2007 WAIRC 00517
2007 STATE WAGE ORDER PURSUANT TO SECTION 50A OF THE ACT
WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

PARTIES ON THE COMMISSION'S OWN MOTION

CORAM CHIEF COMMISSIONER A R BEECH
SENIOR COMMISSIONER J H SMITH
COMMISSIONER P E SCOTT
COMMISSIONER S J KENNER
COMMISSIONER S M MAYMAN
HEARD MONDAY, 21 MAY 2007, TUESDAY, 22 MAY 2007
DELIVERED WEDNESDAY, 13 JUNE 2007
FILE NO. APPL 1 OF 2007
CITATION NO. 2007 WAIRC 00517

CatchWords State Wage order – Commission's own motion – Minimum wage for employees under Minimum Conditions of Employment Act 1993 – Award rates of wage – Award minimum wage – Arbitrated Safety Net Adjustment – State wage principles – coverage of jurisdiction – Industrial Relations Act 1979 s.50A.
Result General Order issued

Representation Ms J Gardner and Mr M Hammond, for Minister for Employment Protection
Ms J Freeman for Trades and Labor Council of Western Australia
Mr G Bull for Australian Mines & Metals Association, Inc.
Mr D Jones for Chamber of Commerce & Industry of Western Australia, Inc.



Reasons for Decision

1 This is our unanimous decision. By section 50A of the Industrial Relations Act, 1979 (the Act) the Commission shall, before 1 July in each year, of its own motion, make a General Order setting the minimum weekly rate of pay applicable under the Minimum Conditions of Employment Act, 1993 (Minimum Conditions Act) to adults, apprentices and trainees and, adjusting rates of wages paid under awards.

2 Section 50A came into effect on 4 July 2006. In June 2006 the Commission had issued a General Order amending all award rates by $20.00 as a result of an application lodged by the Trades and Labor Council of Western Australia (TLCWA) under section 50(2) of the Act ([2006] WAIRC 04703; (2006) 86 WAIG 1655) . Subsequent to that General Order, and after 4 July 2006, the Commission convened on its own motion under section 50A but only to deal with the requirement under section 50A(1)(a) to set minimum weekly rates of wages under the Minimum Conditions Act ([2006] WAIRC 05320; (2006) 86 WAIG 2687). This is therefore the first occasion that the Commission will issue a State Wage order under section 50A which sets both the minimum weekly rate of pay applicable under the Minimum Conditions Act and adjusts rates of wages paid under awards having regard to the matters the Commission is now obliged to take into consideration under section 50A(3) of the Act.

3 In response to the public advertisements of the proceedings placed by the Commission, the Commission has received submissions from the Minister for Employment Protection (the Minister), TLCWA, Australian Mines and Metals Association, Inc. (AMMA), the Chamber of Commerce and Industry of Western Australia (CCIWA), the Employment Law Centre (ELC), Australian Young Christian Workers (AYCW) and Western Australian Council of Social Services (WACOSS). The Minister, TLCWA, AMMA and CCIWA appeared in the proceedings and also made oral submissions. The Minister called evidence from Ms Nicola Cusworth, the Director, Economic Policy of the WA Department of Treasury and Finance. The submissions were supported by considerable economic and social welfare information.

COVERAGE OF COMMISSION'S JURISDICTION
4 The coverage of the Commission's jurisdiction was referred to in the evidence provided by the Minister. This evidence was not opposed or disputed by any other person appearing. The issue arises because of the Commonwealth government's Work Choices amendments to the Workplace Relations Act, 1996 (Cth) and it was the subject of both submissions, and a finding by the Commission, in the 2006 proceedings ([2006] WAIRC 04611; (2006) 86 WAIG 1631, at [75] to [84]). The finding of the Commission on that occasion was based upon unpublished data from the 2004 Employee Earnings and Hours Survey (Australian Bureau of Statistics (ABS) Cat No. 6306.0). We are advised that this survey is published every two years and the 2006 survey data is now available. As a result of the evidence provided to us, we find the likely coverage of the Commission's jurisdiction to be as set out in the following table from the Minister's submissions:
Employee Group
Proportion of all WA employees – May 2004
Proportion of all WA employees – May 2006
Subject to the federal IR jurisdiction
59.9%
61.4%
Incorporated
46.6
48.8
Federal Government
2.0
1.9
State Corporations
8.5
8.3
Local Government
2.8
2.3
Subject to the WA IR jurisdiction
40.1%
38.6%
Unincorporated
31.5
30.7
State Government
8.6
7.9
All employees Figures may not add up to 100% due to errors in rounding.

100.00%
100.00%

Based upon this information, it is not unreasonable to conclude that potentially 38.6% of all WA employees are in the State industrial relations system. Of these approximately 31% are employed in the private sector and approximately 8% by the State government. As the Minister observed, the above figures are a marginal change to the finding of the Commission in the 2006 case where the proportion of employees in the federal and State jurisdictions respectively was approximately 60:40.

5 Other data provided by the Minister shows that in May 2006 approximately 11.1% of all WA employees were paid at exactly the rate of pay specified in a State or federal award. Assuming that most State government employees are paid according to an enterprise agreement and not an award, the figure of 31% of employees in the private sector suggests that approximately 3.4% of all WA employees are both in the State industrial relations system and being paid at the rate specified in a State award.

6 We acknowledge that the above figures must be approximate and there appears to be no reliable data available to indicate the number of award-free employees who are paid at the minimum wage and thus would be reliant on the minimum wage to be set in these proceedings.

THE STATE WAGE ORDER
Outlines of Submissions Made to the Commission
7 The Minister submitted that the Commission should increase the State minimum wage by $27.60 per week and increase all State adult award wage rates by that amount. Proportionate increases would apply to apprentices and trainees. The Minister relied upon the current labour market and wages, the State's buoyant economic conditions and the needs of WA employees in concluding that a $27.60 per week increase is a balanced and sustainable outcome. The Minister's submission is that $532.00 per week should be the minimum wage. It represents an approximate 5.5% increase in the minimum wage and a 4.6% increase in the trade rate. This would amount to an increase moderately above Perth's inflation rate of 3.5% (based upon March quarter to March quarter) but would also be a significant increase to minimum wage workers.

8 The Minister's representative, Ms Gardner, drew attention to the matters the Commission is now obliged by section 50A(3) of the Act to take into consideration. The following matters in particular are matters which the Commission was not required to take into consideration in previous State Wage cases:
(3)(a) the need to —
…
(ii) meet the needs of the low paid;
(iii) provide fair wage standards in the context of living standards generally prevailing in the community;
(iv) contribute to improved living standards for employees;
…and…
(vii) provide equal remuneration for men and women for work of equal or comparable value;

9 Ms Gardner submitted that the section 50A criteria provide more scope for the Commission to take into account a greater variety of needs and on that basis the Minister is seeking a less conservative position than has been sought in past State Wage Cases. The Minister submits that the key difference between past State Wage decisions and the present matter is that section 50A provides the capacity for a real wage increase to be entertained as an appropriate part of wage setting in Western Australia. Section 50A is not simply about matching the increase in the minimum wage with the Consumer Price Index (CPI), nor is it simply about matching it with the Wage Price Index (WPI); it is about taking into account all of those factors.

10 The Minister's submission also emphasised the requirement in section 50A(3)(a)(vii) that the Commission take into consideration the need to provide equal remuneration for men and women for work of equal or comparable value. The Minister submitted that female employees are more likely to rely solely on awards for their remuneration and often have less bargaining power to negotiate above-award rates of pay, whether through formal agreement or otherwise. The Minister noted that WA has the largest gender pay gap of all the States, at 25% (compared to a national gender pay gap of 16%) and that awards are the only method of pay setting where female employees in WA earn more per hour than their male counterparts. The Minister submitted that any adjustment to the minimum wage in WA will therefore have a disproportionate beneficial effect upon women as a group; any real wage increase delivered through minimum wage adjustments will go some way to addressing the gender pay gap in WA.

11 The TLCWA supported the position of the Minister and submitted that $27.60 was an appropriate increase to the minimum wage. The TLCWA's position is consistent with the Australian Council of Trade Union's submission to the Australian Fair Pay Commission (AFPC) for a $28.00 increase resulting in a minimum wage of $532.00. The TLCWA considers the increase asked for to be moderate and sustainable and it also emphasised that the matters the Commission is now obliged to take into consideration under section 50A(3) of the Act are weighted towards low paid employees. It set out considerable submissions under each of the criteria the Commission is required to take into account.

12 The TLCWA provided data on the State's economic performance, describing it as "extremely robust. Unemployment is at historical lows, labour participation rates are high, jobs growth significant, and infrastructure investment remains substantial". The trends suggest employment growth and favourable economic conditions are likely to be maintained for the foreseeable future.

13 The TLCWA sought the insertion of an Equal Remuneration principle into the State wage principles. The TLCWA submitted that such a principle is consistent with the objects of the Act and section 50A and recognises the need to address the gender pay gap in WA.

14 The ELC endorsed and supported the TLCWA submission. The AYCW supported an increase in the State minimum wage that reflects the real cost of living submitting that young people rely heavily on the minimum wage and conditions as a means of avoiding poverty. The AYCW presented statistics and situations of young people aged between 15 and 24 years. It submitted that a high proportion of young workers are employed on a part time basis, some of which will be casual employment, in the retail sector, hospitality and in small business.

15 WACOSS supported the TLCWA submission and presented submissions on the phenomenon of the "working poor", the rising cost of living in WA and the experience of community service agencies in providing services for people living on low income, the demographic profile of low paid workers, WA's gender pay gap and determining fair award wages. The submission included the survey results of its community sector survey of February 2007, a copy of the Australian Council of Social Services (ACOSS) submission to the AFPC of July 2006, a paper by Dr Richard Denniss produced for The Greens, and a paper by Professor Alison Preston and Dr Therese Jefferson on Australian Wage Determination and Gender Equity: A View from the West, March 2007.

16 AMMA provided considerable material on the mining and minerals sectors of the State's economy. It acknowledged that those sectors are not likely to be affected by any General Order issuing in these proceedings. AMMA pointed out however, that any increase is of interest to the mining and minerals sectors because it is taken into account when employment contracts are negotiated in the industry. AMMA submitted that any increase to the minimum wage should be modest and have regard to the CPI and WPI for WA.

17 It queried the figure of $27.60 proposed by the Minister and the TLCWA: in AMMA's view, the figure proposed seems to have an element of "catch up" with the AFPC decision of October 2006 and appeared to be a figure plucked from the air. AMMA submitted that it was not the role of the Commission in these General Order proceedings to remedy the gender pay gap and submitted that the Commission should follow its approach of last year and be relatively modest in any increase awarded. In AMMA's view, the economic circumstances of the State this year are less favourable than they were last year.

18 CCIWA similarly questioned the $27.60 proposed by the Minister and the TLCWA. It too saw a link between this amount and the result of the AFPC determination in December 2006. In the view of CCIWA, the matters the Commission is now obliged to take into consideration under section 50A(3) of the Act suggest that there should be an analysis undertaken in the manner provided in 1996 by Professor David Plowman from the Graduate School of Management, University of WA in order for the Commission to consider a needs-based minimum wage. The CCIWA noted that no such analysis had been conducted and therefore the Commission should continue with the principles it had decided in previous State Wage cases, particularly that low paid employees on the adult minimum wage should receive an increase in wage rates commensurate with wages outcomes generally. It should maintain, as far as possible, the real value of wages and not add to the inflationary pressures on the State's economy. These wage increases follow rather than lead wage determinations elsewhere in the labour market.

19 In the view of CCIWA, the State's economic performance over the last year and the predictions of strong continuing growth in 2007/08 suggest that it would be unreasonable to withhold a moderate wage rise to the persons who would be affected by the Commission's determination. The CCIWA considers an amount of approximately $20.00 is appropriate, this being an amount midway between the CPI increase of 3.5% and the WPI increase of 4.9%.

The State Wage Order - The Commission's Consideration
20 The Commission has been presented with detailed information regarding the State's economy. It shows continuing very strong economic activity. The resource boom has stimulated other sectors of the economy with most key economic indicators showing more favourable conditions in WA than nationally. Retail sales and general consumer spending growth rates are stronger and consumer and business confidence levels are higher in the State than nationally. We note the State's real Gross State Product (GSP) increased by 4.9% in 2005/06 and that WA's economic growth has exceeded the national average by a significant margin for each of the past five years. GSP is expected to grow by 5.75% in 2006/07 and household consumption, business investment and dwelling investment are all forecast to make positive contributions to economic growth. Wages growth is high by comparison with the rest of the country; to the March quarter 2007 the WPI increased by 4.8%, average weekly earnings (AWE) increased by 9.4% and average weekly ordinary time earnings (AWOTE) increased by 6.7%.

21 Perth's CPI for the year to the March quarter is 3.5% compared to 2.4% CPI growth nationally however the economic information before us suggests that this has been in part due to the exceptional price growth of fruit and fuel. Nevertheless, the residual effects of these factors together with strong employment and incomes growth could see relatively high inflation in the State for 2006/07, particularly because of the risk that the effects of the drought on agricultural production could raise food prices, even though the growth in the State's inflation rate is anticipated to slow. In our 2006 decision, we relied significantly on a 2006 report prepared for the Commission by Professor Plowman analysing the effects of past statutory minimum wage adjustments on a range of economic measures and accepted its conclusion that it is more likely that the movement in the CPI affects the level of the minimum wage rather than the reverse. No person sought to dissuade us from that point of view on this occasion, and indeed the submission from CCIWA supports that view.

22 There are risks to the State economy. The largest risk would be from any significant downturn in prices and demand for commodity exports. Further, although the housing cycle appears to have peaked, there is a risk that house prices and construction activity could fall more sharply than forecast. The State's wage inflation has been relatively contained given the tightness of the labour market. If new pressures emerge to keep Perth's price movements ahead of the national average because of stronger wages growth or from ongoing high levels of consumer demand, inflation could exceed forecasts. Labour availability constraints also may slow future economic growth as they put pressure on wages growth.

23 The Commission was once again assisted by the evidence given by Ms Cusworth. Her comprehensive analysis of the State, national and relevant international economies is appreciated. Ms Cusworth confirmed that from a broad perspective, Australia is continuing a period of very strong growth of sustained duration. The rate of growth of WA commodity prices is decelerating but is unlikely to return to its pre-boom levels. Unemployment in WA is the lowest for a generation. There is a very strong domestic demand. Ms Cusworth presented figures on WA employment growth by industry but cautioned that these figures are subject to wide margins of error.

24 We note that employment in the retail trade sector showed a 1.3% growth in the year to February 2007 and that over the same period employment in the accommodation, restaurant and cafes sector grew by more than the State average. The level of unemployment in the 15-19 age group is declining. The wages growth in the retail and accommodation, cafes and restaurants sectors over the year to March 2007 has been 2.8% and 2.9% respectively. These are sectors, which on the information before us, are likely to be sensitive to adjustments in the minimum wage. We note, however, the significant negative growth of employment in the agriculture sector over that same period.

25 We also note Ms Cusworth's evidence, in response to a question from Mr Jones who appeared for CCIWA, that if the object is to maintain the real value of the minimum wage, a year-average rather than a year-end inflation measure would be preferred. While Perth's CPI for the year to the March quarter is 3.5%, a year-average measure would take the whole of the four quarters to March 2007 and compare them with the four quarters to March 2006, showing an inflation rate over the year to March of 4.3%.

26 Ms Cusworth's evidence was also that:
a. the combination of data about the condition of the labour market,
b. the fact that the employment rate is at a 30-odd year low,
c. there is record high level of participation in the workforce,
d. those who are vulnerable in the workplace (whether it be long term unemployed or youth) seem to be benefiting from favourable labour market conditions, and
e. labour demand is very strong,
all suggest that it is unlikely there would be a significant negative employment effect from a real wage increase in the current environment. Ms Cusworth acknowledged that it is always possible that at the margins, smaller businesses and sole traders might be affected by the kind of increase proposed by the Minister in these proceedings.

27 In relation to the national economy, we have taken judicial notice of the Commonwealth’s Mid-Year Economic and Fiscal Outlook for 2006-2007 which forecasts that the Australian economy is expected to grow by 2½% in 2006/07, significantly slower than the Commonwealth Budget forecast of 3¼%, largely reflecting the severe drought being experienced across large parts of Australia. It also forecasts that in 2007/08, Gross Domestic Product (GDP) growth will accelerate to 3¾%. Non-farm GDP is expected to grow by 3% in 2006/07 and 3¼% in 2007/08, while the farm sector is assumed to recover on the basis of a return to average seasonal conditions.

28 Employment growth has been stronger than anticipated, contributing to the unemployment rate falling to a 30-odd year low. However, employment growth is expected to moderate in the period ahead, in line with around trend non-farm output growth. The easing in labour market conditions should see wage growth remain moderate.

29 Nationally the unemployment rate decreased from 4.5% to 4.4% between March and April 2007. National employment increased by 3.1% over the year to April 2007. The Labour Price Index (LPI) increased by 3.9% over the year to December 2007. Retail sales increased by 7.8% over the year to March 2007. The Reserve Bank increased interest rates from 6% to 6.25% on 7 November 2006. Producer prices at all three stages of production increased over the year to March 2007.

30 We take into account the buoyant state of the economy compared to the national economy. We consider that in the context of such strong performance from the WA economy there is unlikely to be any effect upon the national economy of the minimum wage decision arising from these proceedings.

31 We have been particularly careful to see if any of the economic indicators presented to us show any effect of the $20.00 increase to award rates of wage and to the WA minimum wage we gave in June and August 2006 (op. cit. at [2] above). The economic evidence before us on that occasion was that the strength of the WA economy would "swamp" any increase in the WA minimum wage given the small numbers of employees affected. That appears to have been the case. There is no evidence before us that the increase we gave on that occasion had any negative consequences. We have been similarly assured on this occasion that the strength of the State economy is such that an increase in the minimum wage beyond mere maintenance of its real value would similarly have little effect.

32 The Minister provided information showing the nominal and real value measurements of previous increases to the State award minimum wage. That information is set out below.
Increases to the State award minimum wage – Nominal and real value measurements Real wage calculations have been adjusted by inflation - benchmarked to June 1996.

Year
Minimum Weekly Award Wage (Nominal)
Dollar Increase
Real (CPI adjusted) minimum wage
Real (CPI adjusted) Dollar Increase
Real (CPI adjusted) Percentage Increase
Aug-96
$ 351.40
 $ 8.00
$ 350.35
-$ 1.05
-0.30 %
Nov-97
$ 359.40
$ 8.00
$ 360.49
$ 10.14
2.81 %
Jun-98
$ 373.40
$ 14.00
$ 370.45
$ 9.96
2.69 %
Aug-99
$ 385.40
$ 12.00
$ 372.95
$ 2.50
0.67 %
Aug-00
$ 400.40
$ 15.00
$ 367.36
-$ 5.59
-1.52 %
Aug-01
$ 413.40
$ 13.00
$ 370.71
$ 3.35
0.90 %
Aug-02
$ 431.40
$ 18.00
$ 374.72
$ 4.01
1.07 %
Jun-03
$ 448.40
$ 17.00
$ 385.23
$ 10.51
2.73 %
Jun-04
$ 467.40
$ 19.00
$ 391.29
$ 6.06
1.55 %
Jul-05
$ 484.40
$ 17.00
$ 386.99
-$ 4.30
-1.11 %
Jun-06
$ 504.40
$ 20.00
$ 388.82
$ 1.83
0.47 %

33 In our 2006 decision we indicated that, in principle, the real value of the minimum wage should be maintained if the economic circumstances of the State permit it. This position of principle appears to be recognised in submissions of the AYCW, CCIWA and, partly, in the submission of AMMA. The increase we granted in 2006 did maintain the real value of the minimum wage, and even provided a small increase to it: the $20.00 increase to the minimum wage was in fact an increase of $1.83 or 0.47% in real terms.

34 There is no submission that our decision on that occasion has acted as a disincentive to enterprise bargaining and the evidence before us does not suggest otherwise and in that context we note that a further increase now of a similar size is not seen as inappropriate by CCIWA given the State's economic performance and the predictions of strong continuing growth in 2007/08. The position of AMMA is not too dissimilar in this regard.

35 We are urged on this occasion however to grant a more significant increase in the real value of the minimum wage. We agree that we are obliged to take into account the need for an increase in the minimum wage to contribute to improved living standards for employees. That matter is to be considered in the context of all of the matters in section 50A(3); no one matter is to be viewed in isolation. The Commission will need to have regard for the overall state of the WA economy when giving weight to the matters in section 50A(3) of the Act. We agree, however, with the submission that section 50A(3) obliges the Commission to consider the need to do more than merely maintain the value of the minimum wage.

36 We have been assisted by the evidence from the Minister regarding the effects on the low paid of the current state of the housing market. We note the evidence provided by WACOSS in relation to the rising cost of living in Western Australia for the low paid and the increase in costs associated with essential items such as public transport, petrol, utilities, housing, rental housing, pharmaceuticals, child care and basic staple foods.

37 We note the evidence, which was not disputed, in the report by Professor Preston and Dr Jefferson which shows that women employees in WA on awards and unregistered individual agreements earn between 4% and 5% less than their counterparts nationally. We have evidence before us that a disproportionate number of female employees receive the minimum wage. In the context of the continuing strong growth of the WA economy, this evidence assists the Commission in reaching a conclusion on the increase to be applied to the minimum wage.

38 We also take into account that:
a. the federal minimum wage received by employees in WA who are employed in the federal jurisdiction is $511.76. We are informed that the AFPC intends to further review the federal minimum wage in mid-2007. We are conscious that any increase to the WA minimum wage beyond $7.36 will widen the gap between it and the federal minimum wage although the gap will change in the relatively short-term when the AFPC delivers its next wage-setting decision.
b. The minimum wage in New South Wales (NSW) is $531.40 per week from 8 June 2007.
c. In Queensland, the minimum wage is $503.80 and the parties are yet to finalise their positions in a review of the minimum wage applicable in that State.
d. In South Australia, the minimum wage is $501.40; we are informed that unions have proposed an increase of $28.00 plus $10.50 to achieve parity between the federal and State minimum wages.

39 It is apparent that the minimum wages both nationally and in the States other than NSW are likely to be increased in the near future. The minimum wage set by the AFPC and the minimum wages set by the other States' Industrial Relations Commissions are only one factor for us to consider. This is because the criteria by which the AFPC sets its minimum wage are different from the criteria in section 50(3)(a) of the Act. Further, the cases presented in the other States' wage cases may differ, and the economic circumstances of the States similarly may differ. As we said in our 2006 decision ([2006] WAIRC 03884; 86 WAIG 408 at [53]):
"Any inconsistency between the decisions of this Commission, and in the future of the AFPC, and of other State's industrial tribunals, will be a factor of relevance to us in the future.
However, consistency does not mean that the respective minimum wages are to be identical."

40 It is also apparent that the gender wage gap in Western Australia continues to deteriorate relative to women nationally. Given the statutory requirements of equal pay for work of equal value in WA and, because wages growth in WA is high by comparison with the rest of the country, we do not consider that an increase beyond the increase necessary to maintain the value of the minimum wage will be significantly out of step with minimum wage fixing generally in the rest of the country.

41 To maintain the real value of the minimum wage will require an increase of 3.5% (being the Perth CPI for the year to the March quarter 2007) or $17.65 per week. We have traditionally used that CPI measure, although if the year-average measure of the CPI referred to by Ms Cusworth is used, an increase of 4.3% would be required leading to an increase of $21.70 per week. Any increase beyond the increase necessary to maintain the real value of the minimum wage will give a real minimum wage increase. This will better meet the needs of the low paid and contribute to improve living standards for employees; it will also act to reduce the gender wage gap and protect employees who may be unable to reach an industrial agreement.

42 The minimum wage of $532.00 per week proposed by the Minister and supported by the TLCWA, ELC and WACOSS does not have any particular basis for its calculation; rather it appears to be based upon a less conservative submission about setting the minimum wage than was made to us in the 2006 State Wage Case due to the matters in section 50A(3), and may have some element of a "correction" of the submission made last year. We have not found the rationale behind the submission overly persuasive.

43 We approach the setting of the minimum wage by considering a wide range of issues. It is helpful to consider wage outcomes generally and the extent to which wage rates of others in the community have moved over the last year.

44 Wage increases in State industrial agreements to the December quarter 2006 average a 4.3% increase. The WPI to the March quarter 2007 shows a 4.8% wage increase. The LPI over the year to December 2006 is up by 4.6% and AWOTE are up by 6.7% over the year to November 2006. These figures, looked at overall against a background of record low unemployment and record high levels of labour participation and strong labour demand lead to the conclusion that we could give a real increase to the minimum wage. In the absence of a strong rationale for the level of minimum wage proposed by the Minister and TLCWA, however, we also give weight to the evidence that those sectors which are likely to be sensitive to adjustments in the minimum wage, those being the retail, accommodation, restaurant and cafes sectors, have recorded much lesser increases in wages growth than is represented by the movements in wages generally.

45 Nevertheless, from the economic material before the Commission, a real wage increase will be sustainable in the current economic environment. It is unlikely to result in a significant negative employment effect nor add to the inflationary pressures on the State's economy. The evidence provided by the Minister shows that WA has had the highest labour productivity rate of all Australian states since 2001/02 measured as GSP against hours worked.

46 An increase of 4.8% to the minimum wage of $504.40 is, in round terms, an increase of $24.00. The new minimum wage in WA will therefore be $528.40 per week. The increase will operate on and from the first pay period on or after 1 July 2007.

47 No person appearing submitted that we should adjust rates of wages paid under awards by a different amount than the increase to the minimum wage. On the evidence before us we will adjust award wages by $24.00 per week. 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.

The Minimum Weekly Rate of Pay Applicable to Apprentices and Trainees
48 Section 50A(3)(a)(vi) requires the Commission to take into consideration the need to encourage ongoing skills development. The TLCWA supports in principle the setting and maintaining of minimum wages for trainees through the adoption of the National Training Wage classification system, but did not press the point on this occasion. No other submissions were put to us on this occasion to warrant a departure from the manner by which the Commission has previously set minimum wages applicable to adult apprentices, and to apprentices and trainees generally. We have recently closely examined the manner by which the minimum wage applicable to apprentices 21 years of age or more (adult apprentices) should be set ([2006] WAIRC 05589; (2006) 86 WAIG 3129). We consider the table of apprenticeships commenced in WA provided by the Minister, which is set out below, does not show that the manner by which the Commission has previously set minimum wages applicable to adult apprentices, and to apprentices and trainees generally has had a detrimental effect on the commencements of apprenticeships in WA.
Apprenticeships commenced in Western Australia – 2000-2007 Statistics provided by the Department of Education and Training.


Year

2000
2001
2002
2003
2004
2005
2006
Total Commencements (junior apprenticeships)
3,636
3,280
3,680
4,401
5,176
6,047
6,881
Total Commencements (adult apprenticeships)
704
662
889
966
1,275
1,762
1,941
Total Commencements
4,340
3,942
4,569
5,367
6,451
7,809
8,822

49 We propose to apply the increase to adult apprentices, other apprentices and to trainees in accordance with the usual practice of the Commission. In doing so we draw attention to the order issued by the Commission in the above matter on 20 October 2006 ([2006] WAIRC 05631; 86 WAIG 3132). The Commission in Court Session was conscious of the significant increase in the rate for adult apprentices and accordingly, phased in the increase over four stages, with the last increase to $448.65 per week effective on and from the commencement of the first pay period on or after 1 July 2007. The Commission said:
It is important to recognise that the minimum weekly rate of pay for adult apprentices we now prescribe will also increase the rate being paid to award-covered adult apprentices when the rate exceeds $421.70 per week. This will occur on 1 July 2007 at which time by section 50A(5) another State Wage Order is required to come into effect. As a consequence, the rate of $448.65 might be overtaken by, and be increased by, any increase in that future State Wage Order.

([2006] WAIRC 05589; (2006) 86 WAIG 3129 at [22])

50 We therefore request that the Minister, TLCWA, AMMA and CCIWA confer and endeavour to agree upon:
(a) whether or not that order should be rescinded by this State Wage order; and
(b) whether or not the rate of $421.70 should be replaced by the rate of $466.65 per week, being 75% of the trade rate under the Metal Trades (General) Award which will result from this State Wage order.

THE STATE WAGE PRINCIPLES
51 We state later in our reasons that when the Commission sits to make the 2008 State Wage order we intend to review whether each of the principles should be retained in their current form. It is therefore appropriate to set out for the record the respective submissions now before us. We will deal first with the proposal by the TLCWA and the Minister to insert an equal remuneration principle into the Statement of Principles, and then with the principles generally.

An Equal Remuneration Principle
(a) The Minister's Submissions
52 The Minister noted that in 2002, the Labour Relations Reform Act 2002 came into force which enacted section 6(ac) of the Act which provides that it is a principal object of the Act to "promote equal remuneration for men and women for work of equal value". In 2003, the Commission in the State Wage decision had rejected the TLCWA's proposal to insert an equal remuneration principle into the Statement of Principles.

53 In 2006, the Labour Relations Legislation Amendment Act 2006 enacted section 50A(3)(a)(vii) which obliges the Commission, when making an order under section 50A, to take into consideration the need to provide equal remuneration for men and women for work of equal or comparable value.

54 Section 6(ac) of the Act was in operation when the Commission last considered whether an equal remuneration principle should be inserted into the Statement of Principles, however, section 50A(3) had not become operative. The Minister submitted that the specific obligation "to provide" equal remuneration pursuant to section 50A(3)(a)(vii) is significantly stronger than the general object in section 6(ac) "to promote" equal remuneration. The key reason why an equal remuneration principle is sought, is to address the obligation in section 50A(3)(a)(vii). The Minister also contended that such a principle could assist in ensuring that all of the considerations set out in section 50A(3)(a) are better addressed.

55 The Minister pointed out that the majority of employees reliant on award wages are women and they are highly segmented by industry. A table was produced on behalf of the Minister which shows total employment by sex by industry for the February quarter 2007 in Western Australia. This table shows the industries most affected by the State Wage order are highly gendered.
Total Employment by sex, WA, by Industry, February Quarter 2007
Industry
Males
(000)
Females
(000)
Total
(000s)
Female Employment as % of total industry workforce
Agriculture, Forestry and Fishing
31.5
13.9
45.4
30.6
Mining
42.7
9.6
52.3
18.4
Manufacturing
76.8
25.1
101.9
24.6
Electricity, Gas and Water Supply
8.3
2.4
10.7
22.4
Construction
96.1
14.8
110.9
13.3
Wholesale Trade
32.2
12.5
44.7
28.0
Retail Trade
72.4
84.3
156.7
53.8
Accommodation, Cafes & Restaurants
18.5
30.3
48.8
62.1
Transport & Storage
31.9
8.4
40.3
20.8
Communication Services
10.3
3.9
14.2
27.5
Finance & Insurance
13.3
16.2
29.5
54.9
Property & Business Services
73.3
58.7
132
44.5
Government Administration & Defence
25.8
28.1
53.9
52.1
Education
21.3
49.9
71.2
70.1
Health & Community Services
21.8
88
109.8
80.1
Cultural & Recreational Services
11.1
16.4
27.5
59.6
Personal & Other Services
23.8
20.1
43.9
45.8
Total
611.1
482.6
1093.7
44.1

56 A table was also produced on behalf of the Minister which shows that male earnings which are greater than female earnings ("gender pay gap") ranges from 7% in cultural and recreational services to 38% in property and business services. Table 4, Average Weekly Earnings by Industry for Western Australia, by sex provides as follows:
WA Average Weekly Earnings by Industry, by sex
Industry
Male AWOTE $
Female AWOTE $
Female AWOTE as % of Male AWOTE
Gender Pay Gap
i.e. % male earnings greater than female earnings
Mining
1771.20
1352.30
76.35
24%
Manufacturing
1188.60
938.30
78.94
21%
Electricity, Gas and Water Supply
1495.80
1186.10
79.30
21%
Construction
1281.70
995.10
77.64
22%
Wholesale Trade
1019.90
859.80
84.30
16%
Retail Trade
769.30
683.90
88.90
11%
Accommodation, Cafes & Restaurants
886.70
725.00
81.76
18%
Transport & Storage
1105.20
738.50
66.82
33%
Communication Services
1054.50
947.30
89.83
10%
Finance & Insurance
1381.30
913.70
66.15
34%
Property & Business Services
1356.40
843.90
62.22
38%
Government Administration & Defence
1105.70
985.00
89.08
11%
Education
1199.00
993.10
82.83
17%
Health & Community Services
1276.90
882.10
69.08
31%
Cultural & Recreational Services
976.60
909.00
93.08
7%
Personal & Other Services
1150.40
866.50
75.32
25%

57 The Minister submitted that the ABS information shows that Western Australia has a gender pay gap of an average of 25%. This is the worst gender paid gap in the nation. Most of the States are clustered at around 15%. Nationally the gender pay gap stands at 15.7% (Average Weekly Earnings Data ABS Cat No. 6302.0).

58 The government commissioned Drs Trish Todd and Joan Eveline of the University of Western Australia to conduct a review of the gender pay gap. One of the recommendations of the Todd and Eveline 2004 report was to address pay equity through the introduction by the Commission of an equal remuneration principle into the Statement of Principles.

59 The Minister proposed an equal remuneration principle in the following form:
"1. In this Principle the term equal remuneration means equal remuneration for men and women doing work of equal value. Remuneration means the total remuneration package of an employee, including conditions of employment.
2. Prior to making any new award, the Commission must be satisfied that the proposed award provides for equal remuneration and other conditions of employment for male and female employees doing work of equal value.
3. Applications may be made under this Principle to make or vary an award in order to implement equal remuneration.
4 Equal remuneration applications will require an assessment of the value of the work performed in the industry or occupation, or in like jobs in another industry, irrespective of the gender of the relevant employee/s.
5. In assessing the value of the work, the Commission may take into account the nature of the work, the skill, responsibility and qualifications required by the work and the conditions under which the work is performed (which has the same meaning as it does for Principle 6 Work Value Changes). Changes in work value do not have to be demonstrated.
6. Prior work value assessments and/or the prior setting of rates for the work cannot be assumed to have been free of assumptions based on gender. The history of the establishment of wage rates in the award will be a consideration and the Commission must broadly assess whether the past valuation of the work has been affected by the gender of the employees.
7. The Commission must ensure that any newly established wage relativities arising from adjustments made under this Principle are maintained.
8. The Commission may determine that any wage increase arising under this Principle will be phased in.
9. The Commission may determine whether any increases in wages will be absorbed into over-award payments."

60 This was prepared after regard was had to provisions adopted by the NSW, Queensland and Tasmanian Industrial Relations Commissions. Each Commission issued equal remuneration principles after each had held detailed pay equity inquiries in relation to specific occupational groups.

61 In each of the three pay equity inquiries it was found that there was a consistent undervaluing of a significant range of female dominated industries and occupations in NSW, Queensland and Tasmania. The Minister does not suggest that this Commission carry out its own case studies but is of the opinion that it is reasonable to assume that many of the findings made by the three pay equity inquiries will apply in Western Australia.

62 It was contended by the Minister that Principle 10 does not currently enable equal remuneration claims to be heard. In addition, it was suggested that the redrafting of Principle 10 to include a reference to equal remuneration would not be a suitable mechanism for enabling pay equity issues to be addressed. The Minister contended that an equal remuneration principle should stand alone and provide substantial guidance for the Commission and parties regarding the operation of any equal remuneration principle. It was also contended that the mounting of a pay equity case is of itself a difficult and complex matter and that any pay equity claim brought under the current Statement of Principles would likely result in lengthy and costly arguments about the applicability of the principle which would delay or ultimately prevent the consideration of the undervaluation of women's work.

(b) TLCWA
63 The TLCWA supported the draft proposed by the Minister for an equal remuneration principle. The TLCWA said that the concept of pay equity and equal remuneration is one where work is transparently and objectively assessed on skill, responsibility and other elements of work to determine its true worth ((1999) QIR Comm 189). It also said that the NSW Pay Equity Inquiry established that pay inequity stems from cultural, economic, social and institutional factors which influence wage setting and result in pay inequity in respect of male and female employees doing the same work or work of equal value (NSW Pay Equity Inquiry (1998a, Report to Minister, Volume 1, 14 December 1998, Matter No. IRC 6320 of 1997, Industrial Relations Commission of NSW, Sydney, page 3)). In addition, the TLCWA said that the gender gap in pay in Western Australia is an indicator of the inherent pay inequity in Western Australia.

64 The TLCWA submitted that the term "equal remuneration" is a broader term than "equal pay" and pointed out that the purpose of an equal remuneration principle is to ascertain the value of work not affected by the gender of workers.

65 Ms Freeman in a submission made on behalf of the TLCWA pointed out that the only equal remuneration case that has ever been run in Western Australia was in respect of childcare workers. That matter was brought under Work Value Changes principle which is not a principle that addresses gender equity.

66 The TLCWA said that if the Commission is not minded to make an equal remuneration principle and it is of the opinion that such an application can be brought under current Principle 10 the fact that such an application can be made should be made very clear and not constrain the hearing and determination of equal remuneration claims.

67 Alternatively, the TLCWA said that if the Commission is not disposed to insert an equal remuneration principle without further investigation and given the mandatory timelines for the issuing of a State Wage decision, the claim for equal remuneration be split from the principal application in order that the claim for an equal remuneration principle may be progressed further.

68 In its reply, the TLCWA supported its call for an equal remuneration principle by referring to amendments made to the Dairy Factory Workers' Award by the Commission which only partially granted equal wages for male and female workers. In a subsequent written advice we were told the reference was to an order amending that award at (1975) 59 WAIG 1399. The amendment referred to (a decision of Kelly C, not Collier C as mentioned by the TLCWA) was dealt with on appeal (FMWU v. Sunnywest Co-Operative Dairies Ltd., and ors (1976) 56 WAIG 1477) and it is readily apparent that the decision was made under the now repealed Industrial Relations Act 1912 which, at that time, had specific provisions in Part X governing equal pay for male and female workers; the appeal found that the decision of Kelly C was in accordance with the evidence and the legislation then applicable (Ibid.). In any event, it was overtaken by the subsequent consent amendments made to the award by Collier C and found at (1979) 59 WAIG 1207 and it is overshadowed both by the subsequent landmark decision of the Commission in 1981 which established for the first time the same minimum wage for adult employees regardless of sex (Re General Order (1981) 61 WAIG 1894) and by the insertion in 2002 of the principal object of the Act to promote equal remuneration for men and women for work of equal value.

(c) AMMA
69 AMMA did not support the making of an equal remuneration principle. It argued that there is no demonstrated basis for such a principle and that such an application could be brought under the current Work Value Changes principle. AMMA said that the Commission's award rates do not demonstrate a gender gap which in turn does not support the making of a new principle. AMMA also said that an equal remuneration claim could be brought under Principle 10, as that principle allows the parties to come to the Commission and argue whether there should be an increase above the safety net.

70 A submission was made on behalf of AMMA that if an industry contains low paid work it does not necessarily follow that wages are unfair. AMMA said it comes down to capacity to pay. It contended that for example it is a fact that a cleaner working on an oil rig earns far more than a cleaner in a public school system. It is also common knowledge that cleaners on oil rigs are predominately male and cleaners in the public school system have a high proportion of females. AMMA said that these facts have nothing to do with discrimination against women, rather that the situation referred to arises because of a capacity to pay or access to occupations that pay higher rates of pay.

71 AMMA also contended that the minimum rates adjustment process in current Principle 3 allows for obvious deficiencies to be corrected.

(d) CCIWA
72 CCIWA opposed the making of an equal remuneration principle. It agrees with submissions made on behalf of AMMA that claims involving pay equity can be brought under current Principle 10, if Principle 10 is retained. CCIWA submitted that Principle 10 should be retained in its current form as its language is wide enough in scope to capture the essence of the pay equity principle advocated by the Minister and the TLCWA. CCIWA submitted that under Principle 10 the Chief Commissioner would have to make a decision whether a Commission in Court Session or a single Commissioner will deal with a pay equity claim.

73 CCIWA said it would be preferable for the first matters involving pay equity to be dealt with by a Commission in Court Session to establish the principles that should be applied in dealing with such claims and because of the importance that will be attached to those first decisions. CCIWA also takes issue with the draft clause proposed by Minister. In particular, it takes issue with the first paragraph of the draft clause which provides that the total remuneration of the package of an employee includes conditions of employment and all monetary and non-monetary benefits. CCIWA said that an inordinate difficulty would arise in comparing non-award benefits between industries and making comparisons with a comparative group because of profitability and other considerations. CCIWA said that if the Commission were to adopt a gender pay equity principle, comparisons should only be made between classifications in awards and not over-award benefits.

74 CCIWA also made a submission that no party advocating for the new principle has convincingly explained how any matter of pay equity could not be dealt with by the Commission under minimum rates adjustments - Principle 3 (Previous State Wage Case Increases).

75 In conclusion CCIWA said that there is no demonstrated need for a special pay equity principle, especially given the provisions of sections 6, 50A(1)(d) and 50A(3)(vii) of the Act.

The Statement of Principles
(a) Minister
76 Prior to the hearing of this matter submissions were filed on behalf of the Minister which indicated that the Minister supported minimal changes to the Statement of Principles. Other than the inclusion of an equal remuneration principle, it was submitted that the only necessary changes to the principles should be to Principle 8 (Arbitrated Safety Net Adjustments) and Principle 9 (Minimum Adult Award Wage) to give effect to the 2007 safety net adjustments. However, during the hearing of this matter the members of the bench pointed out that the coming into operation of section 50A(1)(d) required the Commission to review the 2006 Statement of Principles as they contain matters which go beyond the matters set out in section 50A(1)(d).

77 During the hearing, the Minister provided a written response to the Commission which addressed the questions the Chief Commissioner had raised in correspondence dated 4 May 2007 to the Minister, the TLCWA, AMMA and CCIWA. The response referred to paragraph 71 of the explanatory memorandum to the Labour Relations Legislation Amendment Bill 2006 (which inserted section 50A) in which it was stated that it is intended that the Statement of Principles is to be applied by all subsequent proceedings by the Commission whether constituted by a single Commissioner or by a Commission in Court Session where the Commission is setting wages and that the Statement of Principles will not be applicable to non-wage related matters.

78 It was contended on behalf of the Minister that the obligation raised by section 50A(1)(d) is that the Statement of Principles are to be separate from any considerations that arise pursuant to sections 6, 26(1) and 50A(3) of the Act. It also was submitted that the State Wage principles should do more than replicate the provisions of the Act and if the principles do not do so they will be redundant.

79 Following the hearing, and at the invitation of the Commission, supplementary written submissions were filed on 25 May 2007. In those supplementary submissions a view was expressed that the current form of the Statement of Principles is not so inconsistent with the obligation in section 50A(1)(d) that the 2006 Statement of Principles should be departed from entirely. The Minister said that the content of the principles should be reviewed pursuant to section 50A(1)(d) and to do so requires consideration of the historical reason why each principle has been included, applied in practice and in that context, an assessment should be made as to whether each principle is relevant to and consistent with section 50A (1)(d).

80 The Minister submitted that a Statement of Principles made pursuant to section 50A(1)(d) should be separate from any considerations that arise pursuant to sections 6 and 26 of the Act. It was also submitted that the obligation of the Commission to make principles is not met now by adopting, as has occurred in the past, principles derived from principles made by the Australian Industrial Relations Commission (AIRC). Nor is it met by merely adopting without change the Statement of Principles adopted in the 2006 General Order which were made under a different statutory regime.

81 The Minister said that it is for the Commission to determine the scope of section 50A(1)(d) and set out principles accordingly. Without any guidance from the Commission as to its view of the interpretation and scope of section 50A(1)(d), it was said that any submission as to the continuing relevance of each of the previous principles is premature. Notwithstanding this submission the Minister makes a number of submissions in relation to the relevance of each of the 2006 Statement of Principles.

82 It is submitted on behalf of the Minister that it is appropriate to delete the reference to "and relevant agreements" in Principle 1, and "or relevant agreement" in Principle 2 as the role of arbitration and the award safety net is to protect employees who may be unable to reach an industrial agreement. The Minister also observes that the Full Bench in Health Services Union of Western Australia (Union of Workers) v. Director General of Health ([2007] WAIRC 00396; (2007) 87 WAIG 737 at [121]) raised the fact that agreements may override awards.

83 The Minister did not support the making of a scope type clause as the Act determines the scope of the principles, although the Minister did not object to a clause which accurately reflects the coverage of the principles.

84 In relation to Principle 7 which provides for applications to reduce standard hours to 38 hours per week, the Minister submitted that this principle does not fall within the scope of section 50A(1)(d) as it does not involve the exercise of jurisdiction "to set the wages, salaries, allowances or other remuneration of employees or the prices to be paid in respect of their employment". It is contended that this construction is supported by section 23(2)(a) and the definition of "industrial matter" in section 7(1) of the Act which distinguishes wages, salaries, allowances, or other remuneration of employees or the prices to be paid in respect of the employment in subparagraph (a) of the definition of "industrial matter" and hours of employment in subparagraph (b).

85 The Minister acknowledged, however, that "other remuneration" is not confined to monetary benefits but submitted that the scope of non-monetary benefits that constitute "other remuneration" is unclear from the authorities (see Capewell v Cadbury Schweppes Australia Ltd (1997) 78 WAIG 299 and May v Lilyvale Hotel Pty Limited (1995) 68 IR 112). Notwithstanding that "other remuneration" can encompass non-monetary benefits the Minister submitted that standard hours do not meet the preliminary requirement of falling within the meaning of "other remuneration" even though standard hours may be a non-monetary benefit.

86 In any event, it is contended that even if Principle 7 is within the scope of section 50A(1)(d), Principle 7 requires the Commission to satisfy itself that "the cost impact is minimised" and arguably the Commission would be required to do so regardless of any principle to that effect. Section 26(1)(d)(iii) requires that the Commission take into consideration, in the exercise of its jurisdiction under the Act, "the capacity of employers as a whole or of an individual employer to pay wages, salaries, allowances or other remuneration and to bear the cost of improved or additional conditions of employment". Consequently, it is said that it is not necessary to retain Principle 7.

87 The Minister also said that references to structural efficiency (in Principles 10 and 11) no longer have any relevance in the Western Australian industrial relations system. The structural efficiency principle was made by the AIRC in 1988 and adopted by the Commission in 1993 ((1993) 74 WAIG 198 at 200). The structural efficiency principle was directed at a review of awards to improve their flexibility and productivity and subsequent reviews including award simplification. It is acknowledged, however, that the structural efficiency principle may have ongoing relevance as the operation of section 40B(1)(d) and (e) allow the Commission to review awards consistent with the original objective of structural efficiency considerations (that is, in order to approve flexibility and productivity), irrespective of the terms of Principle 11.

88 It is argued on behalf of the Minister that given the scope of the principles to be set pursuant to section 50A(1)(d), the structural efficiency consideration in current Principle 11 falls outside the scope of principles that are to be made. It is also the Minster's view that the structural efficiency principle applies more broadly than to matters dealing with the setting of wages, salaries, allowances or other remuneration of employees or the prices to be paid in respect of their employment. Consequently, the Minister suggested that this Commission should consider an amendment of the current Statement of Principles so as to confine structural efficiency considerations to the exercise of jurisdiction to which the principles is to apply.

89 In relation to Principle 4 (Test Case Standards), it is submitted that insofar as test case standards relate to matters other than wages, salaries, allowances or other remuneration of employees or the prices to be paid in respect of their employment, principles made pursuant to section 50A(1)(d) do not apply to test case standards. However, where test case standards of other courts and tribunals relate to the setting of wages, salaries, allowances or other remuneration of employees or prices to be paid in respect of their employment, the Statement of Principles may allow their incorporation.

90 Notwithstanding this submission the Minster said that it is not appropriate to amend Principle 4 to allow for test case standards of other courts and tribunals to be incorporated into an award, as section 50A(3)(f) is a requisite consideration in the making of an order under section 50A and because there is an absence of any similar provision in the objects or in any other provision of the Act.

91 In relation to Principle 10, a submission is made that Principle 10 is the procedural gateway for award increases that fall outside the scope of other principles. In these proceedings various persons have characterised this principle as being protective of the award safety net, enterprise bargaining, and the economy, or alternatively as a fetter that hinders individual Commissioners from fully accessing their broad powers under the Act. In deliberating the future of Principle 10, the Minister submitted that it is necessary to examine the role awards play within the Western Australian system and what form a revised Principle 10 would take.

92 The considerations under the Act that are broadly analogous to elements of the previously imported award safety net concept are objects 6(ad), (ag) and (ca) and section 26(1)(d), that is the need to provide fair wages, promote (or not discourage) enterprise bargaining, and recognise the impact of decisions on the economy generally. Specifically, section 50A(3) outlines the considerations that the Commission must apply when making its annual State Wage order. It is contended that these provisions operating in concert require the Commission to maintain a specific role for awards. Importantly, section 50A is also a specific provision that provides for an annual review and an adjustment of award rates of wages.

93 The question before the Commission in this matter is whether to reissue Principle 10 and maintain this procedural gateway or rely on the provisions of the Act to provide guidance for individual Commissioners issuing wage increases to awards outside of the annual review mandated by section 50A. The Minister submitted that caution should be exercised in the first instance in amending the intent of Principle 10 and that a procedure needs to be retained in a limited form, if only until some of the other matters relevant to the exercise of section 50A(1)(d) are settled. For clarity of expression and purpose, it could be combined into a new revised Principle 2 that gives effect to the Commission's deliberations in this matter. In this proposed principle schema, Principle 1 would set out the role of awards and Principle 2 would outline how variations outside the annual State Wage order were facilitated. The impact of these amendments could be monitored and reviewed in the 2008 State Wage order hearing.

(b) TLCWA
94 The TLCWA supported the continuation of the current Statement of Principles with reservation. It is its position that the principles need to be examined.

95 In 1999 the TLCWA argued that the AIRC principles were not transferable into the State industrial relations system as the federal and State legislation provided for different roles for the two tribunals. At that time the TLCWA made a submission that the principles could not import the provisions of the Workplace Relations Act 1996 into the Act and that the Commission could be sufficiently guided by sections 6 and 26 of the Act. The position of the TLCWA has not changed. It noted the context in which the submission was made in 1999 is vastly different to that which currently applies and the purpose of adopting the national wage principles to promote a unified system is no longer valid.

96 The TLCWA submitted that principles could and should be simple and flexible guidelines regarding the exercise of the Commission's jurisdiction and should not be used to prescribe requirements that are contrary to or limit the statutory obligations of the Commission. In particular, they submit that section 26 establishes the Commission's jurisdiction and section 27 the Commission's powers. Further, the principles should only be set in accordance with the requirements of section 50A with respect to the exercise of setting wages and they should not and cannot be an exhaustive statement of matters that may or may not be considered by the Commission.

97 The TLCWA submitted that the current complexity of the federal industrial relations system necessitates wage fixation in State awards to maintain its relevance through being simple, clear and applicable. For example, complexities such as tiered increases, like that awarded by the AFPC, should be avoided and principles which establish simple and clear guidelines need to be established.

98 The TLCWA continued to submit that the Commission is sufficiently guided by sections 6 and 26 of the Act in its procedures and that the requirements of section 50A now complement those provisions. It therefore contended that in meeting the requirements of section 50A(1)(d) the current Statement of Principles should be reviewed with a view to establishing guidelines that are complementary to these provisions and are flexible enough to ensure the Commission's role in dispute resolution is not undermined.

99 The TLCWA submitted that a scope clause is required to be drafted that confines the principles to the matters set out in section 50A(1)(d). The TLCWA maintained that the current Statement of Principles lacks flexibility to enable the Commission to fully explore its powers in the undertaking of dispute resolution and working with parties to fulfil the objects of the Act.

100 The TLCWA said that the principles should reflect the requirement of section 50A(3)(e) - that there is a need to ensure that the Western Australian award framework represents a system of fair wages and conditions of employment, and that the principles should take into account the need to give parties the capacity to carry out that sort of investigation into awards.

(c) AMMA
101 AMMA said that whilst the Statement of Principles were similar to the federal wage principles they never mirrored the principles of the federal Commission. It said that the Commission can be flexible in a sense that it should adopt principles that are consistent with the Act. AMMA pointed out that the Statement of Principles act as a fetter for the period of time the principles are operative. However, at the end of each period of 12 months, if the principles are not workable or there are things that need to be changed as a result of submissions made to the Commission or on the Commission's own initiative, new principles can be made.

102 AMMA said that the current Statement of Principles are not perfect as they do not reflect in their entirety the recent changes to the Act. Consequently, the Statement of Principles should be modernised in the sense of redrafting the principles to provide consistency with the provisions of the Act.

103 AMMA submitted that the purpose of the principles is to control claims for unrealistic award outcomes and should act as a disincentive for enterprise bargaining. AMMA does not want to see the award system become a dominant form of increasing labour costs as that is not healthy in the terms of the way the economy is performing.

104 AMMA agreed that section 50A(1)(d) limits the making of principles to wages, salaries, allowances or other remuneration of employees or the prices to be paid in respect of their employment which raises the issue whether the entire content of existing principles can be repeated without being in excess of section 50A(1)(d). For example, Principles 1, 2 and 10 refer to wages and conditions of employment. AMMA said that it has not considered whether the words "other remuneration" can equate to conditions of employment that may be subject to Principle 4 (Test Case Standards) or Principle 7 (Standard Hours) and it notes the Commission in these proceedings has not had the benefit of any detailed submission on this subject.

105 In this respect AMMA submitted that in lieu of fuller submissions on this matter, the new principles can include matters contained in the existing principles as the word "remunerate" as defined by the Macquarie Dictionary includes "recompense, or reward for work" and as such this should include conditions of employment where they are rewards for work, such as leave provisions.

106 In respect of Principle 10, AMMA pointed out that in 2005 the Commission in its State Wage order removed the words:
"– why the matter has not been progressed and/or finalised pursuant to section 41 of the Act;
– why the matter has not been pursued under any other Principle set out in this Statement; and
– how in the discharge of its statutory function to consider varying above or below the safety net the Commission should take into account, to the extent that it is relevant, each of the matters identified in section 26 of the Act."

107 These words were removed on the basis that they were not reflected in federal principles to which the Commission was required to give effect. AMMA had opposed the removal of these words on the basis that it would be a signal to the parties that the emphasis on enterprise bargaining would no longer be valid. AMMA submitted that these words should be reinserted as it is no longer a requirement that the principles reflect the federal principles.

(d) CCIWA
108 CCIWA submitted that there should be retention and modernisation of the Statement of Principles to ensure compliance with the provisions of the Act. CCIWA pointed out that between 1975 and 1981 there were no rigid wage fixing principles and that the Commission adopted a broad approach to the adjustment of wages and conditions of employment following three principles:
(a) A well recognised nexus for the awards of other tribunals;
(b) Unfair discrepancies between rates of pay in Western Australia; and
(c) An ability to establish a nexus with other State awards or federal awards.

109 Following a national federal and State wages pause during 1982 and 1983, the Commission adopted wage fixing principles similar to those put in place by the AIRC as a result of the reintroduction of the centralised system of wage fixation ((1983) 63 WAIG 2207). CCIWA pointed out that the principles made in 1983 have largely remained in place with "minor tweaking here and there".

110 At the time the principles were first made, the state of the economy was the complete opposite of what it is now. It was pointed out that this fact might be used to advocate an abandonment of the principles but CCIWA does not support an abandonment as the principles act as a containment to excessive claims not only in an unstable economic environment but also act to maintain the Commission's awards as a safety net upon which interested parties may negotiate agreements in accordance with the objects of section 6 and the purpose of section 41 of the Act.

111 CCIWA noted that in the current proceedings no party had made a submission that the current principles should be abandoned and to the extent that amendment is required there appeared to be a consensus that the principles should be varied to accommodate the provisions of section 50A(1)(d) of the Act. CCIWA said there is no justification to revert to the pre-State Wage principles era where awards could be adjusted with relatively little control imposed by the Commission short of its statutory duty to exercise equity and good conscience in dealing with claims that come before it.

112 CCIWA submitted that the scope of section 50A(1)(d) which requires the Commission to set out a Statement of Principles to be applied and followed in the exercise of jurisdiction is wide enough to deal with monetary and non-monetary entitlements. Not only does the provision direct attention to monetary benefits but it also includes in its scope "other remuneration of employees".

113 In light of the decision of Health Services Union of Western Australia (Union of Workers) v. Director General of Health (op. cit. at [82] above), CCIWA agreed with the Minister's submission that the words "and relevant agreements" and "or relevant agreement" be deleted wherever occurring in Principles 1 and 2.

114 CCIWA proposed that there be no changes to Principles 3 to 6 which deal with Previous State Wage Case Increases, Test Case Standards, Adjustment of Allowances and Service Increments and Work Value Changes.

115 CCIWA submitted that Principle 7 which deals with reducing standard hours to 38 hours per week requires some modification in light of the provisions of the Minimum Conditions Act because under that Act there is no requirement that the cost impact is minimised.

116 In relation to Principle 8 which deals with arbitrated safety net adjustments and in particular completion of minimum rates adjustments, CCIWA submitted that award rates should be expressed as "weekly" or "hourly" rates but not both; this is because in awards where rates are expressed as both weekly and hourly rates, adjustment of flat wage increases has resulted in marginally inconsistent outcomes to the weekly and hourly rates.

117 CCIWA proposed no changes to Principle 9 except to adjust the internal wage rates as a result of the Commission's decision in this matter.

118 As to Principle 10, CCIWA submitted that the principle ought to be retained in its current form. It said that its language is wide enough in scope to capture the essence of the equal remuneration principle advocated by the Minister and the TLCWA. CCIWA also submitted that the procedures contained within the principle contain adequate safeguards in dealing with what will amount to significant "test cases".

119 CCIWA said that there should be no amendment to Principles 11 to 13 save for a minor typographical error to Principle 11(c) where in the parenthesis the word "and" should be "an".

The State Wage Principles - Conclusions
120 We have been assisted particularly by the written submissions received. In saying that, we recognise that although in our 2006 decision we foreshadowed that the State Wage Principles would require attention, all persons appearing considered that they had had insufficient opportunity to comprehensively review them. Thus the submissions before us have approached the issue from the standpoint of examining the 2006 principles and assessing what might, or might not, fit within the obligation now on the Commission under section 50A(1)(d).

121 We consider this approach is limiting, and particularly so given the significant changes effected by the Commonwealth's Work Choices legislation on the federal jurisdiction and upon this jurisdiction. The State Wage Principles in their current form are derived from the operation of the now-repealed section 51. In practice, adoption of similar wage fixation principles by the AIRC and each State industrial relations jurisdiction created an almost uniform system of wage setting throughout the country. As a result of Work Choices there is no longer an almost uniform system of wage setting.

122 We entirely agree with the Minister’s submission that the obligation of the Commission to make principles is not met now by adopting, as has occurred in the past, principles derived from principles made by the AIRC; nor is it met by merely adopting without change the Statement of Principles adopted in the 2006 General Order which were made under a different statutory regime. Following the repeal of the former section 51, and the enacting of section 50A, it is necessary, given the requirement under section 50A(1)(d) to set out a Statement of Principles to be applied and followed in relation to the exercise of jurisdiction in relation to wage, salary, allowances and other remuneration matters under the Act, to set out a Statement of Principles which are derived from the Act, its principal objects and the requirement that section 26(1)(a) imposes on the Commission when it exercises its jurisdiction.

123 We consider that the principles serve at least two broad purposes. One purpose is to provide guidance to parties or potential parties. For example, the Economic Incapacity principle illustrates that an application may be made to reduce or postpone a labour cost increase arising from a decision of the Commission. Persons with a working knowledge of the Act will already know that such an application may be made: it is an industrial matter as defined in section 7 and may be referred to the Commission by an employer pursuant to section 29 of the Act. Many, if not most, persons affected by the Commission's decisions will not have a working knowledge of the Act. Having an Economic Incapacity principle is important in drawing attention to this availability of such an application.

124 Another purpose is to set out for the assistance of Commissioners sitting singly, and the parties appearing, the approach under section 26(1) to be followed. For example, applying and following the Adjustment of Allowances and Service Increments principle both informs the parties how allowances and service increments will be adjusted and ensures consistency of approach.

125 While we are not limited by the submissions of those appearing before us, the statutory requirement in section 50A(5) that the State Wage order takes effect on 1 July in the year it is made gives the Commission insufficient opportunity to explore this issue further with the Minister, the TLCWA, AMMA and CCIWA. We advise that in the latter half of 2007 the Commission will create on its own motion the application necessary for us to consider the 2008 State Wage order and will then convene for the purpose reviewing the State Wage Principles 2007 to ensure that they are appropriate to be applied and followed in this State in relation to the exercise of jurisdiction under the Act to set the wages, salaries, allowances or other remuneration of employees or the prices to be paid in respect of their employment. The outcome of that review will then be able to be considered formally during the 2008 State Wage order proceedings.

126 We have had particular regard for the issue of gender equity given the most recent data from the ABS demonstrates the gender pay gap in Western Australia continues to deteriorate relative to women nationally, a downturn that commenced in 1993. We are grateful to WACOSS for including this up to date material in its written submissions to the Commission in Court Session. We consider that the principles should permit an application to be made for equal remuneration for men and women for work of equal or comparable value. Given that a principal object of the Act in section 6(ac) is to promote equal remuneration for men and women for work of equal value, it is fundamental, in the context of the principles, to recognise that such a claim is able to be made. We note that even the position of AMMA and the CCIWA in opposition to a discrete principle for this purpose recognises that such a claim in any event may well be brought under Principle 10.

127 We do not consider that it is necessary to create a separate principle for this purpose. Such a claim may be brought under Principle 10. This Commission has yet to receive such an application. We do not think it advisable to set out the criteria by which such a claim is to be assessed given specific criteria might restrict or confine a particular claim in this jurisdiction which may not be appropriate. In addition we have had insufficient material and submissions put before us to assess how the parameters of assessing a claim in a manner proposed on behalf of the Minister would work.

128 The scope or the application of the principles will be set out in the first principle. It uses the language of section 50A(1)(d) and refers to the requirement on the Commission in section 26.

129 All persons appearing supported a modernising of the principles, although there was not a common understanding how this would be done. We consider that it is desirable that the language in the Statement of Principles follows as far as possible the language of the Act. The language of an award being a "safety net" is not used in the Act. The Commission has long recognised, however, that an award contains minimum conditions of employment. That, together with principal object 6(ag):

to encourage employers, employees and organisations to reach agreements appropriate to the needs of enterprises within industry and the employees in those enterprises;

and the requirement on the Commission in section 26(1)(d)(vii) to take into account:
the need to encourage employers, employees and organisations to reach agreements appropriate to the needs of enterprises and the employees in those enterprises,

amply covers the concept inherent in a "safety net". The necessary removal of those words, and their replacement by the words "award minimum conditions", therefore does not represent a change of substance.

130 Similarly, reference to "arbitrated safety net adjustment" will be changed to "State Wage order" or "State Wage order adjustment" where necessary.

131 In light of the decision of Health Services Union of Western Australia (Union of Workers) v. Director General of Health (op. cit. at [82] above), wherever the words "and relevant agreements" and "or relevant agreement" occur, they will be deleted.

132 We have deleted former Principle 2(e) and Principle 7 which deals with the 38 hour week. In our opinion leaving aside whether there might be doubt about whether reducing standard hours relates to "the setting of wages, salaries, allowances or other remuneration of employees or the prices to be paid in respect of the employment", it is our opinion that any variation of an award to reduce standard hours to 38 hours a week may be dealt with under Principle 10 if it involves any adjustment of any wages, salaries, allowances or other remuneration of employees or the prices to be paid in respect of employment.

133 We have also deleted the provision in relation to superannuation in former Principle 2(i). If an application is made to increase the quantum of superannuation above the quantum prescribed by Commonwealth law or in an award of this Commission such an application may be dealt with under Principle 10.

134 We consider the Minister's submission that it is not appropriate to amend current Principle 4 to allow for test case standards of other courts and tribunals to be incorporated into an award is correct. Those other test case standards may deal with matters other than wages and it is apparent, nevertheless, that test case standards of other courts and tribunals will form part of the Commission's considerations under section 26 of the Act when relevant.

135 We have updated Principle 6(c) which deals with the date on which a work value assessment is to be measured. In light of the submissions made on behalf of the Minister and TLCWA, we have inserted a new subclause (9) to make it plain that the Work Value Changes principle does not apply to any claim or matter in respect of a claim to provide equal remuneration for men and women for work of equal or comparable value. Such claims and matters may be dealt with under Principle 10. The addition of these words should overcome the concerns raised on behalf of the Minister and TLCWA.

136 We agree with the submission of the Minister that the structural efficiency principle is no longer relevant to the making of awards in this Commission.  It contains matters that are overly prescriptive and in part deals with matters that go beyond the setting of wages, salaries, allowances or other remuneration of employees or the prices to be paid in respect of their employment.  The Commission retains the capacity to consider under sections 26(1)(d)(vii) and 40B(1)(e) the original objective of structural efficiency considerations (that is, in order to approve flexibility and productivity) irrespective of the terms of Principle 11.  We agree however that in assessing extensions of wages in existing awards or to award free work under Principle 11 that one of the main considerations should be taking into account the matters set out in section 26(1)(d)(vii).  We are also of the opinion that the other main consideration should be that if wages are set they should be fair.  This consideration flows from section 6(ca) and the matters set out in section 50A(3) of the Act.

137 We have decided that it is not necessary to re-insert into Principle 10 the three matters to which AMMA, very properly, referred which were deleted in 2005.  We do not consider the evidence relating to agreement making since their removal shows that their removal has been a signal that the emphasis on enterprise bargaining is no longer valid.  In our opinion when considering a matter under Principle 10 the Commission is obliged pursuant to sections 6(ad), (ag) and 26(1)(d)(vii) of the Act to consider where relevant, whether the parties have taken appropriate steps to progress a matter in dispute by entering into an industrial agreement.  However, AMMA is able to ask us to revisit this issue when the Statement of Principles are reviewed in 2008. 

ROUNDING OF ALLOWANCES
138 The Commission's attention was drawn to what was described in the CCIWA's submission as "minor disagreements in the matter of calculating increases in wages and allowances", especially in circumstances where there had been no adjustment to those wages or allowances over a period of two or more years.

139 The Commission was also referred to the decision of Kenner C in The Australian Workers' Union, West Australian Branch, Industrial Union of Workers v. Kalgoorlie Consolidated Gold Mines Pty Ltd and Others ((2003) 83 WAIG 3596) as providing a format for the Commission to establish a methodology to be applied generally.

140 CCIWA suggested two methods of calculation as being appropriate for situations where there has been no adjustment to rates for more than 1 year. They were:
"• Method 1 – Two Step Calculation

The amount to be adjusted be calculated by applying the appropriate increase and then rounding to the 'appropriate level'. If any second increase is necessary the same calculation method be repeated.

• Method 2 – One Step Calculation

If multiple increases are warranted, the increases are to be compounded and the total result applied to the figure to be amended.

• An example

• Assume a weekly wage of $500.00. The wage has not been increased for two years and the Commission has determined that each yearly increase should be 3.5% in year 1 and 4.0% in year 2.

• Method 1 – Two Step Calculation

• $500.00 x 103.5 = $517.50
100

• $517.50 x 104.00= $538.20
100


• Method 2 – One Step Calculation Compounded

• $500.00 x 107.64 = $538.20
NB 107.64 = 103.5 x 104.00."

141 CCIWA also submitted that rates of pay expressed as annual amounts should be rounded to the nearest dollar; weekly rates to the nearest ten cents; daily rates to the nearest five cents and hourly rates to the nearest cent.

142 The Minister and AMMA generally agreed with the approach suggested by CCIWA, except that the Minister preferred Method 1 above as being mathematically more accurate.

143 TLCWA submitted that a principle setting out a formula or methodology was not appropriate, and said that there may be circumstances where parties to an award have an established custom and practise which is agreed between them, and they may prefer to maintain their custom and practise. TLCWA did not otherwise express a view about any particular methodology.

144 Taking account of the submissions, and of Kenner C’s decision in The Australian Workers’ Union, West Australian Branch, Industrial Union of Workers v. Kalgoorlie Consolidated Gold Mines Pty Ltd and Others (op. cit. at [139] above), it is appropriate that the Commission provide some guidance to parties so as to avoid disagreements arising out of a relatively mechanical issue such as this. As to whether Method 1 or 2 ought to apply, the outcome in each case ought to be the same. However, rounding or the lack of it, in a series of calculations will affect the result in the long term.

145 The best way to ensure there is no disadvantage to employees in the calculation of rates is to calculate those rates as if they were being calculated each year. Accordingly, Method 1 ought to apply, that is, each increase is to be calculated, then rounded, before the next increase is calculated on the rounded result.

146 In respect of the particular approach to rounding, the consensus view amongst those who addressed the methodology provides an appropriate approach to rounding and ought to be adopted unless there is an agreed, established custom and practise in an industry or for an award, or where arbitration has set a methodology. Accordingly, rounding ought to be applied as follows:

1. (a) Yearly rates are to be rounded to the nearest dollar;
(b) Weekly rates are to be rounded to the nearest 10 cents;
(c) Daily rates are to be rounded to the nearest 5 cents; and
(d) Hourly rates are to be rounded to the nearest 1 cent.

2. Ideally, allowances ought be increased each year. However, where multiple increases are warranted, the increases are to be compounded and a total result applied to the figure to be amended.

3. Where the parties to an award agree that there is a custom and practise to be applied to rounding for that award which varies from the method set out above, then the custom and practise should apply. Alternatively, where arbitration has established a particular method of rounding appropriate to the circumstances, that arbitrated method ought to apply.

ORDERS
147 A Minute of Proposed Order now issues and a speaking to the minutes, if required, is set for Wednesday, 20 June 2007 at 9:00 am. The Commission should be advised by 4:00 pm on Monday, 18 June 2007 whether or not a speaking to the minutes is requested.