Commission's Own Motion -v- (Not applicable)

Document Type: Decision

Matter Number: APPL 2/2010

Matter Description: 2010 State Wage Order pursuant to section 50A of the Act

Industry: Various

Jurisdiction: Commission in Court Session

Member/Magistrate name: Chief Commissioner A R Beech, Acting Senior Commissioner P E Scott, Commissioner S J Kenner, Commissioner J L Harrison, Commissioner S M Mayman

Delivery Date: 11 Jun 2010

Result: 2010 State Wage order issued

Citation: 2010 WAIRC 00337

WAIG Reference: 90 WAIG 568

DOC | 139kB
2010 WAIRC 00337
2010 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
ACTING SENIOR COMMISSIONER P E SCOTT
COMMISSIONER S J KENNER
COMMISSIONER J L HARRISON
COMMISSIONER S M MAYMAN
HEARD TUESDAY, 1 JUNE 2010, TUESDAY, 8 JUNE 2010
DELIVERED FRIDAY, 11 JUNE 2010
FILE NO. APPL 2 OF 2010
CITATION NO. 2010 WAIRC 00337

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 -State wage principles - Industrial Relations Act 1979 s 50A
Result 2010 State Wage order issued

Representation Mr A Lyon, and with him Ms S Haynes, on behalf of the Hon. Minister for Commerce
MR J RIDLEY ON BEHALF OF THE CHAMBER OF COMMERCE AND INDUSTRY OF WA (INC.)
Mr D Ellis on behalf of the Trades and Labor Council of WA



Reasons for Decision

1 This is the unanimous decision of the Commission in Court Session. The Commission is required by s 50A of the Industrial Relations Act 1979 (the Act) before July in each year to make a General Order (the State Wage order) setting the minimum wage applicable under s 12 of the Minimum Conditions of Employment Act 1993 (MCE Act) to employees who have reached 21 years of age, and to apprentices and trainees. The Commission is also to adjust rates of wages paid under State awards.

2 The Commission placed advertisements in two local newspapers on 17, 21 and 22 April 2010 calling for public submissions. The advertisement was also published on the Commission’s website and in the WA Industrial Gazette ((2010) 90 WAIG 213; [2010] WAIRC 00211).

3 The Commission sat on 1 June 2010 and heard oral submissions and evidence from the Hon Minister for Commerce, the Chamber of Commerce and Industry of Western Australia (Inc) (CCIWA) and the Trades and Labor Council of Western Australia (TLC). Written submissions were received from Australian Mines and Metals Association (AMMA), Australian Hotels Association WA Branch (AHAWA), the Western Australian Council of Social Services Inc (WACOSS), Mr F. Nicoletti and Mr G. Gray. Copies of all submissions were placed on the Commission’s website and the proceedings were webcast.

SUMMARY OF POSITIONS

The Hon Minister for Commerce

4 The Minister proposes a flat dollar adjustment to the State adult minimum wage and adult award rates based on the 2009-10 estimated consumer price index (CPI) for Perth as published in the 2010-11 State Budget. This is a figure of 2.25% which would lead to an increase of $12.80 per week. The Minister also submits that the minimum wage and award wage rates for junior employees, apprentices and trainees should be increased by the appropriate relativities. The Minister does not support a minimum wage adjustment beyond inflation in 2010 given the potential risks to the State’s economic outlook including WA’s focus on global resource markets, the rapid increase in global public debt and uncertainty surrounding the proposed introduction of the 40% Resource Super Profits Tax (RSPT).

5 Given the continued increases in costs for workers reliant on the State minimum wage, the Minister submits that an adjustment below inflation is not an appropriate outcome. Rather, an inflation-based increase to the State minimum wage and award wage rates is moderate and sustainable in the context of the slow economic recovery.

6 The Minister compared the nominal cumulative increases in WA’s wage price index (WPI) against State minimum wage increases and Perth’s CPI over the last 10 years. This shows that the State minimum wage has been broadly maintained in line with the WPI: since 1999 WA’s WPI has cumulatively increased by 50.7% compared to 47.8% for the State minimum wage. The real increase to the minimum wage over the past decade has been 6.3%.

7 The Minister acknowledges that there have been significant increases in costs for essential items like housing, health, education and transportation, and that these increases are likely to be most keenly felt by lower paid employees. The Minister submits that there is no evidence to suggest the previous increases to the State minimum wage rate and award wage rates have provided a disincentive to enterprise bargaining. Previous State minimum wage increases for apprentices and trainees have not discouraged their uptake in WA; there has been a 14.1% increase in the annual uptake of apprenticeships in WA in the six years to February 2010, and during the same period the number of traineeships commenced each year increased by 24.7%.

8 The Minister acknowledges that women are over-represented among low paid and award-dependent employees and submits that if adjustments in the minimum wage fail to keep pace with inflation this will be disproportionately felt by women. In WA the gender pay gap is 24.2%, is the largest of any State and well above the national average of 17.9%. The Minister carefully addresses each of the criteria in s 50A(3) of the Act.

Relevant decisions of other courts and tribunals

9 The Minister submits that the wage disparity between the minimum wages in each jurisdiction is a consequence of the different legislative criteria considered by each tribunal when adjusting their respective minimum wages, the timing of determinations and the different economic circumstances experienced in each jurisdiction. In relation to the legislative criteria to be observed by Fair Work Australia in its current review of the national minimum wage, the Minister submits that although similarities now exist between the national minimum wages objective and the State minimum wages criteria, important differences remain. Primarily the national minimum wages objective does not require consideration of:
a. The state of the WA economy;
b. The WA award framework; or
c. Relevant decisions of other industrial courts or tribunals.

10 The Minister submits therefore that little weight should be attributed to this current disparity between the WA and national minimum wages.

State jurisdiction coverage

11 The Minister presents information taken from the Australian Bureau of Statistics (ABS) Employee Earnings and Hours, Australia, August 2008 (Catalogue number 6306.0). Table 4 of the Minister’s submission is reproduced below and it updates the information before the Commission in 2008 (2008 WAIRC 00347 at [22]) which had been made available to it by the Australian Taxation Office.

Table 4: Methods of Pay Setting by Jurisdiction, States and Territories, August 2008 ABS, Jurisdictional coverage article, Australian Labour Market Statistics, July 2009, (cat. no. 6105.0)

Proportion of employees (%)
NSW
VIC
QLD
SA
WA
TAS
NT
ACT
Australia
Federal jurisdiction

Federal award or agreement (a)
36.5
55.3
35.8
38.0
32.4
43.5
62.9
75.3
42.0

State award or agreement (b)
1.2
-
2.8
2.7
0.81
2.61
-
-
1.3

Unregistered arrangement (c)
31.0
39.0
23.1
26.0
27.8
16.3
32.4
21.6
30.2

Working proprietor or incorporated business
5.4
5.7
4.0
5.2
4.7
2.7
4.5
3.1
5.0

Total Federal jurisdiction
74.1
100.0
65.7
71.9
65.7
65.1
100.0
100.0
78.5
State jurisdiction

State award or agreement
10.4
-
17.81
17.6
14.01
19.51
-
-
10.0

Unregistered arrangement (c)
2.8
-
5.1
4.1
6.2
4.7
-
-
2.9

Total State jurisdiction
13.2
-
22.8
21.7
20.3
24.31
-
-
13.0
Unable to be determined
12.6
-
11.5
6.4
14.1
10.6
-
-
8.6
Total

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
1 Estimate has a relative standard error of between 25 and 50 per cent and should be used with caution.
(a) Includes employees transitioning out of the federal jurisdiction.
(b) Employees transitioning into the federal jurisdiction.
(c) Includes employees receiving over award pay.
(d) Employees whose jurisdictional coverage for pay-setting was unable to be determined.

12 The Minister concludes that it is difficult to clearly and conclusively identify how many employees in WA are covered under the State industrial relations system. Looking at pay setting methods does not provide an accurate estimate of the coverage due to the large portion of undetermined jurisdiction and pay setting information. By using the Type of Legal Organisation (TOLO) of the employer, it is estimated that in 2006-07 there were approximately 22,383 unincorporated employing businesses in WA. Unincorporated businesses employ approximately 26.9% of WA’s workforce and the WA State Government employs approximately 11.6% of WA’s workforce. Relying upon the 2006 report to the Commission by Professor Plowman and analysis of unpublished data from the ABS Employee, Earnings and Hours, Australia, August 2008 (Catalogue 6306.0) it can be estimated that a maximum of 38.5% of WA employees will be subject to the General Order, although there is no information which can accurately identify the proportion of employees directly or indirectly affected.

Evidence from the Department of Treasury and Finance

13 In support of his submission, the Minister called evidence from Michael Eckermann, the Assistant Director of the Forecasting and Quantitative Services Division within the Department of Treasury and Finance (DTF). Mr Eckermann’s evidence presented a comprehensive overview of global conditions and risks to the global outlook, domestic conditions, the labour market, wages, prices and the economic forecasts for the State. We express our thanks to Mr Eckermann for his presentation.

14 Mr Eckermann’s key messages were that the recovery of the WA economy is strengthening but the next few years are not expected to be as strong as the previous resource-boom years; the outlook for the future is still quite complex; some capacity constraints are likely to develop over the next few years but not as severely as recent resource-boom years; and although the outlook is much better than a year ago, risks to the outlook remain acute, complex and very dynamic. Key domestic risks are interest rates moving higher than expected, the consequences of the unwinding of the domestic stimulus packages, the effect of the Commonwealth’s proposed 40% RSPT and business investment volatility. We will refer further to Mr Eckermann’s evidence in what is to follow in these Reasons.

Chamber of Commerce and Industry of Western Australia (Inc)

15 The CCIWA requests that the Commission should award only a moderate increase to the adult rate of pay. It proposes an increase of $12.00 per week up to the tradesperson level and a $10.00 increase to wage levels above the tradesperson rate, with a proportionate increase to juniors, trainees and apprentices. CCIWA submits this tiered approach is based upon a contemporary assessment of the facts and evidence to promote the role of the minimum wage as a safety net for low-paid employees. It says that an increase beyond that advocated by the CCIWA may result in job losses and otherwise disadvantage businesses recovering from the economic downturn.

16 CCIWA remains of the view that it is no longer sustainable that minimum wages should necessarily increase in each calendar year or that any increase should exceed inflation and there is no legislative presumption to the contrary. Although much of the economic risk and uncertainty in 2009 nationally and in WA has diminished, difficulties remain in forecasting the effects of an increase from the State Wage Case. Such difficulties are exacerbated by the uncertainty about the current global economic instability and the ramifications for the WA economy of the Commonwealth’s proposed RSPT. The paramount concern should be support for business to retain and create jobs and to ensure that a strong and sustainable recovery is underpinned, not compromised. CCIWA presents a comprehensive submission which also addressed the criteria under s 50A(3) of the Act. The CCIWA supplied copies of
§ the March quarter 2010 WA Economic Compass – Outlook;
§ the Commonwealth Bank – CCI Survey of WA Business Expectations and the Curtin Business School – CCI Survey of Consumer Confidence for the March quarter 2010;
§ the CCI Profile of WA Business 2010;
§ the CCI Discussion Paper – Women in the Workforce – October 2008; and
§ the ACCI Issues Paper - Youth Employment May 2010.

Australian Mines and Metals Association

17 AMMA submits that WA is again starting to benefit from an international environment where increasing commodity prices are favouring WA’s export industries and in particular the mineral commodity export industries. The outlook for the WA economy in 2009-10 is a vast improvement on 2008-09 indicating that the WA economy can withstand a modest increase in the minimum wage without fuelling inflationary pressures or impacting unemployment growth. AMMA presents a detailed submission of significant resource projects in Australia with particular emphasis on the Gorgon Joint Venture on Barrow Island.

18 AMMA submits that the real value of the minimum wage should be maintained when the prevailing economic circumstances of the State are favourable. AMMA supports a modest increase to the minimum wage, similar increases to adult award wages and a proportionate increase to juniors, trainees and apprentices. The increase should not exceed the estimated 2010-11 CPI for Perth as stated in the WA State Budget. Economic growth in WA in 2008-09 was below that of the national economy and AMMA submits that the Commission should be cognisant of the fact that the State minimum wage is currently at a level which exceeds all other States and the federal minimum wage, and any further widening of the difference would not appear to be justified on current economic data.

Australian Hotels Association WA Branch

19 AHAWA submits that hospitality industry employees are more likely to be employed under the Award system than in most other industries. Any adjustment to the minimum wage significantly affects hospitality businesses and these have experienced difficult trading conditions over the past 12 months. The AHAWA submits details of the impact upon its members in regional areas and the impact of smoking, packaged liquor sales and utilities costs. The hospitality industry is primarily a 7-day business operation and any wage increase also flows on to overtime, allowances, superannuation and payroll tax.

20 AHAWA recommends that the increase to the minimum wage be $12.00 per week and be effective from 1 October 2010. If the increase to the minimum wage is to operate from 1 July 2010 then the increase in the hospitality awards should operate from 1 October 2010 to assist in reducing the significant operating costs for businesses in the 2010-11 financial year.

Trades and Labor Council of Western Australia

21 The TLC seeks a 5.5% increase to the minimum wage and to award wages. The TLC emphasises that this is not an extravagant amount when compared to increases granted to the minimum wage in 2008. The claim is comparable to the last two November national increases in Average Weekly Earnings (AWE) of 5.4% in 2008 and 5.9% in 2009, and is less than the November WA increase in the AWE of 7.9% in 2008 and 7.2% in 2009. The TLC submits that any increase less than the TLC claim will not keep minimum wage earners up with earnings elsewhere in the economy. The TLC submits that minimum wage earners in WA are falling behind minimum wage earners in other States relative to mean weekly full-time earnings in WA and in other States respectively.

22 The TLC states that the threat of the global financial crisis has receded and that the WA and national economies have performed better than anticipated. It submits that employees reliant on the minimum and award wages should benefit from that improved outlook. It refers to the CPI and to the WPI for WA and nationally, and states that price increases in education, health and in utilities were higher for Perth than for the rest of Australia. The TLC submits that recent increases in the cost of utilities announced in the WA Budget are likely to be felt most by minimum wage earners. The TLC presents information about housing affordability movements as a proportion of the minimum wage compared to movements in average weekly earnings. It also presents evidence in support of its submission that WA has a persistently higher gender pay gap than the rest of Australia and submits that the increase it claims would stop the gap from widening.

WA Council of Social Services

23 WACOSS endorses the claim of the TLC for a 5.5% increase to the minimum wage. This would take into account a significant increase in the price of utilities, an increase in the CPI in the year to March 2009 of 3.4% and an AWE increase in WA in the year to March 2009 of 7.2%. It submits that many West Australians living on low incomes continue to feel the adverse effects of the economic downturn despite the positive signs of recovery. Perth and WA continues to be an expensive place in which to live and the headline CPI figure is inadequate as a measure of the cost of living for low income earners due to the composition and weighting of the basket of goods used to calculate the CPI. While the ABS approach yields a useful and accurate measure of overall consumer price movements, WACOSS urges the Commission to have regard to the composition of low-income earners’ budgets when judging the adequacy of any proposed increase to the minimum wage. An approach which merely aims to preserve the real value of the minimum wage by adjusting it by the 3.4% CPI movement for Perth to the March quarter will in fact represent a reduction in its real value. WACOSS presents information on the community services sector, the gender pay gap in WA and upon unemployment and underemployment and the effect of minimum wages. It attaches copies of its Close the Gender Pay Gap and Cost of Living papers of 2009.

Mr G. Gray

24 Mr Gray, who describes himself as a retired industrial agent, submits that employees aged 18, 19 and 20 should be paid as adults because at the age of 18, persons are eligible to vote, enlist in the armed services and serve in a theatre of war, consume alcoholic beverages, enter into commercial contracts and if convicted of a criminal offence be named and sent to an adult prison. Mr Gray acknowledges that the Commission does not have the jurisdiction under the Minimum Conditions of Employment Act, 1993 to make these changes.

Mr F. Nicoletti

25 Mr Nicoletti, who is a teacher employed in a government high school, made a written submission referring to the cleaners, gardeners, support staff and education assistants. He submits that they carry out many tasks that are additional to their core duties and gave examples of these. He submits that a minimum wage increase of 5% be awarded to low wage earners over-and-above a wage adjustment that also matches a CPI and WPI increase in WA for the previous year and that this occur yearly from 2010.

CONSIDERATION

26 In the 2009 State Wage Order decision ((2009) 89 WAIG 735; [2009] WAIRC 00375), we noted the State’s economy and the national economy had been significantly affected by the global financial crisis and observed that the outlook for the State’s economy for 2009-10 was most uncertain. We accept the DTF overview of the current conditions, that over the second half of 2009 and into 2010 confidence returned, and there are now indications that WA is on relatively sturdy footing towards recovery. We also recognise the global and key domestic risks to this position.

27 In WA, employment grew for six consecutive months to March 2010, although it fell in April 2010. The State’s unemployment rate fell and remains low at 4.7% in April 2010. The CPI to the March quarter 2010 from the March quarter 2009 was 3.4%; as measured in annual average growth, it was 2.25%. The movement in the CPI is much lower than that experienced in the economic upswing. Similarly, rates of growth of the State’s WPI have been at a much slower pace. The annual average growth of the WPI in WA was 3.7% to March 2010. The Reserve Bank has raised interest rates on six occasions since October 2009 to a rate of 4.5% in May 2010.

28 For 2009-10 the DTF forecasts a 2.25% CPI increase for Perth from the previous financial year and the State’s WPI is forecast to grow by 3.5% over the same period. The WA economy is expected to expand by 4.5% in 2010-11, the outlook for both employment and unemployment is positive and wages growth of 3.75% is forecast for that period. Nevertheless, WA’s focus on global resource markets means it is particularly exposed to global economic conditions relative to other States.

29 In the context of the coverage of the General Order to issue from these proceedings, we pay particular attention to the information before us regarding those industry sectors which are likely to employ minimum-wage dependent employees. These are more likely to be small businesses. We note the Minister’s submission that as measured by Gross Operating Surplus plus Gross Mixed Income, profits of WA industries as a whole increased by 5.1% in 2008-09 and that award-reliant industries such as accommodation, cafes and restaurants and retail trade continued to record profit growth during this period. We also note the limitation of this measure when considering the capacity to pay of employers as a whole and the submission of CCIWA that it cannot be deduced with any certainty, especially in regard to low-paid/low skilled industries that there is a generalised capacity to pay by all or most employers. We acknowledge the AHAWA submission that many businesses have experienced a downturn in income and even losses in order to retain existing staff during the economic downturn and that since 2009 the hotel industry has experienced an across-the-board decrease of 8-15% on previous years’ takings. Not all sectors of the economy are recovering at the same pace and the retail sector recorded only a 0.4% increase in turnover in March 2010 after a fall of 1.3% in February 2010.

30 The evidence before us is that some of WA economic indicators are tracking quite close to the national economic indicators. Table 1 of the Minister’s Submission in Reply helpfully sets out a comparison of the major economic indicators for WA and for Australia. The evidence particularly from DTF shows the State’s economy as measured by Gross State Product recorded growth of only 0.7% in 2008-09 compared with growth of 1.1% nationally. National CPI to the March quarter 2010 rose by 2.9% compared to WA’s rise of 3.4%; the slowdown in the inflation rate in Perth was almost identical with national consumer price trends. WA’s unemployment rate at 4.7% for April 2010 is the lowest in Australia and below the national rate of 5.3%. The State’s annual average WPI growth is still higher than nationally although in year-ended terms the rates of wages growth are quite similar. Average weekly total earnings in WA were 5.6% higher in February 2010 than in February 2009, compared to growth of 5.7% nationally.

31 We turn to consider the level of the minimum wage in WA and in the other States. These are set out below.
Jurisdiction
State minimum wage
Effective date
New South Wales
$568.20
30 July 2009
Western Australia
$569.70
1 July 2009
Tasmania
$558.10
27 July 2009
South Australia
$560.65
21 August 2009
Queensland
$568.20
1 September 2009

32 The minimum wages in other States and in WA range between $558.10 and $569.70, respectively. As we observed in our 2009 decision, these differences have occurred because of the differing legislative criteria which each court or tribunal is required to observe and the differing economic circumstances experienced by each State. We consider that the referral on 1 January 2010 by the States of NSW, Queensland, South Australia and Tasmania to the Commonwealth of their coverage of the unincorporated private sector is significant. In those States, the States’ minimum wages will apply primarily to employees of State and local government where the impact of the minimum wage is not likely to be as significant as it would have been in the unincorporated private sector. Accordingly, the minimum wages of the other States now have less relevance to our consideration.

33 In the 2009 decision, we referred to the changes to the setting of the minimum wage under the Fair Work Act 2009 (Cth) (the FW Act) to occur in 2010. Section 285(2) of the FW Act obliges Fair Work Australia (FWA) to complete an annual review in each financial year during which FWA:
“(2) …
(a) must review:
(i) modern award minimum wages; and
(ii) the national minimum wage order; and
(b) may make one or more determinations varying modern awards to set, vary or revoke modern award minimum wages; and
(c) must make a national minimum wage order.”

34 The statutory criteria by which FWA is to reach its determination are as follows:
“284 The minimum wages objective
What is the minimum wages objective?
(1) FWA must establish and maintain a safety net of fair minimum wages, taking into account:
(a) the performance and competitiveness of the national economy, including productivity, business competitiveness and viability, inflation and employment growth; and
(b) promoting social inclusion through increased workforce participation; and
(c) relative living standards and the needs of the low paid; and
(d) the principle of equal remuneration for work of equal or comparable value; and
(e) providing a comprehensive range of fair minimum wages to junior employees, employees to whom training arrangements apply and employees with a disability.”

35 The FWA delivered its decision in the Annual Wage Review 2009-10 on 3 June 2010 ([2010] FWAFB 4000). Section 50A(3)(f) of the Act obliges the Commission to take into consideration relevant decisions of other industrial courts and tribunals, and we consider that FWA is within that description. We acknowledge, as the Minister has submitted, that the statutory criteria in the FW Act does not require consideration of the state of the WA economy, the WA award framework or relevant decisions of other industrial courts or tribunals. Nevertheless, we note also that CCIWA considers that minimum wage movements in other jurisdictions should be given more, not less, weight as a guide. We also note that CCIWA and AMMA submit that any further widening of the difference between the State minimum wage and all other States and the federal minimum wage would not appear to be justified on current economic data.

36 Further, notwithstanding that s 284(1) of the FW Act does not include those matters to which the Minister has drawn to our attention, we consider it significant that s 284(1) obliges FWA to establish and maintain a safety net of fair minimum wages. Sections 50A(3)(a)(i) and (iii) require us to take fairness into consideration as follows:
“(3) In making an order under this section, the Commission shall take into consideration —
(a) the need to —
(i) ensure that Western Australians have a system of fair wages and conditions of employment;
(ii) …
(iii) provide fair wage standards in the context of living standards generally prevailing in the community.”

37 The safety net of fair minimum wages determined by FWA applies throughout Australia to the unincorporated private sector to which the General Order to issue from these proceedings will have particular application. We accept the CCIWA description of the employing businesses in the private sector in WA which fall within the State’s jurisdiction as a “small minority” (submission [268]) and note that correspondingly, the safety net of fair minimum wages determined by FWA is applicable to the majority of employees in the private sector in WA.

38 Importantly too, the minimum wage set by FWA operates from 1 July 2010 (s 286(1) of the FW Act) which is the same date as the operation of the General Order to issue from these proceedings. The timing of the FWA Annual Wage Review and the date of operation of the minimum wage to be set by FWA is contemporaneous with the obligations on this Commission under s 50A of the Act. For all of these reasons, we consider the decision of the FWA in its Annual Wage Review to be a relevant consideration under s 50A(3)(f) of the Act.

39 The federal minimum wage is now $569.90 per week representing a $26.00 per week increase to the previous federal minimum wage of $543.90 set in July 2008. WA’s minimum wage is almost the same figure: $569.70. The $26.00 per week increase resulting from the FWA decision is an increase which, in part, takes into account that there had been no increase to the federal minimum wage since July 2008. FWA took into account the developments of the last two years in reaching its decision (see [2010] FWAFB 4000 at [330]). However, in the last two years in WA we awarded a $12.30 per week increase to the minimum wage which came into effect in October 2009. Our consideration will necessarily need to consider the circumstances particular to the WA economy since our last decision.

40 We consider that the evidence that the WA economy is on a relatively sturdy footing towards recovery and strengthening compared to the position last year suggests that to:
(i) ensure that Western Australians have a system of fair wages and conditions of employment;
(ii) meet the needs of the low paid;
(iii) provide fair wage standards in the context of living standards generally prevailing in the community; and
(iv) contribute to improved living standards for employees,
an increase to the minimum wage greater than the increase of $12.30 granted in 2009 is warranted. However, the fact that the economy is not as strong as the boom years is seen particularly from the submissions of CCIWA and AHAWA in relation to those industries with a significant number of unincorporated businesses.

41 We set out below the increases to the minimum wage in WA since s 50A was enacted in 2006.
Year
Increase to Minimum Wage
1 July 2006 (2006) 86 WAIG 2683; date of operation 1 September 2006

$20.00
1 July 2007 (2007) 87 WAIG 1487; date of operation 1 July 2007

$24.00
1 July 2008 (2008) 88 WAIG 773; date of operation 1 July 2008

$29.00
1 July 2009 (2009) 89 WAIG 735; date of operation 1 October 2009

$12.30

42 In relation to the minimum wages we have set, we note the Minister’s submission that a comparison of real wage movements in average weekly ordinary time earnings illustrates that the WA minimum wage has declined relative to AWE over the 10 years to December 2009. A comparison of the WA minimum wage with WA’s WPI and CPI for Perth shows that the WA minimum wage has broadly tracked WPI and CPI movements over the 10 years to December 2009. We note also that the real increase to the minimum wage over the past decade has been 6.3%. We are conscious that the gender pay gap in WA is greater than for the rest of the country although it is not entirely clear what effect increases to the minimum wage, including the $29.00 per week increase granted in 2008, have had upon the gender pay gap in this State.

43 The cost of living as measured by the CPI to the March quarter 2010 is greater in Perth at 3.4% than it is nationally at 2.9%. There have recently been significant increases to utility costs in WA although we are conscious that these are borne not just by the low-paid employees referred to in s 50A(3)(ii) of the Act but also by their employers. Although there is room for optimism that there is a capacity of employers as a whole to bear the costs of an increased minimum wage, there is still some way to go before the effects of the global financial crisis can be said to have passed.

44 Given that the risks to the economic outlook for WA remain uncertain, we consider it appropriate to adjust the minimum wage by reference to movements in the cost of living in WA which is measured as 2.25% in annual average terms and 3.4% for the year since our last decision. We do not disregard the criticisms presented particularly by WACOSS of the adequacy of the CPI in measuring the costs incurred by low-paid employees, however we consider the CPI to be the most appropriate and widely accepted measure for our purposes. We consider that an amount some $5.00 more than the increase of $12.30 awarded by us last year adequately recognises the strengthening of the economy since July 2009 whilst taking into account both the risks to the WA economy and those industry sectors which have experienced difficult trading conditions over the past 12 months.

45 An increase of $17.50 per week is not an increase beyond inflation and in the context of the existing WA minimum wage will, to the extent we consider possible in the current economic climate, maintain WA’s system of fair wages and conditions of employment, meet the needs of the low-paid and provide fair wage standards in the context of living standards generally prevailing in the community. We consider it will be unlikely to impact adversely on the level of employment, inflation and productivity in WA. It will have the effect of reducing the current difference between the WA and federal minimum wages of $25.80 to a difference of $17.30.

CONCLUSION

46 We have therefore concluded that the minimum wage will be set at $587.20. We consider also that the economic evidence before us does not warrant a departure from the presumption in s 50A(5) of the Act that the State Wage order takes effect on 1 July in the year it is made and the minimum wage to be set also takes effect from that date. The new minimum wage will take effect from the commencement of the first pay period on or after 1 July 2010.

47 We are obliged by s 50A(4) to ensure, to the extent possible, that there is consistency and equity in relation to the variation of awards. No person appearing submitted that we should not correspondingly adjust rates of wages paid under awards. Given that position, and the role of awards in providing fair wage standards, we will adjust award wages by $17.50 per week from the first pay period on or after 1 July 2010. The increase will apply only to employees who are paid the award wage; any wage paid over the award wage is able to be used to offset the increase. In relation to the submissions of Mr Nicoletti, s 50A of the Act does not permit specific regard to be given to individual classifications within individual awards, nor for those individual classifications to be treated differently from the conclusions we have reached.

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 evidence before us shows that previous minimum wage increases for apprentices and trainees have not discouraged their uptake in WA. We accept the Minister’s submission (at [39]) that a responsible increase to minimum apprentice and trainee wages, having regard to ss 13 and 14 of the MCE Act, award relativities and the methodology applied by the Registrar in previous State Wage orders, will not have a detrimental effect on the uptake of training arrangements in the current economic climate.

49 No 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 (see (2006) 86 WAIG 3129), and to apprentices and trainees generally. We propose to apply the increase to adult apprentices, other apprentices and to trainees in accordance with the usual practice of the Commission. The submission of Mr Gray recognises the inherent legislative difficulties in his submission and we do not take his submission any further.

Part-time and School-based traineeships

50 The Minister has drawn our attention to the current provision in Clause 6(e) of the 2009 General Order. This clause was first introduced following a minimum wages review in 2003 (2003) 83 WAIG 3537
and is modelled on the National Training Wage Award 2000 (the NTW Award). In 2009 the Vocational Education and Training Award Act 2006 (WA) (the VET Act) was amended to ensure that apprentices and trainees are paid for all time spent in training, and the provisions of Clause 6(e)(ii) of the 2009 General Order is now inconsistent with that legislation. Pursuant to s 60B of the VET Act, that Act takes precedence over the General Order and therefore Clause 6(e)(ii) should be deleted. This was not opposed by any person appearing and we also agree that Clause 6(e)(ii) should be deleted.

51 Further, the Minister submitted that there is some confusion over the appropriate rates of pay for school-based trainees. This arises because it is not clear whether the provision in Clause 6(e)(i) refers to the highest year of schooling completed or the current year of schooling. The Minister recommends that this confusion be addressed by adopting similar formatting to that expressed in the NTW Award. We agree that this does reflect the intention of Clause 6(e)(i) and no person appearing objected to the Minister’s suggestion that Clause 6 be replaced with a new Clause as proposed by the Minister. This will be done and the change is reflected in the Minute which issues.

Industry/Skill Levels

52 As in previous years, the Minister has provided an updated industry/skill level classifications table based on advice from the Department of Education and Training. This updated table will be included in Attachment A to the 2010 State Wage order to issue. We thank the Minister for providing this information and for the helpful submissions presented in relation to the part- time and school-based traineeships issues.

THE STATE WAGE PRINCIPLES

53 No person suggested that any change is required to be made to the State Wage Principles. Section 50A(1)(d) of the Act obliges the Commission to set out a statement of principles to be applied and followed in relation to 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. The Statement of Principles July 2010 to issue remains unchanged from the Statement of Principles July 2009 apart from the necessary and consequential amendments to Principle 9.

MINUTE OF PROPOSED GENERAL ORDER

54 A minute of proposed General Order now issues. The Commission should be advised by 2:00pm on Tuesday, 15 June 2010 whether or not a speaking to the minutes is requested. If a speaking to the minutes is necessary, it will be dealt with on the papers and written submissions should be received by 10.00am on Friday, 18 June 2010.
Commission's Own Motion -v- (Not applicable)

2010 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

 Acting Senior Commissioner P E Scott

 Commissioner S J Kenner

 Commissioner J L Harrison

 Commissioner S M Mayman

HEARD Tuesday, 1 June 2010, Tuesday, 8 June 2010

DELIVERED friday, 11 JUNE 2010

FILE NO. APPL 2 OF 2010

CITATION NO. 2010 WAIRC 00337

 

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 -State wage principles - Industrial Relations Act 1979 s 50A

Result 2010 State Wage order issued

 


Representation Mr A Lyon, and with him Ms S Haynes, on behalf of the Hon. Minister for Commerce

 Mr J Ridley on behalf of the Chamber of Commerce and Industry of WA (Inc.)

   Mr D Ellis on behalf of the Trades and Labor Council of WA

  

 

 

Reasons for Decision

 

1          This is the unanimous decision of the Commission in Court Session.  The Commission is required by s 50A of the Industrial Relations Act 1979 (the Act) before July in each year to make a General Order (the State Wage order) setting the minimum wage applicable under s 12 of the Minimum Conditions of Employment Act 1993 (MCE Act) to employees who have reached 21 years of age, and to apprentices and trainees.  The Commission is also to adjust rates of wages paid under State awards.

 

2          The Commission placed advertisements in two local newspapers on 17, 21 and 22 April 2010 calling for public submissions.  The advertisement was also published on the Commission’s website and in the WA Industrial Gazette ((2010) 90 WAIG 213; [2010] WAIRC 00211).

 

3          The Commission sat on 1 June 2010 and heard oral submissions and evidence from the Hon Minister for Commerce, the Chamber of Commerce and Industry of Western Australia (Inc) (CCIWA) and the Trades and Labor Council of Western Australia (TLC).  Written submissions were received from Australian Mines and Metals Association (AMMA), Australian Hotels Association WA Branch (AHAWA), the Western Australian Council of Social Services Inc (WACOSS), Mr F. Nicoletti and Mr G. Gray.  Copies of all submissions were placed on the Commission’s website and the proceedings were webcast. 

 

SUMMARY OF POSITIONS

 

The Hon Minister for Commerce

 

4          The Minister proposes a flat dollar adjustment to the State adult minimum wage and adult award rates based on the 2009-10 estimated consumer price index (CPI) for Perth as published in the 2010-11 State Budget.  This is a figure of 2.25% which would lead to an increase of $12.80 per week.  The Minister also submits that the minimum wage and award wage rates for junior employees, apprentices and trainees should be increased by the appropriate relativities.  The Minister does not support a minimum wage adjustment beyond inflation in 2010 given the potential risks to the State’s economic outlook including WA’s focus on global resource markets, the rapid increase in global public debt and uncertainty surrounding the proposed introduction of the 40% Resource Super Profits Tax (RSPT).

 

5         Given the continued increases in costs for workers reliant on the State minimum wage, the Minister submits that an adjustment below inflation is not an appropriate outcome.  Rather, an inflation-based increase to the State minimum wage and award wage rates is moderate and sustainable in the context of the slow economic recovery. 

 

6         The Minister compared the nominal cumulative increases in WA’s wage price index (WPI) against State minimum wage increases and Perth’s CPI over the last 10 years.  This shows that the State minimum wage has been broadly maintained in line with the WPI: since 1999 WA’s WPI has cumulatively increased by 50.7% compared to 47.8% for the State minimum wage.  The real increase to the minimum wage over the past decade has been 6.3%. 

 

7         The Minister acknowledges that there have been significant increases in costs for essential items like housing, health, education and transportation, and that these increases are likely to be most keenly felt by lower paid employees.  The Minister submits that there is no evidence to suggest the previous increases to the State minimum wage rate and award wage rates have provided a disincentive to enterprise bargaining.  Previous State minimum wage increases for apprentices and trainees have not discouraged their uptake in WA; there has been a 14.1% increase in the annual uptake of apprenticeships in WA in the six years to February 2010, and during the same period the number of traineeships commenced each year increased by 24.7%. 

 

8         The Minister acknowledges that women are over-represented among low paid and award-dependent employees and submits that if adjustments in the minimum wage fail to keep pace with inflation this will be disproportionately felt by women.  In WA the gender pay gap is 24.2%, is the largest of any State and well above the national average of 17.9%.  The Minister carefully addresses each of the criteria in s 50A(3) of the Act.

 

Relevant decisions of other courts and tribunals

 

9         The Minister submits that the wage disparity between the minimum wages in each jurisdiction is a consequence of the different legislative criteria considered by each tribunal when adjusting their respective minimum wages, the timing of determinations and the different economic circumstances experienced in each jurisdiction.  In relation to the legislative criteria to be observed by Fair Work Australia in its current review of the national minimum wage, the Minister submits that although similarities now exist between the national minimum wages objective and the State minimum wages criteria, important differences remain.  Primarily the national minimum wages objective does not require consideration of:

a. The state of the WA economy;

b. The WA award framework; or

c. Relevant decisions of other industrial courts or tribunals. 

 

10      The Minister submits therefore that little weight should be attributed to this current disparity between the WA and national minimum wages. 

 

State jurisdiction coverage

 

11      The Minister presents information taken from the Australian Bureau of Statistics (ABS) Employee Earnings and Hours, Australia, August 2008 (Catalogue number 6306.0).  Table 4 of the Minister’s submission is reproduced below and it updates the information before the Commission in 2008 (2008 WAIRC 00347 at [22]) which had been made available to it by the Australian Taxation Office.

 

Table 4: Methods of Pay Setting by Jurisdiction, States and Territories, August 2008[1]

Proportion of employees (%)

NSW

VIC

QLD

SA

WA

TAS

NT

ACT

Australia 

Federal jurisdiction

 

Federal award or agreement (a)

36.5

55.3

35.8

38.0

32.4

43.5

62.9

75.3

42.0

 

State award or agreement (b)

1.2

-

2.8

2.7

0.81

2.61

-

-

1.3

 

Unregistered arrangement (c)

31.0

39.0

23.1

26.0

27.8

16.3

32.4

21.6

30.2

 

Working proprietor or incorporated business

5.4

5.7

4.0

5.2

4.7

2.7

4.5

3.1

5.0

 

Total Federal jurisdiction

74.1

100.0

65.7

71.9

65.7

65.1

100.0

100.0

78.5

State jurisdiction

 

State award or agreement

10.4

-

17.81

17.6

14.01

19.51

-

-

10.0

 

Unregistered arrangement (c)

2.8

-

5.1

4.1

6.2

4.7

-

-

2.9

 

Total State jurisdiction

13.2

-

22.8

21.7

20.3

24.31

-

-

13.0

Unable to be determined

12.6

-

11.5

6.4

14.1

10.6

-

-

8.6

Total

 

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

1 Estimate has a relative standard error of between 25 and 50 per cent and should be used with caution.

(a) Includes employees transitioning out of the federal jurisdiction.

(b) Employees transitioning into the federal jurisdiction.

(c) Includes employees receiving over award pay.

(d) Employees whose jurisdictional coverage for pay-setting was unable to be determined.

 

12      The Minister concludes that it is difficult to clearly and conclusively identify how many employees in WA are covered under the State industrial relations system.  Looking at pay setting methods does not provide an accurate estimate of the coverage due to the large portion of undetermined jurisdiction and pay setting information.  By using the Type of Legal Organisation (TOLO) of the employer, it is estimated that in 2006-07 there were approximately 22,383 unincorporated employing businesses in WA.  Unincorporated businesses employ approximately 26.9% of WA’s workforce and the WA State Government employs approximately 11.6% of WA’s workforce.  Relying upon the 2006 report to the Commission by Professor Plowman and analysis of unpublished data from the ABS Employee, Earnings and Hours, Australia, August 2008 (Catalogue 6306.0) it can be estimated that a maximum of 38.5% of WA employees will be subject to the General Order, although there is no information which can accurately identify the proportion of employees directly or indirectly affected.

 

Evidence from the Department of Treasury and Finance

 

13       In support of his submission, the Minister called evidence from Michael Eckermann, the Assistant Director of the Forecasting and Quantitative Services Division within the Department of Treasury and Finance (DTF).  Mr Eckermann’s evidence presented a comprehensive overview of global conditions and risks to the global outlook, domestic conditions, the labour market, wages, prices and the economic forecasts for the State.  We express our thanks to Mr Eckermann for his presentation.

 

14       Mr Eckermann’s key messages were that the recovery of the WA economy is strengthening but the next few years are not expected to be as strong as the previous resource-boom years; the outlook for the future is still quite complex; some capacity constraints are likely to develop over the next few years but not as severely as recent resource-boom years; and although the outlook is much better than a year ago, risks to the outlook remain acute, complex and very dynamic.  Key domestic risks are interest rates moving higher than expected, the consequences of the unwinding of the domestic stimulus packages, the effect of the Commonwealth’s proposed 40% RSPT and business investment volatility.  We will refer further to Mr Eckermann’s evidence in what is to follow in these Reasons.

 

Chamber of Commerce and Industry of Western Australia (Inc)

 

15      The CCIWA requests that the Commission should award only a moderate increase to the adult rate of pay.  It proposes an increase of $12.00 per week up to the tradesperson level and a $10.00 increase to wage levels above the tradesperson rate, with a proportionate increase to juniors, trainees and apprentices.  CCIWA submits this tiered approach is based upon a contemporary assessment of the facts and evidence to promote the role of the minimum wage as a safety net for low-paid employees.  It says that an increase beyond that advocated by the CCIWA may result in job losses and otherwise disadvantage businesses recovering from the economic downturn. 

 

16      CCIWA remains of the view that it is no longer sustainable that minimum wages should necessarily increase in each calendar year or that any increase should exceed inflation and there is no legislative presumption to the contrary.  Although much of the economic risk and uncertainty in 2009 nationally and in WA has diminished, difficulties remain in forecasting the effects of an increase from the State Wage Case.  Such difficulties are exacerbated by the uncertainty about the current global economic instability and the ramifications for the WA economy of the Commonwealth’s proposed RSPT.  The paramount concern should be support for business to retain and create jobs and to ensure that a strong and sustainable recovery is underpinned, not compromised.  CCIWA presents a comprehensive submission which also addressed the criteria under s 50A(3) of the Act.  The CCIWA supplied copies of

  • the March quarter 2010 WA Economic Compass – Outlook;
  • the Commonwealth Bank – CCI Survey of WA Business Expectations and the Curtin Business School – CCI Survey of Consumer Confidence for the March quarter 2010;
  • the CCI Profile of WA Business 2010;
  • the CCI Discussion Paper – Women in the Workforce – October 2008; and
  • the ACCI Issues Paper - Youth Employment May 2010.

 

Australian Mines and Metals Association

 

17      AMMA submits that WA is again starting to benefit from an international environment where increasing commodity prices are favouring WA’s export industries and in particular the mineral commodity export industries.  The outlook for the WA economy in 2009-10 is a vast improvement on 2008-09 indicating that the WA economy can withstand a modest increase in the minimum wage without fuelling inflationary pressures or impacting unemployment growth.  AMMA presents a detailed submission of significant resource projects in Australia with particular emphasis on the Gorgon Joint Venture on Barrow Island. 

 

18      AMMA submits that the real value of the minimum wage should be maintained when the prevailing economic circumstances of the State are favourable.  AMMA supports a modest increase to the minimum wage, similar increases to adult award wages and a proportionate increase to juniors, trainees and apprentices.  The increase should not exceed the estimated 2010-11 CPI for Perth as stated in the WA State Budget.  Economic growth in WA in 2008-09 was below that of the national economy and AMMA submits that the Commission should be cognisant of the fact that the State minimum wage is currently at a level which exceeds all other States and the federal minimum wage, and any further widening of the difference would not appear to be justified on current economic data.   

 

Australian Hotels Association WA Branch

 

19       AHAWA submits that hospitality industry employees are more likely to be employed under the Award system than in most other industries.  Any adjustment to the minimum wage significantly affects hospitality businesses and these have experienced difficult trading conditions over the past 12 months.  The AHAWA submits details of the impact upon its members in regional areas and the impact of smoking, packaged liquor sales and utilities costs.  The hospitality industry is primarily a 7-day business operation and any wage increase also flows on to overtime, allowances, superannuation and payroll tax. 

 

20      AHAWA recommends that the increase to the minimum wage be $12.00 per week and be effective from 1 October 2010.  If the increase to the minimum wage is to operate from 1 July 2010 then the increase in the hospitality awards should operate from 1 October 2010 to assist in reducing the significant operating costs for businesses in the 2010-11 financial year.

 

Trades and Labor Council of Western Australia

 

21      The TLC seeks a 5.5% increase to the minimum wage and to award wages.  The TLC emphasises that this is not an extravagant amount when compared to increases granted to the minimum wage in 2008.  The claim is comparable to the last two November national increases in Average Weekly Earnings (AWE) of 5.4% in 2008 and 5.9% in 2009, and is less than the November WA increase in the AWE of 7.9% in 2008 and 7.2% in 2009.  The TLC submits that any increase less than the TLC claim will not keep minimum wage earners up with earnings elsewhere in the economy.  The TLC submits that minimum wage earners in WA are falling behind minimum wage earners in other States relative to mean weekly full-time earnings in WA and in other States respectively. 

 

22      The TLC states that the threat of the global financial crisis has receded and that the WA and national economies have performed better than anticipated.  It submits that employees reliant on the minimum and award wages should benefit from that improved outlook.  It refers to the CPI and to the WPI for WA and nationally, and states that price increases in education, health and in utilities were higher for Perth than for the rest of Australia.  The TLC submits that recent increases in the cost of utilities announced in the WA Budget are likely to be felt most by minimum wage earners.  The TLC presents information about housing affordability movements as a proportion of the minimum wage compared to movements in average weekly earnings.  It also presents evidence in support of its submission that WA has a persistently higher gender pay gap than the rest of Australia and submits that the increase it claims would stop the gap from widening.

 

WA Council of Social Services

 

23      WACOSS endorses the claim of the TLC for a 5.5% increase to the minimum wage.  This would take into account a significant increase in the price of utilities, an increase in the CPI in the year to March 2009 of 3.4% and an AWE increase in WA in the year to March 2009 of 7.2%.  It submits that many West Australians living on low incomes continue to feel the adverse effects of the economic downturn despite the positive signs of recovery.  Perth and WA continues to be an expensive place in which to live and the headline CPI figure is inadequate as a measure of the cost of living for low income earners due to the composition and weighting of the basket of goods used to calculate the CPI.  While the ABS approach yields a useful and accurate measure of overall consumer price movements, WACOSS urges the Commission to have regard to the composition of low-income earners’ budgets when judging the adequacy of any proposed increase to the minimum wage.  An approach which merely aims to preserve the real value of the minimum wage by adjusting it by the 3.4% CPI movement for Perth to the March quarter will in fact represent a reduction in its real value.  WACOSS presents information on the community services sector, the gender pay gap in WA and upon unemployment and underemployment and the effect of minimum wages.  It attaches copies of its Close the Gender Pay Gap and Cost of Living papers of 2009.

 

Mr G. Gray

 

24      Mr Gray, who describes himself as a retired industrial agent, submits that employees aged 18, 19 and 20 should be paid as adults because at the age of 18, persons are eligible to vote, enlist in the armed services and serve in a theatre of war, consume alcoholic beverages, enter into commercial contracts and if convicted of a criminal offence be named and sent to an adult prison.  Mr Gray acknowledges that the Commission does not have the jurisdiction under the Minimum Conditions of Employment Act, 1993 to make these changes.

 

Mr F. Nicoletti

 

25      Mr Nicoletti, who is a teacher employed in a government high school, made a written submission referring to the cleaners, gardeners, support staff and education assistants.  He submits that they carry out many tasks that are additional to their core duties and gave examples of these.  He submits that a minimum wage increase of 5% be awarded to low wage earners over-and-above a wage adjustment that also matches a CPI and WPI increase in WA for the previous year and that this occur yearly from 2010.

 

CONSIDERATION

 

26       In the 2009 State Wage Order decision ((2009) 89 WAIG 735; [2009] WAIRC 00375), we noted the State’s economy and the national economy had been significantly affected by the global financial crisis and observed that the outlook for the State’s economy for 2009-10 was most uncertain.  We accept the DTF overview of the current conditions, that over the second half of 2009 and into 2010 confidence returned, and there are now indications that WA is on relatively sturdy footing towards recovery.  We also recognise the global and key domestic risks to this position. 

 

27       In WA, employment grew for six consecutive months to March 2010, although it fell in April 2010.  The State’s unemployment rate fell and remains low at 4.7% in April 2010.  The CPI to the March quarter 2010 from the March quarter 2009 was 3.4%; as measured in annual average growth, it was 2.25%.  The movement in the CPI is much lower than that experienced in the economic upswing.  Similarly, rates of growth of the State’s WPI have been at a much slower pace.  The annual average growth of the WPI in WA was 3.7% to March 2010.  The Reserve Bank has raised interest rates on six occasions since October 2009 to a rate of 4.5% in May 2010. 

 

28       For 2009-10 the DTF forecasts a 2.25% CPI increase for Perth from the previous financial year and the State’s WPI is forecast to grow by 3.5% over the same period.  The WA economy is expected to expand by 4.5% in 2010-11, the outlook for both employment and unemployment is positive and wages growth of 3.75% is forecast for that period.  Nevertheless, WA’s focus on global resource markets means it is particularly exposed to global economic conditions relative to other States.

 

29       In the context of the coverage of the General Order to issue from these proceedings, we pay particular attention to the information before us regarding those industry sectors which are likely to employ minimum-wage dependent employees.  These are more likely to be small businesses.  We note the Minister’s submission that as measured by Gross Operating Surplus plus Gross Mixed Income, profits of WA industries as a whole increased by 5.1% in 2008-09 and that award-reliant industries such as accommodation, cafes and restaurants and retail trade continued to record profit growth during this period.  We also note the limitation of this measure when considering the capacity to pay of employers as a whole and the submission of CCIWA that it cannot be deduced with any certainty, especially in regard to low-paid/low skilled industries that there is a generalised capacity to pay by all or most employers.  We acknowledge the AHAWA submission that many businesses have experienced a downturn in income and even losses in order to retain existing staff during the economic downturn and that since 2009 the hotel industry has experienced an across-the-board decrease of 8-15% on previous years’ takings.  Not all sectors of the economy are recovering at the same pace and the retail sector recorded only a 0.4% increase in turnover in March 2010 after a fall of 1.3% in February 2010.

 

30       The evidence before us is that some of WA economic indicators are tracking quite close to the national economic indicators.  Table 1 of the Minister’s Submission in Reply helpfully sets out a comparison of the major economic indicators for WA and for Australia.  The evidence particularly from DTF shows the State’s economy as measured by Gross State Product recorded growth of only 0.7% in 2008-09 compared with growth of 1.1% nationally.  National CPI to the March quarter 2010 rose by 2.9% compared to WA’s rise of 3.4%; the slowdown in the inflation rate in Perth was almost identical with national consumer price trends.  WA’s unemployment rate at 4.7% for April 2010 is the lowest in Australia and below the national rate of 5.3%.  The State’s annual average WPI growth is still higher than nationally although in year-ended terms the rates of wages growth are quite similar.  Average weekly total earnings in WA were 5.6% higher in February 2010 than in February 2009, compared to growth of 5.7% nationally.

 

31       We turn to consider the level of the minimum wage in WA and in the other States.  These are set out below. 

Jurisdiction

State minimum wage

Effective date

New South Wales 

$568.20

30 July 2009

Western Australia 

$569.70

1 July 2009

Tasmania 

$558.10

27 July 2009

South Australia 

$560.65

21 August 2009

Queensland 

$568.20

1 September 2009

 

32      The minimum wages in other States and in WA range between $558.10 and $569.70, respectively.  As we observed in our 2009 decision, these differences have occurred because of the differing legislative criteria which each court or tribunal is required to observe and the differing economic circumstances experienced by each State.  We consider that the referral on 1 January 2010 by the States of NSW, Queensland, South Australia and Tasmania to the Commonwealth of their coverage of the unincorporated private sector is significant.  In those States, the States’ minimum wages will apply primarily to employees of State and local government where the impact of the minimum wage is not likely to be as significant as it would have been in the unincorporated private sector.  Accordingly, the minimum wages of the other States now have less relevance to our consideration.

 

33       In the 2009 decision, we referred to the changes to the setting of the minimum wage under the Fair Work Act 2009 (Cth) (the FW Act) to occur in 2010.  Section 285(2) of the FW Act obliges Fair Work Australia (FWA) to complete an annual review in each financial year during which FWA:

“(2) …

(a) must review:

(i) modern award minimum wages; and

(ii) the national minimum wage order; and

(b) may make one or more determinations varying modern awards to set, vary or revoke modern award minimum wages; and

(c) must make a national minimum wage order.”

 

34      The statutory criteria by which FWA is to reach its determination are as follows:

284 The minimum wages objective

What is the minimum wages objective?

(1)  FWA must establish and maintain a safety net of fair minimum wages, taking into account:

(a) the performance and competitiveness of the national economy, including productivity, business competitiveness and viability, inflation and employment growth; and

(b) promoting social inclusion through increased workforce participation; and

(c) relative living standards and the needs of the low paid; and

(d) the principle of equal remuneration for work of equal or comparable value; and

(e) providing a comprehensive range of fair minimum wages to junior employees, employees to whom training arrangements apply and employees with a disability.”

 

35      The FWA delivered its decision in the Annual Wage Review 2009-10 on 3 June 2010 ([2010] FWAFB 4000).  Section 50A(3)(f) of the Act obliges the Commission to take into consideration relevant decisions of other industrial courts and tribunals, and we consider that FWA is within that description.  We acknowledge, as the Minister has submitted, that the statutory criteria in the FW Act does not require consideration of the state of the WA economy, the WA award framework or relevant decisions of other industrial courts or tribunals.  Nevertheless, we note also that CCIWA considers that minimum wage movements in other jurisdictions should be given more, not less, weight as a guide.  We also note that CCIWA and AMMA submit that any further widening of the difference between the State minimum wage and all other States and the federal minimum wage would not appear to be justified on current economic data.

 

36      Further, notwithstanding that s 284(1) of the FW Act does not include those matters to which the Minister has drawn to our attention, we consider it significant that s 284(1) obliges FWA to establish and maintain a safety net of fair minimum wages.  Sections 50A(3)(a)(i) and (iii) require us to take fairness into consideration as follows:

“(3) In making an order under this section, the Commission shall take into consideration 

 (a) the need to 

 (i) ensure that Western Australians have a system of fair wages and conditions of employment;

 (ii) 

 (iii) provide fair wage standards in the context of living standards generally prevailing in the community.”

 

37       The safety net of fair minimum wages determined by FWA applies throughout Australia to the unincorporated private sector to which the General Order to issue from these proceedings will have particular application.  We accept the CCIWA description of the employing businesses in the private sector in WA which fall within the State’s jurisdiction as a “small minority” (submission [268]) and note that correspondingly, the safety net of fair minimum wages determined by FWA is applicable to the majority of employees in the private sector in WA.

 

38      Importantly too, the minimum wage set by FWA operates from 1 July 2010 (s 286(1) of the FW Act) which is the same date as the operation of the General Order to issue from these proceedings.  The timing of the FWA Annual Wage Review and the date of operation of the minimum wage to be set by FWA is contemporaneous with the obligations on this Commission under s 50A of the Act.  For all of these reasons, we consider the decision of the FWA in its Annual Wage Review to be a relevant consideration under s 50A(3)(f) of the Act.

 

39       The federal minimum wage is now $569.90 per week representing a $26.00 per week increase to the previous federal minimum wage of $543.90 set in July 2008.  WA’s minimum wage is almost the same figure: $569.70.  The $26.00 per week increase resulting from the FWA decision is an increase which, in part, takes into account that there had been no increase to the federal minimum wage since July 2008.  FWA took into account the developments of the last two years in reaching its decision (see [2010] FWAFB 4000 at [330]).  However, in the last two years in WA we awarded a $12.30 per week increase to the minimum wage which came into effect in October 2009.   Our consideration will necessarily need to consider the circumstances particular to the WA economy since our last decision. 

 

40      We consider that the evidence that the WA economy is on a relatively sturdy footing towards recovery and strengthening compared to the position last year suggests that to:

(i) ensure that Western Australians have a system of fair wages and conditions of employment;

(ii) meet the needs of the low paid;

(iii) provide fair wage standards in the context of living standards generally prevailing in the community; and

(iv) contribute to improved living standards for employees,

an increase to the minimum wage greater than the increase of $12.30 granted in 2009 is warranted.  However, the fact that the economy is not as strong as the boom years is seen particularly from the submissions of CCIWA and AHAWA in relation to those industries with a significant number of unincorporated businesses. 

 

41      We set out below the increases to the minimum wage in WA since s 50A was enacted in 2006.

Year

Increase to Minimum Wage

1 July 2006[2]

$20.00

1 July 2007[3]

$24.00

1 July 2008[4]

$29.00

1 July 2009[5]

$12.30

 

42      In relation to the minimum wages we have set, we note the Minister’s submission that a comparison of real wage movements in average weekly ordinary time earnings illustrates that the WA minimum wage has declined relative to AWE over the 10 years to December 2009.  A comparison of the WA minimum wage with WA’s WPI and CPI for Perth shows that the WA minimum wage has broadly tracked WPI and CPI movements over the 10 years to December 2009.  We note also that the real increase to the minimum wage over the past decade has been 6.3%.  We are conscious that the gender pay gap in WA is greater than for the rest of the country although it is not entirely clear what effect increases to the minimum wage, including the $29.00 per week increase granted in 2008, have had upon the gender pay gap in this State. 

 

43      The cost of living as measured by the CPI to the March quarter 2010 is greater in Perth at 3.4% than it is nationally at 2.9%.  There have recently been significant increases to utility costs in WA although we are conscious that these are borne not just by the low-paid employees referred to in s 50A(3)(ii) of the Act but also by their employers.  Although there is room for optimism that there is a capacity of employers as a whole to bear the costs of an increased minimum wage, there is still some way to go before the effects of the global financial crisis can be said to have passed. 

 

44       Given that the risks to the economic outlook for WA remain uncertain, we consider it appropriate to adjust the minimum wage by reference to movements in the cost of living in WA which is measured as 2.25% in annual average terms and 3.4% for the year since our last decision.  We do not disregard the criticisms presented particularly by WACOSS of the adequacy of the CPI in measuring the costs incurred by low-paid employees, however we consider the CPI to be the most appropriate and widely accepted measure for our purposes.   We consider that an amount some $5.00 more than the increase of $12.30 awarded by us last year adequately recognises the strengthening of the economy since July 2009 whilst taking into account both the risks to the WA economy and those industry sectors which have experienced difficult trading conditions over the past 12 months. 

 

45       An increase of $17.50 per week is not an increase beyond inflation and in the context of the existing WA minimum wage will, to the extent we consider possible in the current economic climate, maintain WA’s system of fair wages and conditions of employment, meet the needs of the low-paid and provide fair wage standards in the context of living standards generally prevailing in the community.  We consider it will be unlikely to impact adversely on the level of employment, inflation and productivity in WA.  It will have the effect of reducing the current difference between the WA and federal minimum wages of $25.80 to a difference of $17.30.

 

CONCLUSION

 

46      We have therefore concluded that the minimum wage will be set at $587.20.  We consider also that the economic evidence before us does not warrant a departure from the presumption in s 50A(5) of the Act that the State Wage order takes effect on 1 July in the year it is made and the minimum wage to be set also takes effect from that date.  The new minimum wage will take effect from the commencement of the first pay period on or after 1 July 2010.

 

47       We are obliged by s 50A(4) to ensure, to the extent possible, that there is consistency and equity in relation to the variation of awards.  No person appearing submitted that we should not correspondingly adjust rates of wages paid under awards.   Given that position, and the role of awards in providing fair wage standards, we will adjust award wages by $17.50 per week from the first pay period on or after 1 July 2010.  The increase will apply only to employees who are paid the award wage; any wage paid over the award wage is able to be used to offset the increase.   In relation to the submissions of Mr Nicoletti, s 50A of the Act does not permit specific regard to be given to individual classifications within individual awards, nor for those individual classifications to be treated differently from the conclusions we have reached. 

 

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 evidence before us shows that previous minimum wage increases for apprentices and trainees have not discouraged their uptake in WA.  We accept the Minister’s submission (at [39]) that a responsible increase to minimum apprentice and trainee wages, having regard to ss 13 and 14 of the MCE Act, award relativities and the methodology applied by the Registrar in previous State Wage orders, will not have a detrimental effect on the uptake of training arrangements in the current economic climate.  

 

49       No 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 (see (2006) 86 WAIG 3129), and to apprentices and trainees generally.  We propose to apply the increase to adult apprentices, other apprentices and to trainees in accordance with the usual practice of the Commission.  The submission of Mr Gray recognises the inherent legislative difficulties in his submission and we do not take his submission any further.  

 

Part-time and School-based traineeships

 

50       The Minister has drawn our attention to the current provision in Clause 6(e) of the 2009 General Order.  This clause was first introduced following a minimum wages review in 2003[6] and is modelled on the National Training Wage Award 2000 (the NTW Award).  In 2009 the Vocational Education and Training Award Act 2006 (WA) (the VET Act) was amended to ensure that apprentices and trainees are paid for all time spent in training, and the provisions of Clause 6(e)(ii) of the 2009 General Order is now inconsistent with that legislation.  Pursuant to s 60B of the VET Act, that Act takes precedence over the General Order and therefore Clause 6(e)(ii) should be deleted.  This was not opposed by any person appearing and we also agree that Clause 6(e)(ii) should be deleted.

 

51       Further, the Minister submitted that there is some confusion over the appropriate rates of pay for school-based trainees.  This arises because it is not clear whether the provision in Clause 6(e)(i) refers to the highest year of schooling completed or the current year of schooling.  The Minister recommends that this confusion be addressed by adopting similar formatting to that expressed in the NTW Award.  We agree that this does reflect the intention of Clause 6(e)(i) and no person appearing objected to the Minister’s suggestion that Clause 6 be replaced with a new Clause as proposed by the Minister.  This will be done and the change is reflected in the Minute which issues.

 

Industry/Skill Levels

 

52       As in previous years, the Minister has provided an updated industry/skill level classifications table based on advice from the Department of Education and Training.  This updated table will be included in Attachment A to the 2010 State Wage order to issue.  We thank the Minister for providing this information and for the helpful submissions presented in relation to the part- time and school-based traineeships issues.

 

THE STATE WAGE PRINCIPLES

 

53      No person suggested that any change is required to be made to the State Wage Principles.  Section 50A(1)(d) of the Act obliges the Commission to set out a statement of principles to be applied and followed in relation to 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.  The Statement of Principles July 2010 to issue remains unchanged from the Statement of Principles July 2009 apart from the necessary and consequential amendments to Principle 9.

 

MINUTE OF PROPOSED GENERAL ORDER

 

54       A minute of proposed General Order now issues.  The Commission should be advised by 2:00pm on Tuesday, 15 June 2010 whether or not a speaking to the minutes is requested.  If a speaking to the minutes is necessary, it will be dealt with on the papers and written submissions should be received by 10.00am on Friday, 18 June 2010.