100317166

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

PARTIES ON THE COMMISSION'S OWN MOTION

 TRADES AND LABOR COUNCIL OF WESTERN AUSTRALIA, CHAMBER OF COMMERCE & INDUSTRY OF WESTERN AUSTRALIA (INC.), AUSTRALIAN MINES & METALS ASSOCIATION INC. AND THE MINISTER FOR CONSUMER AND EMPLOYMENT PROTECTION

CORAM COMMISSION IN COURT SESSION

 CHIEF COMMISSIONER W S COLEMAN

  SENIOR COMMISSIONER A R BEECH

  COMMISSIONER J F GREGOR

DATE THURSDAY, 19 JUNE 2003

FILE NO/S APPLICATION 569 OF 2003

CITATION NO. 2003 WAIRC 08520

General Order   -   Minimum Weekly Rates of Pay   -   Application of sections 51D(a), 51E(1) and 51F(1) of the Industrial Relations Act, 1979   -   Application to section 12 of the Minimum Conditions of Employment Act, 1993    -   Statutory Minimum Wage for employees 21 years of age or over who are not apprentices or trainees

Statutory Minimum Wage

1         Each time the Commission considers a National Wage Decision it is required to review minimum weekly rates of pay under the Minimum Conditions of Employment Act, 1993 (see section 51E(1) of the Industrial Relations Act, 1979 as amended (“the Act”)).

2         By section 51D(a) of the Act the Commission is to review the minimum weekly rate of pay applicable under section 12 of the Minimum Conditions of Employment Act, 1993 to employees who have reached 21 years of age and who are not apprentices or trainees. An order which issues under section 51F(1) of the Act has effect at the same time as the General Order that was made following the Commission’s consideration of the National Wage Decision.

3         On 5th June 2003, the Commission issued its decision in the State Wage Case which was consequential upon its consideration of the “Safety Net Review – Wages, May 2003” [Print PR002003], a National Wage Decision for the purposes of section 51(1) of the Act. The increase in wage rates and the Minimum Adult Award Wage had effect on and from 5th June 2003.

4         At present the minimum weekly rate of pay for employees aged 21 or more under section 12 of the Minimum Conditions of Employment Act, 1993 is $431.40 per week. This was established with effect from 1st August 2002 by operation of the Labour Relations Reform Act No 20 of 2002 (see Labour Relations Reform Act, 2002, section 168 – Transitional provisions for minimum weekly rates of pay and Schedule 1 to that Act).

5         The rate of $431.40 per week was the same as the Minimum Adult Award Wage determined by the Commission in the June 2002 State Wage Case ((2002) 82 WAIG 1375). The Minimum Adult Award Wage has been increased with effect on and from 5th June 2003 to $448.40 per week (unreported 2003 WAIRC 08452).

6         In proceedings held in conjunction with the Commission’s consideration of the 2003 National Wage Decision parties made submissions on the level of the new rate to be determined pursuant to section 51F of the Act.

7          The Minister for Consumer and Employment Protection (“the Minister”) strongly supports maintaining equalisation of the Statutory Minimum Wage under the Minimum Conditions of Employment Act, 1993 with the Minimum Adult Award Wage. An increase of $17.00 per week in line with the arbitrated safety net adjustment under the National Wage and State Wage Decisions represents a 3.9% increase to the minimum weekly rate of pay for employees who have reached 21 years of age and who are not apprentices or trainees. In the Minister’s view this increase accords with wage movements and trend measurements for wages growth in Western Australia.

Average Weekly Earnings

 In the 12 months to November 2002 full-time average weekly ordinary time earnings for WA adults increased by 4.2% in trend terms, and 3.4% in seasonally adjusted terms.

 In the 12 months to November 2002 full-time average weekly total earnings for WA adults increased by 4.5% in trend terms, and 3.6% in seasonally adjusted terms.

 In the 12 months to November 2002 all employees average weekly total earnings for WA adults increased by 4.5% in trend terms, and 4.7% in seasonally adjusted terms.

 Raising the Adult Minimum Wage in WA by $17 per week only equates to a 3.9% increase, which is lower than all of the trend measurements for wages growth in WA.

(Average Weekly Earnings: ABS 6302.0 – November 2002)

(Refer to Ministers Exhibit, Attachment E)

8         The Minister also points out that the Wage Cost Index for Western Australia rose by 3.7% in the 12 months to December 2002. This is only marginally less than the increase proposed for the minimum wage. Furthermore inflation in Perth remains under control and is well within the Reserve Bank’s target range. Annual inflation for Perth increased by 2.8% in the 12 months to March 2003 and was equal to the lowest rate of all the Capital Cities. Perth’s inflation rate was also below the national rate of 3.4%.

9         Amongst other statements advocating a rate which enhances the dignity of the lower paid adult wage earners, the Minister reiterates the statement made by the Commission when it last made a recommendation for the adjustment to the statutory minimum wage under the previous legislation:

“The only guidance that can be taken on the role of the Minimum Wage is the intention expressed when the Minimum Conditions of Employment Act was enacted that the minimum wage would provide an “equitable level of remuneration consistent with principles of fairness and justice.” (Western Australian Parliamentary Debates (Hansard) Thursday 8 July 1993 at p. 1456).

…When regard is had for the intention of Parliament to establish a minimum wage in this State which is equitable and reflects principles of fairness and justice, and the basis upon which the $13.00 per week increase for low paid employees covered by awards was established in the Living Wage Case and applied in Western Australia it is, in our view difficult not to recognise that in equity other low paid employees in this State should be treated the same. The minimum wage should not be considered in abstract and somehow removed from its application and unrelated value of work.”

(WAIRC 39th Annual Report Recommendation under section 14 of the Minimum Conditions of Employment Act, 1993 (prior to the operation of the Labour Relations Reform Act, 2002)).

10      Finally the Minister in the written submission presented to the Commission states:

“130. …..Economic growth remains extremely robust in WA, with WA Domestic Demand increasing by 5.5% in the December quarter 2002 – the highest of all the States. Access Economics predicts WA’s economic growth will reach 6.3% this financial year, and Perth’s inflation remains moderate. The Perth CPI increased by 2.9% in the year to December 2002.

131. Importantly unemployment in WA has fallen to its lowest level in 14 years. In March 2003, the seasonally adjusted unemployment rate was 5.4%, the lowest of all the States and lowest since November 1989. Western Australia’s participation rate continues to be the highest of all the States, and stood at 66.0% in March 2003. Job advertisements remain strong in WA, with the ANZ job advertisement series increasing by 6.1% in March 2003. The number of jobs advertised in WA newspapers in March 2003 was the highest for almost three years, and was 35% higher than in March 2002.”

11      The Trades and Labor Council of WA (“the TLC”) supports the principle of equal pay for work of equal value. Maintaining the concept of two minimum wages – the Minimum Adult Award Wage and the Statutory Minimum Wage for an employee 21 years and over – contradicts this principle. The increase in the Statutory Minimum Wage is justified on economic, industrial and equity criteria. The TLC contends that there is strong justification for an increase in the Statutory Minimum Wage “based on relativities between Average Weekly Earnings (WA) along with the economic imposts on the lowest paid and an increase in the gender gap in our society”. Previous arrangements for the determination of the Statutory Minimum Wage perpetuated an unfair distribution of wages amongst the lowest paid workers in Western Australia; between those on awards and those on other instruments of regulation or common law contracts of employment. The legislative amendments provide an opportunity to improve the situation. Not only has the statutory rate been significantly lower than the award minimum for a period of the time since 1994 but adjustments to the statutory rate have lagged behind the time when award minimums have been varied.

12      The TLC submits that any deterioration in the level of the Statutory Minimum Wage in a decentralised wage system is a major determinant in the growth of earnings inequality. It is asserted that a decentralised wage system has a greater negative impact on women than men as the former are concentrated in lower status jobs and in part time and casual employment. They have lower levels of union membership and are more likely to avoid aggressive behaviour associated with negotiating better terms and conditions (see Wooden, M., ‘Enterprise Bargaining and the Gender Earnings Gap’, Australian Bulletin of Labour, Vol. 23 No. 3 of 1997).

13      The TLC rejects what it sees as “simplistic statements” that raising the Statutory Minimum Wage will cause unemployment.

“Levels of unemployment is not the mono-causal attribution to higher wages but a combination of economic activity and fiscal and monetary policy responses to minimum wage increases directed to maintaining targets of wages growth and inflation. The TLCWA does not support the view that wage increases (particularly to the most marginal and low paid workers) causes structural unemployment”.

(TLC Exhibit paragraph 5.26)

14      With a forecast for 4.25% in economic growth in Western Australia, the economy can sustain an increase of $17.00 per week to bring the Statutory Minimum Wage to $448.40 per week.

15      The Australian Mines and Metals Association Inc (“the AMMA”) acknowledges the limited relevance of the Statutory Minimum Wage to the mining and hydrocarbons industries. The Association does not oppose the position advocated by the Minister for adjusting the Statutory Minimum Wage.

16      The Chamber of Commerce and Industry of Western Australia (“the CCIWA”) maintains that the existing rate of $431.40 per week should not be varied. The Statutory Minimum Wage has increased significantly over a relatively short period of time. In March 2001 it was increased by $31.40 to $400.40. A further adjustment was made in April 2002 to increase the rate to $413.40 and on 1st August 2002 the existing rate was established. CCIWA submits that the current rate is appropriate. The history of the minimum wage rates in Western Australia shows that until 1993 with the advent of the Minimum Conditions of Employment Act, minimum award rates were virtually ignored by all parties to awards. Western Australia was the first State to introduce a non-award rate and the fact that it may not be exactly the same as an award minimum wage does not render the Statutory Minimum Wage unfair.

17      Given the intent of Parliament to provide “an equitable level of remuneration consistent with principles of fairness and justice”, the Commission has on the basis of equity, sought to align the Statutory Minimum Wage with that determined in awards of this State and with the Federal Minimum Wage. (See recommendations pursuant to section 14 of the Minimum Conditions of Employment Act, 1993 in the period from 1993 to 2002).

18      It is noted that the current level of the Statutory Minimum Wage is the same as the Minimum Adult Award Wage in Western Australian and the Federal Minimum Adult Wage prior to the arbitrated safety net adjustment resulting from the May 2003 National Wage Case (op cit).

19      Indeed an alignment with the Minimum Adult Award Wage was established in March 2001; then with movement in the award rate from August 2001 the differential persisted until April 2002 when parity was again re-established.

20      The recent history of wage movements in this State has been characterised by the alignment of the Statutory Wage and the award rate. This has been achieved without any identifiable increase in the wage cost index for Western Australia nor in any identifiable adverse impact on employment.

21      The “no disadvantage test” has been introduced into the process for registering instruments to facilitate employment relationships outside the Award System. “Employer-Employee Agreements” under the new legislation require a comparison with rates under “awards”, “comparable awards” or “relevant awards”. This introduces the lowest rate for employees 21 years of age and above at levels determined by reference to either the Minimum Adult Award Wage in State awards or the Federal Minimum Wage under awards of the Australian Industrial Relations Commission, both of which presently stand at $448.40 per week (refer to Part VID, Division 6 – No Disadvantage Test, the Industrial Relations Act, 1979). As a matter of practicality it would in our view be illogical to maintain a differential between the Statutory Minimum Wage and the rate used for the purposes of applying the “no disadvantage test” to employees 21 years of age and above.

22      It is incumbent upon the Commission to take into account matters identified under section 26 of the Act when determining the level of the Statutory Minimum Wage. Implicit in matters to be considered is an appreciation of the numbers of minimum wage earners in Western Australia.

23      Information obtained by the Minister for Consumer and Employment Protection from the Australian Bureau of Statistics has been made available to the Commission and other parties appearing in proceedings under section 51F of the Act. This information has been obtained from unpublished data collected in the course of the Australian Bureau of Statistics Survey of Employee Earning and Hours (EEH).

24       The following assessment of the summary was presented to the Commission:

“116. The EEH survey is conducted biennially. The most recent collection period was May 2002, with results published March 2003. The May 2002 EEH survey collection involved data for approximately 53,000 employees from approximately 8,000 employer units Australia wide. As Western Australia makes up around 10% of the Australian workforce, the WA contribution to the survey would most likely be around 10% of the total sample.

117. The Department’s initial request for information from the ABS included rates of pay for adult employees and junior employees by years of age. Information was requested at the minimum full-time weekly, and part-time and casual hourly levels. Additional data was requested within a range of incremental bands above the current minimum rates, to assist the Commission in assessing the impact of any proposed increase.

118. During further consultation with the ABS, it became apparent that some information sought could not be obtained at the requested levels of disaggregation. The limited WA sample size and methodology of the survey presented obstacles in gathering accurate data particularly in regard to junior employees and casuals

119. The sample size was simply too small for any reputable data to be released for junior employees. The way in which the EEH survey defines casual employees, being quite different to an industrial definition of casual employee, prevented accurate data for casuals being released. The survey defines all employees as either full-time or part-time, and then further distinguishes them as permanent or casual. While data could have been sought at the casual minimum rate of pay, it could not be determined whether employees in receipt of those rates were true “industrial” casuals, or simply highly paid full-time or part-time employees.

120. The key results from the unpublished data request suggest that:

a) 2.5% of the total employed population6 were full-time adults in receipt of the then minimum wage of $413.40 or less per week;

b) 0.7% were full-time adults in receipt of earnings greater than $413.40 per week and less than or equal to $431.40 per week;

c) 0.8% were full-time in receipt of earnings greater than $431.40 per week and less than or equal to $451.40 per week;

d) a total of up to 3.2% of the total employed population in receipt of the current minimum wage of $431.40 or less per week will potentially be affected by any increase in the minimum weekly wage;

e) a total of up to 4% of the total employed populations will potentially be affected by an increase in the current minimum weekly wage of up $20.00 per week.

121. An assessment of hourly rates of pay for non-managerial7 employees indicated that:

a) 3.2% of these employees were adults in receipt of the then minimum hourly rate of pay of $10.90 or less. Of 3.2%, 1.3% were part-time adults and 1.9% were full-time adults;

b) 2% (comprised of 0.4% part-time and 0.8% full-time adults) were in receipt of hourly rate of pay greater than $10.90 per hour and less than or equal to $11.40 per hour;

c) 1.0% of these employees were adults in receipt of an hourly rate of pay greater than $11.40 per hour and less than or equal to $1.90 per hour;

d) a total of up to 4.4% of these employees will potentially be affected by any increase in the current minimum adult hourly rate of $11.358 per hour;

e) a total of up to 5.4% of these employees will potentially be affected by an increase of up to 50 cents per hour (ie. $20.00 per week).

122. Taking into account the absence of information for junior employees, who make up approximately 6% of the EEH employment population, and the inability to accurately measure the proportion of adult casual employees in receipt of the minimum wage rate or within $20.00 per week of the minimum wage, the data suggests that:

a) between 4 and 5.5% of the Western Australian employed population, as measured by the EEH survey, would be affected by an increase in the current minimum weekly wage of up to $20.00 per week.

________________________

6 The EEH survey estimates that the May 2002 WA employed population to be 696,500 (see explanatory notes).

7 The sample size for the hourly rate data did not include managerial employees which comprised approximately 10% of the total original sample.

8 ABS data is rounded to the nearest 10 cents. The current minimum adult hourly rate is $11.35 per hour. However, data was presented at the rate of $11.40 per hour.”

(Ministers Exhibit)

25      The Commission was assisted by Professor David Plowman in its analysis of the EEH summary. Professor Plowman has provided up to date data on the Western Australian population (>15 years) and the labour force:

26      In the above table the appropriate denominator for determining the proportion of those in receipt of the minimum wage is the Wage and Salary employees figure. This figure excludes those who are self-employed, working proprietors, Directors of Boards, those paid entirely on the basis of commission etc.

27       Whilst acknowledging the general limitations of the EEH survey Professor Plowman points out that it does not collect data on casual employees and that full time employment for the purpose of the survey is taken to be those working 35 hours a week or more. This is a different definition to that used under the Minimum Conditions of Employment Act, 1993. A further caveat is that the survey records a finite period – a particular pay period. The assumption is that other pay periods are not dissimilar. With respect to casual employment in the absence of a direct measure, Professor Plowman estimates the number on the basis of whether or not employees enjoy leave benefits as an employment condition. Those that do not are considered to be casual employees. On this method of estimation some 23% of males, 32% of females and 28% of persons are considered to be in casual employment. Other groups not directly measured are juniors (estimated to be 5% of the Western Australian workforce) and apprentices and trainees (estimated to be about 21,000 or 3.9% of the workforce). Though these last two categories are not measured as separate categories they are included in the aggregated data.

28      In determining the proportion of the workforce in March 2002 that would be affected by a $20.00 per week increase in the minimum wage the ABS data suggests that 4% of the full-time employed workforce would be affected.

29      Professor Plowman notes that in March 2002 the total number of salary and wage earners was 690,500. The percentage of full-time wage and salary earners was 64.2%. Thus, the number of full-time employees affected by a $20.00 per week wage increase is 17,732. The same percentage applied to the March 2003 data would see 18,200 employees affected by a $20.00 increase in the minimum wage.

30      The ABS data suggests that 5.4% of part-time employees would potentially be affected by an increase of $20.00 per week or the hourly equivalent. In March 2002, this translates to about 11,210 employees. If the assumptions hold true for March 2003, the number of employees affected would be in the order of 11,400.

31      Applying the national percentage of the 15 – 19 years group in receipt of wages above the $400.00 per week band and adjusting this for the threshold of the existing minimum wage and the ABS definition of an 18 years old as an adult, it is estimated that 50% of 15 – 19 year old employees come within the cohort which would be affected by an increase of $20.00 per week or the hourly equivalent.

32      On the basis of the March 2003 population and labour statistics, Professor Plowman estimates that in total 32,400 (4.6%) of the Western Australian workforce will be affected by an increase in the minimum wage of up to $20.00 per week.

33      The Commission acknowledges the qualifications pointed out by Professor Plowman which must be taken into account in accepting this estimate. We are appreciative of the work done by him in assisting in the development of the EEH survey conducted by the ABS to address the particular requirements for assessing the impact of the Statutory Minimum Wage in Western Australia and for his analysis of the data.

34      In these proceedings held in conjunction with consideration being given to the making of a General Order pursuant to the handing down of the May 2003 National Wage Decision and the determination of the Minimum Adult Award Wage, the Commission has received extensive submissions on the level of economic activity both nationally and in Western Australia (refer to 2003 WAIRC 08450 (unreported) at paragraphs 6 to 8 inclusive).

35      On what is before us and on our assessment of economic trends there is nothing which deters us from the course of maintaining the alignment between the Statutory Minimum Wage for employees 21 years of age and over and Adult Minimum Adult Award Wage. The rate of $448.40 per week is an equitable level of remuneration and accords with principles of fairness and justice.

36      The General Order under section 51F following the review under section 51E(1) replaces the present minimum weekly rate of $431.40 per week payable under section 12 of the Minimum Conditions of Employment Act, 1993 to employees who have reached 21 years of age and who are not apprentices or trainees and establishes the rate at $448.40 per week. This rate has effect on and from 5th June 2003.