In Payroll & Employment by Clyde Mooney

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The Fair Work Commission has delivered its mandated annual review of national minimum and award wages, which govern pay for nearly 23 per cent of all employees.

Under the Fair Work Act 2009, the FWC is required to appoint an expert panel to conduct a review each financial year.

The report released today on 2017-18 cited key changes to the economy since last review, such as:

  • Growth in full-time employment of 3.1 per cent, versus 1.0 last year
  • Growth in hours worked of 3.3 per cent, versus 1.8 last year
  • Increase in GDP of 2.4 per cent, consistent with the five-year average
  • Business conditions are generally robust and wages growth remains low

The Consumer Price Index records inflation of 1.9 per cent (to March 2018), and the Living Cost Index for employee households is up by two per cent.

The panel concluded an appropriate increase to the national minimum wage (NMW) this year would be 3.5 per cent, lifting the base pay for a full-time employee $23.90 to $719.20 per week, or 64 cents per hour to $18.93. The changes will come into effect 1 July, 2018.

This follows a 3.3 per cent increase to the NMW in 2017.

Business entities including the Australian Hotels Association, Australian Chamber of Commerce and Industry and the Australian Retailers Association had proposed a more modest increase.

“The AHA supported an increase of 1.9 per cent,” reports AHA National CEO, Stephen Ferguson.

“However, an increase of 3.5 per cent does not surprise, given the history of the Fair Work Commission on minimum rises each year.”

Although having campaigned for a smaller rise, Ferguson believes the FWC is the best way to manage the ongoing issue.

“I must add that we support the Fair Work Commission being the body that determines all wages, unlike calls by trade unions that minimum wages be set by parliament.”

Taking into account an array of factors and economic indicators, the FWC disputed any claim the rise will impact employment, supporting its decision with the following:

  • The prevailing economic circumstances provide an opportunity to improve the relative living standards of the low paid and to enable them to better meet their needs.
  • The level of increase we have decided upon will not lead to undue inflationary pressure and is highly unlikely to have any measurable negative impact on employment. However, such an increase will mean an improvement in the real wages for those employees who are reliant on the NMW and modern award minimum wages and, absent any negative tax transfer effects, an improvement in their living standards.

But wary of set-and-forget decisions, future reviews will aim to keep regulations on-purpose.

“We acknowledge that the compounding effect of increases over time may have a cumulative effect which is not apparent in the short term. We will continue to closely monitor this in future reviews.”