2006 WAIRC 04608
GENERAL ORDER TO VARY ALL AWARD RATES AND ALLOWANCES

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION


PARTIES TRADES AND LABOR COUNCIL OF WESTERN AUSTRALIA
APPLICANT
-V-
MINISTER FOR CONSUMER AND EMPLOYMENT PROTECTION, CHAMBER OF COMMERCE AND INDUSTRY OF WESTERN AUSTRALIA
RESPONDENTS
MINISTER FOR EMPLOYMENT AND WORKPLACE RELATIONS (CTH)
INTERVENOR
AUSTRALIAN COUNCIL OF SOCIAL SERVICES, AUSTRALIAN YOUNG CHRISTIAN WORKERS, COMBINED SMALL BUSINESS ALLIANCE OF WESTERN AUSTRALIA, MR. MH DALE, UNITING CHURCH IN AUSTRALIA, WESTERN AUSTRALIAN SYNOD, WESTERN AUSTRALIAN COUNCIL OF SOCIAL SERVICES

OTHER PERSONS
CORAM CHIEF COMMISSIONER A R BEECH
SENIOR COMMISSIONER J F GREGOR
COMMISSIONER S J KENNER
COMMISSIONER J H SMITH
COMMISSIONER J L HARRISON
HEARD MONDAY, 30 JANUARY 2006, THURSDAY, 6 APRIL 2006, MONDAY, 22 MAY 2006, TUESDAY, 23 MAY 2006,
WEDNESDAY, 24 MAY 2006
DELIVERED MONDAY, 26 JUNE 2006
FILE NO. APPL 957 OF 2005
CITATION NO. 2006 WAIRC 04608

CatchWords General Order – Award rates of wage – Award minimum wage – Arbitrated Safety Net Adjustment – State wage principles – coverage of jurisdiction – Industrial Relations Act 1979 s.6, s.22B, s.26(1)(d), s.50(2), s.50(10), s.51(3)
Result General Order issued
REPRESENTATION

APPLICANT MS. J. BOOTS, OF COUNSEL

RESPONDENTS MS. J. GARDNER AND MR. M. HAMMOND ON BEHALF OF THE MINISTER FOR CONSUMER AND EMPLOYMENT PROTECTION
Mr. D. Jones on behalf of the Chamber of Commerce and Industry of Western Australia, Inc.

Intervenor Mr. S. Amendola, of counsel on behalf of the Commonwealth Minister for Employment and Workplace Relations

Other Persons Mr. M. Cox, of counsel on behalf of Uniting Church in Australia, Western Australian Synod


Contents

Page

List of Main Abbreviations 4
Outline of Submissions Made to the Commission 8
Trades and Labor Council 9
Minister for Consumer and Employment Protection 11
Australian Young Christian Workers 13
Western Australian Council of Social Services 14
Social Justice Commission, Uniting Church in Australia, Western Australian Synod 15
Mr MH Dale 17
Combined Small Business Alliance of Western Australia Inc 17
Commonwealth Minister for Employment and Workplace Relations 18
Chamber of Commerce and Industry of Western Australia 20
Plowman Report 21
Consideration 23
Should We Adjourn to Await the AFPC? 24
Coverage of Commission’s Jurisdiction 26
Percentage or Flat Increase 29
The Claim - Statutory Obligations 34
The State of the National Economy 34
The State of the Economy of Western Australia 36
Capacity of Employers as a Whole or of an Individual to Pay 38
The Likely Effects of the Decision on the National and State Economies 43
Any Changes in Productivity that Occurred or are Likely to Occur 45
The Need to Facilitate the Efficient Organisation of Performance of Work 45
The Need to Encourage Employers, Employees and Organisations to Reach Agreements Appropriate to the Needs of Enterprises and the Employees in those Enterprises 45
Conclusions 46
The State Wage Principles 51
Minute of Proposed Order 58

List of Main Abbreviations

In this decision the following abbreviations are used:

ABS: Australian Bureau of Statistics
ACOSS: Australian Council of Social Services
ACR: Accommodation, Cafes and Restaurants
Act: Industrial Relations Act, 1979
ACTU: Australian Council of Trade Unions
AFPC: Australian Fair Pay Commission
AMMA: Australian Mines and Metals Association Inc
AIRC: Australian Industrial Relations Commission
AYC: Australian Young Christian Workers
CCIWA: Chamber of Commerce and Industry of Western Australian
Commonwealth: Minister for Employment and Workplace Relations
CPI: Consumer Price Index
CSBAWA: Combined Small Business Alliance of Western Australia
GMI: Gross Mixed Income
GOS: Gross Operating Surplus
LPI: Labour Price Index
MTAWA: Motor Trades Association of Western Australia Inc
POS: Personal and Other Services
Real GDP: Real Gross Domestic Product
SJC: Social Justice Commission, Uniting Church in Australia, Western Australian Synod

State Minister: Minister for Consumer and Employment Protection
TLC: Trades and Labor Council
WACOSS: Western Australian Council of Social Services
WASBEA: Western Australian Small Business and Enterprise Association Inc
WPI: Wage Price Index
WRA: Workplace Relations Act, 1996

Reasons for Decision

1 This is our unanimous decision. On 10 November 2005 the Trades and Labor Council ("TLC") lodged an application for a General Order pursuant to section 50(2) of the Industrial Relations Act, 1979 ("the Act"). The TLC’s application seeks a 4% increase to all award wage rates and related allowances, and that the minimum adult award wage be increased to $503.80 per week, from 7 July 2006. The application seeks to amend the State Wage Principles in order to give effect to these changes.

2 The application was served upon the Minister for Consumer and Employment Protection ("State Minister"), Chamber of Commerce and Industry of Western Australia, Inc. ("CCIWA") and Australian Mines and Metals Association, Inc. ("AMMA").

3 On 13 January 2006 the Commonwealth Minister for Employment and Workplace Relations ("the Commonwealth") made an application seeking leave to intervene in these proceedings. On 30 January 2006 a hearing was conducted to deal with the application to intervene. On 7 March 2006 a Statement and Reasons for Decision were issued by the Commission in Court Session granting the Commonwealth limited leave to intervene ((2006) 86 WAIG 408, 2006 WAIRC 03884). Directions were also issued on this date programming the hearing of the application ((2006) 86 WAIG 414, 2006 WAIRC 03885).

4 A notice was placed on 10 and 15 March 2006 in The West Australian and on 12 March 2006 in The Sunday Times. This notice published the Directions and invited any interested persons to make submissions either in person or in writing.

5 On 14 March 2006 the Commission also sent copies of the notice to Anglicare WA, Centacare Employment and Training - Perth, Salvation Army, St. Vincent de Paul Society WA Inc, The Samaritans, UnitingCare, WA Council of Social Services ("WACOSS"), Activ Foundation Inc, Mission Australia, Welfare Rights and Advocacy Service, Women’s Electoral Lobby WA Inc, Western Australian Farmers Federation, The WA Retailers Association Inc, WA Small Business Association, WA Hotels and Hospitality Association Inc - Union of Employers, Motor Trade Association of Western Australia Inc ("MTAWA"), Housing Industry Association, Combined Small Business Alliance of Western Australia Inc ("CSBAWA") and Western Australian Small Business and Enterprise Association Inc ("WASBEA") inviting them to present a submission.

6 The following persons replied in response to the notice and the Commission’s invitation: CSBAWA, WASBEA, MTAWA, Mr MH Dale from Albany, WACOSS, Social Justice Commission, Uniting Church in Australia - Synod of Western Australia ("SJC") and the Australian Young Christian Workers ("AYCW"). WASBEA subsequently advised the Commission that it withdrew.

7 The Commission convened on 6 April 2006 to decide whether the persons who had replied did have a sufficient interest in the application pursuant to section 50(10) of the Act to be given an opportunity to be heard. It has been twenty-five years since this Commission was asked to award an increase to the award minimum wage and to award wages in the absence of a corresponding National Wage Decision. The Commission wished to hear a wide range of community views. It decided on this occasion that all persons who replied demonstrated that they had a sufficient interest and they were given the opportunity to place their submissions and materials before us.

8 The Commonwealth renewed its application to intervene pursuant to section 30(2) of the Act and this was granted on the basis of the Commonwealth’s interest in the national and State economies.

9 On 3 April 2006 the AMMA wrote to the Commission advising that it did not intend to participate any further in this matter due to the composition of their membership and the effect of the amendments to the Workplace Relations Act 1996 (Cwth) ("WRA") by the Work Choices legislation. On 24 April 2006 the MTAWA wrote to the Commission seeking leave to withdraw from its participation in this matter due to other commitments.

10 On 1 May 2006 and then 10 May 2006 Further Directions were issued (86 WAIG 1159, 2006 WAIRC 04265 and 86 WAIG 1160, 2006 WAIRC 04325) that amended particular dates in the Direction that was issued on 7 March 2006.

11 On 22 May 2006 Mr. MH Dale wrote to the Commission withdrawing from this matter.

12 All persons were given the opportunity to make oral submissions and present evidence to the Commission at public hearings on 22, 23 and 24 May 2006. The TLC, State Minister, SJC, the Commonwealth and CCIWA appeared; CSBAWA, WACOSS and AYCW relied upon their written submissions.

13 In accordance with Direction 8 of the Directions issued on 7 March 2006 (referred to above in paragraph 3), parties were able to lodge their submissions on the Commission’s website. The Commission scanned all written submissions and materials and placed them onto the website. The website was made accessible to the public at the commencement of the public hearings on 22 May 2006.

14 Further, the entire hearings on 22, 23 and 24 May 2006 were streamed live over the internet. It is the first time in the Commission’s history that the technology has been available for this to occur. The hearings of the Commission are open to the public as a matter of course (section 27(1a) of the Act). The streaming of the hearing, given the importance to the community of WA of setting the award minimum wage and award wage rates, gave access to the public at large and demonstrated to the community the transparency of the Commission’s process.

Outline of Submissions Made to the Commission

15 The Commission has received comprehensive written submissions and supporting materials relating to the claim before it. Below are outlines of these submissions.

Trades and Labor Council

16 The TLC states that its claim seeks to ensure that all WA employees within the jurisdiction of the Commission have access to a fair safety net of wages. This should be done by way of a General Order amending all awards, not on an award-by-award basis. It seeks any increase in award rates to be subject to absorption in the same terms as previous State Wage Decisions. The TLC stressed that one of the principal objects of the Act is “to provide a system of fair wages and conditions of employment” (section 6(ca)). The objects also require the Commission to facilitate the efficient organisation and performance of work according to the needs of an industry and enterprises within it, balanced with fairness to the employees in the industry and enterprises. The TLC referred the Commission to previous decisions where it has recognised the need to give consideration to social as well as economic factors, and the needs of the low paid.

17 The TLC submits that an increase that would constitute a significant further reduction in the minimum wage relative to average weekly earnings would not be considered fair. It submits that the evidence before the Commission shows that it is more difficult for award wage earners to rely on bargaining because of a lack of bargaining power; that award wage increases do not reduce or eliminate the incentive to bargain; and that award wage earners have needs associated with the costs of living. It seeks an amendment to the State Wage Principles to the extent necessary to effect a 4% award wage increase.

18 The TLC submits that WA is experiencing robust economic conditions with growth that continues to exceed expectations. It refers to the WA Economic Summary for Spring 2005 produced by the Department of Treasury and Finance. The TLC took the Commission in considerable detail to the economic data available showing the state of the national and State economies. We refer to this data subsequently in our findings.

19 The TLC submits that the Wage Price Index ("WPI") is the appropriate indicator to use for measuring the fairness and economic impact of the TLC’s application. It referred to the Australian Industrial Relations Commission ("AIRC") having highlighted the benefits of the WPI as compared to other measures of wage movements as an indicator of wage movements for the purpose of determining the Safety Net Review decision. The claim, at 4%, is conservative being less than the current rate of the WPI which is 4.2% to the December quarter 2005 in WA, and 4.1% for Australia. Total hourly rates of pay excluding bonuses for all employees increased to 4.2% over the year to the December quarter 2005.

20 The TLC submits that from September 2001 to September 2005 the annual percentage change in real unit labour costs has averaged -1.2%; real unit labour costs fell by 2.1% for the year to September 2005, which means that productivity is growing faster than real labour costs. The TLC submits that employee bargaining agreements increased 4.5% for the December quarter 2005. The TLC adopted the recent economic data presented by the State Minister following the publication of the State budget papers in the week before the hearing commenced. It concludes that its claim for a 4% increase in award rates is moderate and reasonable given the trend in wages growth.

21 The TLC also submits that increasing minimum award rates will have an important influence on the gender pay gap which in WA in 2005 was 24.7% whereas the national figure was 16.7%. Effective implementation of minimum wage protection was referred by the TLC as being critically important for gender pay equality. The TLC made an extensive submission regarding indicators of living standards from the Household Expenditure Survey of the Australian Bureau of Statistics ("ABS").

22 The TLC referred to unpublished ABS data from the Employee Earnings and Hours May 2004 Survey in WA (ABS Cat. 6306.0) and concluded that 40.1% of WA employees will remain within the State jurisdiction. The TLC presented a table (Table 6.1) showing that for Australia as a whole, the coverage of the federal jurisdiction was 76.3% and in Western Australia, the coverage of the federal jurisdiction was 59.9%. Correspondingly, coverage of the State jurisdiction after Work Choices on these figures was 40.1%. The TLC noted that the estimate of 40.1% is likely to be an over-estimate in that there will be non-constitutional corporations remaining in the federal system under the transitional provisions of the WRA.

23 The data also showed that in WA, 12.59% of all workers are award-dependent. Further, 8.05% of all WA workers who are award-dependent are employed by unincorporated businesses and these employees are the major subject of the TLC’s application; 98.69% of all award-dependent employees are found in the private sector. Almost half of unincorporated employing businesses are concentrated in retail trade (17.8%); agriculture, forestry and fishing (15.7%) and property and business services (15.2%). These industries however only account for less than a third of all private sector employed persons.

Minister for Consumer and Employment Protection

24 The State Minister submits the appropriate quantum is a $20.00 per week wage increase with award wage rates for other classifications of employees to be increased in an appropriate proportion best determined by the Commission having regard to award relativities. The only changes necessary to the State Wage Principles are to Principles 8 (Arbitrated Safety Net Adjustments) and 9 (Minimum Wage).

25 The State Minister considers that it is inappropriate for the Commission to assign any significant weight to the state of the national economy or to the impact of any decision of this Commission on the national economy. This is because the potential effect of the Commission’s decision is limited to the WA economy and to those employers who are not constitutional corporations or otherwise brought within the scope of the federal system under the definition of "employer" in the WRA who are not already bound by a federal industrial instrument.

26 The State Minister estimates that approximately 60% of WA employers fall within the scope of the WRA and 40% of WA employers remain within the State system. This coverage may be centralised in several sectors of the workforce. Relying on the Federal Government’s 1996 Breaking the Gridlock papers, federal coverage would be relatively low in the accommodation, cafes and restaurants, educational and personal and other services sectors. Sectors such as mining, manufacturing, wholesale trade, transport and storage, communication services, finance and insurance sectors, will be almost exclusively under the WRA.

27 Correspondingly, employees remaining within the State system are most likely to be paid wage rates set by awards. The State Minister places emphasis on female employees as being more likely to be more reliant on award rates of pay and have less bargaining power to negotiate above-award rates of pay. These are reasons supporting a submission that an increase in state award rates of pay is necessary to maintain the living standards of award-reliant employees.

28 The State Minister states that there are 322 awards that could be affected by this application. Sixty-four specifically apply to cover the majority of the WA Public Sector. Agreement making has historically been approximately 270 agreements per year for the last five years. Recent data suggests that 276 agreements were entered into during the 2005 calendar year. The number of employees becoming covered by agreements was 26,000, when the average is approximately 35,000; the downturn is likely to be due to the cyclical nature of agreement making, the gradual migration of employers and employees towards the federal jurisdiction and confusion resulting from the pending introduction of Work Choices.

29 The State Minister presented a comprehensive analysis of the State economy in Attachment D to the written submissions. In the written submissions in reply, the State Minister attached Chapter 5 of the 2006-07 Budget Paper No. 3 (Economic and Fiscal Outlook) which was part of the budget analysis recently delivered by the State Government.

30 The State Minister also presented evidence from Ms Nicola Cusworth, the Director, Economic Policy within the Department of Treasury and Finance. Ms Cusworth gave a most comprehensive and detailed overview of the national and State economies. The Commission wishes to record the considerable assistance that she has given to the Commission in both the evidence which she gave and also her accurate and detailed responses to any questions or issues raised by the Commission. Her evidence, and the Economic and Fiscal Outlook are referred to later in these Reasons.

31 The State Minister reiterates that WA is currently experiencing extremely robust economic conditions, the likes of which have not been seen for many years. These include historically low unemployment, high participation rates, solid jobs growth, substantial infrastructure investment and a historic commodities boom. The State Minister observed that no party to these proceedings is seeking to deny the strong economic outcomes WA is currently enjoying nor the solid labour market statistics presented to the Commission.

32 The State Minister submits that a wage increase of $20.00 per week is both sustainable and necessary to ensure that award-reliant employees are able to share in the State’s prosperity and maintain their living standards. The State Minister also submits that it is fair and appropriate for any General Order which issues in this matter to take effect from 7 July 2006, a date twelve months since the previous decision of the Commission under section 51 of the Act which implemented in awards in this State the 2005 Safety Net Decision of the AIRC.

Australian Young Christian Workers

33 The AYCW is a movement that educates, represents, and provides services for, young adults. It is autonomously run by, for and with young workers. The term "workers" is not limited to only paid employees but also unemployed workers, voluntary or unpaid workers, university students, those workers in further training and anyone else who fits this definition.

34 In its submission, AYCW predominately presents statistics and situations of young people aged 15 to 24 years. Referring to ABS statistics, AYCW estimates that 14% of the State’s total population are young people aged 15 to 24 years. 55.5% of these are employed in some capacity. A high proportion are employed on a part time basis and some are employed on a casual basis. 31% are employed in the retail industry; 10% are employed in the hospitality industry. They are employed in small businesses in low skilled positions earning minimal weekly wages. Many young people will remain under, and continue to heavily rely on, the State award system and State minimum wage. The AYCW strongly supported a 4% increase to the minimum state award wages and allowances. It considered that young people are amongst the most vulnerable in WA’s workforce because of an increasing occurrence of individual contracts, lack of bargaining skills and "the impossible situations of intimidation" in negotiating such contracts.

35 The AYCW makes the point that an extreme increase in minimum wages and allowances would be detrimental to youth employment because youth employment is vulnerable to any increase in minimum wages. However, it is the AYCW’s understanding that a 4% increase is economically sound and sustainable given the current state of the WA economy. Therefore, AYCW believes that the 4% rise will be a moderate increase to the current minimum award wages and allowances and this alleviates any concern that it has that young people will be vulnerable to job losses.

Western Australian Council of Social Services

36 WACOSS submits that it is the peak body of the community services sector in WA. It is part of a national network consisting of Australian Council of Social Services ("ACOSS") and the State and Territory Councils of Social Service who assist low income and disadvantaged people, Australia-wide. ACOSS regularly intervenes in the National Wage Case on behalf of low income earners Australia-wide. It supports more than 350 member agencies and individuals and works with and represents a range of agencies including emergency relief agencies, financial counsellors, neighbourhood centres, community legal centres, large church-based welfare organisations, disability service organisations and housing and crisis accommodation services.

37 WACOSS supports the application made by the TLC and states that a 4% increase in the minimum wage will go some way to ensuring that the strong economic growth currently being experienced in WA flows on to provide strong social outcomes for the lowest paid workers in this State. Its submission was supported with research into the experience of community service agencies providing services for disadvantaged people, the phenomenon of "working poor", income inequality, rises in the cost of living, minimum wages and work incentives and determining a fair minimum wage. This research has been given detailed consideration by the Commission. Necessarily, only part of it is able to be referred to in these Reasons.

38 WACOSS considers that decent minimum wages provide a critical "floor" for the incomes of many low income households. People experiencing "working poverty" are likely to be those who are most reliant on award wages. WACOSS submits that the cost of living has risen much more sharply than has been measured by the Consumer Price Index ("CPI") because research by the St Vincent de Paul Society found that falls in the price of luxury items have caused a fall in the CPI giving a false sense of the cost of living for low income earners, particularly in housing.

39 WACOSS repeated in its submission the position of ACOSS to the 2005 National Wage Case that a benchmark for the adequacy of minimum wages should be objectively constructed using contemporary social research methods tested against indicators of actual living standards and set at a level that enables a single adult living alone to live in "modest comfort" and participate fully in society in accordance with contemporary community standards. A 4% increase in the minimum wage would go some way to ensuring that the strong economic growth currently being experienced in WA flows on to provide strong social outcomes for the lowest paid workers in the State.

40 In an appendix to its submission, WACOSS attached a number of documents. We have considered these and we record our appreciation of the comprehensiveness of the material provided by WACOSS.

Social Justice Commission, Uniting Church in Australia, Western Australian Synod

41 The Social Justice Commission submitted that having regard to the "V8" WA economy in particular, the strong national economy in general, the needs of low income and award-dependent earners and the experience of the Church’s social welfare services, that the wage claim of 4% increase is very modest, is within the capacity of employers and the economy to absorb and modestly assists those affected to keep up with average wage increases of income earners and increases in the cost of living. The submission stated that the minority of employees to whom the order to issue will directly apply represents the most vulnerable sectors of the community and are predominantly female.

42 The SJC states that its position, role and experience within the community, particularly in WA, demonstrates the crucial need for a minimum wage increase as a matter of fairness, human rights and social cohesion. The position of the Church, as expressed in papers and statements made by it demonstrated the Church’s position in relation to current industrial matters. Its experience was set out in the Wesley Mission Perth Annual Report 2005, extracts of which were contained within the submission. The SJC quoted from the "low paid project", a research organisation funded by the Australian Research Council, union bodies and the Brotherhood of St Laurence, examining the effects of low pay on workers and their households.

43 In additional oral submissions, Mr Cox, of counsel, argued that the Commission should not defer its decision in this matter as requested by the Commonwealth and CCIWA. Mr Cox submitted that the cost of living in WA has increased faster than elsewhere. He submitted that the claim involved a gender issue and that the increase should be paid as soon as possible. He stated that even the Commonwealth does not say that the economy cannot afford the increase and that therefore its impact on the economy cannot be significant. He emphasises the Church’s view that a 4% increase is both modest and moderate. Evidence was called from Rosemary Miller, the Social Justice Consultant to the SJC. Ms Miller is responsible for research, policy development and advocacy in issues relating to prisons, the legal justice systems, post release support programmes, refugees and new migrants, mental health, gender and sexual equality, social justice, human rights and peace.

44 Ms Miller’s evidence is that while the economy, particularly the WA economy, is apparently booming and upper echelons of the community are doing very well, the more marginalised and economically vulnerable sections of the community that the Church deals with are increasingly struggling and the burdens on church social welfare services are growing. Ms Miller’s opinion was that if the claim is granted it will allow employees to keep up with average increases and make it easier for lower income earners in the present difficult climate to keep up with the cost of living. The claim is seen by her as being important for those with little or no bargaining power in relation to working wages and conditions and those on low incomes.

45 In addition to her written statement, Ms Miller also gave oral evidence before the Commission. She spoke of the work of the Church in providing assistance to persons on low income and the low-waged. She spoke of single-income households using credit for day-to-day expenses. Refugees are also typically in the low paid/unskilled areas of employment and have difficulty in speaking the language and bargaining for employment conditions. She spoke of the impact of the increasing price of fuel, the impact of the current rental market and of young people in vulnerable positions.

Mr MH Dale

46 Mr Dale’s written submission was subsequently withdrawn by him, but at the conclusion of the proceedings. His submission had been before us during the proceedings and the Commission has taken into account his views that an increase in wages will carry over to price increases for the general public which includes a widespread, mostly hidden, underclass of financially-struggling people. The more expensive it becomes to employ people, the more employers have to try to do without them. He submitted that wage increases cause hardship for welfare organisations who have to employ paid staff for themselves. Mr Dale submitted that it is hardly the responsibility of employers to make up the cost of living increases for their employees. Mr Dale attached an enclosure regarding what he described as impositions on employers.

Combined Small Business Alliance of Western Australia Inc

47 CSBAWA submitted that the Commission should delay delivering its decision until after the Australian Fair Pay Commission ("AFPC") hands down its determination and that the Commission have regard for that determination. It is CSBAWA’s considered judgment that the Work Choices amendments present the Commission with an "interesting conundrum" in that the only employers over which the Commission has jurisdiction are ostensibly the public sector and non-registered corporations in the private sector, those being small business. CSBAWA states that government agencies themselves estimate that small business employs approximately 50% of the private sector workforce and that this is significant to the economy of WA. CSBAWA then posed a number of questions about how the Commission will differentiate in its determination between registered and non-registered corporations; how does the TLC present before the Commission representing employees of employers that are both registered and non-registered corporations and where the substantial majority of employees of small business employers are not members of a union? How will the Commission differentiate between registered and non-registered corporations in its determination of the TLC’s submissions? It concluded that the Commission retained an important role in influencing consequential amendments to the Act and its determination of the issues which CSBAWA has raised in its submissions. CSBAWA otherwise supported and adopted the submissions of other employer organisations insofar as any of those submissions or any parts of them are not in conflict with CSBAWA’s own submissions.

Commonwealth Minister for Employment and Workplace Relations

48 The Commonwealth submitted that the TLC application, if granted in its present terms, could have the effect of undermining a national approach to minimum wage fixation and the intent of the WRA as amended by Work Choices. It says granting the application could be the first step to increasing minimum wage differentials that would become more and more divergent over time. A nationally consistent approach to minimum wage fixation is highly desirable and there is nothing in the Work Choices reforms that undermines a nationally consistent approach to minimum wage fixation. The Commonwealth maintains that an appropriate course of action is for the Commission to hear the evidence and defer a decision on this application until it has had the opportunity to consider the deliberations and determinations of the AFPC in spring 2006.

49 The Commonwealth expanded on its submissions. It presented material on the AFPC, its legislative charter and its present establishment. It submitted that the reforms move away from an adversarial system of minimum-wage setting to a more consultative approach more closely aligned with minimum-wage setting practice of other OECD countries. It submitted that the AFPC is primarily concerned with questions of fairness: hence its title. The AFPC presents a significant improvement in terms of fairness because it explicitly references the employment needs of those most disadvantaged in the labour market: the unemployed.

50 The Commonwealth made submissions regarding the coverage of the Commission’s jurisdiction. It too presented tables extracted from the ABS survey previously referred to by the TLC. The Commission expresses its appreciation to the Commonwealth for the material in Tables 3.1, 3.2, 3.3 and Exhibit CG1. The Commission recognises that the data cannot tell the Commission precisely what proportion of employees of unincorporated enterprises is within its jurisdiction and what proportion remains in the AIRC jurisdiction for the transitional period of five years.

51 The Commonwealth submitted that the TLC’s submission lacks the detail of the material that has traditionally been put before the AIRC and is wholly inadequate for an application that seeks a wage increase in the absence of a national decision. The Commonwealth contends the TLC costings are inadequate in that they consider the macro impact of the claim on aggregate wages and CPI on the whole of the WA economy. However, it says the TLC’s claim will mainly impact on the retail, accommodation, cafes and restaurant sectors of the WA labour market. The Commonwealth says the TLC’s macro economic analysis says very little about the sectors affected by this claim. Further it says an appropriate costing would focus on the impact of the competitiveness and effective operation of these businesses and employment opportunities for employees in these enterprises.

52 In the Commonwealth’s view, granting the claim would put employers affected by the claim who are in the same industries as industries in the federal jurisdiction at a competitive disadvantage compared to those employers in the federal jurisdiction. It is contended that there is nothing in the Act which would present the Commission from waiting for the few months until the AFPC’s decision, thus lessening the risk to WA employers. It is conceded however that a corresponding competitive disadvantage could also arise if the AFPC was to award an increase in rates in minimum pay prior to this Commission considering an increase in minimum wages. It is also conceded that there is nothing in the WRA that seeks to ensure national consistency in the setting of wages.

53 The Commonwealth referred to historical studies set out in the State Minister’s written submissions that support the proposition that unemployment will result in a group of vulnerable employees as a result of any increase in minimum wages. The Commonwealth however also pointed out that the State Minister’s submissions say that there may be equity gains that compensate for loss of employment. In particular that a minimum wage helps to ensure that employers do not exploit workers when in a position of power, and may help to prevent the wage differential between the highest and the lowest paid from widening.

Chamber of Commerce and Industry of Western Australia

54 The CCIWA does not dispute the economic rationale upon which the submissions of both the TLC and the State Minister are based. It states that it is not possible to deny the economic fact that the WA economy is currently growing at a yearly rate which is at least treble that of the Australian economy as a whole.

55 Nor is the CCIWA opposed to employees sharing in the benefits of the economic rewards of a productive economy. Rather, those rewards should be negotiated at the enterprise level to take account of the needs of the individual business enterprises consistent with the objects of the Act. In the alternative, Safety Net Adjustments should be made within a national framework of minimum wage increases determined by the AFPC. To act now, without the advantage of the AFPC determination, may mean the decision of the Commission is out of step with future federal increases thus creating a wage rate disparity and consequential harm to WA employers who may suffer economic disadvantage.

56 CCIWA pointed to the history of recent wage fixation in this State which assured WA employees bound by the Commission’s awards a minimum wage growth commensurate with those minimum wage increases afforded to employees bound by federal awards: consistent and equal minimum wage growth throughout Australia. This outcome should be the goal of the statute, and the Commission. In the view of the CCIWA, the charter of the AFPC is not substantially different from that which preceded the Work Choices legislation.

57 CCIWA similarly referred to the data presented to the Commission by the Commonwealth regarding the coverage of the Commission’s jurisdiction. In the CCIWA’s submission the Commission should defer its decision until the AFPC has made its determination. In the alternative, the Commission should award a moderate increase that may be topped up if needed to equate to any future minimum award increases determined by the AFPC. The CCIWA agrees with the TLC’s submission that the existing State Wage Principles ought be rescinded and new, suitably amended Principles be enacted pursuant to section 50 of the Act. The CCIWA tendered its WA Economic Compass for the March quarter 2006.

Plowman Report

58 The Commission requested Professor David Plowman, from the Graduate School of Management, University of WA, to provide a Report on the effects of past statutory minimum wage adjustments on:
a. the number of persons employed;
b. the number of unemployed persons seeking work;
c. job vacancies;
d. average weekly ordinary earnings;
e. the level of inflation;
f. the profit share; and
g. the level of investment,
in Western Australia.

59 The Report was distributed to the persons appearing in this matter and they were given an opportunity to be heard upon it. Submissions were received that discussed the relevance of the Report to the issues before us; there was no objection as such to the Commission taking the Report into consideration. We do so. What follows is a summary of the Report.

60 The Report notes that in the past there had been a consensus that minimum wage increases resulted in unemployment for low paid workers; today, the matter is one of contention with some divergence of opinion. There appears to be little pure science in understanding the important relationship concerning the employment effects of minimum wage increases. After a detailed review of the issues involved, Professor Plowman concludes that the effects of minimum wage increases on employment outcomes are not as clear cut as some might suggest. There is likely to be agreement that, other things being equal, the state of the economy is an important moderator of outcomes: a minimum wage increase during a period of recession is likely to have a greater effect on unemployment than a minimum wage increase during a period of economic buoyancy.

61 In relation to the history of minimum wage movements in WA, Professor Plowman notes that the State tribunals made determinations in line with the AIRC’s determinations, which in turn were adjusted in line with general wage/earnings movements. As a result, the minimum wage in WA as a proportion of average weekly earnings is high by international standards: in Australia it is 58% of full-time median weekly earnings; in the United Kingdom it is 45% and in the United States of America 34%.

62 There are high estimated labour elasticities in Australia. For aggregate labour, the elasticities range from -0.4 to -0.9. For minimum-wage earners they range from -0.2 to -1.14 depending on time lags and type of employment. Professor Plowman estimates that about 2.2% of the WA workforce would be directly affected by a minimum wage adjustment. If account is taken of adjustments of other wages to maintain established relativities, Professor Plowman estimates that about 4% of the WA workforce could be affected in differing degrees. On that estimate, the 4% increase in the minimum wage in 2005 would have added approximately $518,450 to the total wages bill in a year when that wages bill amounted to nearly $41 million.

63 Professor Plowman notes the prime industries of concern for present purposes are retail, accommodation, cafes, restaurants and personal and other services. However, average employee earnings in each of these industries is well in excess of the minimum wage.

64 Professor Plowman then considers in detail the history of minimum wage movements in recent times with economic data applicable to WA. He concludes there has been little minimum wage effect on the economy as a whole and weak effects on those sectors with higher levels of low paid workers. Aggregate demand moderates, and to a considerable extent, any minimum wage effects. The minimum wage increases have had only minor effects on employment and do not seem to have affected employment levels of those aged 15 to 24. Nor has the minimum wage been shown to have had any influence over full-time employment; however there has been a minor effect on part time employment.

65 Minimum wages have had a negligible impact on the level of average weekly ordinary time earnings. Analysis of the evidence of the relationship between the CPI and minimum wage growth suggests that CPI is affecting the level of the minimum wage rather than vice versa. The minimum wage is irrelevant in considerations of major investment undertakings in the State. It is likely to have some unquantified effect on investment in the low paid sectors.

66 The Commission records its appreciation to Professor Plowman for the timely preparation of this Report. We consider Professor Plowman’s 1995 Report on the method of defining, determining and adjusting the minimum wage, and the paper he presented to the Commission for the 2003 State Wage Case, demonstrate his expertise in the application of the minimum wage and its economic effects in this State. His Report provides considerable assistance to the Commission in our consideration of the claim before us regarding the award minimum wage.

Consideration

67 The claim before the Commission is to increase the minimum wage prescribed in the awards of the Commission, and the wage rates and related allowances within those awards, by 4%. The increase is to be fully absorbable for any employer who currently pays in excess of those wages. The application does not, and cannot, apply to the statutory minimum wage under the Minimum Conditions of Employment Act, 1993 which applies to employees in this State who are not covered by the Commission’s awards.

Should We Adjourn to Await the AFPC?

68 The Commonwealth once again pressed the Commission to await the decision of the AFPC expected in the spring. On the first occasion the Commonwealth made this submission, it was to the effect that that the claim not be set down for hearing and the application be adjourned. The Commission ruled against that submission ((2006) 86 WAIG 408, 2006 WAIRC 03884 already referred to). On this occasion, the Commonwealth does not ask the Commission to delay the proceedings; it asks the Commission to hear the case but not deliver its decision until after the AFPC has made its determination.

69 Given our earlier ruling in this matter, the Commonwealth’s submission is surprising. We have already referred to the statutory obligations upon us. One of the principal objects of the Act in section 6(ca) is to provide a system of fair wages and conditions of employment. We are to do so for the employees and those employing them that are within the coverage of the Commission’s jurisdiction. Those employees and employers will not be affected by an eventual determination of the AFPC. We consider it is inconsistent with the Commission’s statutory duty, including the duty under section 22B of the Act to act with as much speed as the requirements of the Act and a proper consideration of the matter before it permit, to adjourn to an unspecified date in the future to await a determination which will have no direct effect upon the employees and their employers who remain within the Commission’s jurisdiction.

70 We reject the rather presumptuous written submission of the Commonwealth that for us to do as we are obliged to do under the Act would be a "leap in the dark". We note that the submission was effectively disowned in the Commonwealth’s oral submissions. We emphasise that it is not the role of the Commission in these proceedings, as the Commonwealth seems to suggest, to somehow anticipate some future determination of the AFPC.

71 We acknowledge the history of minimum wage fixation in this State which has followed the fixing of minimum wages by the AIRC in National Wage Decisions. Consistency between the State and federal minimum wages may be a desirable outcome. Consistency at this point in time when there has not been a change to the federal minimum wage since 2005 becomes problematic given the decision of the Commonwealth Parliament to fundamentally change the manner in which federal minimum wages are set. Whether the result of that change is something with which there can be consistency can only be a matter for the future, not the present.

72 The Commonwealth and the CCIWA each submit that if the Commission awards an increase from these proceedings prior to the decision of the AFPC, that may well place employers covered by the Commission’s decision at a competitive disadvantage compared to employers who are covered by the WRA. This is a very general concept which is highly dependent upon the individual firm’s circumstances: its geographical position relative to other firms, its product or products, the service it provides, the wages already being paid and the ability of any firm to either absorb or pass on the cost of increased wages paid to employees. There is no evidence of specific issues before the Commission in support of the Commonwealth’s general submission.

73 We observe here, as we did during the hearing, that inconsistencies between federal and State wage rates are not novel. They may occur over relatively short periods of time and consistency between State and federal wage rates, if thought desirable, may be achieved in the longer, rather than the shorter term. We also observe that the converse of the Commonwealth’s proposition is also true: for the Commission to adjourn until after the AFPC’s determination may create a competitive disadvantage for employers under the WRA who may be obliged to pay a higher rate than corresponding employers under the State jurisdiction until the Commission then issues a Decision in this matter. We consider the Commonwealth’s and CCIWA’s submissions place too little weight on the statutory obligations on the Commission and they are, again, rejected.

74 We also observe, as we did during the hearing, that the present inconsistent statutory framework of the Commission and the AFPC results from a decision of the Commonwealth Parliament. The State Parliament has not chosen to amend the Act to follow the Commonwealth’s changes. If there is to be any adjustment to the legislation, that is a matter for the State Parliament and not the Commission (Chamber of Commerce and Industry of WA v ALHMWU [2002] WASCA 24; (2002) 82 WAIG 405). It is not for this Commission to put itself in the place of the State Parliament.

Coverage of Commission’s Jurisdiction

75 The TLC, the State Minister, the Commonwealth and the CCIWA made submissions regarding the coverage of the Commission’s jurisdiction after Work Choices. The SJC supported the submissions of the TLC in this regard. We agree that it is important to clarify, so far as is possible at this point in time, the effect of any order to issue from these proceedings. In particular the submission made by Mr. Moon on behalf of CSBAWA submits that the situation presents a number of questions. To the extent possible, we attempt to answer those questions.

76 The amendments made by the Commonwealth Government to the WRA by its Work Choices legislation did not, and could not, amend the Act which creates and governs the operation of this Commission. This Commission’s obligations under section 50 of the Act in the claim before it therefore remain unchanged. Indeed, as CSBAWA itself recognises, the Commission still has its obligations to perform. Accordingly, any General Order to issue from these proceedings will vary all of the Commission’s awards.

77 For those employers who previously were covered by this Commission’s awards and who were not swept into the federal system by Work Choices on 27 March 2006, the effect of amending the Commission’s awards will be no different than it was prior to Work Choices. The State’s awards continue to apply to them as they did before.

78 For those employers who previously were covered by this Commission’s awards and who were swept into the federal system by Work Choices, the Commission’s awards were frozen in time as at 27 March 2006 and became "notional agreements" under Schedule 8 of the WRA. Any General Order to issue from these proceedings cannot, and will not, vary those "notional agreements".

79 Whether an employer is or is not affected by any General Order to issue from these proceedings does not depend upon the General Order. It depends upon whether the employer is an employer as defined in section 6 of the WRA. That involves a case by case examination of the circumstances of the employer. It cannot be decided on a general basis as part of these proceedings. For that reason, any General Order to issue from these proceedings will be in the usual form.

80 Each of the persons appearing addressed both the coverage of the Commission’s jurisdiction and the proportion of employees who are award-reliant and thus likely to be directly affected by any General Order to issue from these proceedings. Any analysis is necessarily subject to the outcome of the States’ challenges to the Work Choices legislation currently before the High Court. All persons relied upon the unpublished data from the Employee Earnings and Hours May 2004 Survey (ABS catalogue 6306.0) already referred to. That data shows that 46.6% of the State’s workforce was then employed in incorporated enterprises. Of the remaining 53.4% of the State’s workforce -
· 2% was employed by the Federal Government;
· 8.5% was employed by State Government corporations; and
· 2.9% was employed by local government.

This is a total of approximately 60% of the State’s workforce is likely to be covered by the WRA. We also find, as the Commonwealth conceded in the hearing, that Work Choices’ coverage Australia wide is 76.3% and its coverage in WA is as low as 60%. Therefore approximately 40% of the State’s workforce is not covered by Work Choices.

81 It is unknown what proportion of the 40% of employees and their employers who are not covered by Work Choices are presently covered by federal instruments for 5 years according to the WRA’s transitional provisions; they will remain so covered for 5 years before reverting to the State system unless the employer incorporates or becomes party to a State instrument before that time.

82 Ultimately, we find that the State system still covers employees in almost every industry sector in the State other than the mining, power and water supplies and communications sectors. Exhibit CG1 submitted by the Commonwealth and which appears hereunder is illustrative of the position in relation to employees most directly affected by this application:
Table: Western Australian industries with a high number of award-reliant employees, May 2004.

Number of employees award-reliant
('000)
Rank according to number of employees award- reliant
Percentage of employees award-reliant
(%)
Proportion of award-reliant employees In unincorporated enterprises (%)
Number of award-reliant employees in unincorporated enterprises
('000)
Retail trade
20.7
1
20.1
59.5
12.3
Accommodation, cafes and restaurants
19.5
2
48.4
78.7
15.4
Hearth and community services
13.9
3
15.1
93.3
12.9
Manufacturing
9.6
4
12.3
28.0
2.7
Personal and other services
8.0
5
20.6
76.0
6.1
Education
5.2
6
6.9
82.4
4.3
Property and business services
4.4
7
4.8
36.8
1.6
Transport and storage
3.8
8
16.6
0.0
0.0
Cultural and recreational services
3.1
9
17.5
50.0
1.5
Construction
2.8
10
6.1
58.3
1.6
Wholesale trade
2.2
11
6.8
67.9
1.5
Government administration and defence
0.4
12
1.0
0.0
0.0
Mining
0.2
13
0.8
0.0
0.0
Electricity gas and water
0.1
14
1.4
0.0
0.0
Communication services
n.p
n.p
n.p
n.p
n.p
Finance and insurance
n.p
n.p
n.p
n.p
n.p
All Industries
93.7

12.6
64.0
60.0

Source: ABS Employee Earnings and Hours (Cat No 6306.0), May 2004, unpublished data. Note that these data are a combination of data from
tables 3.2 and 3.3 from the Commonwealth’s submission

83 These figures are accepted to be the best presently available. They do not dis-aggregate the government administration and defence sector which necessarily contains employees employed by the Federal Government, State Government, State Government corporations and local government. Our conclusions do not deal with whether all or any State Government corporations are constitutional corporations nor whether every local government body is a constitutional corporation. We accept that in many cases, local government bodies are presently likely to be parties to federal instruments.

84 The conclusion that can be drawn for present purposes is that there are many State awards operating across an extensive range of industries which will need to be varied on a regular basis to maintain their currency to ensure that the State system provides a viable safety net for employees who remain in it and certainty for their employers.
Percentage or Flat Increase

85 The claim before us seeks a percentage increase in order to avoid any further compression of relativities which has occurred from a succession of past flat dollar safety net increases. The last occasion which the AIRC and this Commission awarded a percentage increase as opposed to a general flat amount increase was in 1991. Its reasons for doing so were as follows:
“In the February 1989 Review decision (endorsed in the August 1989 National Wage Case decision), the Commission said that:
"… minimum rates awards will be reviewed to ensure that classification rates and supplementary payments in an award bear a proper relationship to classification rates and supplementary payments in other minimum rates awards." In many awards, this facet of restructuring has not even commenced; in others, it is incomplete. The process has involved establishing specific relativities, defined in percentage terms, between classifications within awards and aligning classifications across awards. Without denying the possibility of redefining the vertical relativities in consequence of granting flat rate increases, we are reluctant to introduce this complication while the exercise is incomplete. More generally, we are concerned that considerations of cost, if accepted as a ground for flat rate increases, will very frequently cause a compression of relativities and that such a compression will create strong pressures for corrective increases. We acknowledge that flat rate increases have been granted in the past, but we have misgivings about the repetition of that approach particularly given the course set by the August 1989 National Wage Case Decision.

Further reason for the approach adopted in relation to minimum rates and supplementary payments was the benefit to low wage and salary earners who suffered from inequities "due to the level of their award rates and their lack of substantial overaward payments". (52) That process is delivering substantial increases to low paid workers and is preferable to flat rate increases as a method of assisting them. ”

86 From 1991 to 1996 there were six flat money adjustments to award rates generally. In 1997 the AIRC considered whether to award a further flat increase. On that occasion it was submitted by the Commonwealth Government and State Governments that joined them that internal award relativities were no longer an important part of the award system. The AIRC disagreed. In its August 1997 decision in Print P1977 it held:
“Such relativities remain an important determinant of the fairness of the minimum wage structure within awards. How can award rates be fair if they do not properly reflect the relative skills, responsibilities, etc of jobs covered by the award? If an award system has to be fair, then it is no answer, as the Joint Governments suggest, to leave it to workplace agreements to establish appropriate relativities. The point is stronger when one considers that it is common for workplace agreements to build uniform percentage increases on to the established award rates. Furthermore, the provision of skill-based career structures in awards is a significant way in which employees are encouraged to improve their skills, contribute to higher productivity and advance to higher wages.
We agree with the Joint Employers who submitted that the shift to competency-based classification structures in awards, which commenced with the August 1989 National Wage Case decision (the August 1989 decision) [7 August 1989; Print H9100], has generally operated successfully and has been regarded as important by the award parties. We also agree with their submission that the 18 month interim period provided by Schedule 5 of the WROLA Act will give parties the opportunity to consider the manner in which they wish to maintain viable award career structures having regard to the new Act. Further, the matter of relativities may be the subject of consideration by the Commission as a result of applications already filed by employers requesting the Commission, pursuant to s.106 of the new Act, to determine principles in respect of allowable award matters.
Given our views on skill-based classification structures reflecting proper relativities, we would have preferred to grant a percentage increase throughout the award structures, thereby maintaining existing relativities. However, given the need to limit the addition to AWOTE - for the reasons elsewhere discussed - and weighing the competing needs of the low paid and the desirability of relativity preservation, we have chosen to give priority to the former.
We add two further points in relation to relativities. First, because of our concern about the disturbance of relativities throughout the structure, we have awarded the $10 per week increase to all award classifications rather than adopt the arbitrary cut-off of AWOTE, as proposed by the Joint Governments. Second, what is said about the deterioration in the position of employees at the lower end of award structures, relative to movements in agreements, inflation and productivity, applies with even greater force at the higher end of award structures.”

87 In 1998 the AIRC again considered the importance of internal relativities in its April 1998 decision. On that occasion it awarded three flat dollar amounts of $14.00, $12.00 and $10.00 a week. The low paid received the highest amounts. When delivering its decision the AIRC observed:
“As on earlier occasions, we are concerned about the effect of flat rate increases on award wage relativities. In 1989 the Commission introduced the Minimum Rates Adjustment principle in an attempt to correct inequities in the wages system because of the potential for those inequities to cause industrial disputation and instability. That Principle was concerned primarily with relativities across awards at the key classification level but also with vertical relativities. The resulting relativity levels were widely adopted in minimum rates awards. Flat increases tend to distort vertical relativities. The distortion is greater if the flat increase does not apply above a certain level. All of the parties advocating an increase in the safety net in these proceedings sought a flat increase. In addition a percentage increase, whilst preserving relativities, necessarily maintains the relative position of those at the lower end of the award hierarchy. Flat increases reduce the relativities in percentage terms. There will often be a tension between the maintenance of relativities and addressing the needs of employees at the lower award levels. The approach we have adopted on this occasion is deliberately designed to give a greater increase to award employees at the lower levels, whilst not neglecting the interests of those at the higher levels who also receive no payments other than those prescribed in the award. We have taken the question of relativities into account in formulating the adjustment on this occasion. The tapering of the adjustment at two points in the scale has an effect on relativities which is almost the same as the effect which would result if the $20.60 component of the ACTU claim was granted in full. We add that the maintenance of vertical relativities is a significant reason for our decision to reject the Joint Governments' proposal that any increase awarded only apply to employees classified at or below the C10 rate in the Metal Industry Award.”

88 In 1999, the AIRC dealt with the submission that an adjustment should only apply to employees classified at or below the C10 rate in the Metal Industry Award. It also dealt with ACTU’s claim which sought a percentage adjustment 5% of award rates above $527.80 per week. On that occasion it determined it should award a flat money increase rather than a percentage increase on the basis it would provide proportionately greater assistance to the low paid. The AIRC stated (Print R1999):
“In previous cases the Commission has drawn attention to the requirement that rates prescribed in awards be fair, to the importance of internal relativities between classification levels and to the need to provide increases for employees who, although employed at the higher levels, are dependent upon safety net increases for increases in pay. Each of these factors, on its own, favours an increase at all levels. Furthermore, we do not accept the Joint Governments' submission that the current legislative framework compels the conclusion that employees on higher award classification rates should generally not be eligible for award safety net increases. In all of the circumstances the approach we have adopted, both the amounts and the form of the increases, strikes the right balance between the competing equity and cost considerations which the parties have drawn to our attention in their submissions.”

89 In May 2000, the AIRC considered the issue again. In its decision in Print S5000 the AIRC considered what it had said in its decisions in 1997, 1998 and in 1999 and observed at paragraphs [118] and [119]:
“[118] The last occasion on which the Commission awarded a percentage adjustment to award rates generally was in the April 1991 National Wage Case.31 Since that time there have been six adjustments to award rates generally which have been in flat money amounts. Relativities have been compressed further by the tapering of the amount of the increase at the higher levels in 1998 and 1999. As a consequence the rate of increase in award rates at the lower levels has continually exceeded the rate at the higher levels. Each of these decisions has given priority to the needs of the low paid and in relative terms the low paid have benefited significantly from this approach. We have decided to maintain the approach of granting a flat dollar increase on this occasion. We indicate now, however, that on the next occasion that award rates are reviewed we shall expect to be addressed on whether a return to percentage adjustment is appropriate to ensure that the award system provides fair wages for employees paid at the middle and upper award classification levels. A proper examination of that question will necessarily include an assessment of whether the reasons for percentage adjustments contained in the extract from the April 1997 decision which we have set out remain valid.
[119] In light of these considerations we turn to examine once again the Joint Coalition Governments' proposal that there should be no increase in award rates above the C10 level in the Metal Industry Award. The Joint Coalition Governments' support for a cap at that level rests primarily on their interpretation of the Act "particularly the intended role of the award system as a genuine minimum safety net protecting the low paid and the Act's emphasis on the Commission's role in encouraging the spread of agreement making." They also submit that the introduction of a cap will moderate the increases in aggregate wage costs and produce better distributional outcomes. In its April 1999 decision the Commission decided that the legislative framework does not compel the conclusion that employees on higher award classification rates should generally not be eligible for award safety net increases. Having reviewed the arguments on this occasion we see no reason for a different conclusion now. Furthermore, whilst it would be open to us to introduce a cap, we do not think it would be desirable to do so having regard to the internal relativity issues to which we have just drawn attention and our conclusion that growth in enterprise bargaining has not been materially inhibited by the application of safety net increases to all award rates. Whilst a cap would be likely to lead to a lower rate of growth in aggregate earnings the amount we intend to award is justifiable and, in the current economic environment, unlikely to lead to excessive growth in earnings overall. In relation to distributional outcomes, as we indicate elsewhere we are reluctant to place much reliance on the household income data presented to us.”

90 All of the major parties made submissions on this issue in 2001. In its decision in May 2001 (Print PR002001) the AIRC dealt extensively with those submissions at paragraphs [130] to [139] and awarded three incremental flat dollar amounts.

91 This matter was last considered by the AIRC in May 2002. On that occasion the ACTU sought again a flat dollar increase and said that the Commission should not pay any regard to the fact that the implementation of its claim would compress relativities further. In particular the ACTU contended that the ongoing relevance of middle and upper case classification rates of pay needed a comprehensive response not a piecemeal solution and the ACTU signalled its intention to ensure that proper skilled based classification structures are not allowed to wither on the vine but are addressed in a responsible and economically sustainable way consistent with the requirements of the WRA. Further they said that the matter would not be agitated in the National Wage Case which can focus on delivering a decent increase for the lower paid. The Commission noted the ACTU submissions in their decision at [156] in PR002002 and reiterated what they said in their decisions in September 1994 [Print L5300] and October 1995 [Print M5600] that the Commission would not grant applications to restore pre-existing relativities on the basis that such relativities have been compressed by the granting of flat dollar arbitrated Safety Net Adjustments.

92 This is the first occasion this Commission has been called upon to consider awarding arbitrated Safety Net Adjustments without after having first considered a National Wage Decision whereby pursuant to section 51(2)(a) of the Act, the Commission unless it determines there are good reasons not to, must make a General Order to adjust by the amount of any change in the rate of wages under the national wage decision. Consequently until 2006 this Commission in a sense "inherited" the statutory framework of the WRA when it made a General Order to adjust wages under section 51. On this occasion the Commission is not so constrained. It must act according to its own statutory framework including the principal objects of the Act.

93 Unlike the AIRC under the now repealed section 88B(2) of the WRA this Commission when adjusting the safety net is not by statute expressly required to have regard to the specific requirements of fair minimum standards for employees in the context of living standards generally prevailing in the Australian community; economic factors, including levels of productivity and inflation and the desirability of attaining a high level of employment and the needs of the low paid. Whilst this Commission’s statutory considerations could be said to encompass such matters, the matters this Commission is required to consider pursuant to section 26(1) are much broader in scope.

94 Whilst the Commission is not expressly required to pay regard to the needs of the low paid, we are of the opinion that such a consideration is implied as a matter the Commission can consider within the scope of the principal object in section 6(ca), in section 26(1)(a) and the opening words of section 26(1)(c) where such a consideration is raised on the evidence before it. In this matter the Commission has before it a substantial amount of cogent and uncontradicted evidence that supports the submission that the Commission should take into account the needs of the low paid and that they will be disadvantaged if they are not awarded a pay increase which will assist them to keep up with increases in the cost of living. We are of the opinion that in awarding an increase on this occasion that the increase we grant should assist the low paid to do so.

95 Although the evidence before us clearly shows that relativities between classifications in the Metal Trades (General) Award 1966 have compressed as a result of flat dollar arbitrated Safety Net Adjustments, there is no evidence or submission before us that compression of wage rates since 1991 has eroded skill based career paths in awards or had any other detrimental effect at the industry or workplace level. If any party wishes in the future to address this issue it is open for them to do so in an application relating to a specific award under section 40 of the Act or for parties or those granted the right to be heard to raise it in any future proceedings for an adjustment of award safety net rates of pay. Whilst we note what the AIRC said in September 1994 and in October 1995 about not granting applications to restore pre-existing relativities on the basis that such relativities have been compressed by flat dollar increases we do not consider this Commission is necessarily bound to follow the decisions of the AIRC in respect of this issue.

96 We take into account also the evidence of Ms Cusworth in response to a question from Mr Cox: a flat rate increase ensures one is targeting the biggest proportional increase for those who are the key target of applying the minimum wage. A percentage increase will obviously flow through to higher levels and that potentially will affect more people. It will increase the labour costs arising from the decision by a little bit more than it otherwise would. A flat rate increase achieves the best outcome in terms of targeting those people who will benefit most from the decision. The more broadly based the increases are and the further up the pay scale they stretch, the more is the likelihood of seeing a slightly larger effect on employment and inflation.

97 The increase we propose will therefore be a flat dollar amount. We consider that where compression in relativities in particular awards have been a cause for concern, this can be addressed by an individual award variation application pursuant to s. 40 of the Act.

The Claim - Statutory Obligations

98 When considering the claim before us, the Commission is to take into account the matters set out in section 26(1)(d) of the Act to the extent that those matters are relevant. We now do so.

The State of the National Economy

99 We note that over the year to March 2006, real Gross Domestic Product ("real GDP") in Australia rose by 3.1% seasonally adjusted. Over the past five years, real GDP has risen by an average of 3.1% per annum. Nationally, domestic demand increased by 0.8% between the December and March quarters of 2006. In the past five years national demand has grown at an average rate of 4.6% per annum. Real business investment increased by 1.1% between the December and March quarters 2006. Over the year to March 2006 business investment increased by 20.4%. Australia’s Current Account Balance improved by $331 million between the December and March quarters 2006 to a deficit of $14.0 billion. This is an improvement compared with one year ago when the account was in deficit by $15.3 billion.

100 The CPI increased by 0.9% between the December and March quarters of 2006; over the year to March 2006, the CPI rose by 3%. The prices of goods produced in the manufacturing sector at all stages of production increased over the year to March 2006. The prices of preliminary commodities increased by 8.6% over the year while the prices of commodities at the intermediate stages of production rose by 6.9%; prices of commodities at the final stages of production were up by 3.8%. We also note that from 3 May 2006 the Reserve Bank of Australia increased the official cash rate from 5.5% to 5.75%, being the first rate rise since March 2005. This rate is at its highest level since March 2001.

101 Average Weekly Ordinary Time Earnings increased by 0.9% to $1,035.80 between November and February 2006, up by 4.5% over the year to February 2006. The Labour Price Index ("LPI") increased by 0.9% between the December and March quarters of 2006 and over the year is up by 3.9%. Over the year to April 2006, retail sales across Australia are up by 7.4%.

102 The unemployment rate decreased from 5.1% to 4.9% between March and April 2006. Employment is up by 1.7% over the year to May; full time employment is up by 1.8% over this period while part time employment is up by 1.4%.

103 We were referred to the Commonwealth Treasury’s Mid-Year Economic and Fiscal Outlook for 2005-06. The forecasts continue to paint a positive picture for the Australian economy over the near future. We do not reproduce here the mid-year economic and fiscal outlook forecasts in detail but note the information provided. The Australian economy is forecast to grow 3% in 2005-06. Gross Domestic Product is forecast to grow by 3%. Private Consumption is expected to slow to 2.25% in 2005-06 and 2006-07 due to increases in petrol prices, debt servicing ratios and lower growth in household wealth. The recent strength in business investment is to continue. Expected new Capital Expenditure is 17.6% higher than that reported a year earlier indicating business confidence in the continuing strength of the economy. Employment is expected to slow to 2% during 2005-06 and unemployment is expected to remain around 5.25%. Despite increases in oil prices, CPI is forecast to increase by 3% in the year during 2005-06 and 2.5% in 2006-07.

The State of the Economy of Western Australia

104 We accept Ms Cusworth’s evidence that WA is significantly different from the rest of the country in terms of its industrial structure and its focus on commodities. The very favourable international environment has resulted in commodity prices climbing to record highs; it is an almost unprecedented favourable environment in terms of WA’s export industries, particularly mineral commodity export industries.

105 We note that in Perth, the CPI increased by 1% between the December and March quarters 2006, leading to an increase over the year to that date of 4.2%; the highest increase related to housing and prices for clothing and footwear fell by 3.5%. Average Weekly Ordinary Time Earnings increased by 1.3% to $1,070.40 between November and February 2006, up by 5.9% over the year to February 2006. Over the year to April 2006 retail sales in WA are up by 8.9%.

106 The WA Treasury’s forecasts for the future are that conditions in the State’s labour market are forecast to remain tight. Employment is forecast to grow by 2% in 2006-07 which is less than 4.5% expected in 2005-06 due to labour supply constraints.

107 We accept the relative merits of the WPI compared to Average Weekly Earnings. Although the WPI has recently recorded the highest level since its inception in terms of growth in WA’s wages it has not been quite so dramatically inflationary. Ms Cusworth presented the WPI by industry for the year to December 2005. She noted the significant increase in the construction, mining and manufacturing sectors. The increases also occurred in retail trade (3.6%), accommodation, cafes and restaurants (2.9%), transport and storage (4%), health and community services (4.1%) and personal and other services (3.8%). The State’s WPI is forecast to increase by 4.5% in 2005-06 and 4.25% in 2006-07. Wages growth is expected to ease to 3.5% in 2007-08.

108 Economic forecasts expect WA to record significantly stronger growth than for the rest of Australia. Gross State Product growth will exceed 5% in 2006-07 and exceed the national average through to 2009-10. The State’s rate of inflation will be the highest for about a decade. House price growth is likely to slow although WA’s inflation rate will be ahead of the national average.

109 The contribution of business investment to the WA economy has been significantly higher than the contribution to the rest of Australia. While it can be true that over the short term different growth rates do prevail in different parts of the economy, there are some general benefits from the strong levels of industrial activity flowing through into other sectors. There has been a strong and accelerating growth in the level of retail sales in WA where nationally there has been something of a deceleration in the rate of growth of retail spending. There has been a resumption of very strong growth in the housing market. The level of approvals for new residential building activity shows a most markedly upward trend in its housing sector with that trend moving downwards in the rest of Australia. There is a very large backlog of engineering and industrial work yet to be done.

110 Ms Cusworth described the participation rate as rising to a level unprecedented in terms of the current data series which began in 1978 but is probably the highest ever participation rate in WA achieved in 2005. Supply constraint issues of labour are likely to result in a slowing of employment growth quite markedly in 2006-07.

111 We note that Western Australia’s unemployment rate decreased from 3.8% to 3.5% between April and May 2006. The State’s unemployment rate stood at 4.6% one year earlier. Employment in WA is up by 2.0% over the year to May 2006. Full time employment is up by 1.7% while part time employment is up by 2.7%. The unemployment rate is expected to come down to 4.25% average for 2005-06 and 2006-07 before edging up marginally to 4.75%.

112 Ms Cusworth examined the breakdown of the unemployment rate in WA by duration of unemployment. As the overall unemployment rate has trended downwards, there has also been a very marked decline in the proportion of the unemployed who are long-term unemployed. In contrast there has been very little movement in the proportion of unemployed who have been unemployed for less than thirteen weeks. We agree with Ms Cusworth’s suggestion that the constant proportion of under-thirteen week unemployed reflects frictional unemployment that would be expected no matter how strong is the labour market.

113 Similarly there has been a decline in the proportion of people who are underemployed and that too suggests that the labour market is currently so strong that people who have traditionally been seen as marginal or who find it difficult to find employment have found employment. There has been an increase in labour force participation across the age groups but most markedly for the 15-19, 20-24 and 60-64 age groups.

114 Ms Cusworth also spoke about the crude oil price acceleration not having had a massive effect on overall aggregate inflation levels. WPIs by stage of production show that there has been generally a much larger increase in businesses’ input costs than in their output costs, which suggests that presently businesses are not passing on all oil price increases in the prices of their own products. However, if the price of oil increases in the future in the same manner as the increase of the past three years, Ms Cusworth considers there is a very real chance that will start to show up in its direct impact on household budgets and also as businesses start to flow on the effect of those cost increases. In relation to interest rates, Ms Cusworth commented that most commentators are suggesting the last increase will not be the last this year but there are not likely to be rapid or marked increases in interest rates compared to history.

Capacity of Employers as a Whole or of an Individual to Pay

115 The TLC submits that the cost of its claim of a 4% increase to minimum and award wages and allowances will have a negligible impact on Western Australia’s economy. Specifically, the TLC submits that if its claim is granted in full it will have a net impact on aggregate wages in WA of around 0.04%, a maximum addition to total ordinary time earnings in WA of 0.16% and a 0.02% impact on the CPI.

116 The cost of the TLC’s claim was calculated using unpublished ABS data relating to the ordinary time earnings of Western Australian award employees employed by private sector unincorporated businesses (catalogue 6306.0). The methodology used by the TLC took into account the impact of the increase on full-time, part-time, permanent, casual, adult and junior employees and the calculations factored in wage movements arising from State Wage Case increases in 2004 and 2005 (see TLC submissions Pages 62-65, Tables 7.1 to 7.5 and Tab 8).

117 The TLC argues that its costings are an over-estimation of the impact of the proposed increase because it did not take into account a range of factors in its calculations which the Australian Council of Trade Unions ("ACTU") has included in its calculations in previous National Wage Cases when using the same formula: the TLC has not factored in the non-compliance with the payment of the increase and its costings assume that 100% of eligible employees will receive the proposed increase with immediate effect.

118 The State Minister did not cost the TLC’s claim or its own counter-claim of an increase of $20.00 per week to minimum and award wage rates. The State Minister stated that its counter-claim results in a 4.1% increase to the minimum adult award wage and a 3.5% increase to the C10 (tradespersons) rate in the Metal Trades (General) Award 1966. The Minister submitted that a $20.00 increase to award wages is likely to have a negligible effect on either the Western Australian or national economies and in support of this contention the Minister relied on data relevant to the state of the Western Australian and Australian economies and the evidence of Ms Cusworth to which we have already referred. The State Minister also argues that for most award classifications a $20.00 per week wage increase would amount to an increase which is less than the current annual inflation rate for Perth of 4% and the Minister contends that a wage increase of this magnitude is moderate in the current economic climate.

119 The Commonwealth did not cost the TLC’s claim but argues that the costings provided by the TLC are of no use to the Commission in determining the impact of the TLC’s claim as these costings were made in relation to the impact of its proposed wage increases on aggregate wages and CPI. As the increases claimed by the TLC will impact on only a specific section of the Western Australian labour market, that is employees employed by unincorporated enterprises within the Commission’s jurisdiction who are award-reliant, the Commonwealth argues that material should have been provided about the impact of these increases in these specific sections of the Western Australian labour market.

120 The CCIWA did not present any costings of the TLC’s claim. The CCIWA acknowledges the current buoyancy of the Western Australian and Australian economies, but argues that the industries most likely to be affected by the Commission’s decision, that is Education, Accommodation, Cafes and Restaurants and Personal and Other Services have recently suffered negative employment growth and the Commission should therefore proceed with caution if it proposes to award a wage increase. The CCIWA had also submitted that any increase in minimum wages may have a significant effect on employment opportunities for young people. In this regard the CCIWA referred to one study referred to in the State Minister’s written submissions.

121 We have already referred to the Report of Professor Plowman. We note again his conclusion that during the period 1990 to 2005 there has been little minimum wage effect on the economy as a whole and weak effects on those sectors with higher levels of low paid workers. As Mr Jones correctly observed, part of Ms Cusworth’s presentation showed rolling annual average employment growth by industry in WA for the year to February 2006. Some industries showing marked employment growth are agriculture, mining, construction, government administration and defence and culture and recreation. Industries showing a negative growth were personal and other services, wholesale trade, and finance and insurance.

122 Professor Plowman reviewed employment data in three sectors where a relatively high proportion of employees come under the Commission’s jurisdiction – Retail, Accommodation, Cafes and Restaurants (ACR) and Personal and Other Services (POS). Award-only employees predominate in these sectors and they are areas which have been identified as having a relatively large number of minimum wage employees. He concluded that the minimum wage has had little effect on employment in general in these sectors but has impacted in small measure on employment in vulnerable sectors and in the main that impact has affected part-time rather than full-time employment.

123 Professor Plowman found that in the period 1990 to 2006 total employment grew in the Retail sector by 34%, in the ACR sector total employment grew more modestly and from a lower base, that is 24% and in the POS sector total employment increased by 51%. Professor Plowman stated that growth in each sector had not been even and employment in each sector peaked in 2002 before declining and then increasing to present levels. Professor Plowman found that in these sectors there is a moderate correlation between unemployment in the 15-24 year old age group and found that there is a moderate correlation between employment in the POS sector and minimum wage increases, in the Retail sector there is a moderate correlation between full-time employment and minimum wage movements and in the ACR sector there is a very weak to modest correlation between employment types and movements in the minimum wage. We conclude from the evidence overall that negative employment growth is unlikely to have been the result of past minimum wage increases.

124 We accept the integrity of the costing analysis put before us. We are assisted in reaching that conclusion by the acknowledgement by the AIRC in previous National Wage Cases that cost estimates of the impact of the ACTU’s claim provided to it by various parties to the proceedings are not perfect but provide guidance to the Commission when reaching conclusions about the cost of the ACTU’s claims. In the 2002, 2003 and 2004 National Wage Reviews the AIRC assessed the actual increases to aggregate labour costs as being similar to the ACTU’s costings and in 2005 the AIRC determined that the true gross impact of the ACTU’s claim on aggregate wage costs was likely to be more than the ACTU’s costings but less than the amount estimated by the Australian Chamber of Commerce and Industry.

125 There was no evidence presented to the Commission in Court Session questioning the TLC’s estimates about the impact of its claim on the earnings of award employees employed by private sector unincorporated businesses in Western Australia in relation to aggregate wages, ordinary time earnings and CPI. Having considered the methodology used by the TLC and taking into account that this methodology has been used by the ACTU and in the main accepted by the AIRC in previous National Wage Reviews as a useful guide when assessing the cost of a wage claim of this nature we are of the view that the TLC’s costing are a reasonably accurate assessment of the impact of its claim.

126 The Commission has before it the Gross Operating Surplus ("GOS") and Gross Mixed Income ("GMI") by industry for WA (Exhibit SG2). The TLC’s submission is that in the accommodation cafes and restaurants, retail and health and community services sectors the GOS and GMI for the financial year 2004-05 indicate profits were 14.7%, 8.3% and 5.7% respectively. These figures, whilst understood to be the most accurate available, are to be treated with caution, as the evidence of Ms Cusworth revealed.

127 We note the submission of Mr Jones that the GOS and GMI data are too general and unreliable to allow a firm conclusion regarding the capacity of employers in the accommodation, cafes and restaurants and personal and other services sectors to pay the cost of the increase. We accept the generality of the GOS and GMI data. We consider it relevant to point out that the sectors identified by Mr Jones have been directly affected by the Commission’s previous safety net increases. On those previous occasions there has not been the detailed data which Mr Jones observes is absent on this occasion. We see no greater need on this occasion for that data than on previous occasions. The economic data before the Commission as a whole permits us to reach a conclusion consistent with our obligations under the Act as the Commission has done on previous occasions.

128 Further, on the evidence in this case, there is no suggestion of an incapacity to pay generally in those sectors which could displace the more general evidence from the GOS and GMI data before us. We acknowledge that at any given point in time, there will be firms for which any increase in wages or salaries may be economically unsupportable. The Incapacity to Pay Principle previously adopted by this Commission recognises that circumstance. A firm’s circumstances however, on the economic data before us, are likely to result from a range of economic factors and those factors as we have referred to already, suggest that the incidence of incapacity to pay in the state of the economy at present is likely to be low. We are influenced in his conclusion by the findings of the Plowman Report which we have referred to above.

The Likely Effects of the Decision on the National and State Economies

129 We note that the claim made by the TLC is an amount less than the WPI and less than the CPI for the year just ending. Ms Cusworth stated in relation to such a claim that an increase in the minimum wage which differed very substantially from the underlying rate of inflation would adjust either upwards or downwards the real rate and that might have a significant impact on employers’ capacities to pay. We take this into account.

130 The extent to which an increase in the real rate might generate unemployment is going to depend on a very wide range of factors, including the condition of the labour market when the increase is applied and the extent of the increase which is applied as well. While nobody would ever argue that the increase to the minimum wage had no effect whatsoever in every circumstance, Ms Cusworth considered that given the current labour market there are other factors which are likely more significant by far in determining both employment and wage trends. There are very substantial changes happening pretty much all of the time in terms of relative employment by industry which are being driven by a number of factors of which minimum wages is only one. The likely impact of an increase in minimum wages in the context of the present economy is almost negligible compared to the other factors which are influencing current labour market conditions.

131 The evidence of Ms Cusworth makes plain that the effect of awarding a $20.00 increase to be made in this matter will be economically insignificant to the national and State economies. We accept that evidence and consider it apparent from the evidence as a whole before the Commission that the decision in this matter, is likely to be "swamped" by the State’s economic growth to come.

132 We have also been considerably assisted here too by the Plowman Report. The Report focuses particularly on the effects of past minimum wage adjustments on the WA economy. Professor Plowman’s research concerns the statutory minimum wage. As he observes, from August 2002 the increase in the statutory minimum wage has not differed from the award minimum wage. Prior to 2002, State award minimum wage and award wage rates increased by decisions of the Commission although not necessarily at the same time as increases to the statutory minimum wage may have occurred. We note for the reasons given by Professor Plowman that in the period 1990-2005 there appears to have been little minimum wage effect on the economy as a whole and weak effects on those sectors with higher levels of low paid workers. The State’s economic growth moderates, perhaps to a considerable extent, any minimum wage effects.

133 We note that any decision we make will be fully absorbable into wage rates already above the award minimum prescribed. The Plowman Report observes that research shows that average employee earnings in the retail, accommodation, cafes, restaurants and personal and other services is well in excess of the minimum wage.

134 Further, the Plowman Report supports the view that minimum wage increases have had only minor effects on employment including in the 15-24 age group, a group considered vulnerable to minimum wage changes in the economic literature. There may have been a minor effect on part time employment.

135 In relation to the rate of inflation, minimum wage increases have had a negligible impact on the level of Average Weekly Ordinary Time Earnings. Further, any relationship between the CPI and minimum wages growth supports the suggestion that CPI affects the level of the minimum wage rather than vice versa.

136 On the evidence before us, the likely effect of the decision on the State and national economies is likely to be insignificant as is the effect on employment, unemployment and inflation.

Any Changes in Productivity that Occurred or are Likely to Occur

137 We note the data from the TLC submission showing that real unit labour costs have decreased by 2.1% to the year ending September 2005 and the submission that the decline in real unit labour costs means that productivity is growing faster than real labour costs. We also have considered the submission of the State Minister that the majority of award-reliant employees who stand to receive a benefit from this matter are employed in service industries where there is less scope for achieving significant productivity gains. In service orientated industries, measures of labour productivity traditionally based on physical output and hours worked may not be the most reliable or relevant indicators.

138 On the information before us we are unable to draw a specific conclusion regarding the changes in productivity which have occurred other than from the data as submitted by the TLC. From that general proposition we consider there has been a marginal increase in productivity although generalised and not arising from changes in particular sectors of industry.

The Need to Facilitate the Efficient Organisation of Performance of Work

139 We do not consider our decision in this matter will have a negative effect upon this consideration.


The Need to Encourage Employers, Employees and Organisations to Reach Agreements Appropriate to the Needs of Enterprises and the Employees in those Enterprises

140 The need to encourage employers, employees and organisations to reach agreements is fundamental to the present wages system. We note the material before us regarding the number of enterprise agreements registered and conclude that previous safety net increases have not caused a decline in the registration of enterprise agreements. We recognise that the renewal of those agreements is cyclical once they have been registered.

141 We also recognise that there are those in the community who have little or no bargaining power. In this regard, the evidence of Ms Miller was of considerable assistance to the Commission. We consider it within our knowledge of industrial matters to recognise that there necessarily are those employees who depend upon proceedings such as these in order to maintain their wage levels in real terms. Ms Miller identifies these as including people from recent migrant communities with language difficulties and single parent families. We do not consider that the order we propose to make will discourage employers, employees and organisations to reach agreements appropriate to the needs of enterprises and the employees in those enterprises.

Conclusions

142 We are conscious that this is the first occasion for twenty-five years when we are asked to increase the award minimum wage and associated wage rates in the absence of a national wage decision. We take into account the fact that the minimum wage being received in WA by employees who are covered by the WRA and its transitional provisions is $484.40. The knowledge that that rate may change at some point in the not too-distant future does not provide any basis for us not to do our duty and to do so with as much speed as the requirements of the Act and a proper consideration of the matter before it permit. We also note, by way of judicial notice, that the minimum wages paid in other States’ jurisdictions is $484.40; and we take into account the submissions made to us that other State tribunals are similarly in the process of dealing with claims similar, if not the same, to the claim before us, in advance of any federal minimum wage determination which may issue.

143 We consider we have ample evidence and material before us to enquire into and deal with the claim. We have taken the step of inviting submissions either in writing, by e-mail or in person from the community. We have found the material presented to us more than adequately provides us with the information we need to make a reasoned and considered decision. We do not accept the submission of the Commonwealth and the CCIWA that we are to have regard principally to the accommodation, cafes and restaurants, personal and other services and education sectors. As we have indicated above, we find that the Commission’s jurisdiction extends into most of the industries in the State other than mining and communication and power generation. While the extent of that coverage is not able to be determined with precision on the data presently available, any order which issues from these proceedings will affect a wide range of industries. It will apply only to those employees in the State system whose employment is governed by an award and who is paid the minimum rate in that award. This is approximately only 8.05% of the State’s workforce. Many of these are likely to be in small business.

144 We note that other than for the submission of Mr Dale, no other person who made a submission to us opposed outright the granting of a minimum wage increase. We consider that Mr Dale’s objections go more to issues with the system of employment and remuneration generally; and raise issues much broader than can be dealt with in this application.

145 Rather, the submissions opposing the TLC’s claim were directed principally to a submission that we should delay our decision. We do not consider this submission valid. We note that some twelve months have passed since the last general wage adjustment in WA. The Commission has historically supported in principle the maintenance of real wages over time to the extent possible. On some occasions, complete maintenance of the real wage is not achievable, at least in the short term. Even during the time of automatic wage indexation between 1975 and 1981 the absolute maintenance of the real wage over that period of time was not achievable.

146 Whenever the Commission is requested to amend award rates generally it will necessarily be cautious in doing so. Notwithstanding the economic information before us showing unprecedented levels of growth for a sustained period of time, together with positive economic forecasts for the foreseeable future, there will be businesses on the margin of profitability for which any increase in award wage levels may cause financial difficulty. The Commission has maintained the capacity to give relief in specified circumstances through the incapacity-to-pay State Wage Principle. We do so again on this occasion.

147 Also, we share the concerns that a sustained increase in oil prices may increase the cost of fuel beyond the capacity of business to absorb it; it could put pressure on prices and interest rates and decrease profitability and production. A weakening in commodity prices may lead to a consequent decline in the growth of the State’s commodity-focused economy.

148 However, we are satisfied from the evidence before us that there are employees now who are unable to bargain for wage increases based upon either maintaining the purchasing power of their wages or assisting in changes in the workplace to make enterprises more productive. We reaffirm that enterprise bargaining is the cornerstone of the wage fixing system. The award wage, and increases to it, form the safety net for those who are unable to achieve the benefits of that system. We accept that those persons include the vulnerable in our society, particularly the low-skilled and predominantly female sectors of the State’s workforce. We have evidence before us, not contradicted, of a class of "working poor" for whom minimum wages are insufficient to meet minimum living expenses. The evidence from WACOSS and the SJC of the Uniting Church has been particularly relevant in this regard.

149 The economic material before the Commission, which was not disputed by any person appearing, provides a sound basis for the determining whether employees in this State who are award-dependent and who have not been able to negotiate a wage increase should now have their wages increased. Against the background of the State’s final demand and its forecast for the future, fairness and a consideration of the labour-related economic data supports a positive conclusion.

150 We note the level of the CPI for WA and that, despite it being greater than the national average over the same period, it does not demonstrate a relationship with award-based wage increases which would be of concern to the Commission. Indeed, we accept the evidence before us from the Plowman Report that it is more likely that the CPI affects the level of the minimum wage rather than the reverse. The increase sought is to compensate for the past year’s cost of living increases, not to cause a further increase in costs.

151 Similarly, too, the figures for the level of employment and unemployment in WA show no negative consequences from previous past safety net adjustments which since 2002 have been:
2002: $18.00 per week (2002) 82 WAIG 1369
2003: $17.00 per week to wages below $731.80;
$15.00 per week above that wage (2003) 83 WAIG 1899
2004: $19.00 per week (2004) 84 WAIG 1521
2005: $17.00 per week (2005) 85 WAIG 2083.


152 Since the July 2005 increase, the evidence before us shows that the national weighted average wage increase in enterprise bargaining agreements has been 4.2% to the December quarter 2005 and the cost of living in Perth has increased by 4.1%.

153 The task of determining the increase to be granted is not a mathematical exercise. Whilst we appreciate the assistance given to us from the submissions and evidence before us, the Commission is not restricted to the specific claim made and is to act according to equity, good conscience and the substantial merits of the case. This is not simply the result from an adversarial procedure but rather from an inquiry by the five members of this Commission in Court Session into the matter before it under legislation which has as its objects, relevantly:
· the promotion of goodwill in industry and enterprises within it,
· to promote equal remuneration for men and women for work of equal value;
· to encourage employers, employees and organisations to reach agreements appropriate to the needs of enterprises within industry and the employees in those enterprises; and
· to provide a system of fair wages and conditions of employment.

154 We consider our task includes, ultimately, deciding what is fair without setting a level of minimum wage that acts to prevent those seeking work from finding it. Account needs to be taken generally of the capacity of employers and industry to pay that increase. We need to be conscious that not all industries outside the mining sector are necessarily profitable although no single employer, group of employers or employer association has objected to the granting of an increase.

155 The increase to be granted should not discourage enterprise agreement making by the size of the increase to award rates. The safety net increases in the past have not done so. We have decided that fairness to those employees and employers directly affected by the outcome of these proceedings warrants an increase which maintains as far as possible the real value of wages and not add to the potential inflationary pressures upon the State’s economy.

156 In the context of all of the foregoing, and in equity, good conscience and the substantial merits of the case, we have decided to increase the award adult full time minimum wage, award wage rates and associated allowances by $20.00 per week. In the context of the previous increases which have occurred in recent times and the very strong economy in this State, that increase is modest. On the evidence, it will be economically insignificant. There is no evidence that such an increase will impact unfairly on small business. We consider it will be within the capacity of employers generally and individually to pay.

157 We also consider that the resulting minimum wage of $504.40 is both fair and sustainable. The full increase will apply only to employees who are paid the award wage; any wage paid over that award rate is able to be used to offset the increase.

158 The state of the economy is such that the increase we propose is most likely to have a negligible effect on the exceptionally low level of unemployment in the present economic circumstances. We consider this is likely to be the case as well for the part-time employees and for employees in the 15-19 age group. Exhibit SG2 shows a declining level of unemployment in the 15-19 age group. We accept that the level of minimum wage of itself is only one factor influencing the state of the economy. We also recognise that household disposable income is highly determined by family circumstances and the tax and benefits regime.

159 The increase will operate on and from 7 July 2006.


The State Wage Principles

160 Both the TLC and the State Minister support the re-making of the present State Wage Principles with changes necessary to accommodate the decision in this matter. This position was also supported by the CCIWA. During the course of the proceedings we raised with the parties the utility of the State Wage Principles given the changes federally brought by the Work Choices legislation. We accept that the common view of those persons identified in section 50, and of those to whom we are obliged to give an opportunity to be heard, is for the re-making of the present State Wage Principles. That common view carries considerable weight. We propose to accede to their view. The present State Wage Principles will be rescinded and re-made and will continue in their usual form until reviewed in the future to see whether they remain appropriate. We raise for future consideration whether it is appropriate for State Wage Principles to remain part of the State’s wage fixation system and if it is, what those Principles should contain.

161 It may be of assistance to consider their history. In the period 1975 to 1981 wage fixing at the federal and State levels was by way of a system of wage indexation based on quarterly adjustments to wages having regard to movements in the consumer price indices. In the National Wage Case April 1975 (1975) AILR 322, the AIRC commenced the process of wage adjustment by indexation and in connection with it, adopted eight Principles setting out the basis of wage adjustments under this system. Those Principles referred to wage adjustments with movements in the CPI on a quarterly basis. They also set out a restricted basis upon which wage increases could be achieved outside of CPI adjustments.

162 This Commission also adopted a general approach to wage fixation based upon wage indexation adjustments. Over the period from 1975 to 1981, the Commission refrained from promulgating rigid Wage Fixing Principles, as had been the case with the AIRC. Rather, the Commission adopted a broad approach to the adjustment of wages and conditions of employment consistent with the Commission's general duty under section 26 of the Act. Three broad "Principles" were adopted by the Commission including a well recognised nexus with awards of other tribunals; unfair discrepancies between rates of pay in WA; and the ability to establish a nexus with other State or federal awards.

163 At the federal level, following the disintegration of the wage indexation process, the AIRC conducted an inquiry into federal wage fixing: Inquiry into Wage Fixation Principles (1981) 260 CAR 4. In what was the last of the indexation cases by the AIRC, its decision of May 1981, it handed down an adjustment to award rates of wages and salaries of 3.6%. The Commission came to consider this in July 1981 in the State Wage Case of that year: (1981) 61 WAIG 1039. That matter was dealt with under section 51(2) of the Act, as it then was which required the Commission, in substantially the same terms as the present Act, to follow a National Wage Decision unless good reasons were shown not to do so.

164 An issue raised in that case was whether the Wage Fixing Principles of the AIRC were a "National Wage Decision" for the purposes of section 51 of the Act and whether the Commission in Court Session was obliged to adopt those Wage Fixing Principles accordingly. By reason of the fact that the AIRC had concluded that the centralised system of wage indexation had broken down and there would be no further proceedings under those Principles, the Commission in Court Session did not consider it relevant to finally determine that issue. However, in considering this matter, the Commission in Court Session rejected the proposition that the Commission should adopt such Principles, and was content to proceed on the basis that the Commission had done in previous years, that being following the terms of the Act, in particular section 26 and the general guides referred to above.

165 Relevantly for present purposes, when considering this issue, the Commission in Court Session said at 1040:
“We focus our attention therefore on considerations which spring from our own legislation and in so doing we think it is of first importance to draw attention to a fact which often appears to be overlooked in discussions of wage fixing principles and practices, namely that a fundamental reason for the creation and existence of the Commission is the prevention and settlement of disputes about industrial matters between employers and their employees and of the unions which represent them; and although employers and unions may be affiliated more or less loosely to “central” organisations such as the Trades and Labor Council, the Confederation of Western Australian Industry or Australian Mines and Metals Association, we doubt that those bodies have the charter or an effective power to direct their respective members or affiliates or a general capacity to commit them to a course of action for the future. Thus, although we respect the points of view of those “central” bodies when they appear before us, whether by intervention or as of right, our assessment of the principles which should guide the Commission in carrying out its prescribed functions must be made in the light of the fact that those functions are performed in relation to disputes between particular employers and employees or groups of them and in the light of our knowledge of the ways in which such employers, employees or groups tend to behave. Even if it were within our power to lay down inflexible rules or rules which have the appearance of inflexibility as was suggested by some of the submissions made to us, to do so would, in our opinion, serve no purpose other than to bring the credibility of the Commission into question. That would be particularly so if those rules prevented the Commission from providing practical solutions to real disputes or if the Commission were seen to be bending or breaking those rules in order to do so.”


166 Further, the Commission in Court Session commented as follows at 1041:
“In exercising its jurisdiction the Commission is of course obliged to observe relevant decisions of the Industrial Appeal Court and in the context of the present proceedings the decision of the Court in the State Energy Commission case (59 WAIG 494) although given in respect of the provisions of the previous Industrial Arbitration Act, has, in our respectful opinion, equal application to the provisions of the Act which is now in force. In its essence that decision points up the fact that the original jurisdiction of the Commission to make and amend awards and orders is reposed in the individual members of the Commission sitting or acting alone; that they are required by the statute to exercise that jurisdiction in accordance with equity, good conscience and the substantial merits of the case; and that it is not given to the Commission in Court Session to take away that jurisdiction and power nor that responsibility. The decision in that case recognised nevertheless that if the Commission in Court Session in an appropriate case had expressed an opinion as to the principles which ought to be followed generally it would be wrong for a Commissioner to ignore that opinion in forming his own, not because it would be jurisdictionally wrong to do so, but because, if he did so, his decision might be set aside if there were an appeal.”

167 Therefore, the Commission’s approach was to enable wage adjustment claims to be determined in accordance with the Act by Commissioners, in particular, having regard to the terms of section 26 of the Act. In this regard, the Commission in Court Session further said at 1041:
“It is also important to emphasise that each matter must be decided as and when it falls for decision by the Commission constituted to deal with it. It cannot be decided in advance by the Commission in Court Session in proceedings under section 51 and even if it could be it would, in our opinion, be an unwise thing to attempt. In the field of industrial relations, the crystal ball has always been notoriously unreliable and in today’s volatile circumstances it is even more so. Indeed it is often difficult enough to decide at the time of the determination what may justifiably be allowed in the light of circumstances then known to exist without laying problems in store by making plans and promises with respect to the future.

A suggestion by the Confederation which was adopted by the Attorney General in these proceedings was that we might include in each award affected by the General Order a provision to the effect that the rates of pay in each such award could not be varied except in accordance with the Commission’s wage fixing principles. In our opinion, such a provision would be beyond the power conferred on the Commission in Court Session by the Act. Subject to the limitations relating to variation of awards which are still within their prescribed term, any employer, union or association bound by an award has, under section 40 of the Act, the right to apply to vary the award, and as we have already explained, the Commission has the duty to hear and determine the matter according to equity, good conscience and the substantial merits of the case, and it has the power to dismiss the application or refrain from hearing it if, in its opinion, such a course is necessary or desirable in the public interest. To do as the Confederation and the Attorney General suggested would in our opinion be contrary to and inconsistent with the provisions of the Act both in inhibiting rights conferred on parties by the Act and in purporting to determine in advance matters which can only be decided at the time by the Commission constituted to decide them.”



168 Subsequently in December 1982 the AIRC adopted a wages pause, preventing any wage increases for six months, following the implementation by the then Federal Government, of a wages freeze for some twelve months: Re National Wage Case and Wages Pause [1983] AILR 19. This was in response to the severe economic recession being experienced at that time. The various State jurisdictions, by March 1983, adopted a wages pause which was intended to last until about June 1983. The Commission considered the wages pause of the AIRC in January 1983 in the State Wage Case at that time: (1983) 63 WAIG 257. The Commission in Court Session acting pursuant to section 51 of the Act, decided to follow the Australian Commission’s decision restraining wage increases from that time, by general order. Additionally, the Western Australian Parliament enacted the Salaries and Wages Freeze Act 1982, which froze wage increases in the public sector but was not at that time proclaimed to apply to employees in the private sector.

169 The next significant event was the State Wage Case of October 1983: (1983) 63 WAIG 2207. This followed a National Wage Case Decision (Print F2900). In considering the AIRC’s decision, which re-instituted a system of centralised wage fixing and granted an increase of 4.3% based on CPI movements, the Commission in Court Session noted the basis for the AIRC’s decision, that being in large part the justification of lifting the wages pause as a result of the Accord, the National Economic Summit and general agreement between the principal parties at the time. An important element of the reintroduction of a centralised system of wage indexation was the agreement between the main parties, including those appearing before the Commission, of consistency between the State and federal tribunals in the operation of the system. The AIRC, in order to regulate the requirements of the new system, introduced 11 Principles to cover the making of claims over the ensuing period. In dealing with the approach of the Commission to date in relation to wage claims, the Commission in Court Session observed at 2208 as follows:
“During the period just mentioned, this Commission avoided too precise a formulation of principles to accompany the indexation of awards. Our reasons for doing so have been spelt out in earlier decisions. They included the fact that primary responsibility for the resolution of anomalies, inequities and special and extraordinary problems resided with individual Commissioners; that the principle of comparative wage justice so pervaded the making of State awards that it needed to be retained to ensure that in adverse economic circumstances employees in Western Australia were not called upon to make a greater sacrifice that their counterparts in other States; and that some of the Australian Commission’s principles were not capable of adoption here because of provisions of the State Act. Additionally, we entertained some reservations about the extent to which guidelines too specific were capable of being rigorously observed inside and outside industrial tribunals.

In the present proceedings the TLC has asked that we continue with a flexible approach to matters coming before us. The Confederation of Western Australian Industry (the Confederation) however, whilst acknowledging the need for us to have regard for local circumstances has pressed upon us the view that on this occasion the appearance of uniformity of approach by all industrial tribunals is almost as important as the actuality. For that reason it urges us to adopt a set of principles which can more readily be identified with those laid down by the Australian Commission.”


170 In its judgment, the Commission in Court Session favoured the approach advanced by the Confederation that the Commission adopt Wage Fixing Principles similar to that adopted by the AIRC. Subject to some adjustments to the AIRC’s Principles to have regard to local circumstances, the Commission in Court Session adopted that course by general order. This was the commencement of the general approach of the Commission to continue to apply the Wage Fixing Principles throughout the rest of the 1980's and the 1990's.

171 There were however, some difficulties experienced en route. In the 1993 State Wage Case ((1993) 74 WAIG 198) the Commission in Court Session adopted the then federal Arbitrated Safety Net Adjustment Principle with some reluctance. Whilst some variations to this Principle were suggested, the Commission in Court Session considered that it would be contrary to section 51(2) to make a general order materially different to a National Wage Case Decision which would also lead to significant practical problems in the workplace, given the expectation that the Commission should give effect to the National Wage Decision. In the 1994 State Wage Case ((1994) 74 WAIG 23) the Commission in Court Session noted difficulties in adopting the federal Wage Fixing Principles, due to the divergence in the legislation between the federal and State jurisdictions. Similar observations were made in the 1997 State Wage Case: ((1997) 77 WAIG 3177).

172 In the 1998 State Wage Case ((1998) 78 WAIG 2579) the Commission in Court Session adopted the Safety Net Review decision of the AIRC, but decided against the option of effecting a general wage movement from a common date as was done in 1997, as this would have meant only six months had passed since the last wage increase. The Commission in Court Session retained the Enterprise Bargaining Principle in the same terms in the Statement of Principles, despite submissions to the contrary.

173 In the 1999 State Wage Case ((1999) 79 WAIG 1847) the Commission in Court Session found that the AIRC’s National Wage Decision should be given effect to. However, the Commission gave notice to the parties that if the operation of the wage fixing system, promoted under the Statement of Principles, inhibited the realisation of the objects of the Act, and thereby affected good industrial relations, then that would be sufficient reason not to give effect to the National Wage Decision. In particular in relation to the Statement of Principles, the Commission in Court Session deleted the preamble and held that the Enterprise Bargaining Principle was no longer appropriate. The Commission in Court Session also said at 1849:
“It is important to ensure that the Statement of Principles operates within the scope of the Industrial Relations Act and does not prescribe procedures which limit the Commission’s statutory obligations with respect to the resolution of disputes in providing a means for conciliation and promoting good will in industry. It is noted that although the federal industrial relations system maintains a set of wage fixing principles that focus on enterprise outcomes, the availability of “protected industrial action” is quite different from the system in this State. Here the emphasis is on dispute resolution without recourse to industrial action and indeed there is a formal process of secret ballots for that to occur.”


174 State Wage Case Decisions after this date, generally gave full effect to National Wage Decisions with only minor variations to the Statement of Principles.

175 We consider that the position has changed markedly with the abolition of the AIRC’s national wage fixing role, and the legislative amendments to the WRA effected by Work Choices. There is no longer any nexus between State and federal minimum wage fixation. The legislative regimes applying to the discharge of the jurisdictions of the Commission under the Act and the AIRC under the WRA are now very different. For present purposes, it may be open to argue that there will no longer be any "National Wage Decision" under section 51(1) of the Act, which the Commission is obliged to consider in the future.

176 The Wage Fixing Principles applicable to the AIRC were most recently made as a consequence of the June 2005 Safety Net Wages Review (Print PR002005). Those Principles remain current.

177 The amendments to the WRA effected by Work Choices commenced on 27 March 2006. From that time, all employers and employees falling within the definitions of “constitutional corporations” in sections 5 and 6 of the WRA, move into the new federal system. On and from commencement of the new system, employers and employees within the terms of sections 5 and 6 of the WRA, remain parties to existing federal awards which are now called “pre-reform awards” which will continue to apply. Significantly however, the amendments to the WRA prescribe that all terms of such awards which are not allowable award matters, save for certain preserved award matters, will cease to have effect. All wages and classification matters for such awards will no longer be allowable award matters, will be prescribed by the AFPC and be the subject of the Australian Fair Pay and Conditions Standard.

178 In the case of pre-reform awards, the AIRC’s ability to make and vary such awards would appear to be limited; generally only to give effect to award rationalisation, to maintain the minimum safety net entitlements, and on other specified grounds. The AIRC 's powers in this regard are set out in sections 552, 553 and 554 of the WRA.

179 Given that the terms of the AIRC's Wage Fixing Principles predominantly deal with for present purposes, the making and variation of awards above the minimum safety net, under the WRA as it now is, it would appear that these Principles will have little practical effect for this Commission to consider.

180 In the case of non-constitutional corporations, and other unincorporated employers, current federal awards and agreements will continue until their expiry, for a transitional period of up to five years. Transitional arrangements for such employers and employees are set out in Schedule 6 of the WRA. This Schedule retains the AIRC’s conciliation and arbitration powers in respect of employers and employees bound by such instruments only.

181 Specifically, Division 2 of Schedule 6 deals with the variation and revocation of transitional awards by the AIRC. It can make an order varying a transitional award only as permitted by clause 29 which in the main, deals with the provision of minimum safety net entitlements about prescribed matters set out in clause 29(2). Furthermore, the AIRC may also vary a transitional award for the purposes of removing discriminatory terms as set out in clause 30. By clause 40(1), the Full Bench of the AIRC may establish Principles about varying transitional awards concerning allowable transitional award matters. Once such Principles are made, variations of transitional awards in relation to such matters may only generally be made by a Full Bench.

182 These transitional provisions would seem to suggest that the existing Wage Fixing Principles of the AIRC, arising from the June 2005 Safety Net Review, have little or no application to transitional awards and are no longer relevant for this Commission to consider, when it comes to discharging its statutory duty under the Act in relation to minimum wages.

Minute of Proposed Order

183 We propose to give effect to our Decision by issuing a General Order which will:
(a) Rescind the General Order 576 of 2005 and its accompanying Statement of Principles.
(b) Make a General Order and accompanying Statement of Principles.

184 A minute of the proposed order is attached.

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