AFEI Employers Adviser Article

 

AFEI Submission to the 2014-15 Annual Wage Review

Published: 28 April 2015

 

The ACTU has proposed a minimum wage increase of $27 per week up to and including the C10 rate ($746.20) and 3.6% for higher classifications. This is significantly above the current inflation rate of 1.7% and overall wage growth in the economy which is at an all time low since the Wage Price Index series began. The Wage Price Index rose by 2.5% (2.4% private sector) in the year to September 2014 and average weekly earnings by 2.7% (full time adult earnings).

In our submission on behalf of members to the annual review AFEI proposed that  the Minimum Wage Panel  take a cautious approach in setting the minimum wage for 2014-15 and should award no more than a fixed dollar amount of $5.70 per week for reasons which include:

  • Minimum wages in Australia are high - 56% of average weekly earnings. High minimum rates price low skilled employees out of jobs and make parts of industry uncompetitive. Associated on-costs exacerbate the problem. Statutory provisions make it unreasonably difficult to manage businesses and employers worry about taking on staff. These pressures must be relieved if Australia is to prosper and profits are to provide for investment and job opportunities to be available.
  • Over the past five years the Panel has awarded minimum wage increases in excess of growth in GDP; increases in CPI, at levels which exceed or approximate growth in overall wages levels, in circumstances of rising unemployment, and declining hours worked. The economic circumstances currently confronting Australian employers will not support increases in labour costs without further job loss. This is a significant consideration for the Panel given that increased employment is essential in lifting consumer confidence and household spending.
  • The minimum wage increases awarded by the Panel apply not only to minimum wage recipients but directly to workers on award wages (up to income levels well in excess of average earnings) and indirectly to a far wider range of workers whose rates are set with reference to minimum rate increases, including bargained rates. The increasing proportion of award dependent workers indicates that minimum rates have moved beyond a “safety net” minimum into the area of paid rates awards. 
  • All employers will be subject to the increase awarded, regardless of their circumstances. The Australian economy was variously described in submissions to earlier annual wage reviews as “two speed” or “multi speed” with the high performing mining sector masking, in aggregate terms, poor conditions elsewhere in the economy. That effect is now subsiding with overall aggregate conditions of reduced demand and capacity now clearly apparent.
  • The economy is in a precarious state of transition with no certain path for a growth trajectory which will replace the income, demand levels and employment generated by the mining boom. The numbers of unemployed and underemployed are a clear indication that further numbers of jobs should not be at risk as a consequence of unaffordable minimum rates. An increase will not meet the objective of promoting inclusion though increased workforce participation.
  • In its previous decisions the Panel has pointed to optimistic assessments of improved overall growth and in particular, employment growth. These anticipated outcomes have not yet eventuated.

In its submission the ACTU has also sought a direction under sections 615 and  582 of the Fair Work Act 2009 (FWA) that a Full Bench be convened in the current 4 Yearly Review of Awards to deal with the ACTU’s claim that employers be required to make an additional 0.5% contribution to superannuation through proposed new award provisions. It has made an alternative claim that if this claim for an additional 0.5% superannuation fails then the national minimum wage increase should be higher. Employers have strongly rejected this submission, on grounds which include:

  • The Expert Panel’s lack of power to exercise powers under sections 582 and 615 of the FWA;
  • Being outside  the scope of the annual wage review and the minimum wage objectives;
  • A national Minimum Wage Order can only contain specified matters which do not include superannuation;
  • The misuse of the four year review process;
  • The ACTU’s strategy to undermine the legislative intent of the Minerals Resources Rent Tax Repeal and Other Measures Act 2014 which gave effect to the deferral of future superannuation increases until 2021.

It is expected that the Panel will announce its decision by mid June 2015. The decision and order generally come into operation on 1 July of the following financial year.

The AFEI submission on the 2014-15 Annual Wage Review can be viewed here.

 

More information:
Call the AFEI Hotline on 02 9264 2000 with your  queries.


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