Government calls for Fair Work to lift minimum wage

The Albanese government has lodged a formal submission with the Fair Work Commission (FWC) recommending it to lift the minimum and ‘modest’ award wages by 5.1%.

6 June 2022 

Employment and Workplace Relations Minister Tony Burke said the government recommended to the FWC’s Expert Panel conducting the Annual Wage Review that they ensure that the real wages of Australia's low-paid workers do not go backwards. 

The FWC is set to make a decision this month on a wage rise for the nation's lowest-paid workers.

The government submitted to the FWC that pay for low-paid workers on minimum wages and awards should rise in line with 21-year high inflation, seen with the 5.1% increase in the consumer price index.

“In considering its decision on wages for this year, the government recommends that the Fair Work Commission ensures that the real wages of Australia’s low paid workers do not go backwards,” Mr Burke said.

Economic conditions are highly unusual and challenging given inflation is at a 21-year high of 5.1% and is expected to increase further in the near term due to persistent and compounding supply shocks. 

“High and rising inflation and weak wages growth are reducing real wages across the economy and creating cost-of-living pressures for Australia’s low-paid workers. 

The submission also broadened its recommendation for wage rises to include low-paid workers in the care economy experiencing pay cuts due to inflation.

Mr Burke said the government did not want to see Australian workers go backwards, in particular, workers on low rates of pay who were experiencing the worst impacts of inflation and had the least capacity to draw on savings.

“Many low-paid workers are young, female, in casual employment, and are far more likely to find themselves experiencing financial hardship,” Mr Burke said.

“These low-paid workers were also on the front line delivering essential services during the COVID-19 pandemic, including in the retail, hospitality, aged care, cleaning, and childcare sectors."

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The submission said higher inflation was now expected to persist throughout 2022 and into 2023.

“If, as currently expected, global supply chain pressures dissipate, oil prices moderate and consumption patterns return to a more normal balance between goods and services, headline inflation would be expected to ease over the course of 2023,” the submission said.

“Wages as measured by the WPI grew by 2.4% through the year to the March quarter. With inflation at 5.1%, this means that on average, real wages have seen the sharpest decline in 21 years. The government notes that this fall in real wages follows persistently and historically low real wages growth over the past decade.

“The stronger than expected rise in inflation has seen consumer prices outpace wages to date, resulting in larger near-term declines in real wages. The near-term pick-up in inflation creates particularly acute cost-of-living pressures on the low-paid.

“There are also significant economic risks associated with falling real wages. Most notably, reduced capacity to spend could weigh on household consumption with flow-on effects to aggregate demand more broadly.”

The current economic circumstances were complex and substantial risks remain, including the possibility of more significant and sustained price pressures, or a more substantial slowing in activity.

Mr Burke said ensuring that real wages for low-paid workers did not go backward would protect the relative living standards for these workers and give them the best chance possible to earn a decent living, keep up with skyrocketing costs of living, secure more opportunities, and actually get ahead. 

“An increase in wages for Australia’s low-paid workers will also complement our efforts to help close the national gender pay gap,” he said.

“The economy we inherited from the previous government is weaker than was expected before the election and there are significant challenges ahead. 

“Ensuring that real wages for low-paid workers do not go backwards in these circumstances will protect the relative living standards for these workers, prevent further financial hardship and avoid adverse distributional outcomes and broader economic and social risks.

“We thank the Fair Work Commission’s Expert Panel conducting the review for the opportunity to make a submission and look forward to their decision later this month.”

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