Setting Australia’s minimum wages:
2007 and beyond
Professor Ian Harper
Chair, Australian Fair Pay Commission
Address to John Curtin Institute of Public Policy
25 May 2007
AFPC – some history
•
Chair announced 13 October 2005
•
wage-setting powers conferred and four
Commissioners appointed 27 March 2006
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first wage-setting decision delivered 26 October 2006
•
first decision implemented 1 December 2006
2
Remit
The Commission exercises its wage-setting powers by:
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adjusting the standard Federal Minimum Wage (FMW)
•
•
determining or adjusting special FMWs (e.g., for
workers with a disability)
determining or adjusting basic periodic rates of pay in
the Australian Pay and Classification Scales (the “Pay
Scales”)
•
determining or adjusting basic piece rates of pay
•
determining or adjusting casual loadings
3
Objective and constraints
The Commission’s objective specified in legislation is to
promote the economic prosperity of the people of Australia
In exercising its powers, the Commission must have regard to:
•
•
•
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the capacity for the unemployed and low paid to obtain
and remain in employment;
employment and competitiveness across the economy;
providing a safety net for the low paid; and
providing minimum wages for junior employees,
employees to whom training arrangements apply and
employees with a disability that ensure those
4
employees are competitive in the labour market
The 2006 Decision
$27.36 per week for people earning up to $700 per week
•
covers just over one million Australian workers - about
10% of the workforce
$22.04 per week for people earning $700 per week and above
•
represents another 220,000 workers or a further 2% of
the workforce
Increases flow on to junior employees, employees to whom
training arrangements apply and employees with a disability
5
Decision rationale - 1
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higher increase for pay-scale reliant workers earning
up to $700 per week reflects research findings and
advice that lower-paid workers are more reliant on
minimum wages
•
research also shows that higher paid workers are
generally more likely to negotiate wage increases
directly with their employers by agreement-making
6
Decision rationale - 2
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decision balances sensitivity of low-paid employment
to wage movements (“demand”) with incentives for
people to seek and remain in paid employment
(“supply”)
•
decision also balances employment and
competitiveness across the economy with
provision of a safety net for the low-paid
7
Decision rationale - 3
Decision took into account:
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period of almost 18 months since the previous
adjustment of Australia’s federal minimum wages
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continued strong (although not uniform) performance
of the economy and labour market
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movements in consumer prices
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potential impact on unemployment and inflation
8
Characteristics of low-paid workers
Low-paid adult workers are more likely than the general
workforce to have the following characteristics …
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employed in relatively low-skilled occupations
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lower levels of education
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relatively young (21 to 24)
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female
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not married
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low equivalent household disposable income
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employed on a casual basis
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migrants from a non-English speaking background
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Award- or Pay Scale-reliant industries
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Accommodation, cafes & restaurants (57.2%)
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Retail Trade (28.7%)
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Health and Community Services (25.4%)
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Personal and Other Services (23.4%)
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Property and Business Services (23.2%)
Source: ABS Employee Earnings and Hours Survey, May 2006
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2007 Minimum Wage Decision
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Submissions called 1 December 2006
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Submissions closed 30 March 2007
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Decision scheduled mid-2007
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2007 Decision - context
Economic growth (GDP Dec ’06)
2.8% p.a. (seasonally adjusted)
Wages growth (WPI Mar ‘07)
4.1% p.a. (seasonally adjusted)
Inflation (CPI Mar ’07)
2.4% p.a. (seasonally adjusted)
Unemployment (Mar ’07)
4.4% (seasonally adjusted)
from 2.7% (WA) to 5.6% (Tas)
The 2007 Decision will recognise the elapse of about 7 months
since the implementation of the 2006 Decision
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Public awareness of the AFPC
UNPROMPTED
PROMPTED
Aware of AFPC
by function
and name
Aware there is
a body to set
wages but can
not recall the
name
Aware of
the AFPC
Aware of
Wage
Decision
5% recalled
the name
unprompted
45% aware
there is a
body but
cannot name
43% have
heard of the
AFPC
38% aware
of the Oct
2006
Decision
Source: AFPC-commissioned survey of 1,000 randomlyselected Australians (including 300 earning FMW)
undertaken in December 2006
29% had heard of
AFPC as at mid
October 2006
Performance on key attributes
50
40
Considers Decisions Listens to
economic based on key orgs
impact
research
Considers
Honest
Consults
Independent
social
Transparent
and open
gen pop
impact
13
14
14
14
11
12
17
30
9
All
respondents
giving a
positive or
negative rating
20
35
32
30
30
33
23
10
%
9-10
30
Positive
24
7-8
0
-10
5
6
6
6
4
5
9
8
5
7
6
3-4
7
12
6
4
Negative
1-2
6
-20
Base n= 286, all respondents aware of the Commission and giving a rating of overall performance
Q27: Given what you know about the Commission, in your opinion, how would you rate The Commissions’ performance on the following attributes?
Stakeholder engagement - 2007
The Commission has:
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established a Business Consultative Group
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implemented a Research Consultative Group
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formed specialist Roundtables (e.g., for workers with a
disability)
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commissioned research into stakeholder responses to
the Commission’s procedures and 2006 Decision
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scheduled face-to-face meetings with key
stakeholder representatives
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Consultation (1) – 2007
Program of targeted focus groups (social research) during
February - March 2007
Theme
Locations
Low paid
Melbourne, Brisbane, Whyalla, Geraldton,
Tamworth, Shepparton
Melbourne, Perth, Canberra, Coffs Harbour
Adelaide, Cairns, Sydney, Alice Springs,
Bendigo, Hobart
Adelaide, Brisbane, Darwin, Burnie
Sydney, Townsville
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Sydney, Melbourne
Employers
Juniors
Unemployed
Indigenous
CALD
Consultation (2) - 2007
Internet ‘bulletin board’ established
• national facilitated discussion groups
Site visits:
• employers of the low paid
• job network providers
• training providers
• schools and technical colleges
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Submissions 2007
National submissions campaign implemented:
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posters and brochures encouraging community
submissions distributed to more than 7000 community
locations across Australia including:
• local libraries
• local Councils
• community centres
• neighbourhood houses
• job network providers and
• community legal services
Online submission form developed and available at
www.fairpay.gov.au
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Submissions 2007
Commission received 62 submissions
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•
•
•
•
•
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Employer organisations
Employee organisations
Community organisations
Individuals
Businesses
Professional/education
Government agencies
23
6
11
10
3
3
6
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Commissioned research
2006:
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•
•
•
2007:
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minimum wages and employment
characteristics of low-paid employees
characteristics of employers of the low paid
interactions between minimum wages and the
tax/transfer system
monitoring strategy to determine the impact of
Commission decisions
economic and social circumstances of young people
aged 15-20
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What type of organisation?
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a focus on unemployed and low-paid Australians and
their employers
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decisions are evidence-based, informed and balanced
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procedures are open, transparent and independent
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emphasis on research and analysis
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a respected authority on the link between
employment and minimum wages in an Australian
context
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Pay scales
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pre-WorkChoices, awards included rates of pay and
were ratified and published by AIRC
currently more than 3,200 federal awards and approx
105,000 pay scales
many awards and associated pay scales are
redundant
government has been publishing pay scale summaries
since Commission’s first decision
Commission will commence process of creating new
pay scales
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Forward agenda
During 2007, the Commission will:
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undertake its second minimum wage review
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including consideration of a request by the
NFF to defer decision in EC declared areas
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undertake a review of pay scales – or piece rates – for
the real estate industry
•
commence work on the rationalisation of pay and
classification scales – this will include a review of wage
rates for juniors and trainees
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