The Fair Work Commission (FWC) last week issued the Annual Wage Review 2018–19 decision, announcing a 3 per cent rise in minimum wages.

The increase rise will apply to both the national minimum wage and minimum award wages. In total, it will impact around 2.2 million employees.

While practically no employers in the resources and energy industry employ people on the national minimum wage, AREEA members with award-covered employees or where enterprise agreements reference the minimum wage decision, should be aware of the decision.

The increase, which comes into effect from 1 July 2019, is the tenth successive annual increase above inflation, and the third with a 3 per cent or more rise.

To bring the national minimum up to a “living wage”, unions had argued for a 6 per cent increase this year followed by a 5.5 per cent in 2019-2020.

Business had submitted an increase of 1.8%, in-line with inflation, would be appropriate given economic headwinds facing SME operators in particular.

Decision criteria

When coming to a decision, the panel takes into account the following factors;

• promoting social inclusion through increased workforce participation
• relative living standards and the needs of the low paid
• the principle of equal remuneration for work of equal or comparable value
• various economic considerations

“This decision is also likely to affect employees paid close to the NMW or a modern award minimum wage rate and those whose pay is set by a collective agreement which is linked to the outcomes of the Review, as well as workers whose pay is set by individual arrangements which are referenced to a modern award minimum wage rate,” the summary decision read.

The Fair Work Act requires the FWC’s Expert Panel for annual wage reviews (Panel) to conduct and complete a review of the national minimum wage (NMW) and minimum wages in modern awards each financial year.

The National Minimum Wage will increase from $719.20 to $740.80, or $21.60 per week, however it increase $33 per week for those paid the median award on $1,100 per week.

Mining uplift key to wage rise

The mining industry’s success was labelled a key contributor to the wage rise.

The decision noted business profits growth to the December quarter 2018 was strong at 10.5 per cent, significantly higher than the previous year and the five and 10-year averages.

However, non-mining profits growth was 2.5 per cent lower than the previous year and the five and 10-year averages.

“We note that profits have grown in the non-mining sector in every year over the past 10 years at an annual average of 3.9 per cent,” the full decision read.

A strong recovery in prices for minerals exports was also linked largely to the nation’s disposable income growing by 3.7 per cent and 2.1 per cent.

Economic and labour market considerations showed business conditions in Australia are generally positive but influenced by the current strength of the mining sector.

Gross value added grew in all but four of the 19 industries analyses over the year to the December quarter 2018 and in all of the 5 most award-reliant industries.

Growth was highest in Health care and social assistance (8.1 per cent), Mining (6.7 per cent), and Public administration and safety (6.1 per cent).

The Australian Government contended that national labour productivity growth figures ‘mask large variations in the productivity performance of each industry’, with mining particularly having a large impact on aggregate productivity.

It was submitted that labour productivity has been more subdued in the award-reliant industries over the current incomplete growth cycle, except for Administrative and support services, however the panel rejected this position whilst conceding it was “clear that the highest rate of productivity growth over the last five years has been in the Mining industry”.

Profits across the whole economy grew by 10.5 per cent over the year to December quarter 2018, which was significantly higher than the preceding year, and above the five and 10-year averages, driven by the 26.3 per cent growth in Mining profits, which accounted for 84.2 per cent of profits growth across all industries.

The panel also noted business investment is expected to fluctuate throughout the forecast period, largely due to volatility in mining investment.

Another minimum wage rise above inflation puts small business and job seekers at risk: ACCI

Australian Chamber of Commerce and Industry (ACCi) said the 3 per cent rise may jeopardise jobs by risking the viability of some small businesses.

“Australia already has one of the highest minimum wages in the world, and continuously increasing minimum wages by significantly more than inflation has consequences,” Australian Chamber CEO, James Pearson, said.

The increase follows 3.5 per cent hikes in 2018 and 3.3 per cent in 2017.