period 2000–12, the proportion of award-reliant employees has trended downwards (from 23.2 per cent to 16.1 per cent), while the proportion of employees on collective agreements has increased (from 36.8 per cent to 42.0 per cent). Despite this overall trend, the data also show that between 2010 and 2012, the proportion of employees on awards has marginally increased (from 15.2 per cent to 16.1 per cent), while the proportion of employees on collective agreements marginally declined (from 43.4 per cent to 42.0 per cent).

[42] Recent data from the Employee Earnings and Hours (EEH) survey highlights the continuing gap between average wages for employees covered by collective agreements and for award-reliant employees. In May 2012, average weekly total cash earnings for full-time award-reliant employees were $933.40, compared with $1518.50 for full-time employees covered by collective agreements. 17 In May 2010, the average weekly total cash earnings for full-time award-reliant employees were $753.80, compared with $1386.20 for full-time employees covered by a collective agreement.18

[43] The current evidence indicates that the level of increases in minimum award wages which have occurred over the last decade are compatible with the continuing encouragement of enterprise bargaining.

The decision

[44] We have decided that the range of considerations we are required to take into account favours the award of an increase which will result in a small improvement in the real value of modern award minimum wages in 2013–14. As to the form of the increase, the flat dollar increases in award minimum rates over the last 20 years have compressed award relativities and reduced the gains from skill acquisition. The position of the higher award classifications has reduced relative to market rates and to average earnings and has fallen in terms of real purchasing power. In the Annual Wage Review 2010–11 decision (2010–11 Review decision) 19 these considerations led the Panel to determine a uniform percentage increase and we have reached the same conclusion in this Review, for the same reasons. The increase in modern award minimum wages we have decided on is 2.6 per cent. Weekly wages will be rounded to the nearest 10 cents.

[45] The national minimum wage is currently set at the minimum wage for the C14 classification. 20 We have not been persuaded to depart from that relationship. The national minimum wage will be $622.20 per week or $16.37 per hour. The hourly rate has been calculated on the basis of a 38 hour week for a full-time employee. This constitutes an increase of $15.80 per week or 41 cents per hour.

[46] The determinations and order giving effect to our decision will come into operation on 1 July 2013.

[47] A number of considerations have led us to award a lower increase than that determined in last year’s review. While the economic outlook remains favourable, GDP growth is expected to ease to slightly below trend in 2013–14 and the unemployment rate is expected to increase slightly. Inflation is expected to remain comfortably within the RBA target range of 2–3 per cent. In addition to these considerations, the SG rate increase to apply from 1 July 2013 has also been a moderating factor in our assessment of the adjustment that should be made to minimum wages. As a result, although it would not be appropriate to quantify its effect, the increase in modern award minimum wages and the NMW we have determined in this Review is lower than it otherwise would have been in the absence of the SG rate increase. We have also had regard to the effect of the carbon price on the published CPI figures and the lower than forecast recent inflation outcome (when abstracting the estimated 0.7 per cent carbon price effect) in considering past inflation for the purpose of the current review.

[48] A number of parties sought differential treatment in respect of any variation determination arising from this Review being applied to certain modern awards.

[49] For the reasons given in Chapter 10, those advocating differential treatment have not persuaded us that their proposals have sufficient merit. The diversity of experience within these sectors tells strongly against the grant of a general exemption. The evidence does not support a conclusion that, as a whole, these industries are suffering economic circumstances which would warrant the differential treatment sought. The general matters relied upon relate to the economy as a whole and do not support differential treatment for the modern awards that have been raised with the Panel. We have, however, taken these matters into account in our consideration of the economy and in the decision more generally.

[50] In relation to incapacity arguments more generally, in Chapter 2 we have again drawn attention to the practical difficulties which arise from the interaction of ss.157(2), 285(1) and 286 of the Act. In particular, there is no mechanism in the Act for revisiting a determination varying modern award minimum wages after an annual wage review has been completed. As a result of this legislative inflexibility, a small or large business; a sector; or a region facing circumstances warranting the deferral of, or exemption from, an annual wage review increase can only make such an application in the context of an annual wage review. So if the adverse circumstances arose in, for example, July, the businesses affected would have to wait until the following year (i.e. the next annual wage review) before they could seek relief.

[51] The Panel drew attention to these issues in the 2011–12 Review decision and noted that the review of the Act provided an opportunity to address them. No legislative amendments have been made and as a consequence the practical difficulty created by the legislative framework remains.

[52] There is a final matter we wish to raise.

[53] As we have mentioned, relative living standards and the needs of the low paid are among the matters we are required to take into account in the fixation of minimum wages. While some modern award minimum wages (namely at and below the C10 level), have increased in real terms over the past decade, they have not kept pace with the level of wage increases generally. Relative to all measures of median and average earnings, modern award minimum wages have fallen over the past decade. The NMW has fallen as a proportion of full-time adult median earnings from 57.5 per cent in 2002, to 52.7 percent in 2012. The decline in the relative living standards of award-reliant employees is also relevant to our assessment of the needs of the low paid—needs being a relative concept.

[54] It is apparent that while real earnings have generally increased over the past decade, earnings inequality is increasing. Changes in the overall levels of earnings inequality show that real weekly earnings of full-time workers have become progressively less equal in the past decade: for each decile, the lower the earnings, the lower the rate of growth in earnings.

[55] If not addressed, these trends may have broader implications both for our economy and for the maintenance of social cohesion in Australia.

[56] As noted in the Annual Wage Review 2009–10 decision (2009–10 Review decision), 21 both minimum wages and the tax-transfer system are relevant to the maintenance of an effective safety net for the low paid—each has its part to play. Minimum wages play a particularly important role in the disposable income of households that do not receive income support payments. We agree with the following observation from the 2009–10 Review decision:

“[244] Our view is that the low paid need the highest level of wages that is consistent with all other objectives including low unemployment, low inflation and the viability of business enterprises. At the least, this level of wages should enable a full-time wage earner to attain a standard of living that exceeds contemporary indices of poverty. We are open to evidence that there are particular economic developments that are placing unusual and severe strain on the budgets of the low paid.” 22

[57] But we acknowledge that increases in minimum wages are a blunt instrument for addressing the needs of the low paid. 23 A significant proportion of low-paid adult employees live in middle to high income households. An analysis of 2011 Household Income and Labour Dynamics in Australia (HILDA) Survey data showed that about 30 per cent of low-paid adult employees live in households in the top four income deciles. The tax-transfer system can provide more targeted assistance to low-income households and is a more efficient means of addressing poverty.

[58] The tax-transfer system plays a significant role in alleviating the impact of earnings inequality and supporting the living standards of low-paid workers, and the evidence suggests that the tax-transfer system has been effective in increasing the real level of disposable incomes for lower paid award-reliant families.

[59] The way in which changes in the tax-transfer system are taken into account in minimum wage fixation remains a matter of contention and we would be assisted if this matter was given some consideration by the parties in the 2013–14 annual wage review. As the Panel did in the 2011–12 Review decision, we would also encourage the Australian Government to discuss such matters with the major parties in an effort to arrive at a consensus as to the specific effect any future tax-transfer changes may have on the variation of minimum wages in the 2013–14 review.

[60] We are aware however that the tax-transfer system has its own limitations, including its impact on incentives to work. It is for this reason, among others, that minimum wages must play their part in meeting the needs of the low paid.

[61] Our productivity performance as a nation underpins our standard of living. In this context labour productivity is relevant. As we have noted, there has recently been an increase in labour productivity. Short-term variations in productivity should be interpreted with some caution and whether the recent increase is sustainable remains to be seen. It is for that reason that we have not given greater weight to recent productivity outcomes in deciding to only award a modest increase in minimum wages in this Review. If sustained, the recent improvement in labour productivity could provide the capacity to address the declining relative position of the low paid and for them to share in increasing community living standards.

[62] The matters we have identified raise substantive issues which need to be addressed in the 2013–14 review, together with a consideration of the capacity to redress the decline in the relative living standards of award-reliant employees. We invite further submissions on widening dispersion in earnings and the declining relative position of employees reliant on award wages in the 2013–14 review.

2. The Statutory Framework

[63] As we have noted, the Act requires the Panel to take into account a number of considerations in reviewing modern award minimum wages and the national minimum wage order. The minimum wages objective in s.284 applies to the exercise of functions and powers under the Parts of the Act concerning minimum wages (Part 2–6) and modern awards (Part 2–3). Section 284 is in these terms:

“284 The minimum wages objective

What is the minimum wages objective?

(1) The FWC must establish and maintain a safety net of fair minimum wages, taking into account:

(a) the performance and competitiveness of the national economy, including productivity, business competitiveness and viability, inflation and employment growth; and

(b) promoting social inclusion through increased workforce participation; and

(d) the principle of equal remuneration for work of equal or comparable value; and

(e) providing a comprehensive range of fair minimum wages to junior employees, employees to whom training arrangements apply and employees with a disability.”

[64] In setting, varying or revoking modern award minimum wages, we are also required to take into account the modern awards objective in s.134(1), but only insofar as the matters specified relate to the setting, varying or revoking of modern award minimum wages. Section 134(1) states:

“134 The modern awards objective

What is the modern awards objective?

(1) The FWC must ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions, taking into account:

(a) relative living standards and the needs of the low paid; and

(b) the need to encourage collective bargaining; and

(d) the need to promote flexible modern work practices and the efficient and productive performance of work; and

(e) the principle of equal remuneration for work of equal or comparable value; and

(f) the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden; and

(g) the need to ensure a simple, easy to understand, stable and sustainable modern award system for Australia that avoids unnecessary overlap of modern awards; and

(h) the likely impact of any exercise of modern award powers on employment growth, inflation and the sustainability, performance and competitiveness of the national economy.”

[65] A third set of considerations the Panel must take into account is found in the general objects of the Act. 24 The minimum wages objective, modern awards objective and objects of the Act contain some common elements. As we indicated in the 2011–12 Review decision,25 the matters of direct relevance to the Review can also be understood by grouping them into three broad categories: economic;26 social;27 and collective bargaining.28

[66] We have considered these matters in making our decision and specifically address them in Chapters 4–8 of this decision. Chapter 3 discusses the proposals of the parties to the Review.

[67] Three particular aspects of the statutory framework have been the subject of submissions in this Review.

[68] The first issue concerns the approach to be taken to annual wage reviews, in particular the scope for differential treatment as between modern awards.

[69] In the 2011–12 Review decision, the Panel made a number of general observations about the legislative framework. Relevantly, for present purposes, the Panel said:

[70] In these proceedings the Australian Chamber of Commerce and Industry (ACCI) disagreed with the above observations. ACCI submitted that the minimum wage objective and the objects of the Act suggest that there must be cogent evidence to warrant an increase to minimum wage rates for “each modern award” and that there is no statutory presumption or requirement that the Panel flow on any increase to all classification levels and/or for all modern awards. ACCI relied on s.284(4) which states, relevantly:

“varying modern award minimum wages is varying the current rate of one or more modern award minimum wages.”

(emphasis added)

[71] ACCI submitted that s.284(4) indicates that Parliament intended that the Panel retain a discretion to vary one or more modern award minimum wages and that, had Parliament intended that all wages in every modern award should be increased, it could have done so.

[72] ACCI concluded its submission on this issue in these terms:

“73. Clearly, had Parliament intended that all wages in every modern award should be increased, it could have done so. On the contrary, Parliament has indicated that the Panel retains discretion to vary one or more modern award minimum wages.

74. As a result of the award modernisation process, there are now 122 modern awards which have replaced thousands of pre-reform federal awards and NAPSAs.

75. Given that these modern awards are predominantly structured along an industry or occupational basis, it is now possible to distinguish and target decisions on an industry by industry basis.

76. Therefore, it is open to the Panel, should it be satisfied, to only vary (or not vary) particular minimum wages in one or more modern awards, which may not have been practical in the past due to the number of disparate and overlapping award instruments.” 30

[73] As the Panel stated in the 2011–12 Review decision, we accept ACCI’s contention that the Act does not compel the variation of modern award minimum wages in all modern awards. Section 285(2)(b) provides that in an annual wage review the Panel:

“may make one or more determinations varying modern awards to set, vary or revoke modern award minimum wages”

(emphasis added).

[74] Further, s.284(4) defines varying modern award minimum wages as “varying the current rate of one or more modern award minimum wages”.

[75] It follows that the Panel has a discretion to vary some or all modern award minimum wages in the context of an annual wage review. The real question is the basis upon which the Panel should exercise that discretion. In that regard we are not persuaded that ACCI’s submission warrants any reconsideration of the observations made by the Panel in the 2011–12 Review decision.

[76] At the outset it is important to appreciate that the Act was legislated against the background of a long-standing approach to minimum wage fixation. Parliament may be presumed to have known of the historical approach taken to such claims. 31 The concepts of uniformity and consistency of treatment have underpinned the fixation of minimum wages in modern awards and date back to the establishment of consistent minimum rates within and across awards endorsed in the National Wage Case February 1989 Review32 and implemented in the National Wage Case August 1988 decision.33 The principle of consistent minimum rates across awards was maintained through the award simplification process;34 the Paid Rates Review;35 and award modernisation.36

[77] As to the current legislative framework, the minimum wages objective requires us to establish and maintain “a safety net of fair minimum wages” and the modern awards objective requires us to ensure that modern awards (together with the National Employment Standards) provide a fair and relevant minimum safety net of terms and conditions. The modern awards objective also speaks of the need to ensure a “stable and sustainable modern award system”. In our view, considerations of fairness and stability tell against an award-by-award approach to minimum wage fixation. If differential treatment was afforded to particular industries this would distort award relativities and lead to disparate wage outcomes for award-reliant employees with similar or comparable levels of skill. In this regard, we note that in its submission, Australian Business Industrial (ABI) “fully accepts that there is a presumption of uniformity in the Fair Work Act and compelling reasons for the system of modern awards for awards to be treated equally in Division 3 Part 2-6 reviews”. 37 Similarly, in its oral submission during the 22 May 2013 consultations, the Australian Industry Group (Ai Group) referred to the need for consistent relativities within and between modern awards. It is also relevant that in establishing and maintaining the minimum wages safety net, the Panel must take into account the principle of equal remuneration for work of equal or comparable value. Such a principle supports the determination of consistent minimum rates for work of equal or comparable value. The maintenance of consistent minimum wages in modern awards and the need to ensure a stable and sustainable modern award system would be undermined if the Panel too readily acceded to requests for differential treatment.

[78] At a broader, conceptual, level it is important to appreciate that the framework for workplace relations established by the Act is predicated on a guaranteed safety net which underpins enterprise level collective bargaining. The safety net of fair, relevant and enforceable minimum wages and conditions is provided through modern awards, national minimum wage orders and the National Employment Standards. Collective bargaining at the enterprise level is underpinned by that safety net. This is evident from the fact that enterprise agreements must pass the “better off overall test” in s.193 of the Act 38 and the terms of an enterprise agreement may supplement, but cannot exclude, any provision of the National Employment Standards (ss. 55 and 186(2)(c)).

[79] The award-by-award approach to minimum wage fixation, based on sectoral considerations, advocated by some parties in these proceedings is inimicable to the safety net nature of modern award minimum wages. Enterprise level collective bargaining is the primary means by which the statutory framework envisages differential treatment based on the circumstances in particular enterprises, which would be influenced by relevant sectoral considerations. That the system functions in this way is evidenced by the sectoral variation in actual wage outcomes.

[80] Three other points support the observations of the Panel in the 2011–12 Review decision.

[81] First, in an annual wage review, the Act directs the Panel’s attention to a range of macroeconomic and general factors including: the performance and competitiveness of the national economy; inflation; employment growth; relative living standards; the promotion of social inclusion; and the needs of the low paid. The nature of these factors directs the Panel’s attention to matters which are relevant to the variation of all modern awards.

[82] The second point is the legislative preference for consistent operative dates for variation determinations made in an annual wage review. Sections 286 and 287 provide that all such determinations must come into operation on 1 July in the next financial year. A party seeking a later operative date must satisfy the Panel that there are exceptional circumstances which justify a later date. It would be an odd outcome if a lower threshold applied in relation to claims for a different quantum to the threshold which applies to claims for a later operative date.

[83] Finally, it is also relevant to observe that s.154 of the Act operates as a prohibition on awarding interstate wage differentials. This is a further indication of a legislative preference for consistent, national, minimum wage rates.

[84] ACCI’s submission relies on one subsection within the Act. But the search for Parliament’s intention depends upon an analysis of the Act as a whole. Such an analysis supports the observations made by the Panel in the 2011–12 Review decision.

[85] The second issue raised in this Review concerns the supplementary exemption process proposed by the Chamber of Commerce and Industry Queensland (CCIQ), The Australian Retailers Association (ARA) and Business SA, and supported by ACCI. CCIQ submitted that if the Panel decided to increase modern award minimum wages then:

“Particular industry specific employers should be exempt from any increase where they are determined to be facing significant challenges, or failing an exemption, the Panel should establish a supplementary hearing process to determine whether part or all of an increase should flow-on to those industry specific modern awards.

i. It is within the statutory discretion of the Panel to differentiate its decisions based on the 122 modern awards that now exist and to grant a differential increase (or no increase) for one or more modern awards, where it is warranted. This would allow the Panel to provide an exemption from any increase for modern awards in designated industry sectors which are in significant difficulty and would be most affected by an increase to minimum wage. These include: tourism, manufacturing, retail, hospitality and residential building and construction.” 39

[86] The ARA submitted that the Panel “should consider an award-by-award basis and provide an interim decision or statement prior to handing down a final decision”. 40

[87] Business SA submitted:

“[p]ursuant to s286 and s287 of the Fair work Act 2009, the FWA should ‘facilitate’ industry sectors such as Retail and Hospitality to apply for a lesser amount of any wage increase and/or a delay in the commencement date of any wage increases arising from the Review.” 41

[88] In the 2011–12 Review decision the Panel rejected a similar proposition advanced by ACCI for the establishment of a brief “supplementary determination process”. The reasons given by the Panel were as follows:

“[281] The parties seeking an exemption have had an opportunity to make submissions in support of their position, both in writing and orally at the consultations. We are not persuaded that any further opportunity is either necessary or practical.

[282] As we have noted, the Act requires that this Review be completed by 30 June 2012 and, absent exceptional circumstances, any modern award minimum wage variation determined by the review must come into operation on 1 July 2012. A practical consequence of these legislative restrictions is that the Panel is obliged to hand down its decision in early June to provide a sufficient period for parties to comment on draft variation determinations to give effect to our decision. These temporal limitations also tell against the process proposed by ACCI.” 42

[89] In this year’s review we invited the parties to answer a number of questions. Relevantly, question 5.1 was in the following terms:

“Noting the observations of the Panel about the legislative context for the consideration of exceptional circumstances in the Annual Wage Review 2011-12 Decision, how would the supplementary exemption process proposed by the [CCIQ], ARA and others operate in practice given the terms of the Fair Work Act 2009 and the timeframes involved?”

[90] It is notable that none of the parties advocating the supplementary exemption process (i.e. CCIQ, ARA and Business SA) provided any response to the question posed nor did they attend the public consultation hearings to advance any oral submissions in support of their proposal. ACCI also did not submit a written response to the question, but during the public consultation on 21 May 2013, ACCI submitted that it believed that a supplementary hearing process “was practical”. However, the basis for that belief was unstated and ACCI did not advance any suggestions as to how such a process may operate in practice.

[91] The practical impediments to the adoption of a supplementary determination process are evident from the chronology below:

14 May 2013—Commonwealth Budget

17 May 2013—Post-Budget submissions filed

21–22 May 2013—Panel public consultations

3 June 2013—Decision

1 July 2013—Operative date of variations

[92] Two points may be made about this chronology. The first is that it is not feasible for the Panel to publish its decision (either in final or draft form) prior to early June. The time between the Budget and early June is the minimum period required in order to provide the parties with an opportunity to file supplementary submissions in relation to the Budget; hold consultations; and finalise the Panel’s decision.

[93] The second point is that there is a statutory requirement that variation determinations arising from annual wage reviews come into operation on 1 July in the next financial year, absent exceptional circumstances (s.286). In order to meet the 1 July requirement, the Panel must, as a matter of practicality, issue its decision in early June in order to provide sufficient time for draft variation determinations to be prepared and commented upon, prior to final variation determinations being issued prior to 1 July.

[94] The parties seeking an exemption have had an opportunity to make submissions in support of their position, both in writing and orally at the consultations. We are not persuaded that any further opportunity is either necessary or practical. None of those parties took advantage of the public consultation process on 21 and 22 May 2013, to advance any further submissions in support of their exemption applications. In this regard, we note that in its written submission ABI stated that:

“It does seem reasonable that applicants for an exemption do avail themselves of the Panel’s consultation process to assist the [Panel] to better understand the nature of [the] impact which has given rise to the claim. It would seem useful for the [Panel] to remake the point more strongly in its decision so there would be no doubt in future years.” 43

[95] We agree with ABI’s observation. Parties seeking an exemption or deferral should utilise the public consultation process to update the Panel on the circumstances pertaining to their application.

[96] The current legislative framework ensures that annual wage reviews are conducted in a timely way and provides certainty for businesses and employees, by nominating the operative date of any wage increases flowing from such reviews. But the interaction of ss.157(2), 285(1) and 286 does give rise to a practical difficulty in that there is no mechanism in the Act for revisiting a determination varying modern award minimum wages after an annual wage review has been completed.

[97] Apart from the context of an annual wage review, or the system of 4 yearly reviews of modern awards, the Commission may only vary modern award minimum wages if it is satisfied, among other things, that the variation is justified on work value grounds (s.157(2)). As a result of this legislative inflexibility, a small or large business; a sector; or a region facing circumstances warranting the deferral of, or exemption from, an annual wage review increase; can only make such an application in the context of an annual wage review. So if the adverse circumstances arose in, for example, July, the businesses affected would have to wait until the following year (i.e. the next annual wage review) before they could seek relief.

[98] The Panel drew attention to these issues in the 2011–12 Review decision and noted that the review of the Act provided an opportunity to address them. No legislative amendments have been made and as a consequence the practical difficulty created by the legislative framework remains.

[99] We now turn to the third aspect of the statutory framework which was the subject of submissions in this Review, namely the proper construction of s.284(1)(b).

[100] ACCI submitted that past decisions of the Panel have wrongly concluded that “social inclusion”, within the context of s.284(1)(b), encompasses both the obtaining of employment and the pay and conditions attaching to the job concerned. ACCI argued that the Panel’s conclusions in this regard ignore the conjunctive qualification in s.284(1)(b), that is, social inclusion is a concept to be promoted exclusively “through increased workforce participation”.

[101] There is considerable force in ACCI’s submission. We accept that our consideration of “social inclusion” in the context of s.284(1)(b) is limited to increased workforce participation. On that basis it is obtaining employment which is the focus of s.284(1)(b). This involves a consideration of the increased incentives that higher minimum wages can provide to those not in employment to seek paid work, balanced against potential impacts on the demand for low-paid workers and hence the supply of low-paid jobs, from large increases in minimum wages.

[102] However, we also accept that modern award rates of pay impact upon an employee’s capacity to engage in community life and the extent of their social participation. These are matters that can be appropriately taken into account in our consideration of the legislative requirement to “maintain a safety net of fair minimum wages” and to take into account “the needs of the low paid” (s.284(1)(c)). Further, the broader notion of promoting social inclusion is also relevant to the fixation of minimum wages, quite apart from the more limited construct reflected in s.284(1)(b). One of the objects of the Act is to promote “social inclusion for all Australians by” (among other things) “ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through…modern awards and national minimum wage orders” (s.3(b)).

3. The Parties’ Proposals

[103] The Panel received submissions from a wide range of parties, including the Australian and state governments, collective bodies representing employees and employers and other organisations. The submissions addressed both the quantum and form of any increases to modern award minimum wages and the NMW, as well as claims for exemptions from any increases determined by the Panel. Some submissions identified issues for consideration without proposing a particular outcome. Others submitted that there should be no increase to the NMW or to minimum wages in modern awards. 44 A summary of the submissions made in relation to the proposed minimum wages adjustments is provided at Appendix 1 and the claims for exemptions and differential outcomes are dealt with in Chapter 10. This chapter summarises the range of parties’ submissions in respect of the quantum and form of increase to be awarded in modern award wages and the NMW.

Proposals for a flat dollar increase

[104] While the majority of submissions recommended flat dollar increases, the quantum of increase proposed varied widely. 45 ACCI, supported by the Australian Federation of Employers and Industry (AFEI), Business SA, the Victorian Employers’ Chamber of Commerce and Industry (VECCI), the ARA, and the Master Plumbers and Mechanical Services Association of Australia (MPMSAA), proposed an increase of not more than $5.80 per week to the NMW and modern award wages. These parties contended that the increase in award rates of pay in the 2011–12 Review decision overcompensated workers for a projected increase in inflation which did not eventuate 46 and that any increase awarded by the current review should be reduced to the extent of this overcompensation. It was argued that an increase of $5.80 would both take account of such overcompensation and maintain the real value of the minimum wage as at 1 July 2011, after expectations for inflation and the increase in the superannuation guarantee levy are taken into account.47 ACCI submitted that:

“Fair Work Australia’s decision in the 2012 Annual Wage Review to award a +2.9 per cent increase in the minimum rates of pay on 1 July 2012 considerably exceeded that necessary to offset the rise in the cost of living over the preceding year. The consumer price index rose by only +2.0 per cent over the twelve months to the September quarter 2012. The effect of last year’s decision was to increase the real value of the minimum wage, at the expense in many instances of the livelihoods of small business operators. ACCI believes it is appropriate for the Fair Work Commission to factor in the extent of this overcompensation in the 2013 Annual Wage Review, especially in light of the marked divergence between actual inflation and expectations for inflation at the time of the decision.” 48

[105] CCIQ submitted that the Panel should make no increase in this Review, but if the Panel decided to award an increase, then it should be no more than $5.80 per week. 49

[106] The Australian National Retailers Association (ANRA) and the National Retail Association (NRA) argued that a flat dollar increase to award rates was consistent with past practice 50 and both raised concerns about the impact of applying a percentage increase to modern awards. The NRA nominated an increase of not more than $4.75 per week,51 the lowest of the proposed flat dollar increases, while the ANRA proposed an increase of $9.10 per week.52

Proposals for a percentage increase

[107] All proposals for a percentage increase came from employer groups. Ai Group proposed a 1.75 per cent increase for both the NMW and modern awards. 53 This figure represents a notional wage increase of around 2.0 per cent, reduced by 0.25 per cent to take account of the increase in the superannuation guarantee levy.54

[108] The Accommodation Association of Australia (AAA) proposed an increase of not more than 1.5 per cent to both the NMW and modern awards, and ABI supported an increase of 1.2 per cent. 55

[109] The Australian Hotels Association (AHA) recommended a 1.0 per cent increase be applied to the Hospitality Industry Award 2010 56 and made no proposal in respect of the NMW or in relation to minimum wages in other modern awards.

Proposals for a tiered approach

[110] Two submissions put forward a tiered approach. 57 The Australian Council of Trade Unions (ACTU) recommended a flat dollar increase of $30.00 per week to the NMW and to modern award wages up to and including the C10 level,58 and a 4.2 per cent increase to all modern award minimum wages above that level. The ACTU submitted that a percentage increase at the higher classification levels would prevent further compression of award-based wage relativities and also improve the extent to which award wages operate as a fair and relevant safety net for employees “at the middle and upper levels”.59

[111] The flat dollar component is equivalent to an increase at the C10 level of approximately 4.2 per cent. An increase of $30.00 per week represents larger percentage increases over the classifications below the C10 level, ranging from around 4.5 per cent at the C11 level to 4.9 per cent at the NMW and C14 level.

[112] Drawing on unpublished data obtained from the Australian Bureau of Statistics (ABS) EEH Survey 2012, the ACTU estimated that, in May 2012, around 48.5 per cent of non-managerial award-reliant employees had hourly earnings equal to or less than the C10 rate. 60 The analysis also estimated that 18.6 per cent of non-managerial award-reliant employees had hourly earnings greater than the C2(b) classification wage rate (the highest classification in the Manufacturing Award).61

[113] The ACTU argued that these findings supported the “hybrid structure” of its proposal and that an increase incorporating both a flat dollar and a percentage component would balance “the needs of the lowest paid with the need to maintain a relevant safety net for award-reliant workers on higher classifications.” 62

[114] A tiered approach was also submitted by the Australian Catholic Council for Employment Relations (ACCER). The primary focus of its proposal was not pay relativities between classifications in modern awards, but rather the value of safety net wages relative to community wage levels. 63

[115] ACCER proposed that modern award minimum wages above the C10 level be increased by an amount equivalent to the CPI increase from the March quarter 2012 to the March quarter 2013, less 0.8 per cent for compensation provided in respect of the carbon price, plus another 1 per cent for productivity increases. For all modern award wage rates below the C10 level, ACCER proposed a flat dollar increase equal to the C10 increase as a dollar figure. It argued that a flat dollar increase for employees at these classifications would counter the “emerging gap at the lower end of the wage scale.” 64

[116] In respect of the NMW, ACCER proposed an increase commensurate to the flat dollar increase for employees below the C10 level, plus a further $10.00 per week, to assist low-paid employees, and their families, who live in poverty. 65 In its submission in reply, Ai Group opposed ACCER’s proposal for a further $10.00 increase to the NMW on the basis that it would interfere with the outcome of the structural efficiency principle which is reflected in the modern award classification structures, and may lead to disputes during bargaining negotiations.66

Other Proposals

[117] The submissions of the Australian Government and the various state governments were generally silent on the quantum of any change to the NMW or modern award minimum wages.

[118] The Australian Government supported “a fair and economically responsible increase” in modern award wage rates and the NMW and submitted that any increase should take account of changes in living costs and the economic environment since the last review, as well as the domestic and global economic outlook in the short to medium term.

[119] The New South Wales, Victorian and Queensland Governments all urged the Panel to take a “cautious approach” to the Review. The New South Wales and Victorian Governments submitted that any increase must have regard to prevailing economic conditions and ensure that incentives to employ entry level employees are not diminished. The Queensland Government took a similar position and submitted that there was “limited scope” for wage increases in light of: the deterioration of the economic outlook over the course of 2012–13; the likelihood of softening global demand; the continuation of a high Australian dollar; low inflation; and an underperforming labour market.

[120] The Western Australian Government supported a “reasonable and equitable adjustment” that balanced “economic and labour market considerations; the need for an employee safety net; and the capacity for employers to pay for wage adjustments”.

[121] The South Australian Government submitted that the Panel should increase minimum wages taking into account the current economic context and the need to ensure that the real value of minimum wages is maintained over time.

[122] The HR Nicholls Society Inc. submitted that there should be no increase in the NMW, because it was both ineffective and inefficient as a welfare measure to assist low-wage earners, and that the Panel should recommend to the Australian Government that the NMW be scrapped. In relation to the latter submission, our role is to give effect to Parliament’s intention as set out in the Act, and legislative changes of the type advocated by the HR Nicholls Society Inc. involve policy considerations which are a matter for Parliament, not the Panel.

4. The Economy

[123] As part of the minimum wages objective, the Commission must establish and maintain a safety net of fair minimum wages and must take into account the performance and competitiveness of the national economy, including productivity, business competitiveness and viability, inflation and employment growth.

[124] The modern awards objective requires the Commission to take into account the need to promote flexible modern work practices and the efficient and productive performance of work; the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden; and the likely impact of any exercise of modern award powers on employment growth, inflation and the sustainability, performance and competitiveness of the national economy.

[125] In this Chapter, we consider:

recent economic performance of the Australian economy:

economic growth, at an aggregate level and at an industry level;

productivity and real unit labour costs;

business competitiveness and viability;

inflation;

wages growth; and

labour market activity, at an aggregate level and at an industry level;

small business;

the award-reliant industries;

the economic outlook; and

structural change in the Australian economy

[126] In paragraphs [153]–[159] we have set out a number of key statistical concepts and their relationships to each other, which are important in understanding the measures of productivity and real unit labour costs and which are relevant to the concepts when considered in other parts of this Chapter.

Recent economic performance 67

Economic growth

[127] GDP grew at 3.1 per cent over the year to the December quarter 2012. This was a little less than the 4 per cent growth to the December quarter 2011. Real net national disposable income (RNNDI) experienced stronger growth relative to real GDP over the decade to the December quarter 2012, mainly due to growth in the terms of trade (Chart 4.1). However, a decline in the terms of trade since the September quarter 2011 has reduced the cumulative gap between real GDP and RNNDI. Since mid 2011, RNNDI has barely changed, while GDP has grown by 5 per cent. 68

Chart 4.1: RNNDI, real GDP and the terms of trade 69

[128] The Australian economy has outperformed the average of the OECD major seven countries in terms of quarterly GDP growth since the second quarter of 2011. This was particularly evident in the December quarter 2012, when GDP across the OECD major seven countries fell by 0.1 per cent, with output declining in Germany, France, Italy and the United Kingdom (Chart 4.2).

Chart 4.2: International comparisons of quarterly GDP growth 70

Note: Data for Japan measure real gross national product.

[129] There was some debate about the extent to which aggregate growth was driven by the mining sector and the extent of growth in output in other sectors of the economy. Data for gross value added by industry, which provides information about the sectoral contribution to aggregate growth, reveals diversity over the past year. Chart 4.3 shows the average annual percentage change in gross value added by industry over the year and over the decade to the December quarter 2012. The industries with the highest growth over the year to the December quarter 2012 were Mining (10.2 per cent); Administrative and support services (7.8 per cent); Health care and social assistance (6.4 per cent); and Wholesale trade (6.4 per cent). In contrast, gross value added fell in Agriculture, forestry and fishing (–9.5 per cent); Manufacturing (–2.2 per cent); Information media and telecommunications (–2.1 per cent); and Arts and recreation services (–1.9 per cent). Over the year to the December quarter 2012 growth in gross value added across more award-reliant industries was mixed.

Chart 4.3: Average annual change in gross value added by industry—December quarter 2002–December quarter 2012 (Percentage) 71

[130] The differential growth in gross value added between industries evident over the past decade reflects structural change in the economy, driven particularly by the resources boom and a shift in community spending toward services such as those provided by the Health care and social assistance industry.

[131] The impact of the resources boom is discussed in a paper by the Reserve Bank of Australia, The Resources Boom and the Australian Economy: A Sectoral Analysis (the RBA Bishop et al Paper). 72 The RBA Bishop et al Paper noted the genesis of the resources boom in the rapid urbanisation and industrialisation of emerging economies in Asia (particularly China) which led to a dramatic increase in the global demand for commodities and, given short-term supply constraints, significant increases in commodity prices.

[132] The rapid increase in commodity prices from 2003–04, which peaked in late 2011, is reflected in Chart 4.4.

Chart 4.4: RBA Index of Commodity Prices 73

[133] The resources boom was characterised in the RBA Bishop et al Paper in three overlapping phases:

Rising commodity prices, resulting in Australia’s terms of trade increasing significantly over a number of years, accompanied by a sizeable appreciation of the exchange rate. The terms of trade had risen by 82 per cent from
2003–04 to reach its highest level on record in September 2011. 74 The nominal exchange rate has appreciated by around 25 per cent in trade-weighted terms since 2003–04.75 The phase of strongly rising commodity prices has passed, with the terms of trade having peaked in late 2011; although it still remains at a high level, as is evident from Chart 4.4.

The surge in investment in the resources sector which has been in progress for some years and still has some way to run, with resource investment expected to peak as a share of GDP sometime over the course of this year, but remain quite high for a time. 76

Increased production and export of resources has also commenced but has much further to run, especially in the case of liquefied natural gas, for which investment takes place over a number of years before production comes on stream. 77

[134] The RBA Bishop et al Paper examined the impact of the resources boom on the Australian economy in terms of three broadly defined sectors:

the resources sector (resource extraction sector and “resource-related” activity);

the “other tradeable” sector (significantly exposed to international trade but not directly related to the resources sector—agriculture, manufacturing, transport, wholesale trade and accommodation and food services); and

the “non-tradeable” sector (which does not have a significant exposure to international trade, and in which production is not directly linked to the resources sector).

[135] The other tradeable sector includes only one of the five industries with the highest proportion of award-reliant employees—Accommodation and food services. The Administrative and support services; Retail trade; Other services; and Rental, hiring and real estate services industries are within the non-tradeable sector.

[136] The RBA Bishop et al Paper concluded that the overall process of macroeconomic adjustment to the rise in the terms of trade since 2003–04 has occurred relatively smoothly, with inflation remaining consistently within the RBA target band, unemployment remaining relatively low and output growing at close to trend rates. However, it identifies differential outcomes between the three broad sectors identified, noting that those parts of the tradeable sector not directly exposed to the terms of trade boom have experienced a reduction in competitiveness due to the exchange rate appreciation, and all industries have faced increased domestic cost pressures due to competition for domestic factors of production. 78

[137] The differential impact, in respect of growth in real gross value added between the resources, other tradeable and non-tradeable sectors, is reproduced from the RBA Bishop et al Paper in Chart 4.5.

Chart 4.5: Real gross value added growth by sector—Three-year-centred moving average 79

Productivity and real unit labour costs

[138] GDP per capita, labour productivity, the wage/profit share and unit labour costs are aspects of the Australian economy that are routinely considered by the Panel in annual wage review proceedings. Many parties also provided data and discussion on these measures. The recent data related to these measures are included in the Commission’s Statistical Report—Annual Wage Review 2012–13 (Statistical Report).

[139] We make two general observations about productivity and related measures.

[140] First, the term productivity, as used in the Act, is directed to the economic concept of the quantity of output relative to the quantity of inputs. 80 Considerations of the price of inputs, including the cost of labour, raise separate statutory considerations relating to the performance and competitiveness of the national economy and other economic considerations, such as inflation.

[141] Second, the various productivity, factor share and unit labour cost series mostly have a settled relationship with each other and with other measures of economic prosperity and real wage growth. But the large rise (and volatility) in the terms of trade associated with the resources boom has disturbed many of these relationships, adding further complexity to issues concerning productivity. This requires us to examine more closely how and why the measures are diverging and what the preferred measures are in terms of setting minimum wages.

[142] Productivity and related measures require consideration in minimum wage fixation for several reasons.

[143] First, the modern awards objective requires the Panel to take into account the likely impact of its decision on business, including on productivity, and the minimum wages objective requires the Panel to take into account the performance and competitiveness of the national economy, including productivity. These statutory requirements have a different focus. In the first instance the focus is on the effect of the review outcome on business and in the second instance, the focus is on consideration of the performance of the national economy.

[144] Second, in the medium to long term, growth in real income, including real wages, depends largely on productivity growth. Whilst the historically high terms of trade in recent years has supported increased real national incomes, over time real wages growth is underpinned by productivity growth. To the extent that productivity growth is reflected in average real wages growth, it will be a relevant consideration for minimum wage fixation because of the requirement in both the modern awards and minimum wages objectives to take into account the relative living standards and needs of the low paid. 81

[145] Third, productivity has been the subject of submissions made in the current review. The ACTU and ACCER in particular have contended that those paid modern award minimum rates have not shared in productivity growth over the past decade and they have proposed increases, in part, directed to ensuring that award-reliant workers benefit from Australia’s productivity growth. 82 Further, the ACTU submitted that:

the labour share of national income was roughly steady in the 1990s, and has fallen since 2000;⁸³

208 ABS, Australian Social Trends, Jun 2011, Catalogue No. 4102.0.

209 Section 3(g).

210 Connolly E, Norman D and West T, "Small Businesses: An Economic Overview, ACCI Submission, Annexure C.

211 ABS Cat. No.6306.0 - Employee Earnings and Hours, Australia, May 2012. AFEI Submission, p.31, at para 76 and Charts 21 and 22.

213 AFEI Submission, p.31, at para 76 and Charts 21 and 22.

214 Connolly E, Norman D and West T, "Small Businesses: An Economic Overview, ACCI Submission, Annexure C.

215 Connolly E, Norman D and West T, "Small Businesses: An Economic Overview, ACCI Submission, Annexure C.

216 ABS Cat. No.8165.0 - Counts of Australian Businesses, including Entries and Exits, June 2008 to June 2012. R&CA submission at para 32, pp. 10–11; ABI submission at para 10.1, p. 19; ACCI reply submission at para 17, p. 7

218 ABI submission at p. 19, para. 10.1.

219 R&CA at para 32, pp. 10–11.

220 ABI submission at p. 19, para. 10.1.

221 Sections 134(1)(a) and 284(1)(c).

222 ABS Cat No 6524.0.55.002: 2009-10.

223 ABI submission at p. 19, para. 10.1.

224 ABS Cat. No. 8175.0, Counts of Australian Business Operators 2006–2007.

225 ACCI Reply Submission, p.8 at para 20.

226 Estimates for Small Areas - Data Cubes, 2004-05 to 2005-06, February 2009, ABS Cat No 6225.0.55.001.

227 ABS Cat No 6524.0.55.002; Explanatory Note 24 and ABS 6225.0.55.001, Explanatory Note 14.

228 ABS Cat No 8175.0 - Counts of Australian Business Operators, 2006 to 2007, Explanatory note 49.

229 ABS, Employee Earnings and Hours, Australia, various, Catalogue No. 6306.0.

230 An overview of compositional change in the Australian labour market and award reliance, Fair Work Australia Research Report 1/2010, at pp. 51–52.

231 ABS, Employee Earnings and Hours, Australia, various, Catalogue No. 6306.0.

232 ACTU submission, in table 5.

233 ACTU submission, in table 5.

234 ACTU submission at p. 15, para. 61; ACCI submission at p. 54, para. 192.

235 Australian Government submission at p. 13, para. 39; AFEI submission at p. 13, para. 31 and ACCER submission at p. 31, para. 85.

236 ABS, Employee Earnings and Hours, Australia, May 2012, Catalogue No. 6306.0; ABS, Australian National Accounts: National Income, Expenditure and Product, Dec 2012, Catalogue No. 5206.0; ABS, Business Indicators, Australia, Sep 2012, Catalogue No. 5676.0; ABS, Labour Force, Quarterly, Feb 2013, Catalogue No. 6202.0; ABS, Wage Price Index, Australia, Mar 2013, Catalogue No. 6345.0; DEEWR, Trends in Federal Enterprise Bargaining, December quarter 2012.

237 [2012] FWAFB, Table 4.5.

238 Australian Government, Budget Paper No. 1: Budget Strategy and Outlook 2013–14, Canberra, 2013, p. 2-16.

239 Australian Government 2013/14 Budget Paper Budget Paper No. 1: Budget Strategy and Outlook 2013–14, Statement 2: Economic Outlook, Table 2.

240 IMF, World Economic Outlook, April 2013.

241 Australian Government, Budget Paper No. 1: Budget Strategy and Outlook 2013–14, Canberra 2013, p. 2–14.

242 RBA, Statement on Monetary Policy, May 2013, Table 6.1.

243 DEEWR, Monthly Leading Indicator of Employment, May 2013; Lowe P (2012), The Labour Market, Structural Change and Recent Economic Developments, Speech to the Financial Services Institute of Australasia (Finsia) Leadership Event, RBA Bulletin, December Quarter 2012, Hobart, 9 October 2012.

²⁴⁵ ACTU submission, at p. 34, paras 107–108.

²⁴⁶ ACTU submission, at p. 75 para. 221.

²⁴⁷ Australian Government submission at p.33, para. 142.

²⁴⁸ Ai Group submission at p. 19.

²⁴⁹ AFEI submission at p. 13, paras 30–31.

²⁵⁰ ACCI submission at p. 41, para. 167.

²⁵¹ ACTU submission in reply, p. 12, para. 47.

252 Lowe P (2012), The Labour Market, Structural Change and Recent Economic Developments, Speech to the Financial Services Institute of Australasia (Finsia) Leadership Event, RBA Bulletin, December Quarter 2012, Hobart, 9 October 2012 at pp. 104–6.

253 ABS, Labour Force, Australia, Detailed, Quarterly, Feb 2013, Catalogue No. 6291.0.55.003.

²⁵⁴ Lowe P (2012), The Labour Market, Structural Change and Recent Economic Developments, Speech to the Financial Services Institute of Australasia (Finsia) Leadership Event, RBA Bulletin, December Quarter 2012, Hobart, 9 October 2012, p. 106.

255 Gruen D, Li B and Wong T (2012), Unemployment disparity across regions, Treasury Economic Roundup Issue 2, August.

256 Ibid , at p.74.

257 Ibid , at p.70.

258 Lowe P, (2013), Internal Balance, Structural Change and Monetary Policy, address to the Australian Industry Group 13th Annual Economics Forum, 19 March.

259 ibid.

²⁶⁰ ibid. et al at p.48.

²⁶¹ [2012] FWAFB 5000, at paras 257 and 258.

262 Superannuation Guarantee (Administration) Amendment Act 2012, Schedule 1.

263 Superannuation Guarantee (Administration) Act 1992, s.27. Schedule 1(4) of the Superannuation Guarantee (Administration) Amendment Act 2012 removes the former s.27(1)(a) which provided for the age limit of 70 for contributions.

264 Australian Government submission, p. 15 at paras 47–50.

265 Australian Government submission, p. 16 at para. 54; Victorian Government submission, p. 15 at para. 2.44; Ai Group submission at pp. 51–53; ABI submission, p. 5 at para. 2.10; AAA submission, p. 6 at para. 20 and p. 12; AHA submission at p. 4; ANRA submission, p. 4 at para. 1.5; NFF submission, p. 15 at para. 5.16; MGA submission, p. 14 at para 7.3.1; VACC submission at p. 6.

266 Australian Government submission, p. 16 at para. 51.

267 Australian Government submission, p. 16 at para. 51.

268 ACTU submission in reply, p. 19 at para. 82.

269 ACTU submission in reply, p. 19 at para. 82.

270 Ai Group submission in reply at p. 3.

271 Ai Group submission at p. 3.

272 NFF submission, p.17 at para. 6.2.

273 ACTU submission at p. 127, Table 14.

274 ACTU submission at p. 128, paras 400-402.

275 ACCER submission in reply, p. 2 at para. 3.

276 ACCI submission, pp. 29–30 at para. 138; Ai Group submission at p. 3; CCIQ submission at pp. 4–5 and p. 24; AFEI submission, p. 7 at para. 17; AHA submission at p. 4; AAA submission at p. 2; ANRA submission, p. 4 at para. 1.5; ARTIO submission at p. 3.

277 Victorian Government submission, p. 15 at para. 2.4.4; NFF submission, p. 16 at para. 5.18.

278 ABI submission, p. 12 at para. 6.3.

279 Ai Group submission at p. 53.

280 ARTIO submission at p. 3.

281 Shorten B (2012), ‘A morecomfortable retirement for working Australians’, The Australian, 22 March 2012, page 28, cited in Ai Group submission at p. 50; ABI submission, p. 12 at para. 6.3.

282 May 2002 Safety Net Review - Wages (2002) 112 IR 411 at 454.

283 CCIQ submission, p. 27 at paras 61–62.

284 Industrial Relations Act 1988, s.90A; Workplace Relations Act 1996, s.90A.

285 (1994) 56 IR 114 at 127.

286 ibid.

287 October 1995 Third Safety Net Adjustment Section 150A Review decision (1995) 61 IR 236 at 278; April 1998 Safety Net Review (1998) 79 IR 37 at 60 and 70; May 2000 Safety Net Review Wages (2000) 95 IR 64 at 65, 76, 91 and 95; May 2002 Safety Net Review - Wages (2002) 112 IR 411 at 444.

288 April 1999 Safety Net Review - Wages (1999) 87 IR 190 at 191 and 203; 2001 Safety Net Review - Wages (2001) 104 IR 314 at 335.

289 (1998) 79 IR 37 at 60.

290 (2002) 112 IR 411 at 444.

291 ACTU submission in reply at p. 18, para. 78.

292 Ai Group submission at pp. 49–50; NFF submission, p. 15 at para. 5.16.

293 Ai Group submission at pp. 49–50.

294 ACTU submission at p. 118, para. 360, ACOSS submission at p. 19 and ACCI submission at p. 25, para. 116, Australian Government submission, p. 42, para 192.

295 [2010] FWAFB 4000 at para 237.

296 ABS, Employee Earnings, Benefits and Trade Union Membership, Australia, various, Catalogue No. 6310.0; ABS, Employee Earnings and Hours, Australia, various, Catalogue No. 6306.0; ABS, Average Weekly Earnings, Australia, Nov 12, Catalogue No. 6302.0.

297 The ACTU estimated that about 10% of award-reliant workers were managers or professionals and among non-managerial workers , over half were paid above the C10 rate. ACTU submission, p 18 and p.20.

298 ACTU submission at pp. 15–19, paras 61–70.

299 ACTU submission, p. 13 at para. 55.

300 ACTU submission at p. 19, para 70 and Table 6.

301 The ACTU imputed the classification levels of award-only workers based on their hourly ordinary time cash earnings, with classification levels and wage rates drawn from the Manufacturing and Associated Industries and Occupations Award 2010 as at May 2012. Employees were assigned to the ‘C14’ category if they had earnings between $15.51 and $15.96 (one cent below C13), and so on for higher levels. These calculations were based on separate percentile distributions of the hourly ordinary time cash earnings of permanent/fixed term and casual award-only employees. These distributions are unpublished data from the 2012 ABS Employee Earnings and Hours survey. The earnings of intra-percentile workers were estimated using interpolation of the percentile data. The ACTU reduced casuals’ earnings by a fifth to remove a loading, assumed to be 25%.

302 ACTU calculations based on ABS 6306 (unpublished). Classifications imputed based on average hourly ordinary time cash earnings. Casual employees’ earnings have been deflated by a fifth to remove an assumed 25 per cent casual loading. Each classification level includes employees employed at the relevant minimum wage and those earning up to and including one cent below the minimum for the classification above.

303

304 ACTU submission, p.21, para 75.

305 Fair Work Commission; ABS, Consumer Price Index, Australia, Mar 2013, Catalogue No. 6401.0.

306 ACCER submission at p. 84, para. 269(b).

307 ACCER submission at p. 89, para. 283.

308 ACCER submission at p. 89, para. 281

309 MA000065.

310 ABS, Consumer Price Index, Australia, Mar 2013, Catalogue No. 6401.0; Metal, Engineering and Associated Industries Award 1998; Manufacturing and Associated Industries and Occupations Award 2010; Professional Employees Award 2010.

311 Ai Group submission at p. 31.

312 Ai Group submission at pp. 34, 35.

313 Ai Group submission at p. 35, Chart 22.

314 Ai Group submission at pp. 34–36.

315 ACTU submission at p. 98, para.290.

316 ACTU reply submission at p. 30, para.123.

317 ACTU submission in reply p. 32, para. 124.

318 Australian Government submission at p. 55, para. 275.

³¹⁹ See, for example, [2010] FWAFB 4000, at para 337.

320 Fair Work Australia, Statistical Report—Annual Wage Review 2012–13, Table 8.1.

321 Fair Work Australia, Statistical Report—Annual Wage Review 2012–13, Table 8.1.

322 ABS, Employee Earnings, Benefits and Trade Union Membership, Australia, Aug 2012, Catalogue No. 6310.0; Metal, Engineering and Associated Industries Award 1998; Manufacturing and Associated Industries and Occupations Award 2010 (from January 2010).

323 Australian Government submission at p. 55, para. 275.

324 ACTU submission at pp. 102/3, para 302.

325 This chart reflects data for the period December quarter 2002 to December quarter 2012. WPI is the index for total hourly rates of pay excluding bonuses in both private and public sectors. It is unaffected by change in the quality or quantity of work performed. AWOTE is calculated by dividing estimates of weekly ordinary time earnings by estimates of the number of employees. It is calculated before taxation and other deductions such as superannuation. It also excludes payments which are not related to the reference period such as overtime, leave loading and redundancy payments. AWOTE estimates refer to full-time adult employees. Average weekly earnings (AWE) is the gross (before tax) earnings of employees (excluding salary sacrifice). The C14 and the C10 are minimum award rates set under the Manufacturing and Associated Industries and Occupations Award 2010 and the former Metal, Engineering and Associated Industries Award 1998. AWOTE and AWE data are published half-yearly, hence, a quarterly time-series is derived through linear interpolation. AWOTE and AWE data are expressed in original terms. ABS, Average Weekly Earnings, Australia, Nov 2012, Catalogue No. 6302.0; ABS, Wage Price Index, Australia, Dec 2012, Catalogue No. 6345.0; Metal, Engineering and Associated Industries Award 1998; Manufacturing and Associated Industries and Occupations Award 2010 (from 1 January 2010).

326 Fair Work Commission, Statistical Report—Annual Wage Review 2012–13, Table 8.2.

327 ABS, Consumer Price Index, Australia, Mar 2013, Catalogue No. 6401.0; ABS, Employee Earnings and Hours, Australia, various, Catalogue No. 6306.0.

328 Australian Government submission, p. 57, para 287

329 [2010] FWAFB 4000 at para 242; [2011] FWAFB 3400 at para 205; [2012] FWAFB 5000 at para 161.

330 Australian Government submission at p. 53, Table 5.6.

331 DEEWR modelling.

332 ACCER submission, p.120, Table 17.

333 Calculation of wages net of tax takes into account exemptions granted from the Medicare Levy where applicable (for example, at the NMW, the full Medicare Levy exemption adds $9.10 per week to the net wage). Family transfers in 2012 include the equivalent weekly value from the FTB A and FTB B and the Schoolkids Bonus which is calculated on the basis that one child is in primary school and the other is in secondary school. See ACCER submission at p. 120.

334 Australian Government submission, p.14.

335 ACOSS submission at pp. 8–9.

336 National Retailers Association submission at p. 6, para. 22; ABI, at para 2.8 (in respect to overcompensation)

337 [2012] FWAFB 5000, at para 166.

338 Statistical Report, in Table 8.2.

339 Australian Government submission at p. 57, para. 289.

340 Fair Work Commission, Statistical Report—Annual Wage Review 2012–13, pp. 29–30, Table 8.2, March 2013.

341 ACTU submission at p. 103, Figure 109.

342 ACTU submission at p. 103, para. 303.

343 ACOSS submission at pp. 26–7.

344 ACOSS (2012), Poverty in Australia, ACOSS Paper 194.

345 ACOSS submission at pp. 27–29.

346 ACOSS submission at pp. 27–28.

347 ACCER submission at p. 136, para. 438.

348 Statistical Report Annual Wage Review—2012–13, Table 8.2.

349 ACCER submission at p. 135, para. 436.

350 For example, ACCER submission, p. 111, table 13.

351 For example, ACCER submission, p. 103, para 334 and table 13.

352 ABS, Average Weekly Earnings, Australia, Nov 2012, Catalogue No. 6302.0; ABS, Household Income and Income Distribution, Australia, 2009–10, Catalogue No. 6523.0; Fair Work Commission modelling; Manufacturing and Associated Industries and Occupations Award 2010;Melbourne Institute of Applied Economic and Social Research (2013), Poverty Lines: Australia, December Quarter 2012.

353 Australian Government submission at p. 47, para. 235.

354 This section of the submission does not provide a definition of a low-paid employee.

355 Australian Government submission at p. 49, Table 5.2 and p. 51, para. 248.

356 Australian Government submission at p. 48, Table 5.1 and pp. 48–9, para. 239.

357 ACOSS submission at pp. 31–2.

358 ACOSS submission at p. 32; Fair Work Commission, Statistical Report—Annual Wage Review 2012–13, pp. 37–8, Tables 11.1–11.2, March 2013.

359 ABS Catalogue No. 4159.0.30.003.Expanded Confidentialised Unit Record File, 2010.

360 Fair Work Commission, Statistical Report—Annual Wage Review 2012–13, pp. 37-41.

361 ABS, Household Expenditure Survey Expanded Confidentialised Unit Record File, 2003–04, 2009-10, Catalogue No. 6540.0.: Could not afford holiday for at least one week a year, Could not afford a night out once a fortnight, Could not afford friends or family over for a meal once a month, Could not afford a special meal once a week, Could only afford second hand clothes most of the time and Could not afford leisure or hobby activities.

362 Fair Work Commission, Statistical Report—Annual Wage Review 2012–13, pp. 34–36, Tables 10.1–10.2, March 2013.

363 Fair Work Commission, Statistical Report—Annual Wage Review 2012–13, p. 35, Table 10.2

364 Australian Government submission, p. 40 at para. 179.

365 Fair Work Commission, Literature review on social inclusion and its relationship to minimum wages and workforce participation, Research Report 2/2010, cited in Australian Government submission, p. 40 at para. 180.

366 Australian Government submission, p. 40 at para. 182.

367 Victorian Government submission, p. 14 at para 2.41.

368 NSW Government submission at p. 7.

369 NRA submission, p. 12 at para. 55.

370 For example Dube A, William LT and Reich M (2011), ‘Do minimum wages really reduce teen employment? Accounting for heterogeneity and selectivity in state panel data’, Industrial Relations, vol. 50, no. 2, pp. 205–240.

371 ACTU submission at p. 110, para. 328.

372 Lee W and Suardi S (2011), ‘Minimum Wages and Employment: Reconsidering the Use of Time Series Approach as an Evaluation Tool’, British Journal of Industrial Relations, vol. 49, S2.

373 ibid. at pp. s376–s401. The AIRC did not see the introduction of minimum wage legislation per se. In 1997, the AIRC, in its Safety Net review – Wages- April 1997 (IR) 1 decided to introduce a federal minimum wage of $359.40 into all awards. The significance of this decision is that it could be seen as a formal introduction of a basic minimum wage in Federal Awards. From 1993, with the introduction of an enterprise bargaining framework via the Industrial Relations Reform Act1993 , awards (other than paid rates awards) were formally defined as safety nets which operated to underpin the enterprise bargaining process. (See s.7 of the Industrial Relations Reform Act 1993). From this time, although there was no legislated or uniform minimum wage, the rates provided in awards were essentially minimum wage rates.

374 ACTU submission at p. 106, para. 316.

375 ACCI submission at p. 76, para. 245.

376 ACCI submission, p. 4 at para. 20 and p. 6 at para. 28; Accommodation Association of Australia submission, pp. 7–9 at paras 1–16; Australian Hotels Association submission at pp. 4–5; Australian Retailers Association submission at p. 12; Master Grocers Australia submission, p. 9 at para. 5.3; R&CA submission, p. 8 at para. 22; Victorian Automobile Chamber of Commerce submission at p. 16.

377 [2012] FWAFB 5000 at para. 203.

378 ACCI submission, p. 5 at para. 25.

379 ACTU submission in reply, p. 36 at para. 143.

380 Fair Work Commission, Labour supply responses to an increase in minimum wages: An overview of the literature, Research Report 2/2013, p. 33.

381 ibid.

382 ibid. at pp. 8–17.

383 ACTU submission, p. 118 at para. 358.

384 ACCI submission, p. 91 at para. 302.

385 ACCI submission, pp. 91–92 at paras 303–304.

386 ACOSS submission at p. 41.

387 ACTU submission at pp. 69–71, paras 208–215; ACOSS submission at p. 51; Ai Group submission at p. 18.

388 Ai Group submission at p. 18.

389 ACOSS submission at p. 8.

390 ABS, Labour Force, Australia, Detailed - Electronic Delivery, Apr 2013, Catalogue No. 6291.0.55.001; original data.

391 Australian Government submission, pp. 63–8, Tables A.1–A.4.

392 Australian Government submission, pp. 66–7, Table A.3.

393 Australian Government submission, p. 41 at para. 193.

394 Australian Government submission at p. 65, Table A.2.

395 Australian Government submission at p. 68, Table A.4.

396 ACOSS submission at pp. 50–51.

397 Australian Government submission at p. 42, para. 197.

398 Australian Government submission at p. 42, para. 200.

399 Australian Government submission at p. 43, Table 4.2.

400 Australian Government submission at p. 43, para. 206.

401 Australian Government submission at p. 43, Table 4.2.

402 NSW submission at p. 7; ACCI submission, pp. 49–50 at para. 183.

403 ACOSS submission at p. 57.

404 [2010] FWAFB 4000 at para. 268; Healy J (2009) The Wages Safety Net of the Australian Industrial Relations Commission, 1993–2005, Unpublished PhD thesis, National Institute of Labour Studies, Flinders University, pp. 138–143.

405 Low Pay Commission, National Minimum Wage: Low Pay Commission Report 2013, viewed 28 May 2013 < Mission Australia, Mission Australia’s Youth Survey 2012, viewed 28 May 2013 < Australian Government response to consultation questions at p. 11.

408 ACTU post-budget submission at p. 36, para. 145.

409 Australian Government responses to questions for consultations at p. 10.

410 ACTU responses to questions for consultations at p. 33, paras 132–135.

411 [2010] FWAFB 4000 at p. 65, para. 276.

412 ABS, Employee Earnings and Hours, Australia, various, Catalogue No. 6306.0.

413 Australian Government submission at pp. 14–15, para. 41.

414 Victorian Government submission at p. 20, para. 3.17; Australian Federation of Employers and Industries submission at p. 6, para. 14.

415 Australian Industry Group submission at p. 45; Accommodation Association of Australia submission at p. 6, para. 21.

416 ACCI submission at p. 29, para. 136.

417 ACCI submission at p. 4, para. 18.

418 Victorian Government submission at p. 20, para. 3.14.

419 New South Wales Government submission at p. 7.

420 ACCER submission at p. 23, para. 48.

421 ACCER submission at p. 23, para. 48.

422 ACTU submission, p. 103 at para. 303.

423 ACTU submission, p. 50 at para. 154.

424 ACTU submission in reply, p. 33 at para. 129.

425 DEEWR, Trends in Federal Enterprise Bargaining, December quarter 2012, p. 1,

426 Australian Bureau of Statistics, Catalogue No. 6306.0 - Employee Earnings and Hours, Australia, May 2012.

427 Australian Bureau of Statistics, Catalogue No. 6306.0 - Employee Earnings and Hours, Australia, May 2010.

428 Fair Work Act, ss.284(1)(d) and 134(1)(e).

429 ACTU submission, p. 125 at para. 385.

430 Australian Government submission, p.12 at paras 28–30.

431 Ai Group submission at pp. 45–47.

432 ACCI submission, p. 26 at paras 117 and 120.

433 NFF submission, p. 10 at para 4.2.

434 Matter no. C2010/3131

435 Australian Government submission, p.12 at paras 28–29; ACOSS submission at pp. 16–17.

436 ACCER submission, p. 110 at paras 353–355.

437 Business SA submission, p.11 at para. 4.2.9.

438 [2012] FWAFB 5000 at para. 231.

439 [2010] FWAFB 4000 at pars 424–6; [2011] FWAFB 3400 at pars 409–13; [2012] FWAFB 5000 at Para 28.

440 [2012] FWAFB 5000 at paras 254–62.

441 1986 National Wage Case decision (1986) 301 CAR 611 at 659; Re Motels Award [Print K2236], Re 1990 Pastoral Industry Award case [Print J1761] at p. 9.

442 Re Musicians’ Hotels Award 1982 (1983) 289 CAR 351.

443 Re Food Preservers’ Award 1973, (1982) 285 CAR 10; 1990 Pastoral Industry Award Case [Print J1761].

444 ACCI Submission, 28 March 2013 at pg 32.

445 Business SA submission, 28 March 2013 at para 2.4.

446 CCIQ submission, 28 March 2013 at pg 7.

447 [2013] FWCFB 1635.

448 Supra at para 225.

449 R&CA submission, 28 March 2013 at para 15.

450 NRA submission at p. 5, para. 13.

451 MA000004.

452 MA000003, NRA written submission at p. 5, para. 13.

453 MA000009.

454 The AHA cited a March 2013 report by AEC appended to its written submissions, 28 March 2013.

455 R&CA submission, 28 March 2013 at para 35 pg 12.

456 Supra at pg 13.

457 ANRA submission, 28 March 2013 at pg 8, para 2.13.

458 ARA submission, 28 March 2013 at pg 5.

459 Supra at pg 9. The ARA also relied upon some Roy Morgan Research appended to its submissions.

460 MGA submission, 28 March 2013 at pg 5.

461 NRA submission, 28 March 2013 at p. 2.

462 Supra.

463 VACC submission, 28 March 2013 at pg 5.

464 Supra at pg 6.

465 South Australian Wine Industry Association submission, 28 March 2013 at pg 12.

466 NFF submission, 28 March 2012 at pg 6.

467 ABARES 2013, Australian farm survey results 2010 – 11 to 2012 – 13, Australian Bureau of Agriculture and Resource Economics and Science, Canberra, March 2013.

468 ACTU reply submission, 19 April 2013 at pg3, para 10.

469 MA000029.

470 ABI submission, 28 March 2012 at part 11.

471 Modern Awards Review 2012—Penalty Rates [2013] FWCFB 1635.

472 ACTU Post-Budget Submission pg 26.

473 Supra at pg 7.

474 AAA submission pg 5 par 13, pg 13 par 5; AHA submission pg 4, 8 and 10; ARA submission pg 6, 10; MGA submission pg 3, 5, 6, 7 at par 4.2; MTASA submission pg 3, 5 par; 2.31 and 2.33, pg 6 par 2.4 and 2.6; NRA submission pg 2, 8 par 30, pg 9 paras 31 to 33; R&CA post budget submission pg 4 par 7, pg 5 par 13; SAWIA submission pg 10.

475 [2012] FWAFB 5000 at para 254.

476 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, items 10(1) and 20(1) of Sch. 9 and item 12A(5) of Sch. 3. The content and coverage of these instruments were addressed in the Panel’s 2009–10 Review decision; more information is contained in Fair Work Australia’s Research Report 6/2010 Minimum wage transitional instruments under the Fair Work Act 2009 and the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009.

477 Fair Work (Transitional Provisions & Consequential Amendments) Act 2009, item 3 of Sch. 5. A small number of these instruments continue to operate and are also subject to review.

478 Fair Work (Transitional Provisions & Consequential Amendments) Act 2009 sch 5, item 3(3)(a).

479 Fair Work (Transitional Provisions & Consequential Amendments) Act 2009 sch 5, item 3(3)(a).

480 MA000100; Equal Remuneration Order, 22 June 2012, PR52485 at p 16, para 5.

481 Transitional Act, items 5(2) and 9(4) of Sch.6 and item 5 of Sch. 6A.

482 Fair Work (Transitional Provisions & Consequential Amendments) Regulations 2009, Reg. 3A.01. One category of these instruments, that is Division 2B State awards, state reference transitional awards and transitional APCSs derived from instruments which covered employees participating in employment schemes in Queensland known as the Community Jobs Plan and the Green Army, are set to terminate on 30 June 2012 (Regs 3.04 and 3A.01). These instruments will cease to exist before the determinations that flow from this decision take effect.

483 Pay Equity Orders are a new category of transitional instruments created or varied in 2012 by operation of modifications to the Transitional Act: Fair Work (Transitional Provisions & Consequential Amendments) Regulations 2009 (Reg 3.03D, 3.03H, 3A.01A, 3A.01B, and sch 1A) modifies the Fair Work (Transitional Provisions & Consequential Amendments) Act 2009.

484 Fair Work (Transitional Provisions & Consequential Amendments) Act 2009 (item 30D(1) of Sch. 3A,) as modified by Fair Work (Transitional Provisions and Consequential Amendments) Regulations 2009 (reg 3A.01B).

485 Fair Work (Transitional Provisions & Consequential Amendments) Act 2009 (item 30D(1) of Sch 3A). It is also worth noting that there is another transitional pay equity order which relates to base rates of pay under Division 2B State reference transitional awards. While the Panel is not required to review this transitional pay equity order, any minimum wage adjustment to the Social, Community, Home Care and Disability Services Industry Award 2010 will apply to the base rate of pay of these transitional pay equity orders. See Fair Work (Transitional Provisions and Consequential Amendments) Regulations 2009 (Regs 3.03H and 3A.01B).

486 The Fair Work (Transfer of Business) Amendment Act 2012, which commenced on 4 December 2012, introduced a new Part 6.3 into the Act. A copied State award continues to operate under the national system for a period of five years, unless terminated or extended by regulation. See Fair Work Act, s. 768AO.

487 Fair Work Act, s. 768AI.

488 The provisions of the Transitional Act dealing with the variation of Division 2B State awards in annual wage reviews also apply to copied State awards. See Fair Work Act, s.768BY and s.768AW(b).

489 RA140348; ACTU response to panel questions at pp 30–31 and Australian Government response to panel questions at p 9.

490 Australian Government response to panel questions at p 9.

491 Australian Accommodation Association Response to Consultation Questions, p. 8.

492 Australian Government Response to Consultation Questions, p. 10.

493 ACTU Response to Consultation Questions, pp. 31–32, para. 129.

494 ACTU Response to Consultation Questions, pp. 32–33, para. 130.

495 Australian Accommodation Association Response to Consultation Questions, p. 8.

496 Fair Work (Transitional Provisions & Consequential Amendments) Act 2009, item 12A of Sch. 3 and items 10 and 20 of Sch. 9.

497 Fair Work Act, s. 284(3).

498 ACTU submission, p. 129 at para. 407; ACCI submission, p. 26 at para. 121, pp. 31–32 at para. 147(d); ACOSS submission, p. 10; CCIQ submission, p. 7 at 15(c); CCIQ submission, p. 7 at para. 15(c); Business SA submission, p. 5 at para. 2.3.

499 South Australian Government submission, p. 9.

500 ACTU submission, p. 129 at para. 406.

501 Victorian Government submission, p. 26 at para. 4.25; AFEI submission, pp. 14-15 at paras 35-41

502 CCIQ submission, p. 24 at para. 56(e).

503 ACCI submission, p. 4 at para. 22; MGA submission, p. 20 at para. 9.2; CCIQ, p. 26 at para. 60.

504 ACCI submission, p. 4 at para. 22.

505 MGA submission, p. 20 at para. 9.2.

506 ACOSS submission, p. 57.

507 ACTU submission, p. 130 at paras 412–44; ACCI submission, p. 26 at para. 121, pp. 31–32 at para. 147(d); ACOSS submission, p. 10; CCIQ submission, p. 7 at para. 15(c); Business SA submission, p. 5 at para. 2.3.

508 ACOSS submission, pp. 57–58.

509 ACOSS submission, p. 58.

510 ACCI submission, p. 26–27, para. 123.

511 CCIQ submission, p. 24 at para. 56(f).

512 VACC submission, p. 18.

513 MTASA submission, p. 5, at para. 2.3.3.

514 ACTU submission, p. 130 at para. 412.

515 ACTU submission, p. 130 at para. 413.

516 South Australian Government submission, p. 8, p. 10.

517 VACC submission at p. 8; HIA submission, p. 6 at para. 3.4.1; AFEI submission, p. 15 at para. 41.

518 AFEI submission, p. 15 at para. 41.

519 AM2012/196, AM2012/18 and others.

520 ACTU submission, p. 129 at para. 407, pp. 130–131 at paras 415–416, p. 133 at para. 426; ACCI submission, p. 26 at para. 121; ACOSS submission, p. 10; CCIQ submission, p. 7 at para. 15(c); Business SA submission, p. 5 at para. 2.3.

521 ACOSS submission, p. 59.

522 ACOSS submission, p. 59.

⁵²³ ACTU submission, p. 131 at para. 419.

524 Australian Government response to Consultation Questions, p. 10; National Farmers’ Federation response to Consultation Questions, p. 12.

525 National Farmers’ Federation response to Consultation Questions, p. 12.

526 Fair Work Act, s. 295(1)(b).

527 ACTU submission, p. 133 at para. 429; Ai Group submission, p. 60; ABI submission, p. 22 at para. 12.4.1.

528 ACTU submission, p. 131 at para. 420; Ai Group submission, p. 60; ABI submission, p. 23 at para. 12.8.

529 ACCI submission, p. 86 at para. 289, pp. 87–89 at para. 295 and Annexure 1, Table 1; Ai Group submission, p. 48, p. 60; Business SA submission pp. 9–10 at paras 4.2.7–4.2.8.2; CCIQ submission, p. 26 at paras 59–60; NRA submission, pp.5–6 at paras 15–18; MGA submission, p. 8 at para. 5.2, p. 20 at para. 9.3; MTASA submission, pp. 5–6 at para. 2.4; SAWIA submission, p. 5; AAA submission, p. 6 at para. 18 and p. 13 at para. 5.

530 [2010] FWAFB 4000 at pars 397 to 403.

531 MA000104.

532 [2011] FWAFB 3400 at para. 396.

533 Ai Group submission at p. 58

534 ACTU submission, p. 133 at para. 427; ABI submission, p. 22 at para 12.4.2.

535 Ai Group submission, p. 58.

536 ACTU submission, p. 133, para. 427; ABI submission, p. 22 at paras 12.4.3-12.4.4

537 ACTU submission, p. 133 at para. 428.

538 Ai Group submission at p. 59; ACTU submission, p. 133 at paras 426-427; ABI submission, p. 22 at paras 12.4.5–12.4.6.

539 ACTU submission, p. 133 at para. 428.

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