The Fair Work Commission has unveiled its 2017–18 annual wage review decision, acknowledging the compound effect of increases over time.
The Fair Work Commission has decided that it is appropriate to increase the national minimum wage by 3.5 per cent.
The new national minimum wage will be $719.20 per week, or $18.93 per hour. This amounts to an increase of $24.30 per week to the weekly rate.
The commission has also decided to increase all modern award minimum wages by 3.5 per cent.
It also said that at the c10 tradespersons award level rate, this translates to an increase of $28.30 per week, and that weekly wages will be rounded to the nearest 10c.
Making the announcement earlier via a live stream feed, the Fair Work Commission said it has taken into account the circumstances of different regions, industries and sectors.
“But no exceptional circumstances have been demonstrated such as to warrant a deferral of the increases we have awarded.
“We acknowledge that the compound 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.”
The commission said the determinations and order giving effect to its decision will come into operation on 1 July 2018.
The timetable for next year’s annual review will be announced in the third quarter of this year.
The commission said that in reaching its verdict it had considered the “most relevant” factors to have occurred in the prior year.
It said that, compared to last year, the economic indicators now point to a more healthy national economy and labour market.
“The recent data have shown growth in full time employment, together with a high participation rate. The labour market has improved significantly with strong employment growth of some 355,200 workers over the year to April 2018, of which 265,000 were full time employees.”
The commission said the economy has continued to grow, and that business conditions remain positive.
“Profits grew by 4.3 per cent in 2017 and by 5.8 per cent in the non-mining sector.”
The Fair Work Commission said that in each review it must take into account the employment impacts of the national minimum wage and any proposed increases to it.
“We remain of the view that modest and regular minimum wage increases do not result in disemployment effects, or inhibit workforce participation."
It said that RBA research and research in the UK supported this view but acknowledged that it is “more contested” by research from the US.
Although the commission said circumstances supported a real increase in the minimum wage, it would not support the figure proposed by the ACTU and the Australian Catholic Council for Employment Relations.
“In our view, an increase of the size they propose is likely to run a substantial risk of adverse employment effects. Such adverse effects will impact on those groups who are already marginalized in the labour market, and on households vulnerable to poverty due to loss of employment or hours.
“It would also carry a substantial risk of reducing the employment opportunities for low-skilled workers, including many young persons looking for work.”
Responding, workplace specialist firm Employsure said the decision will be challenging for SMEs.
It said the change in the minimum wage rate will have a “significant” impact on all businesses and industries — and on the more than 2.3 million employees who are paid at it.
Senior employment relations adviser, Josh Vikis, said the move makes it harder to employ people.
“We have significant consultations with small businesses and the overwhelming view is that this increase will affect their bottom line significantly.
“Since small businesses employ majority of the Australian workforce and generate a fifth of our GDP, it is vital that they are provided with sufficient support to remain profitable whilst spurring growth.”
He said SMEs may initially face an increase in the cost of doing business due to higher wage costs and competition for manpower from the larger firms.
“Most SMEs will need to come up with an extra $24.30 per week per employee, paid at the expense of their bottom line," said Mr Vikis.
“To afford the increases to minimum wage, many small businesses have to adjust their business models. Some businesses simply need to reduce their profit targets and take their extra payroll costs from their profits. Businesses that already operate on tight profit margins need to find money in other places.”