List of Decisions

Decisions published by the Commission will be displayed as a chronological list below, starting with the most recent.

The options below allow you to filter and narrow the collection by entering information such as:

  • the jurisdiction to which the matter was referred;
  • the date the document was issued; or
  • the industry to which the document is related.

ADVANCED SEARCH: to search the List of Decisions using free text terms and phrases (such as party name or citation), or to search for Awards, Agreements or the Western Australian Industrial Gazette, please go to the Advanced search page.

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

Document Type: Decision

Matter Number: APPL 2/2012

Matter Description: 2012 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 2012

Result: 2012 State Wage Order issued

Citation: 2012 WAIRC 00346

WAIG Reference: 92 WAIG 557

DOC | 147kB
2012 WAIRC 00346
2012 STATE WAGE ORDER PURSUANT TO SECTION 50A OF THE ACT
WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

CITATION : 2012 WAIRC 00346

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, 29 MAY 2012, WEDNESDAY, 30 MAY 2012, WEDNESDAY, 6 JUNE 2012

DELIVERED : MONDAY, 11 JUNE 2012

FILE NO. : APPL 2 OF 2012


:
ON THE COMMISSION'S OWN MOTION

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
Legislation : Industrial Relations Act 1979s26, s 50A, Minimum Conditions of Employment Act 1993 s 12, Fair Work Act 2009 (Cth) s 284
Result : 2012 State Wage Order issued
REPRESENTATION:

Ms S Haynes and with her, Ms M Bolitho on behalf of the Hon. Minister for Commerce
MR J RIDLEY AND WITH HIM, MS R CATALANO ON BEHALF OF THE CHAMBER OF COMMERCE AND INDUSTRY OF WA (INC.)

MS K DAVIS AND WITH HER, DR T DYMOND ON BEHALF OF UNIONSWA


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 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 18, 21 and 26 April 2012 calling for public submissions. The advertisement was also published on the Commission’s website and in the WA Industrial Gazette ((2012) 92 WAIG 450; [2012] WAIRC 00229).

3 The Commission sat on 29 and 30 May and 6 June 2012, and heard oral submissions and evidence from the Hon Minister for Commerce, the Chamber of Commerce and Industry of Western Australia (Inc) (CCIWA) and UnionsWA. Written submissions were received from Australian Hotels Association WA Branch (AHAWA) and the Western Australian Council of Social Services Inc (WACOSS). Copies of all submissions were placed on the Commission’s website and the proceedings were webcast.

SUMMARY OF SUBMISSIONS RECEIVED

4 We set out a summary of the submissions we have received. The submissions regarding the matters we are obliged to take into consideration are referred to where appropriate later in this decision.

The Hon Minister for Commerce

5 The Hon Minister seeks to balance the disparate issues relating to the needs of the low paid, and the capacity of employers to absorb pay adjustments, within the parameters of the WA economy. The Hon Minister submits that the State minimum wage determination should aim to maintain the real value of minimum and award wages, and therefore it is appropriate to adjust wages by the estimated actual percentage rate of inflation for the financial year 2011/12 as published in the WA State Budget for 2012/13. This figure will account for the first three quarters of the year as measured by the Australian Bureau of Statistics (ABS) and incorporate an estimate for the fourth quarter. The Hon Minister submits that a percentage adjustment to minimum and award wages to account for inflation is fair and sustainable, and considers the needs of both the low paid and employers. The Hon Minister submits that the Commission should also increase the State minimum wage and award wages for other classifications of employees.


6 The Hon Minister refers to the published estimated actual Consumer Price Index (CPI) for Perth in 2011/12 of 2.5% and submits that the appropriate increase is 2.5% or $15.20 which would adjust the minimum wage to $622.30 per week. Other wages set by the State Wage order should likewise be adjusted by 2.5%. This would reflect inflation in the current financial year, and not any potential or anticipated increases in 2012/13 and beyond arising from the impact of the Clean Energy Act 2011 (Cth) as such increases are not quantifiable before the fact.

7 The Hon Minister presents information to show that over the previous decade the State minimum wage has increased by 6.4% above the CPI. Therefore there has been a gradual real increase over time affording the low paid a relative improvement in their wages compared to cost of living increases. Wages growth across industries tends to fluctuate each year and there does not appear to be a direct correlation between the State Wage order and the wages growth in each industry. The Hon Minister acknowledges the submissions regarding rises in costs which may not be reflected in the headline CPI rate and submits that such costs increases impact on both employees and employers. A wage adjustment in line with overall inflation remains the most reliable means of balancing the needs of the low paid against the capacity of employers to absorb pay adjustments.

8 The Hon Minister presented evidence on the State and national economies from Ms Amy Lomas, the Director of the Forecasting and Quantitative Services Division within the WA Department of Treasury. We express our thanks to the WA Department of Treasury for providing the Commission each year with this information, and to Ms Lomas for her presentation to us.

Chamber of Commerce and Industry of Western Australia (Inc)

9 CCIWA contends that there should be a moderate increase of $11.00 per week to the minimum wage. CCIWA states that the objective is to reflect the role of the minimum wage as being a safety net for the low paid and CCIWA believes the best way to protect recipients of the minimum wage is to ensure their jobs are retained, that there is no reduction in their hours and that overall job growth is promoted. There is still a continuing recovery from the most significant economic downturn since the 1930’s, exacerbated by a more pronounced two (multi) speed, or patchwork, economy. Whilst headline figures show the WA economy remains strong, a number of sectors are finding conditions have not fully recovered from the Global Financial Crisis (GFC). CCIWA broadly supports the AHAWA submission, recognising that the hospitality industry has experienced difficult conditions over recent periods with a reduction in operating hours and a severely reduced income for many small businesses in the industry.

10 CCIWA notes that service industries, including retail, hospitality and restaurants have a comparatively higher level of direct employment on minimum wages (without over-award or agreement-based pay) than all-industries averages and other industries with a higher incidence of agreement making, such as manufacturing, construction mining, communications and transport. Accordingly the impact of wage increases in minimum wage reviews is disproportionately experienced in these industries.

11 A minimum wage increase beyond what CCIWA considers to be “moderate” is likely to result in job losses and otherwise disadvantage businesses recovering from the GFC. The approach advocated by CCIWA continues to be one of prudence and caution. Retaining and creating jobs must be of paramount concern.

12 CCIWA maintains that the concept of an income safety net requires the Commission to consider a combination of both minimum wages and the tax/transfer system. Meeting the needs of low paid workers is not consistent with an elevated increase to the minimum wage that sacrifices jobs and/or results in “underemployment”. CCIWA refers to Commonwealth Budget initiatives contending that these monetary amounts need to be taken into consideration when determining the quantum of the minimum wage.


13 CCIWA states that an increase of $42.50 per week as sought by UnionsWA is a significant increase in wage rates and is untenable. Many businesses are struggling and employers often have their homes mortgaged to fund their unincorporated business. WA already has the highest minimum wage in Australia, being $17.80 higher than the current national minimum wage. CCIWA also contends that there is no justification for a further widening of the gap between WA and the six other State/Territory minimum wages and the national minimum wage.

14 CCIWA points to the change to the coverage of private sector awards since 2006 when Commonwealth legislation removed trading and financial corporations to the national system. CCIWA asserts that businesses remaining in the State system are very different from medium to large businesses which are trading corporations. Many State private sector awards do not reflect those businesses remaining in the State jurisdiction. The vast majority of State awards are now very old, reflecting very different economic times, industries and occupations and are unlikely to be relevant or operationally practical today. Most of these awards have changed little since they were made and although there is a capacity for awards to be amended, very few have been the subject of applications to amend, in particular applications to amend for the minimum rates adjustment. CCIWA reiterates its submission that the considerations set out in s 50A(3)(a) of the Act can apply only to employers and employees remaining in the State jurisdiction.

15 CCIWA states that applying percentage increases to the minimum wage does not restore work value parity to any award wage scale. Rather, the appropriate way to ensure that award wage classifications and wages reflect work value is to ensure that the award is minimum-rates adjusted where there has been significant net addition to work requirements. In the absence of award modernisation, applying a percentage increase will further distort work value relativities in award classifications and wages, and significantly increase award wages, disproportionately favouring those on higher award wages.

16 CCIWA contends that the WACOSS submission should be afforded less weight as it assumes incorrectly that the Commission has the power or role to redistribute wealth more broadly from one group of workers to another. References to data relating to households also needs to be viewed with caution; prima facie such information is about households, not about low paid workers. “Low income households” is not the same as “low paid employees”.

17 CCIWA included a number of attachments to its submission. We are grateful for the assistance they provide to us in our consideration of the many issues involved in this review.

UnionsWA

18 UnionsWA presented evidence from Professor Alison Preston, the Director of the Curtin Graduate School of Business, Professor of Economics and Co-Director of the Women in Social and Economic Research Unit at Curtin University. Professor Preston’s evidence is that the WA economy is growing strongly, above trend, and it is predicted to grow above trend for the next few years. Gross State Product (GSP) is projected to grow around 6% this year which is a significant increase on the 2010/11 outcome. In the year to December 2011, WA was growing at a rate of 11.1%. Professor Preston’s evidence is that WA “is absolutely in boom conditions”: Western Australia is a strong economy, it is profitable and it is growing.

19 Her evidence is that Gross Final Demand in WA is very much made up of the strong growth in business expenditure; this expenditure has been committed and will be flowing through the WA economy for another few years. The strongest growing sectors over the last two years having been mining, followed by health care and rental; also retail trade has been a very strong sector with strong growth in WA.

20 Evidence presented by Professor Preston shows that since the end of 2004, male rates of pay in WA on average have increased significantly. For a significant number of years, women in WA have been paid less than their counterparts nationally. The rate of increase of the minimum wage has been a lot slower, significantly below the rate of increase in average weekly ordinary time earnings (AWOTE) for adults in WA. There has been a decline in the value of the minimum wage relative to average wages.

21 Professor Preston stated that individuals judge the fairness of their wage by reference to the wage rates around them. In 2005, the WA minimum wage/Average Weekly Earnings (AWE) relativity was 47.6%; today the same relativity is 40.1%. The relativity has been steadily declining partly because AWE have been on the increase but also because minimum wage adjustments have been at a slower rate over the latter part of this decade. A person on the WA minimum wage earns 36.5% of the AWE of a male in WA. Therefore, as wages are rising generally, it is important to consider what should happen with the State minimum wage. The gender pay gap is around 17.8% nationally but 27.3% in WA. Gender pay gaps are significant because they affect women’s economic and financial status, not only in the current term but over the long term and into retirement as well.

22 We express our thanks to Professor Preston for her evidence.

23 In its submissions, UnionsWA seeks a wage increase of 7%, which would increase the minimum wage by $42.50 per week. It states that while WA has arguably the strongest economy of all States, it is also the most unequal State in the Commonwealth in terms of income distribution between individuals, between households and between genders. It is UnionsWA’s contention that WA’s minimum wage should reflect WA’s stronger economic performance. The WA minimum wage should also play its part in redressing the growing inequalities in WA society and that whilst a minimum wage increase is not the only response to these growing inequalities, other responses will not be adequate without a sufficient minimum wage increase.

24 UnionsWA contends that components of CPI inflation should be disaggregated for low paid workers, for whom some costs have more impact than others. UnionsWA agrees with WACOSS that the Commission should have regard to the composition of low income earners’ budgets when judging the adequacy of any proposed minimum wage increase with respect to the cost of living. WA’s performance stands out when compared with other States’ and Territories’ State Final Demand.

25 UnionsWA refers to the most recent ABS data on retail trade which shows that in March 2012 WA’s retail turnover rose by 1.2% seasonally adjusted and that since March 2011 WA’s retail turnover has had the largest increase of all States and Territories, rising by 10.7%. It submits that WA is clearly ahead of the other States and Territories in trend growth for full time, adult ordinary time earnings. However WA is by no means leading the pack when it comes to the cost of labour per employee; ABS data on labour costs shows that WA comes fourth out of the eight States and Territories in terms of earnings per employee and total labour costs.

26 There are serious concerns about how many Western Australians are actually sharing in the benefits of that strong performance. For example, pockets of high unemployment - particularly high youth unemployment - continue to exist in WA. The need for social inclusion and workforce participation reinforce the need for a State minimum wage that goes beyond simply matching the all groups CPI, otherwise, the need for strong earnings growth to support the growth of local economies and businesses will be ignored.

27 UnionsWA submits that wage levels are a crucial determinant of participation rates, and refers to the Australian Council of Trade Unions (ACTU) submission to Fair Work Australia (FWA) Annual Wage Review 2011-12, quoting from an article Jefferson, T and Preston, A Australia’s Other Two Speed Economy: Gender, Employment and Earnings in the Slow Lane Australian Bulletin of Labour, Vol. 36, No. 3, 2010, pp. 333-4. The ACTU submission argues that if minimum wages do not increase in real terms, then the incentive to seek employment will be reduced.

28 The 7% increase sought by UnionsWA is to address the growing divergence in WA between the State minimum wage and AWE. UnionsWA submits that the proportion of WA’s AWOTE taken by the State minimum wage has deteriorated from a high point of 51.3% in 2002 to its current 41.2%. The proportion of the WA minimum wage to AWOTE has deteriorated by 10.1 points while the proportion of the national minimum wage to the national AWOTE has deteriorated by 6.2 points.

29 The WA minimum wage increased by 9.1% between 2000 and 2011 whereas AWOTE has increased by 39% over the same period. UnionsWA submits that a substantial increase to the State minimum wage above the all groups CPI figure is needed to begin addressing this growing disparity between WA minimum wage employees and other WA employees.

30 UnionsWA submits that the commonly agreed single statistic that summarises the distribution of income across the population is the Gini Coefficient which is used by the ABS in its household income and income distribution survey to indicate the degree of inequality between households across Australia. The survey shows that a WA household with income in the top 10% now earns 4.8 times as much as a household in the bottom 10%. By contrast, Australia-wide the bottom 10% of households had their income grow by 3.6%, while in WA those households went backwards by 0.9%.

31 Given that WA has the strongest State economy in the country, and the gender pay gap in WA is getting worse as the economy improves, WA’s gender pay gap will continue to be at an unacceptably higher level, although a 7% increase in the State minimum wage is one of the ways which may ensure the impact of the growing gender pay gap is limited. UnionsWA contends that the increase in the minimum wage it is asking for is not a disincentive to bargain.

32 UnionsWA urges the Commission to reject downgrading the AWE measure in status and consideration in preference to the Wage Price Index (WPI). Both should be considered together in order to gain a more complete picture of the WA economy. If the WPI is to be the preferred measure of earnings growth then the Commission will be downgrading consideration of the gender pay gap in its deliberations because the WPI does not include information on male and female earnings gaps.

Australian Hotels Association (Western Australia)

33 AHAWA submits that the national minimum wage and the State minimum wage should be the same. Therefore, the State minimum wage should remain the same, or alternatively, transition over the next two years until the national minimum wage catches up. However, if there is to be an increase to the minimum wage, consideration should be given to a $10.00 per week increase. AHAWA notes that approximately 10% of the AHAWA membership are hospitality businesses who are non-constitutional corporations. Hospitality industry employees are more likely to be employed under the award system than in most other industries and any adjustment to the minimum wage significantly affects hospitality businesses more than industries where there is less exposure to the award system.

34 The hospitality industry has experienced difficult conditions over recent periods and many businesses have reduced operating hours, and suffered a decrease in income and a severe shortage of particularly skilled labour. In WA’s booming economy, small businesses will continually be exposed to significant increases in operational costs and worsening labour shortages. Regional locations incur increased costs for transportation, fuel, utilities, food and essential services. Regional businesses are generally small and often have few staff, with the responsibility falling on proprietors to work longer hours. The impact of taxation, utility costs, expenses and the Commonwealth Government’s proposed Carbon Tax is explored in the AHAWA’s submission. It submits that WA businesses have suffered from a fall-off in tourism, particularly in the South West of WA. Hospitality award rates are among the highest available and consequently wage costs are a significant issue for small businesses.

Western Australian Council of Social Services Inc

35 WACOSS’s submission calls for an increase to the minimum wage of $42.50 per week consistent with the claim made by UnionsWA. WACOSS submits it is in a unique position to comment on critical social issues that affect members of the WA community and in particular those on low incomes. WACOSS submits that minimum wages are a vital means of protecting low income workers from poverty. Wages earned by full time minimum wage employees should be sufficient to ensure they have the capacity to meet their basic living costs while living with dignity and respect.

36 However, WACOSS is alarmed at the rate at which the gap between the minimum wage and median pay levels in WA is continuing to grow. WACOSS submits that an increase of $42.50 is consistent with maintaining a fair system of wages and conditions in the current WA context. WACOSS also makes the submission, as does UnionsWA, that over the last three years, the WA minimum wage has failed to keep pace with AWOTE, leaving those on the minimum wage falling further and further behind.

37 WACOSS submits data showing indicators of financial stress in low income families in 2009/10 in comparison to other WA households. WACOSS urges the Commission to have regard for the fact that the economy is showing signs of strong expansion, and that minimum wage earners should benefit from this expansion.

38 However not everyone is benefiting from the booming sectors in the economy. Many Western Australians living on low incomes are not benefiting from the boom and continue to be adversely affected in many ways, particularly by cost of living pressures. Although for the average household, the cost of living had generally kept pace with increases in household income, the use of “average” figures can mask the difference in impact on low/middle/high income households.

39 The headline CPI figure does not provide an accurate measure of the true living costs that lower income households actually experience because it is based on an average price increase across a basket of items that an average household might purchase. It does not take into account the spending patterns of households on lower incomes who spend significantly more of their incomes on essential items such as food, utilities, health and public transport, all of which have risen by substantial amounts. WACOSS pointed in particular to the cost of utilities, the cost of housing, the cost of home ownership including the rental market and the cost of food. WACOSS contends that the cost of living pressures on a low income earner relying on the minimum wage are significant and justify the $42.50 increase in the minimum wage being sought.

40 WACOSS refers to the significant number of low income employees in the community services sector and that it is likely a significant number of these fall within the State industrial relations system. The Commission’s decision in this matter will have a tangible impact on the living standards of employees in this sector. For various reasons, the sector is disproportionately reliant on award wages and conditions, and the Commission therefore has a direct role in influencing wages for employees in the sector. There is a relative inability of the sector’s employees and employers to engage in bargaining. WACOSS refers in particular also to the Regional Price Index because of the additional cost of living burden faced by low income households in regional WA.

41 WACOSS submits that WA has the largest gender pay gap of any State in Australia, a gap much larger than the national average. To reduce the gender pay gap it is vital that minimum wages keep pace with community standards as women are over-represented in low paid jobs and continue to bear an unequal responsibility for unpaid caring roles. WACOSS submits that s 50A(3)(a)(vii) of the Act, which refers to the need to “provide equal remuneration for men and women for work of equal or comparable value” provides the Commission with a mandate to consider this. WACOSS submits that youth wages are inherently discriminatory and submits that the Commission should also provide for those on youth wages, apprentices and trainees the full $42.50 increase rather than only a proportion of any increase to the minimum wage.

42 Whilst WACOSS refers to some Commonwealth Government Budget announcements, it submits that changes to the tax transfer system, whilst providing incentive for labour force participation, should not be used to argue down fair minimum wage levels. Increases in minimum wages are an effective way to improve incentives for jobless people. While the current unemployment figures are encouraging, they mask the ranks of underemployed men and women who are still feeling the impacts of changes to their employment status during the economic downturn. Consequences of underemployment are very real and underemployed individuals often tend to lack bargaining power in the workplace, which reinforces the significance of an increase in the minimum wage.

CONSIDERATION

Legislative Requirements and Application

43 The Act in s 50A(3) obliges the Commission in making a State Wage order to take into consideration:

(a) the need 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;
(iv) contribute to improved living standards for employees;
(v) protect employees who may be unable to reach an industrial agreement;
(vi) encourage ongoing skills development; and
(vii) provide equal remuneration for men and women for work of equal or comparable value;
(b) the state of the economy of Western Australia and the likely effect of its decision on that economy and, in particular, on the level of employment, inflation and productivity in Western Australia;
(c) to the extent that it is relevant, the state of the national economy;
(d) to the extent that it is relevant, the capacity of employers as a whole to bear the costs of increased wages, salaries, allowances and other remuneration;
(e) for the purposes of subsection (1)(b) and (c), the need to ensure that the Western Australian award framework represents a system of fair wages and conditions of employment;
(f) relevant decisions of other industrial courts and tribunals; and
(g) any other matters the Commission considers relevant.

44 The operation of the Fair Work Act 2009 (Cth) (the FW Act) means that the order which will issue from this decision will affect only businesses in the private sector, and local governments in WA, which are not trading or financial corporations. It will also apply to a significant proportion of State government employment, however, in practical terms, we suspect that most areas of State government employment, and many areas within local government, are unlikely to have employees who will be directly affected by an increase to the minimum wage.

45 Therefore, as a matter of jurisdiction:

· The WA minimum wage will have application to employers and employees in the approximately 20% of businesses in the private sector in WA which are sole traders, partnerships, some trusts and incorporated businesses which are not trading or financial corporations. (Attachment B to the Hon Minister’s submission estimate approximately 23.8% by reference to the statistics available regarding type of legal organisation. CCIWA disputes this figure, submitting that it is in the range of 11% to 16%. It is not necessary in these proceedings to finally decide the issue.)

· Correspondingly as a matter of jurisdiction, the minimum wage determined under the FW Act in the Annual Wage Review will have application to employers and employees in the approximately 80% of businesses in the private sector in WA which are trading or financial corporations.

46 An increase in the respective minimum wages will directly affect those employees who are paid the minimum wage, and indirectly affect those paid in the vicinity of it such that their wage would be increased by an increase to the minimum wage. CCIWA submits that we should read down the considerations in s 50A(3) of the Act because of the operation of the FW Act, however, we are not persuaded that submission is correct. We are obliged by the legislation to consider the evidence concerning WA as a whole. Sections 26(1)(a) and (c) will ensure that the outcome of that consideration is tempered with the knowledge that the minimum wage which we set can apply only to the “small minority” of the workforce in WA (See the 2010 State Wage order Decision (2010) 90 WAIG 568; [2010] WAIRC 00337 at 37). As we observed in paragraph 29 of that decision, we pay particular attention to the information before us regarding those industry sectors which are likely to employ minimum-wage dependent employees.

Consideration of the Statutory Criteria

Section 50A(3)(a)(i) and (iii) - The need to ensure that Western Australians have a system of fair wages and conditions of employment; provide fair wage standards in the context of living standards generally prevailing in the community

47 It is convenient to commence our consideration with s 50A(3)(a)(i) and (iii), which speak of the concept of fairness inherent in the need to ensure that Western Australians have a system of fair wages and conditions of employment, and provide fair wage standards in the context of living standards generally prevailing in the community, because it is the context of “fairness” that UnionsWA mounts its significant submission regarding the gender pay gap in WA.

48 The Hon Minister too submits information showing that more than 30% of women in the WA workforce are employed in four industries which all report an AWOTE below the State average: healthcare and social assistance; retail trade; education and training; and accommodation and food services. With the exception of education and training, employees in these female-dominated industries are likely to be paid according to award rates within the State industrial relations jurisdiction. All industries in WA have gender pay gaps of more than 10% and four industries have gaps of more than 30%. The overall WA gender pay gap of 27.2% is the largest of any State and is well above the average of 17.6%. The Hon Minister concludes that it is likely that increases in the minimum wage help to prevent further divergence between men and women’s pay by maintaining the income levels of the lowest paid, amongst whom women are over-represented.

49 CCIWA submits that the disproportion between male and female wage rates largely reflects several characteristics of the female workforce in WA being employed on a part time basis. In general, female employees tend to be employed in more services-orientated industries which, in many cases, have lower rates of pay than many other industries, particularly the higher paying resources, manufacturing and construction industries. CCIWA contends that minimum wage increases have a minimal impact on any gender pay gap.

50 We continue to have reservations regarding linking the setting of the minimum wage to Average Weekly Ordinary Time Earnings. We agree, with respect, with the comment of Professor Preston that an employee’s judgment of whether their wage is fair or not is by reference to what is being received by others. However, in the 2011 State Wage order decision ((2011) 91 WAIG 1008; [2011] WAIRC 00399 at 33) we observed that AWE will necessarily measure earnings across the State, including of employees in relatively high-wage sectors such as mining which are not likely to be representative of wages and living standards generally prevailing in the community.

51 CCIWA submits that the differential between the minimum wage and WA’s AWOTE can be explained by an increase in positions in the mining, oil and gas related industries. There is a strong correlation between the rise of the mining sector’s share of WA’s total factor income and the growth in the differential between AWOTE and the State minimum wage. We consider the evidence supports this submission. The data in AWOTE represent gross earnings and provide an average of earnings in WA. However, an average of earnings is not the same thing as the earnings of an average person. There is evidence before us which suggests that since 2005, mining wages have increased by 50 per cent and the average of earnings will undoubtedly be affected by that. The average of earnings is affected by compositional shifts which can result in fluctuations in earnings growth even though rates of pay have not changed.

52 Consequently we have not been persuaded by UnionsWA’s submission that the setting of the WA minimum wage should be significantly influenced by its past or present relativity to AWOTE.

53 UnionsWA acknowledges that at least the WPI should also be considered in order to give a more complete picture. UnionsWA observes that while nationally the minimum wage has risen over the past decade at about the same rate as the WPI, this cannot be said of the WA minimum wage and WPI in WA. However, s 50A(3) of the Act requires us to consider a number of matters in reaching our decision. Whilst the concept of “fairness” must be a consideration by us when considering the system of wages and conditions of employment in WA and wage standards in the context of living standards generally prevailing in the community, it is not given greater weight in the legislation than the other matters which we are obliged to consider.

54 The evidence shows the gender pay gap in WA is greater than the gender pay gap nationally. An issue arises whether the restricted coverage of the order to issue from these proceedings can be effective to address the issue. The gender pay gap is calculated by reference to all industries in WA, however we do not set a minimum wage which applies across all industries in WA. The State Wage order can apply only to the small minority of the private sector workforce in WA. The lack of any measurable reduction in the gender pay gap in WA following the $29.00 per week increase to the minimum wage we ordered in 2008 leads inevitably to the conclusion that the gender pay gap in WA is unlikely to be reduced by any order which can issue from these proceedings: the overriding effect of the FW Act makes it likely that the coverage of the State Wage order is insignificant for this purpose. There is nothing to suggest that the gender pay gap for the small minority of employees in WA who are covered by the State industrial relations system is significantly different from the gender pay gap for the majority of employees in WA who are covered by the national industrial relations system.

55 Further, a significant increase to the WA minimum wage will correspondingly significantly increase the price of labour for WA businesses in the State jurisdiction when, in the absence of a corresponding increase to the national minimum wage, there will be no significant cost increase of the price of labour for WA businesses in the national jurisdiction. Given that the jurisdiction is determined by reference only to whether or not the business is undertaken by a trading or financial corporation, this is not a result which sits comfortably with the requirement on the Commission in ss 26(1)(a) and (c) of the Act to decide matters according to equity, good conscience and substantial merit, having regard for the interests of the persons immediately concerned whether directly affected or not and, where appropriate, for the interests of the community as a whole.

56 Moreover, the evidence before us also establishes that gender pay ratios differ significantly by industry or industry sector. In particular, in a low pay sector where there is not a lot of difference in the earnings between male and female employees such as accommodation, cafes and restaurants, there is a consequent reduction in the gender pay gap. In that context, significantly increasing the WA minimum wage with the object of reducing the gender pay gap in WA necessarily will mean that that significant increase will apply to an industry or sector of the State where it is not necessary because the gender pay gap is significantly less than elsewhere.

57 We stated in the 2011 State Wage order decision (op cit) at 39 and 40 that the reasons for the gender pay gap in WA are complex and that the scope in State Wage order proceedings for us to address those reasons is limited. We repeat that conclusion here.

58 We accept the evidence that a significant proportion of minimum wage employees is female and correspondingly increases to the minimum wage will be of benefit to female employees. We recognise that increases to the minimum wage assist in reducing the gender pay gap for those female employees within the State jurisdiction. Given that the WA minimum wage is higher than the national minimum wage it will, for that reason, be of greater benefit to female employees than will be the national minimum wage. However s 50A(3)(a) as a whole means that these issues also need to be balanced against competing considerations.

Section 50A(3)(a)(ii) and (iv) – The need to meet the needs of the low paid; contribute to improved living standards for employees

59 In relation to the concept of improving living standards in s 50A(3)(a)(iv) of the Act, CCIWA submits that there is no presumption that changes in living standards as reflected by the CPI or other measures require a significant increase to minimum wages to keep up with, or indeed outpace, inflation. CCIWA states that increases in the minimum wage influence the viability of businesses employing at minimum wage levels, therefore increases in the minimum wage must not reduce jobs, or have the potential to promote job loss, or inhibit job creation. The extent of reliance on increases to the State minimum wage to assist low income workers must depend and inter relate with tax transfers, income supplementation and other measures provided by Commonwealth and State governments. Increases in the minimum wage must not discourage productivity improvement or act as a substitute for productivity bargaining.

60 This submission from CCIWA effectively repeats its submission in 2011 and we retain confidence in our decision on that occasion (op cit at 35) when we said that it is difficult to take into consideration the need to meet the needs of the low paid (s 50A(3)(a)(ii)) and the need to contribute to improved living standards for employees (s 50A(3)(a)(iv)) without giving some weight to measures which are available to assess the relative value of the minimum wage over time. We observe that the Commission has been responsive in the past to the State’s economic performance and to movements in the cost of living and wage rates generally in WA in the context of the considerations in s 50A(3)(a) of the Act.

Section 50A(3)(v) – The need to protect employees who may be unable to reach an industrial agreement

61 We are not aware of any evidence which would lead to the conclusion that the increases to the WA minimum wage since s 50A commenced in 2006 have discouraged bargaining in the workplace. We consider that the adjustment arising from this decision will protect employees who may be unable to reach an industrial agreement. The Hon Minister acknowledges that lower paid workers are generally less likely to engage in workplace bargaining which means they have a greater reliance on adjustments to minimum and award wages. This corresponds to the WACOSS submission that there is an inability to bargain in the community services sector. Further, many small business employers are less likely to engage in wage bargaining than better resourced businesses and as such, small business employers apply minimum or award wage determinations. We respectfully agree with those conclusions.

Section 50A(3)(vii) – The need to provide equal remuneration for men and women for work of equal or comparable value

62 The Hon Minister submits that women are more likely than men to work in award-reliant industries and occupations, and are therefore more likely to have their pay determined by award or minimum wages. Minimum wage decisions are one of a range of factors which influence overall patterns of female labour market participation.

63 CCIWA submits that pay equity principles are supported by CCIWA and employers generally. Whilst reiterating its support for pay equity principles, CCIWA points out that the equal remuneration criterion should not be given disproportional weight - it is only one factor to be taken into consideration. Award classifications and wages that do not reflect contemporary workplace circumstances or work value, however, present major and confronting difficulties, none of which can be rectified through increases to the State minimum wage. There are more appropriate and targeted measures to address substantiated paid differentials or inequities including that award classifications and wages are appropriately benchmarked and reflect work value.

64 There is some overlap between this consideration and the issue of pay equity which we have considered earlier in this decision. We consider that an increase to the minimum wage has the potential to assist in providing equal remuneration for men and women for work of equal or comparable value.

Section 50A(3)(b) – The state of the economy of Western Australia

65 In relation to the State’s economic performance for the financial year 2011/12 and for 2012/13, Ms Lomas referred to three measures of aggregate economic activity: State Final Demand, Gross State Product, and Gross State Income. Ms Lomas’s evidence was that considering these measures of economic activity, and a number of other indicators, and notwithstanding the risks to any forecast, the expectations for the State economy for the remainder of this year and for next year are very positive.

66 The major economic forecasts for WA are set out in the following table as shown in table 2 of the Minister’s submission in reply:

Table Two: Economic Forecasts
Major Economic Aggregates, Annual growth (%)
Western Australia
Indicator
2010-11
Actual
2011-12 Estimated Actual
2012-13 Budget Estimate
2013-14 Forward Estimate
2014-15 Forward Estimate
Gross State Product (GSP)
3.5
6.0
4.75
4.75
4.25
Gross State Income (GSI)
20.0
6.25
2.5
3.5
1.5
Employment
3.2
2.5
2.75
2.5
2.25
Unemployment Rate
4.4
4.25
4.25
4.25
4.0
Wage Price Index
3.9
4.25
4.5
4.5
4.5
Consumer Price Index(a)
2.8
2.5
3.5
3.25
3.25
(a) Includes 0.7 percentage points In 2012-13 and 0.2 percentage points In 2015-16, to reflect the price level effects of the
Commonwealth Government's Carbon Tax.

67 We note particularly that Gross State Product is forecast to grow by 4.75% in 2012/13, following an increase of 6% in 2011/12. Demand for labour is expected to remain strong, with the State’s economy effectively at full employment. Inflation is expected to be its lowest in 2011/12 and then peak next year with the introduction of the Carbon Tax, after which it will average around 3.25%. Wages growth is expected to be quite strong, exceeding 4% across the years. Population growth will peak this year at 2.5% and is expected to remain above the long run average. There has been stronger than expected growth in agricultural exports and household consumption over the past year as households display considerably less conservative spending behaviour.

68 Ms Lomas gave evidence regarding the national economy. She also gave evidence regarding the outlook for the global economy and identified the risks to the Department of Treasury forecasts which could potentially lead to changes. These are principally the sovereign debt concerns in the Eurozone, a slowing of economic growth in China and the dependence of the global economy on oil prices with instability in the Middle East.

69 CCIWA also provides economic information regarding the performance of the WA and national economies. CCIWA points out notwithstanding the current economic growth forecasts, there remain significant challenges for business including:

· Low productivity growth, the need to foster entrepreneurial innovation and creativity;
· Implications of the ageing population and skills shortages;
· Labour force inflexibilities;
· Constraints imposed by inadequate infrastructure; and
· Regulatory burdens.

70 CCIWA also submits that difficulties in forecasting the effects of the minimum wage decision are ever present and are exacerbated by the expectation that global economic growth would weaken, with growth in China easing and Europe expecting to enter a shallow recession in the first half of the year. Further, uncertainty remains about the actual effects of the Commonwealth Carbon Tax commencing on 1 July 2012.

71 Overall, the evidence before us, particularly from the Department of Treasury, is that according to current economic indicators the WA economy is robust and projections are for continued growth even though the recovery from the GFC has been uneven and some sectors such as housing continue to face suppressed conditions.

72 We conclude that the strength of the WA economy will support an increase to the WA minimum wage. The evidence before us permits the conclusion that increases to the WA minimum wage from our annual decisions since s 50A was introduced into the Act in 2006 have had little, if any, effect on the level of employment, inflation and productivity in WA. We conclude that the increase to the minimum wage which arises from this decision will have little effect on the level of employment, inflation and productivity in WA. There is no evidence that past increases to the WA minimum wage had adversely affected profitability or had an impact on business failures.

Section 50A(3)(c) - The state of the national economy

73 The WA economy can be contrasted with the rest of the country, particularly in the categories of unemployment and average earnings which are strongly influenced by the resource sector. The CPI for Perth to the March quarter 2012 increased by 1.9% compared to 1.6% nationally. The LPI for the same period showed an annual change for WA of 4.5% compared to the national annual change of 3.5%.

74 WA has significantly higher AWE than the rest of Australia due in large part to the higher earnings in the resource sector. Treasury forecasts that the overall demand for labour is likely to grow in the next year. There is evidence that nationally, labour productivity fell 0.3% over the course of 2010/11, meanwhile WA’s labour productivity climbed by 1.5% in 2010/11 following a 6.4% surge in the previous year.

75 In general terms, the stronger performance of the WA economy compared to the national economy leads to the conclusion that a minimum wage in WA which is higher that the national minimum wage is supportable. This general conclusion is tempered by the conclusion we have stated above, that is, the minimum wage we set in this State Wage order is not a minimum wage for the whole of WA but only for a small minority of WA employers and employees. The extent to which those employers are able to sustain a minimum wage which is higher than the national minimum wage is a separate consideration.

Section 50A(3)(d) – The capacity of employers as a whole to bear the costs of increased wages, salaries, allowances and other remuneration

76 The Hon Minister submits that the overall healthy economic picture supports the view that the WA labour market has the capacity to maintain real wages. The only data available to measure profitability for businesses in WA is the Gross Operating Surplus (GOS) plus Gross Mixed Income (GMI) measure recorded by the ABS. It should be used with caution but, as a whole, WA businesses in the year to June 2011 increased overall profitability by 23.9%.

77 Only the rental, hiring and real estate services sector recorded a reduction in profitability. Overall the industries with more than 50% of employees within the State industrial relations jurisdiction, and which also rely heavily on awards for wage setting, recorded overall profitability. It is nevertheless imperative, in the Hon Minister’s submission, not to arrest positive trends with wage increases that employers, particularly small businesses, cannot afford.

78 CCIWA refers to the Hon Minister’s reference to the GOS and GMI measure. CCIWA suggests that such data tells us very little about capacity to pay of the majority of industries affected by State wage increases. The data is viewed as potentially deceptive given the patchwork nature of the economy. CCIWA views this profitability measure with considerable caution especially in relation to the capacity to pay micro businesses.

79 UnionsWA submits that the number of businesses operating in each of the industries most likely to be impacted by a State minimum wage increase has grown by 3.8% between the financial year 2007/08 and the financial year 2010/11 and the indications are that having a high State minimum wage in WA has not hurt the growth of these business numbers.

80 UnionsWA acknowledges the difficulties faced by small businesses in the hospitality industry, particularly in the area of attracting and retaining quality staff to provide competitive service. UnionsWA submits that the “compensation of employees” share of total factor income in WA’s accommodation and food services industry in WA was lower than the equivalent nationally in June 2011.

81 We conclude that the strength of the WA economy supports the conclusion that employers as a whole have the capacity to bear the cost of the minimum wage arising from our decision. We consider it is important to state that the size of any increase to the WA minimum wage which would follow from this conclusion will take into account the evidence and submissions about those industry sectors identified by CCIWA and AHAWA which are not experiencing strong conditions and which are likely to have employers and employees in the WA industrial relations jurisdiction.

Section 50A(3)(e) – The need to ensure that the Western Australian award framework represents a system of fair wages and conditions of employment

82 We have consistently applied the increase to the WA minimum wage to wage rates in awards. Indeed, there has not been an occasion when we have been asked not to do so. We consider that to do so maintains the currency of award wages and assists in ensuring that the WA award framework represents a system of fair wages. We do not overlook the submission from CCIWA that many of the awards may not reflect the coverage resulting from the operation of Commonwealth legislation, and that they are not modern awards, however they are issues separate from these proceedings under s 50A of the Act and are not a reason why the wage rates in awards should not be increased in these proceedings.

Section 50A(3)(f) – Relevant decisions of other industrial courts and tribunals

83 We noted in the 2011 State Wage order decision (op cit at 46) that the minimum wages of other States are now not applicable to private sector employment in those States. We note for the record that the WA minimum wage which, since 2006, has been higher that the corresponding national minimum wage, is not the highest minimum wage in Australia, with the Queensland minimum wage of $610.20 (2011 QIRComm 147, 31 August 2011) being higher than the WA minimum wage.

84 However, more significantly, since the referral to the Commonwealth of the other States’ remaining private sector industrial relations coverage, the minimum wage that is applicable to employers and employees in the unincorporated private sector in those States, and which we do consider to be more relevant to these proceedings, is the minimum wage applicable to employers and their employees in WA who are covered by the national system.

85 It is more relevant because the WA minimum wage will apply to the same types of private sector businesses in WA, and in the same industry sectors with the same gender pay gap or the same relative position regarding average earnings, as are subject to the national minimum wage. As we have observed, the point of difference between those businesses in the national system and those in the WA system is not a difference in productivity or profitability, but only a difference in the employer’s business structure. Until the Commonwealth Government’s use of the corporations power in 2006 to legislate employment conditions for employees of constitutional corporations, the business structure of an employer was largely an irrelevant consideration in the setting of employment conditions. Other than for the question of jurisdiction in WA, it remains largely an irrelevant consideration for our purposes.

86 Fairness, in the context of setting the WA minimum wage, necessarily includes a comparison with the national minimum wage which is applicable to comparable employees elsewhere in the State. The observation that an employee’s judgment of whether or not their wage is fair by reference to what is being received by others, applies equally to the minimum wage received by the others who are the significant majority of low paid employees in WA, and in each other State.

87 Although s 284(1) of the FW Act does not require consideration of the state of the WA economy and the WA award framework which we are obliged by s 50A(3)(b) and (e) of the Act to take into consideration, we consider it significant that there is a considerable overlap between the considerations of the FWA Minimum Wage Panel and the considerations we are obliged by s 50A(3) to take into account. We refer to s 284(1) of the FW Act which obliges FWA:

· To establish and maintain a safety net of fair minimum wages. This broadly corresponds to the obligation on this Commission under ss 50A(3)(a)(i) and (iii) of the Act.
· In the context of the performance and competitiveness of the national economy, to take into account productivity, inflation and employment growth. This broadly corresponds to the obligation on this Commission in s 50A(3)(b) to take into account productivity, inflation and employment growth with respect to the WA economy, and in s 50A(3)(c) consideration of the state of the national economy.
· To take into account relative living standards and the needs of the low paid. This broadly corresponds to the obligation on this Commission in s 50A(3)(a)(ii).
· To take into account the principle of equal remuneration for work of equal or comparable value. This corresponds to the obligation on this Commission in s 50A(3)(a)(vii).

88 Further, 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.

89 On this occasion, the Annual Wage Review 2011-12 has considered submissions and issues which have also been raised in these proceedings, namely:
· That average earnings have risen faster than individual rates;
· The relative position of the minimum wage and average earnings;
· Financial stress and the role of the tax/transfer system;
· Specific characteristics of award-reliant industries;
· Conditions in retail and tourism sectors;
· Pay equity.

90 For all of these reasons, we consider the Annual Wage Review 2011-12, which increased the national minimum wage by 2.9% from $589.30 to $606.40 per week, an increase of $17.10 per week, to be a relevant and significant consideration.

91 Although the Annual Wage Review 2011-12 is relevant and significant, the Act does not provide simply for it to be adopted by us in the absence of good reason not to do so. We are obliged by s 50A(3) of the Act to set a minimum wage for WA by having regard primarily to the conditions of the WA economy and labour market. This is in contrast to the national considerations which the FWA Minimum Wage Panel is obliged to take into account. For that reason, and also that since 2006 –

· S 50A(3) of the Act and the corresponding national legislative provisions have not been the same; and
· there have been differences in the timing of both national and WA minimum wage decisions,

the WA minimum wage has been higher than the national minimum wage. On this occasion, as was the case in the 2011 State Wage order case, the AHAWA’s primary submission that there should be no increase to the WA minimum wage in order to allow the WA minimum wage to align with the national minimum wage was not supported by any other person. We consider that s 50A(3) of the Act would not permit the Commission to “freeze” the WA minimum wage merely to achieve such an alignment.

92 Rather, we have an obligation to ensure “that Western Australians have a system of fair wages and conditions of employment” and to “provide fair wage standards in the context of living standards generally prevailing in the community”. This suggests that it would not be fair to those low paid employees in the WA industrial relations system, even though they are a small minority, who are dependent on the minimum wage, not to receive an increase when one is otherwise appropriate. For as long as s 50A(3) retains its present wording, the WA minimum wage will require to be set by an exercise of independent judgment according to equity, good conscience and the substantial merits of the case having regard to the s 50A(3) considerations.

93 In the context of s 50A(3), we consider the approach of the FWA Minimum Wage Panel to its setting of the national minimum wage to be of assistance. The resulting 2.9% increase to the national minimum wage followed FWA’s consideration of some of the issues raised in these proceedings. This includes the issue of the role of the tax transfer system and the introduction of the Carbon Tax. It also includes the issue raised by UnionsWA in relation to the gender pay gap and the reliance of women on the minimum wage, where FWA’s conclusion at [231] was that given women are disproportionately represented amongst the low paid, an increase in minimum wages is likely to promote pay equity, although moderate changes in award rates of pay would be expected to have only a small effect on the overall differences in earnings between males and females. This accords with our own conclusion.

94 The evidence of Professor Preston, and the submissions of UnionsWA however shows that although the national minimum wage has risen over the past decade at about the same rate as the WPI, that cannot be said of the WA minimum wage. We have earlier not accepted UnionsWA’s reliance on AWOTE as an appropriate measure for this purpose. However, we do consider that it is appropriate to refer to the WPI movement in WA, taking into account that WPI also includes some measure of mining and resource wages which are not representative of wages generally. We note also the WACOSS material regarding financial stress in low income families being experienced in WA.

95 We also note the extent to which the FWA Minimum Wage Panel has considered specific award-reliant industries, retail: accommodation and food. FWA specifically addressed retail, manufacturing and tourism which are expected to be adversely affected by the ongoing global uncertainty, high Australian dollar, consumer caution and changes in expenditure patterns. At [98], FWA stated:

In assessing the available economic information, we have looked at developments in the economy as a whole and paid particular attention to developments in the award-reliant industries. It is in these industries where the minimum wage has greatest application and where the greatest practical impact of minimum wage increases might be felt. In specifically addressing information concerning the award-reliant industries, we remain aware of the fact that changes in award rates of pay continue to have a substantial influence beyond those industries.

96 In our case too we look at the WA economy as a whole and pay particular attention to the information before us regarding those industry sectors which are likely to employ minimum wage dependent employees.

CONCLUSION

97 Our past decisions setting the WA minimum wage have paid particular regard to the State of the WA economy. We are obliged to do so by s 50A(3)(b) of the Act, however we point out that we have been responsive in the past to the State’s economic performance and to movements in the cost of living and wage rates generally. Where we have been able to do so, we have given a real increase to the minimum wage, considering that to do so gives effect to the obligation to meet the needs of the low paid and contribute to improved living standards for employees.

98 Where the state of the WA economy has been such that we have not been able to do so, we have at least been able to maintain its real value relative to CPI in WA, even though that measure is criticised by UnionsWA and WACOSS.

99 There is no evidence that these decisions have been inappropriate to the circumstances.

100 In 2011, our considerations under s 50A(3) of the Act resulted in an increase which was much the same as the increase awarded in the FWA Annual Wage Review 2010-11. On that occasion, the relative positions of the WA economy and of the national economy were similar. That is not the case on this occasion. As the evidence from the WA Department of Treasury shows, conditions in WA are stronger than they are nationally, WA’s annual CPI is greater than the national, its unemployment rate is lower, male and female participation rates are higher, its youth unemployment rate is lower, and its WPI and AWE are higher, than nationally.

101 Additionally, over the last decade the WA minimum wage has not kept pace with the WPI, in contrast to the national minimum wage which has risen over the last decade at about the same rate as the WPI.

102 In the context of the current strength of the WA economy, and taking into consideration the need -
· “to meet the needs of the low paid”;
· “to contribute to improved living standards for employees”;
· “to protect employees who may be unable to reach an industrial agreement”; and
· “to provide equal remuneration for men and women for work of equal or comparable value”,
we consider an increase to the WA minimum wage greater than awarded nationally is warranted.

103 As to the size of the increase, we are obliged to balance many competing and almost irreconcilable issues. We conclude, as the Annual Wage Review 2011-12 has concluded for the national minimum wage, that we too should give a real increase to the WA minimum wage. For that reason, we consider the increase suggested by CCIWA, and in turn, the increase submitted by the Hon Minister to maintain the real value of the WA minimum wage, on this occasion do not satisfy the considerations in s 50A(3) of the Act.

104 Correspondingly, we consider UnionsWA’s submission that the setting of the WA minimum wage should be significantly influenced by its past or present relativity to AWOTE not to be appropriate.

105 The lower rate of increase in the WA minimum wage relative to the WPI is explainable by reference to the higher wages in the mining and resource sectors in WA. In both sets of data, there is an influence of high wages in the mining and resource sectors which we do not see as representative of earnings growth generally.

106 Further, the patchy growth in some award-reliant sectors of the WA economy and difficulties being experienced in some sectors, including hospitality and tourism, shows a limited capacity to afford to pay an increase which significantly seeks to address the lower level of the minimum wage in WA relative to wage rates in WA. And of course, any increase to the WA minimum wage widens the gap between it and the national minimum wage.

107 Although we consider an increase to the WA minimum wage greater than awarded nationally is warranted, we are acutely conscious that we must balance considerations of the capacity of employers to pay with the need for the WA minimum wage to meet the needs of the low paid, provide fair wage standards and indeed to contribute to improved living standards for employees. We have decided to increase the WA minimum wage by 3.4%, representing an increase of $20.60 per week to the WA minimum wage. This is 0.5%, or $3.50 more than that awarded in the Annual Wage Review 2011-12.

108 This is an increase less than the increase in wage rates generally in WA, and we think it will not affect the WA economy or have a measurable effect on the level of employment, inflation and productivity in WA. Although s 50A(3)(a)(i) and (iii) in particular suggest that it might be desirable to further remedy the decline of the relative position of the WA minimum wage to wages generally in the community, any greater increase we might have awarded has been conditioned by the evidence of some award-reliant industry sectors in WA which are not performing as well as some other sectors.

109 The adjustment will increase the gap between the WA and national minimum wages which has existed since the 2011 State Wage order, although only marginally.

Date of Operation

110 The presumption in s 50A(5) of the Act is 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 2012.

Consequent Variations to Awards

111 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.

112 On this occasion, we consider award rates of wages should be varied by 3.4% because we appreciate that our past flat-dollar increases inevitably will have had the effect of compressing relativities between wage rates in awards. We also appreciate, as submitted by CCIWA, that many awards do require the attention of the parties to those awards if they are to be modernised, however, in the meantime, employers and employees in award-reliant industries in WA are still bound by them. We have taken into account that the application of the percentage increase to awards gives a greater increase to those on higher award rates than those on the minimum wage, and that the corresponding cost to employers. The increase is able to be absorbed into any overaward payment such that it 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.

The Minimum Weekly Rate of Pay Applicable to Apprentices and Trainees

113 Section 50A(3)(a)(vi) requires the Commission to take into consideration the need to encourage ongoing skills development. The Hon Minister submits that in the past seven years, the overall number of apprenticeships commenced has risen and the percentage of people over the age of 21 commencing apprenticeships has increased significantly, and that previous State minimum wage increases for apprentices and trainees have not had a significant impact on the number of apprenticeships and traineeships being undertaken in WA.

114 We note the submissions of UnionsWA and WACOSS that on this occasion we should award the full increase to apprentices and trainees. However in the absence of evidence from which we could reach a conclusion regarding the effect of doing so on the need to encourage ongoing skills development, we are not persuaded to do so. The Hon Minister refers to the FWA review of modern awards which will include apprentice, trainee and junior rates; the outcome of the review as it relates to apprentice and trainee wages and conditions may be a matter which can be taken into account in our consideration of s 50A(3)(a)(vi) in the next State Wage order case.

Industry/Skill Levels

115 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 2012 State Wage order to issue.

THE STATE WAGE PRINCIPLES

116 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 2012 to issue remains unchanged from the Statement of Principles July 2011 apart from the necessary and consequential amendments to Principle 9.

MINUTE OF PROPOSED GENERAL ORDER

117 A minute of proposed General Order now issues. The Commission should be advised by 2.00pm on 13 June 2012 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 14 June 2012.

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

2012 STATE WAGE ORDER PURSUANT TO SECTION 50A OF THE ACT

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

 

CITATION : 2012 WAIRC 00346

 

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, 29 May 2012, Wednesday, 30 May 2012, WEdNESDay, 6 June 2012

 

DELIVERED : MONday, 11 JUNE 2012

 

FILE NO. : APPL 2 OF 2012

 

 

:

ON THE Commission's Own Motion

 

CatchWords : State Wage order - Commissions own motion - Minimum wage for employees under Minimum Conditions of Employment Act 1993 - Award rates of wage - Award minimum wage -State wage principles

Legislation : Industrial Relations Act 1979 s 26, s 50A, Minimum Conditions of Employment Act 1993 s 12, Fair Work Act 2009 (Cth) s 284

Result : 2012 State Wage Order issued

Representation:

 


Ms S Haynes and with her, Ms M Bolitho on behalf of the Hon. Minister for Commerce

Mr J Ridley and with him, Ms R Catalano on behalf of the Chamber of Commerce and Industry of WA (Inc.)

 

Ms K Davis and with her, Dr T Dymond on behalf of UnionsWA

 

 

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 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 18, 21 and 26 April 2012 calling for public submissions.  The advertisement was also published on the Commission’s website and in the WA Industrial Gazette ((2012) 92 WAIG 450; [2012] WAIRC 00229).

 

3          The Commission sat on 29 and 30 May and 6 June 2012, and heard oral submissions and evidence from the Hon Minister for Commerce, the Chamber of Commerce and Industry of Western Australia (Inc) (CCIWA) and UnionsWA.  Written submissions were received from Australian Hotels Association WA Branch (AHAWA) and the Western Australian Council of Social Services Inc (WACOSS).  Copies of all submissions were placed on the Commission’s website and the proceedings were webcast.

 

SUMMARY OF SUBMISSIONS RECEIVED

 

4          We set out a summary of the submissions we have received.  The submissions regarding the matters we are obliged to take into consideration are referred to where appropriate later in this decision.

 

The Hon Minister for Commerce

 

5          The Hon Minister seeks to balance the disparate issues relating to the needs of the low paid, and the capacity of employers to absorb pay adjustments, within the parameters of the WA economy.  The Hon Minister submits that the State minimum wage determination should aim to maintain the real value of minimum and award wages, and therefore it is appropriate to adjust wages by the estimated actual percentage rate of inflation for the financial year 2011/12 as published in the WA State Budget for 2012/13.  This figure will account for the first three quarters of the year as measured by the Australian Bureau of Statistics (ABS) and incorporate an estimate for the fourth quarter.  The Hon Minister submits that a percentage adjustment to minimum and award wages to account for inflation is fair and sustainable, and considers the needs of both the low paid and employers.  The Hon Minister submits that the Commission should also increase the State minimum wage and award wages for other classifications of employees.

 

 

6          The Hon Minister refers to the published estimated actual Consumer Price Index (CPI) for Perth in 2011/12 of 2.5% and submits that the appropriate increase is 2.5% or $15.20 which would adjust the minimum wage to $622.30 per week.  Other wages set by the State Wage order should likewise be adjusted by 2.5%.  This would reflect inflation in the current financial year, and not any potential or anticipated increases in 2012/13 and beyond arising from the impact of the Clean Energy Act 2011 (Cth) as such increases are not quantifiable before the fact.

 

7          The Hon Minister presents information to show that over the previous decade the State minimum wage has increased by 6.4% above the CPI.  Therefore there has been a gradual real increase over time affording the low paid a relative improvement in their wages compared to cost of living increases.  Wages growth across industries tends to fluctuate each year and there does not appear to be a direct correlation between the State Wage order and the wages growth in each industry.  The Hon Minister acknowledges the submissions regarding rises in costs which may not be reflected in the headline CPI rate and submits that such costs increases impact on both employees and employers.  A wage adjustment in line with overall inflation remains the most reliable means of balancing the needs of the low paid against the capacity of employers to absorb pay adjustments.

 

8          The Hon Minister presented evidence on the State and national economies from Ms Amy Lomas, the Director of the Forecasting and Quantitative Services Division within the WA Department of Treasury.  We express our thanks to the WA Department of Treasury for providing the Commission each year with this information, and to Ms Lomas for her presentation to us.

 

Chamber of Commerce and Industry of Western Australia (Inc)

 

9          CCIWA contends that there should be a moderate increase of $11.00 per week to the minimum wage.  CCIWA states that the objective is to reflect the role of the minimum wage as being a safety net for the low paid and CCIWA believes the best way to protect recipients of the minimum wage is to ensure their jobs are retained, that there is no reduction in their hours and that overall job growth is promoted.  There is still a continuing recovery from the most significant economic downturn since the 1930’s, exacerbated by a more pronounced two (multi) speed, or patchwork, economy.  Whilst headline figures show the WA economy remains strong, a number of sectors are finding conditions have not fully recovered from the Global Financial Crisis (GFC).  CCIWA broadly supports the AHAWA submission, recognising that the hospitality industry has experienced difficult conditions over recent periods with a reduction in operating hours and a severely reduced income for many small businesses in the industry. 

 

10       CCIWA notes that service industries, including retail, hospitality and restaurants have a comparatively higher level of direct employment on minimum wages (without over-award or agreement-based pay) than all-industries averages and other industries with a higher incidence of agreement making, such as manufacturing, construction mining, communications and transport.  Accordingly the impact of wage increases in minimum wage reviews is disproportionately experienced in these industries. 

 

11       A minimum wage increase beyond what CCIWA considers to be “moderate” is likely to result in job losses and otherwise disadvantage businesses recovering from the GFC.  The approach advocated by CCIWA continues to be one of prudence and caution.  Retaining and creating jobs must be of paramount concern. 

 

12       CCIWA maintains that the concept of an income safety net requires the Commission to consider a combination of both minimum wages and the tax/transfer system.  Meeting the needs of low paid workers is not consistent with an elevated increase to the minimum wage that sacrifices jobs and/or results in “underemployment”.  CCIWA refers to Commonwealth Budget initiatives contending that these monetary amounts need to be taken into consideration when determining the quantum of the minimum wage. 

 

 

13       CCIWA states that an increase of $42.50 per week as sought by UnionsWA is a significant increase in wage rates and is untenable.  Many businesses are struggling and employers often have their homes mortgaged to fund their unincorporated business.  WA already has the highest minimum wage in Australia, being $17.80 higher than the current national minimum wage.  CCIWA also contends that there is no justification for a further widening of the gap between WA and the six other State/Territory minimum wages and the national minimum wage. 

 

14       CCIWA points to the change to the coverage of private sector awards since 2006 when Commonwealth legislation removed trading and financial corporations to the national system.  CCIWA asserts that businesses remaining in the State system are very different from medium to large businesses which are trading corporations.  Many State private sector awards do not reflect those businesses remaining in the State jurisdiction.  The vast majority of State awards are now very old, reflecting very different economic times, industries and occupations and are unlikely to be relevant or operationally practical today.  Most of these awards have changed little since they were made and although there is a capacity for awards to be amended, very few have been the subject of applications to amend, in particular applications to amend for the minimum rates adjustment.  CCIWA reiterates its submission that the considerations set out in s 50A(3)(a) of the Act can apply only to employers and employees remaining in the State jurisdiction. 

 

15       CCIWA states that applying percentage increases to the minimum wage does not restore work value parity to any award wage scale.  Rather, the appropriate way to ensure that award wage classifications and wages reflect work value is to ensure that the award is minimum-rates adjusted where there has been significant net addition to work requirements.  In the absence of award modernisation, applying a percentage increase will further distort work value relativities in award classifications and wages, and significantly increase award wages, disproportionately favouring those on higher award wages. 

 

16       CCIWA contends that the WACOSS submission should be afforded less weight as it assumes incorrectly that the Commission has the power or role to redistribute wealth more broadly from one group of workers to another.  References to data relating to households also needs to be viewed with caution; prima facie such information is about households, not about low paid workers.  “Low income households” is not the same as “low paid employees”.

 

17       CCIWA included a number of attachments to its submission.  We are grateful for the assistance they provide to us in our consideration of the many issues involved in this review.

 

UnionsWA

 

18       UnionsWA presented evidence from Professor Alison Preston, the Director of the Curtin Graduate School of Business, Professor of Economics and Co-Director of the Women in Social and Economic Research Unit at Curtin University.  Professor Preston’s evidence is that the WA economy is growing strongly, above trend, and it is predicted to grow above trend for the next few years.  Gross State Product (GSP) is projected to grow around 6% this year which is a significant increase on the 2010/11 outcome.  In the year to December 2011, WA was growing at a rate of 11.1%.  Professor Preston’s evidence is that WA “is absolutely in boom conditions”:  Western Australia is a strong economy, it is profitable and it is growing. 

 

19       Her evidence is that Gross Final Demand in WA is very much made up of the strong growth in business expenditure; this expenditure has been committed and will be flowing through the WA economy for another few years.  The strongest growing sectors over the last two years having been mining, followed by health care and rental; also retail trade has been a very strong sector with strong growth in WA. 

 

20       Evidence presented by Professor Preston shows that since the end of 2004, male rates of pay in WA on average have increased significantly.  For a significant number of years, women in WA have been paid less than their counterparts nationally.  The rate of increase of the minimum wage has been a lot slower, significantly below the rate of increase in average weekly ordinary time earnings (AWOTE) for adults in WA.  There has been a decline in the value of the minimum wage relative to average wages. 

 

21       Professor Preston stated that individuals judge the fairness of their wage by reference to the wage rates around them.  In 2005, the WA minimum wage/Average Weekly Earnings (AWE) relativity was 47.6%; today the same relativity is 40.1%.  The relativity has been steadily declining partly because AWE have been on the increase but also because minimum wage adjustments have been at a slower rate over the latter part of this decade.  A person on the WA minimum wage earns 36.5% of the AWE of a male in WA.  Therefore, as wages are rising generally, it is important to consider what should happen with the State minimum wage.  The gender pay gap is around 17.8% nationally but 27.3% in WA.  Gender pay gaps are significant because they affect women’s economic and financial status, not only in the current term but over the long term and into retirement as well.

 

22       We express our thanks to Professor Preston for her evidence.

 

23       In its submissions, UnionsWA seeks a wage increase of 7%, which would increase the minimum wage by $42.50 per week.  It states that while WA has arguably the strongest economy of all States, it is also the most unequal State in the Commonwealth in terms of income distribution between individuals, between households and between genders.  It is UnionsWA’s contention that WA’s minimum wage should reflect WA’s stronger economic performance.  The WA minimum wage should also play its part in redressing the growing inequalities in WA society and that whilst a minimum wage increase is not the only response to these growing inequalities, other responses will not be adequate without a sufficient minimum wage increase.

 

24       UnionsWA contends that components of CPI inflation should be disaggregated for low paid workers, for whom some costs have more impact than others.  UnionsWA agrees with WACOSS that the Commission should have regard to the composition of low income earners’ budgets when judging the adequacy of any proposed minimum wage increase with respect to the cost of living.  WA’s performance stands out when compared with other States’ and Territories’ State Final Demand.

 

25       UnionsWA refers to the most recent ABS data on retail trade which shows that in March 2012 WA’s retail turnover rose by 1.2% seasonally adjusted and that since March 2011 WA’s retail turnover has had the largest increase of all States and Territories, rising by 10.7%.  It submits that WA is clearly ahead of the other States and Territories in trend growth for full time, adult ordinary time earnings.  However WA is by no means leading the pack when it comes to the cost of labour per employee; ABS data on labour costs shows that WA comes fourth out of the eight States and Territories in terms of earnings per employee and total labour costs. 

 

26       There are serious concerns about how many Western Australians are actually sharing in the benefits of that strong performance.  For example, pockets of high unemployment - particularly high youth unemployment - continue to exist in WA.  The need for social inclusion and workforce participation reinforce the need for a State minimum wage that goes beyond simply matching the all groups CPI, otherwise, the need for strong earnings growth to support the growth of local economies and businesses will be ignored. 

 

27       UnionsWA submits that wage levels are a crucial determinant of participation rates, and refers to the Australian Council of Trade Unions (ACTU) submission to Fair Work Australia (FWA) Annual Wage Review 2011-12, quoting from an article Jefferson, T and Preston, A Australia’s Other Two Speed Economy: Gender, Employment and Earnings in the Slow Lane Australian Bulletin of Labour, Vol. 36, No. 3, 2010, pp. 333-4.  The ACTU submission argues that if minimum wages do not increase in real terms, then the incentive to seek employment will be reduced.

 

28       The 7% increase sought by UnionsWA is to address the growing divergence in WA between the State minimum wage and AWE.  UnionsWA submits that the proportion of WA’s AWOTE taken by the State minimum wage has deteriorated from a high point of 51.3% in 2002 to its current 41.2%.  The proportion of the WA minimum wage to AWOTE has deteriorated by 10.1 points while the proportion of the national minimum wage to the national AWOTE has deteriorated by 6.2 points.

 

29       The WA minimum wage increased by 9.1% between 2000 and 2011 whereas AWOTE has increased by 39% over the same period.  UnionsWA submits that a substantial increase to the State minimum wage above the all groups CPI figure is needed to begin addressing this growing disparity between WA minimum wage employees and other WA employees. 

 

30       UnionsWA submits that the commonly agreed single statistic that summarises the distribution of income across the population is the Gini Coefficient which is used by the ABS in its household income and income distribution survey to indicate the degree of inequality between households across Australia.  The survey shows that a WA household with income in the top 10% now earns 4.8 times as much as a household in the bottom 10%.  By contrast, Australia-wide the bottom 10% of households had their income grow by 3.6%, while in WA those households went backwards by 0.9%.

 

31       Given that WA has the strongest State economy in the country, and the gender pay gap in WA is getting worse as the economy improves, WA’s gender pay gap will continue to be at an unacceptably higher level, although a 7% increase in the State minimum wage is one of the ways which may ensure the impact of the growing gender pay gap is limited.  UnionsWA contends that the increase in the minimum wage it is asking for is not a disincentive to bargain.

 

32       UnionsWA urges the Commission to reject downgrading the AWE measure in status and consideration in preference to the Wage Price Index (WPI).  Both should be considered together in order to gain a more complete picture of the WA economy.  If the WPI is to be the preferred measure of earnings growth then the Commission will be downgrading consideration of the gender pay gap in its deliberations because the WPI does not include information on male and female earnings gaps. 

 

Australian Hotels Association (Western Australia)

 

33       AHAWA submits that the national minimum wage and the State minimum wage should be the same.  Therefore, the State minimum wage should remain the same, or alternatively, transition over the next two years until the national minimum wage catches up.  However, if there is to be an increase to the minimum wage, consideration should be given to a $10.00 per week increase.  AHAWA notes that approximately 10% of the AHAWA membership are hospitality businesses who are non-constitutional corporations.  Hospitality industry employees are more likely to be employed under the award system than in most other industries and any adjustment to the minimum wage significantly affects hospitality businesses more than industries where there is less exposure to the award system. 

 

34       The hospitality industry has experienced difficult conditions over recent periods and many businesses have reduced operating hours, and suffered a decrease in income and a severe shortage of particularly skilled labour.  In WA’s booming economy, small businesses will continually be exposed to significant increases in operational costs and worsening labour shortages.  Regional locations incur increased costs for transportation, fuel, utilities, food and essential services.  Regional businesses are generally small and often have few staff, with the responsibility falling on proprietors to work longer hours.  The impact of taxation, utility costs, expenses and the Commonwealth Government’s proposed Carbon Tax is explored in the AHAWA’s submission.  It submits that WA businesses have suffered from a fall-off in tourism, particularly in the South West of WA.  Hospitality award rates are among the highest available and consequently wage costs are a significant issue for small businesses.

 

Western Australian Council of Social Services Inc

 

35       WACOSS’s submission calls for an increase to the minimum wage of $42.50 per week consistent with the claim made by UnionsWA.  WACOSS submits it is in a unique position to comment on critical social issues that affect members of the WA community and in particular those on low incomes.  WACOSS submits that minimum wages are a vital means of protecting low income workers from poverty.  Wages earned by full time minimum wage employees should be sufficient to ensure they have the capacity to meet their basic living costs while living with dignity and respect. 

 

36       However, WACOSS is alarmed at the rate at which the gap between the minimum wage and median pay levels in WA is continuing to grow.  WACOSS submits that an increase of $42.50 is consistent with maintaining a fair system of wages and conditions in the current WA context.  WACOSS also makes the submission, as does UnionsWA, that over the last three years, the WA minimum wage has failed to keep pace with AWOTE, leaving those on the minimum wage falling further and further behind.

 

37       WACOSS submits data showing indicators of financial stress in low income families in 2009/10 in comparison to other WA households.  WACOSS urges the Commission to have regard for the fact that the economy is showing signs of strong expansion, and that minimum wage earners should benefit from this expansion.

 

38       However not everyone is benefiting from the booming sectors in the economy.  Many Western Australians living on low incomes are not benefiting from the boom and continue to be adversely affected in many ways, particularly by cost of living pressures.  Although for the average household, the cost of living had generally kept pace with increases in household income, the use of “average” figures can mask the difference in impact on low/middle/high income households. 

 

39       The headline CPI figure does not provide an accurate measure of the true living costs that lower income households actually experience because it is based on an average price increase across a basket of items that an average household might purchase.  It does not take into account the spending patterns of households on lower incomes who spend significantly more of their incomes on essential items such as food, utilities, health and public transport, all of which have risen by substantial amounts.  WACOSS pointed in particular to the cost of utilities, the cost of housing, the cost of home ownership including the rental market and the cost of food.  WACOSS contends that the cost of living pressures on a low income earner relying on the minimum wage are significant and justify the $42.50 increase in the minimum wage being sought.

 

40       WACOSS refers to the significant number of low income employees in the community services sector and that it is likely a significant number of these fall within the State industrial relations system.  The Commission’s decision in this matter will have a tangible impact on the living standards of employees in this sector.  For various reasons, the sector is disproportionately reliant on award wages and conditions, and the Commission therefore has a direct role in influencing wages for employees in the sector.  There is a relative inability of the sector’s employees and employers to engage in bargaining.  WACOSS refers in particular also to the Regional Price Index because of the additional cost of living burden faced by low income households in regional WA.

 

41       WACOSS submits that WA has the largest gender pay gap of any State in Australia, a gap much larger than the national average.  To reduce the gender pay gap it is vital that minimum wages keep pace with community standards as women are over-represented in low paid jobs and continue to bear an unequal responsibility for unpaid caring roles.  WACOSS submits that s 50A(3)(a)(vii) of the Act, which refers to the need to “provide equal remuneration for men and women for work of equal or comparable value” provides the Commission with a mandate to consider this.  WACOSS submits that youth wages are inherently discriminatory and submits that the Commission should also provide for those on youth wages, apprentices and trainees the full $42.50 increase rather than only a proportion of any increase to the minimum wage. 

 

42      Whilst WACOSS refers to some Commonwealth Government Budget announcements, it submits that changes to the tax transfer system, whilst providing incentive for labour force participation, should not be used to argue down fair minimum wage levels.  Increases in minimum wages are an effective way to improve incentives for jobless people.  While the current unemployment figures are encouraging, they mask the ranks of underemployed men and women who are still feeling the impacts of changes to their employment status during the economic downturn.  Consequences of underemployment are very real and underemployed individuals often tend to lack bargaining power in the workplace, which reinforces the significance of an increase in the minimum wage. 

 

CONSIDERATION

 

Legislative Requirements and Application

 

43      The Act in s 50A(3) obliges the Commission in making a State Wage order to take into consideration:

 

 (a) the need 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;

 (iv) contribute to improved living standards for employees;

 (v) protect employees who may be unable to reach an industrial agreement;

 (vi) encourage ongoing skills development; and

 (vii) provide equal remuneration for men and women for work of equal or comparable value;

 (b) the state of the economy of Western Australia and the likely effect of its decision on that economy and, in particular, on the level of employment, inflation and productivity in Western Australia;

 (c) to the extent that it is relevant, the state of the national economy;

 (d) to the extent that it is relevant, the capacity of employers as a whole to bear the costs of increased wages, salaries, allowances and other remuneration;

 (e) for the purposes of subsection (1)(b) and (c), the need to ensure that the Western Australian award framework represents a system of fair wages and conditions of employment;

 (f) relevant decisions of other industrial courts and tribunals; and

 (g) any other matters the Commission considers relevant.

 

44      The operation of the Fair Work Act 2009 (Cth) (the FW Act) means that the order which will issue from this decision will affect only businesses in the private sector, and local governments in WA, which are not trading or financial corporations.  It will also apply to a significant proportion of State government employment, however, in practical terms, we suspect that most areas of State government employment, and many areas within local government, are unlikely to have employees who will be directly affected by an increase to the minimum wage.

 

45      Therefore, as a matter of jurisdiction:

 

  • The WA minimum wage will have application to employers and employees in the approximately 20% of businesses in the private sector in WA which are sole traders, partnerships, some trusts and incorporated businesses which are not trading or financial corporations.  (Attachment B to the Hon Minister’s submission estimate approximately 23.8% by reference to the statistics available regarding type of legal organisation.  CCIWA disputes this figure, submitting that it is in the range of 11% to 16%.  It is not necessary in these proceedings to finally decide the issue.)

 

  • Correspondingly as a matter of jurisdiction, the minimum wage determined under the FW Act in the Annual Wage Review will have application to employers and employees in the approximately 80% of businesses in the private sector in WA which are trading or financial corporations. 

 

46      An increase in the respective minimum wages will directly affect those employees who are paid the minimum wage, and indirectly affect those paid in the vicinity of it such that their wage would be increased by an increase to the minimum wage.  CCIWA submits that we should read down the considerations in s 50A(3) of the Act because of the operation of the FW Act, however, we are not persuaded that submission is correct.  We are obliged by the legislation to consider the evidence concerning WA as a whole.  Sections 26(1)(a) and (c) will ensure that the outcome of that consideration is tempered with the knowledge that the minimum wage which we set can apply only to the “small minority” of the workforce in WA (See the 2010 State Wage order Decision (2010) 90 WAIG 568; [2010] WAIRC 00337 at 37).  As we observed in paragraph 29 of that decision, we pay particular attention to the information before us regarding those industry sectors which are likely to employ minimum-wage dependent employees.  

 

Consideration of the Statutory Criteria

 

Section 50A(3)(a)(i) and (iii) - The need to ensure that Western Australians have a system of fair wages and conditions of employment; provide fair wage standards in the context of living standards generally prevailing in the community

 

47      It is convenient to commence our consideration with s 50A(3)(a)(i) and (iii), which speak of the concept of fairness inherent in the need to ensure that Western Australians have a system of fair wages and conditions of employment, and provide fair wage standards in the context of living standards generally prevailing in the community, because it is the context of “fairness” that UnionsWA mounts its significant submission regarding the gender pay gap in WA. 

 

48       The Hon Minister too submits information showing that more than 30% of women in the WA workforce are employed in four industries which all report an AWOTE below the State average:  healthcare and social assistance; retail trade; education and training; and accommodation and food services.  With the exception of education and training, employees in these female-dominated industries are likely to be paid according to award rates within the State industrial relations jurisdiction.  All industries in WA have gender pay gaps of more than 10% and four industries have gaps of more than 30%.  The overall WA gender pay gap of 27.2% is the largest of any State and is well above the average of 17.6%.  The Hon Minister concludes that it is likely that increases in the minimum wage help to prevent further divergence between men and women’s pay by maintaining the income levels of the lowest paid, amongst whom women are over-represented.

 

49      CCIWA submits that the disproportion between male and female wage rates largely reflects several characteristics of the female workforce in WA being employed on a part time basis.  In general, female employees tend to be employed in more services-orientated industries which, in many cases, have lower rates of pay than many other industries, particularly the higher paying resources, manufacturing and construction industries.  CCIWA contends that minimum wage increases have a minimal impact on any gender pay gap.

 

50       We continue to have reservations regarding linking the setting of the minimum wage to Average Weekly Ordinary Time Earnings.  We agree, with respect, with the comment of Professor Preston that an employee’s judgment of whether their wage is fair or not is by reference to what is being received by others.  However, in the 2011 State Wage order decision ((2011) 91 WAIG 1008; [2011] WAIRC 00399 at 33) we observed that AWE will necessarily measure earnings across the State, including of employees in relatively high-wage sectors such as mining which are not likely to be representative of wages and living standards generally prevailing in the community.

 

51       CCIWA submits that the differential between the minimum wage and WA’s AWOTE can be explained by an increase in positions in the mining, oil and gas related industries.  There is a strong correlation between the rise of the mining sector’s share of WA’s total factor income and the growth in the differential between AWOTE and the State minimum wage.  We consider the evidence supports this submission.  The data in AWOTE represent gross earnings and provide an average of earnings in WA.  However, an average of earnings is not the same thing as the earnings of an average person.  There is evidence before us which suggests that since 2005, mining wages have increased by 50 per cent and the average of earnings will undoubtedly be affected by that.  The average of earnings is affected by compositional shifts which can result in fluctuations in earnings growth even though rates of pay have not changed. 

 

52      Consequently we have not been persuaded by UnionsWA’s submission that the setting of the WA minimum wage should be significantly influenced by its past or present relativity to AWOTE.

 

53      UnionsWA acknowledges that at least the WPI should also be considered in order to give a more complete picture.  UnionsWA observes that while nationally the minimum wage has risen over the past decade at about the same rate as the WPI, this cannot be said of the WA minimum wage and WPI in WA.  However, s 50A(3) of the Act requires us to consider a number of matters in reaching our decision.  Whilst the concept of “fairness” must be a consideration by us when considering the system of wages and conditions of employment in WA and wage standards in the context of living standards generally prevailing in the community, it is not given greater weight in the legislation than the other matters which we are obliged to consider.

 

54      The evidence shows the gender pay gap in WA is greater than the gender pay gap nationally.  An issue arises whether the restricted coverage of the order to issue from these proceedings can be effective to address the issue.  The gender pay gap is calculated by reference to all industries in WA, however we do not set a minimum wage which applies across all industries in WA.  The State Wage order can apply only to the small minority of the private sector workforce in WA.  The lack of any measurable reduction in the gender pay gap in WA following the $29.00 per week increase to the minimum wage we ordered in 2008 leads inevitably to the conclusion that the gender pay gap in WA is unlikely to be reduced by any order which can issue from these proceedings: the overriding effect of the FW Act makes it likely that the coverage of the State Wage order is insignificant for this purpose.  There is nothing to suggest that the gender pay gap for the small minority of employees in WA who are covered by the State industrial relations system is significantly different from the gender pay gap for the majority of employees in WA who are covered by the national industrial relations system.

 

55      Further, a significant increase to the WA minimum wage will correspondingly significantly increase the price of labour for WA businesses in the State jurisdiction when, in the absence of a corresponding increase to the national minimum wage, there will be no significant cost increase of the price of labour for WA businesses in the national jurisdiction.  Given that the jurisdiction is determined by reference only to whether or not the business is undertaken by a trading or financial corporation, this is not a result which sits comfortably with the requirement on the Commission in ss 26(1)(a) and (c) of the Act to decide matters according to equity, good conscience and substantial merit, having regard for the interests of the persons immediately concerned whether directly affected or not and, where appropriate, for the interests of the community as a whole.

 

56      Moreover, the evidence before us also establishes that gender pay ratios differ significantly by industry or industry sector.  In particular, in a low pay sector where there is not a lot of difference in the earnings between male and female employees such as accommodation, cafes and restaurants, there is a consequent reduction in the gender pay gap.  In that context, significantly increasing the WA minimum wage with the object of reducing the gender pay gap in WA necessarily will mean that that significant increase will apply to an industry or sector of the State where it is not necessary because the gender pay gap is significantly less than elsewhere.

 

57      We stated in the 2011 State Wage order decision (op cit) at 39 and 40 that the reasons for the gender pay gap in WA are complex and that the scope in State Wage order proceedings for us to address those reasons is limited.  We repeat that conclusion here.

 

58      We accept the evidence that a significant proportion of minimum wage employees is female and correspondingly increases to the minimum wage will be of benefit to female employees.  We recognise that increases to the minimum wage assist in reducing the gender pay gap for those female employees within the State jurisdiction.  Given that the WA minimum wage is higher than the national minimum wage it will, for that reason, be of greater benefit to female employees than will be the national minimum wage. However s 50A(3)(a) as a whole means that these issues also need to be balanced against competing considerations.

 

Section 50A(3)(a)(ii) and (iv) – The need to meet the needs of the low paid; contribute to improved living standards for employees

 

59       In relation to the concept of improving living standards in s 50A(3)(a)(iv) of the Act, CCIWA submits that there is no presumption that changes in living standards as reflected by the CPI or other measures require a significant increase to minimum wages to keep up with, or indeed outpace, inflation.  CCIWA states that increases in the minimum wage influence the viability of businesses employing at minimum wage levels, therefore increases in the minimum wage must not reduce jobs, or have the potential to promote job loss, or inhibit job creation.  The extent of reliance on increases to the State minimum wage to assist low income workers must depend and inter relate with tax transfers, income supplementation and other measures provided by Commonwealth and State governments.  Increases in the minimum wage must not discourage productivity improvement or act as a substitute for productivity bargaining.

 

60      This submission from CCIWA effectively repeats its submission in 2011 and we retain confidence in our decision on that occasion (op cit at 35) when we said that it is difficult to take into consideration the need to meet the needs of the low paid (s 50A(3)(a)(ii)) and the need to contribute to improved living standards for employees (s 50A(3)(a)(iv)) without giving some weight to measures which are available to assess the relative value of the minimum wage over time.  We observe that the Commission has been responsive in the past to the State’s economic performance and to movements in the cost of living and wage rates generally in WA in the context of the considerations in s 50A(3)(a) of the Act.

 

Section 50A(3)(v) – The need to protect employees who may be unable to reach an industrial agreement

 

61       We are not aware of any evidence which would lead to the conclusion that the increases to the WA minimum wage since s 50A commenced in 2006 have discouraged bargaining in the workplace.  We consider that the adjustment arising from this decision will protect employees who may be unable to reach an industrial agreement.  The Hon Minister acknowledges that lower paid workers are generally less likely to engage in workplace bargaining which means they have a greater reliance on adjustments to minimum and award wages.  This corresponds to the WACOSS submission that there is an inability to bargain in the community services sector.  Further, many small business employers are less likely to engage in wage bargaining than better resourced businesses and as such, small business employers apply minimum or award wage determinations.  We respectfully agree with those conclusions.

 

Section 50A(3)(vii) – The need to provide equal remuneration for men and women for work of equal or comparable value

 

62       The Hon Minister submits that women are more likely than men to work in award-reliant industries and occupations, and are therefore more likely to have their pay determined by award or minimum wages.  Minimum wage decisions are one of a range of factors which influence overall patterns of female labour market participation.

 

63       CCIWA submits that pay equity principles are supported by CCIWA and employers generally.  Whilst reiterating its support for pay equity principles, CCIWA points out that the equal remuneration criterion should not be given disproportional weight - it is only one factor to be taken into consideration.  Award classifications and wages that do not reflect contemporary workplace circumstances or work value, however, present major and confronting difficulties, none of which can be rectified through increases to the State minimum wage.  There are more appropriate and targeted measures to address substantiated paid differentials or inequities including that award classifications and wages are appropriately benchmarked and reflect work value. 

 

64       There is some overlap between this consideration and the issue of pay equity which we have considered earlier in this decision.  We consider that an increase to the minimum wage has the potential to assist in providing equal remuneration for men and women for work of equal or comparable value.

 

Section 50A(3)(b) – The state of the economy of Western Australia

 

65       In relation to the State’s economic performance for the financial year 2011/12 and for 2012/13, Ms Lomas referred to three measures of aggregate economic activity: State Final Demand, Gross State Product, and Gross State Income.  Ms Lomas’s evidence was that considering these measures of economic activity, and a number of other indicators, and notwithstanding the risks to any forecast, the expectations for the State economy for the remainder of this year and for next year are very positive.

 

66      The major economic forecasts for WA are set out in the following table as shown in table 2 of the Minister’s submission in reply:

 

Table Two: Economic Forecasts

Major Economic Aggregates, Annual growth (%)

Western Australia

Indicator

2010-11

 Actual

2011-12 Estimated Actual

2012-13 Budget Estimate

2013-14 Forward Estimate

2014-15 Forward Estimate

Gross State Product (GSP)

3.5

6.0

4.75

4.75

4.25

Gross State Income (GSI)

20.0

6.25

2.5

3.5

1.5

Employment

3.2

2.5

2.75

2.5

2.25

Unemployment Rate

4.4

4.25

4.25

4.25

4.0

Wage Price Index

3.9

4.25

4.5

4.5

4.5

Consumer Price Index(a)

2.8

2.5

3.5

3.25

3.25

(a) Includes 0.7 percentage points In 2012-13 and 0.2 percentage points In 2015-16, to reflect the price level effects of the

Commonwealth Government's Carbon Tax.

 

67       We note particularly that Gross State Product is forecast to grow by 4.75% in 2012/13, following an increase of 6% in 2011/12.  Demand for labour is expected to remain strong, with the State’s economy effectively at full employment.  Inflation is expected to be its lowest in 2011/12 and then peak next year with the introduction of the Carbon Tax, after which it will average around 3.25%.  Wages growth is expected to be quite strong, exceeding 4% across the years.  Population growth will peak this year at 2.5% and is expected to remain above the long run average.  There has been stronger than expected growth in agricultural exports and household consumption over the past year as households display considerably less conservative spending behaviour.

 

68       Ms Lomas gave evidence regarding the national economy.  She also gave evidence regarding the outlook for the global economy and identified the risks to the Department of Treasury forecasts which could potentially lead to changes.  These are principally the sovereign debt concerns in the Eurozone, a slowing of economic growth in China and the dependence of the global economy on oil prices with instability in the Middle East.

 

69       CCIWA also provides economic information regarding the performance of the WA and national economies.  CCIWA points out notwithstanding the current economic growth forecasts, there remain significant challenges for business including:

 

  • Low productivity growth, the need to foster entrepreneurial innovation and creativity;
  • Implications of the ageing population and skills shortages;
  • Labour force inflexibilities;
  • Constraints imposed by inadequate infrastructure; and
  • Regulatory burdens.

 

70      CCIWA also submits that difficulties in forecasting the effects of the minimum wage decision are ever present and are exacerbated by the expectation that global economic growth would weaken, with growth in China easing and Europe expecting to enter a shallow recession in the first half of the year.  Further, uncertainty remains about the actual effects of the Commonwealth Carbon Tax commencing on 1 July 2012.

 

71      Overall, the evidence before us, particularly from the Department of Treasury, is that according to current economic indicators the WA economy is robust and projections are for continued growth even though the recovery from the GFC has been uneven and some sectors such as housing continue to face suppressed conditions.

 

72      We conclude that the strength of the WA economy will support an increase to the WA minimum wage.  The evidence before us permits the conclusion that increases to the WA minimum wage from our annual decisions since s 50A was introduced into the Act in 2006 have had little, if any, effect on the level of employment, inflation and productivity in WA.  We conclude that the increase to the minimum wage which arises from this decision will have little effect on the level of employment, inflation and productivity in WA.  There is no evidence that past increases to the WA minimum wage had adversely affected profitability or had an impact on business failures.

 

Section 50A(3)(c) - The state of the national economy

 

73       The WA economy can be contrasted with the rest of the country, particularly in the categories of unemployment and average earnings which are strongly influenced by the resource sector.  The CPI for Perth to the March quarter 2012 increased by 1.9% compared to 1.6% nationally.  The LPI for the same period showed an annual change for WA of 4.5% compared to the national annual change of 3.5%.

 

74       WA has significantly higher AWE than the rest of Australia due in large part to the higher earnings in the resource sector.  Treasury forecasts that the overall demand for labour is likely to grow in the next year.  There is evidence that nationally, labour productivity fell 0.3% over the course of 2010/11, meanwhile WA’s labour productivity climbed by 1.5% in 2010/11 following a 6.4% surge in the previous year.

 

75       In general terms, the stronger performance of the WA economy compared to the national economy leads to the conclusion that a minimum wage in WA which is higher that the national minimum wage is supportable.  This general conclusion is tempered by the conclusion we have stated above, that is, the minimum wage we set in this State Wage order is not a minimum wage for the whole of WA but only for a small minority of WA employers and employees.  The extent to which those employers are able to sustain a minimum wage which is higher than the national minimum wage is a separate consideration.

 

Section 50A(3)(d) – The capacity of employers as a whole to bear the costs of increased wages, salaries, allowances and other remuneration

 

76       The Hon Minister submits that the overall healthy economic picture supports the view that the WA labour market has the capacity to maintain real wages.  The only data available to measure profitability for businesses in WA is the Gross Operating Surplus (GOS) plus Gross Mixed Income (GMI) measure recorded by the ABS.  It should be used with caution but, as a whole, WA businesses in the year to June 2011 increased overall profitability by 23.9%.

 

77       Only the rental, hiring and real estate services sector recorded a reduction in profitability.  Overall the industries with more than 50% of employees within the State industrial relations jurisdiction, and which also rely heavily on awards for wage setting, recorded overall profitability.  It is nevertheless imperative, in the Hon Minister’s submission, not to arrest positive trends with wage increases that employers, particularly small businesses, cannot afford.

 

78       CCIWA refers to the Hon Minister’s reference to the GOS and GMI measure.  CCIWA suggests that such data tells us very little about capacity to pay of the majority of industries affected by State wage increases.  The data is viewed as potentially deceptive given the patchwork nature of the economy.  CCIWA views this profitability measure with considerable caution especially in relation to the capacity to pay micro businesses.

 

79       UnionsWA submits that the number of businesses operating in each of the industries most likely to be impacted by a State minimum wage increase has grown by 3.8% between the financial year 2007/08 and the financial year 2010/11 and the indications are that having a high State minimum wage in WA has not hurt the growth of these business numbers.

 

80       UnionsWA acknowledges the difficulties faced by small businesses in the hospitality industry, particularly in the area of attracting and retaining quality staff to provide competitive service.  UnionsWA submits that the “compensation of employees” share of total factor income in WA’s accommodation and food services industry in WA was lower than the equivalent nationally in June 2011.

 

81       We conclude that the strength of the WA economy supports the conclusion that employers as a whole have the capacity to bear the cost of the minimum wage arising from our decision.  We consider it is important to state that the size of any increase to the WA minimum wage which would follow from this conclusion will take into account the evidence and submissions about those industry sectors identified by CCIWA and AHAWA which are not experiencing strong conditions and which are likely to have employers and employees in the WA industrial relations jurisdiction.

 

Section 50A(3)(e) – The need to ensure that the Western Australian award framework represents a system of fair wages and conditions of employment

 

82      We have consistently applied the increase to the WA minimum wage to wage rates in awards.  Indeed, there has not been an occasion when we have been asked not to do so.  We consider that to do so maintains the currency of award wages and assists in ensuring that the WA award framework represents a system of fair wages.  We do not overlook the submission from CCIWA that many of the awards may not reflect the coverage resulting from the operation of Commonwealth legislation, and that they are not modern awards, however they are issues separate from these proceedings under s 50A of the Act and are not a reason why the wage rates in awards should not be increased in these proceedings.

 

Section 50A(3)(f) – Relevant decisions of other industrial courts and tribunals

 

83      We noted in the 2011 State Wage order decision (op cit at 46) that the minimum wages of other States are now not applicable to private sector employment in those States.  We note for the record that the WA minimum wage which, since 2006, has been higher that the corresponding national minimum wage, is not the highest minimum wage in Australia, with the Queensland minimum wage of $610.20 (2011 QIRComm 147, 31 August 2011) being higher than the WA minimum wage.

 

84      However, more significantly, since the referral to the Commonwealth of the other States’ remaining private sector industrial relations coverage, the minimum wage that is applicable to employers and employees in the unincorporated private sector in those States, and which we do consider to be more relevant to these proceedings, is the minimum wage applicable to employers and their employees in WA who are covered by the national system.

 

85      It is more relevant because the WA minimum wage will apply to the same types of private sector businesses in WA, and in the same industry sectors with the same gender pay gap or the same relative position regarding average earnings, as are subject to the national minimum wage.  As we have observed, the point of difference between those businesses in the national system and those in the WA system is not a difference in productivity or profitability, but only a difference in the employer’s business structure.  Until the Commonwealth Government’s use of the corporations power in 2006 to legislate employment conditions for employees of constitutional corporations, the business structure of an employer was largely an irrelevant consideration in the setting of employment conditions.  Other than for the question of jurisdiction in WA, it remains largely an irrelevant consideration for our purposes.

 

86      Fairness, in the context of setting the WA minimum wage, necessarily includes a comparison with the national minimum wage which is applicable to comparable employees elsewhere in the State.  The observation that an employee’s judgment of whether or not their wage is fair by reference to what is being received by others, applies equally to the minimum wage received by the others who are the significant majority of low paid employees in WA, and in each other State.

 

87       Although s 284(1) of the FW Act does not require consideration of the state of the WA economy and the WA award framework which we are obliged by s 50A(3)(b) and (e) of the Act to take into consideration, we consider it significant that there is a considerable overlap between the considerations of the FWA Minimum Wage Panel and the considerations we are obliged by s 50A(3) to take into account.  We refer to s 284(1) of the FW Act which obliges FWA:

 

  • To establish and maintain a safety net of fair minimum wages.  This broadly corresponds to the obligation on this Commission under ss 50A(3)(a)(i) and (iii) of the Act.
  • In the context of the performance and competitiveness of the national economy, to take into account productivity, inflation and employment growth.  This broadly corresponds to the obligation on this Commission in s 50A(3)(b) to take into account productivity, inflation and employment growth with respect to the WA economy, and in s 50A(3)(c) consideration of the state of the national economy. 
  • To take into account relative living standards and the needs of the low paid.  This broadly corresponds to the obligation on this Commission in s 50A(3)(a)(ii).
  • To take into account the principle of equal remuneration for work of equal or comparable value.  This corresponds to the obligation on this Commission in s 50A(3)(a)(vii).

 

88       Further, 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.

 

89       On this occasion, the Annual Wage Review 2011-12 has considered submissions and issues which have also been raised in these proceedings, namely:

  • That average earnings have risen faster than individual rates;
  • The relative position of the minimum wage and average earnings;
  • Financial stress and the role of the tax/transfer system;
  • Specific characteristics of award-reliant industries;
  • Conditions in retail and tourism sectors;
  • Pay equity.

 

90       For all of these reasons, we consider the Annual Wage Review 2011-12, which increased the national minimum wage by 2.9% from $589.30 to $606.40 per week, an increase of $17.10 per week, to be a relevant and significant consideration. 

 

91      Although the Annual Wage Review 2011-12 is relevant and significant, the Act does not provide simply for it to be adopted by us in the absence of good reason not to do so.  We are obliged by s 50A(3) of the Act to set a minimum wage for WA by having regard primarily to the conditions of the WA economy and labour market.  This is in contrast to the national considerations which the FWA Minimum Wage Panel is obliged to take into account.  For that reason, and also that since 2006 –

 

  • S 50A(3) of the Act and the corresponding national legislative provisions have not been the same; and
  • there have been differences in the timing of both national and WA minimum wage decisions,

 

the WA minimum wage has been higher than the national minimum wage.  On this occasion, as was the case in the 2011 State Wage order case, the AHAWA’s primary submission that there should be no increase to the WA minimum wage in order to allow the WA minimum wage to align with the national minimum wage was not supported by any other person.  We consider that s 50A(3) of the Act would not permit the Commission to “freeze” the WA minimum wage merely to achieve such an alignment. 

 

92       Rather, we have an obligation to ensure “that Western Australians have a system of fair wages and conditions of employment” and to “provide fair wage standards in the context of living standards generally prevailing in the community”.  This suggests that it would not be fair to those low paid employees in the WA industrial relations system, even though they are a small minority, who are dependent on the minimum wage, not to receive an increase when one is otherwise appropriate.  For as long as s 50A(3) retains its present wording, the WA minimum wage will require to be set by an exercise of independent judgment according to equity, good conscience and the substantial merits of the case having regard to the s 50A(3)  considerations.

 

93       In the context of s 50A(3), we consider the approach of the FWA Minimum Wage Panel to its setting of the national minimum wage to be of assistance.  The resulting 2.9% increase to the national minimum wage followed FWA’s consideration of some of the issues raised in these proceedings.  This includes the issue of the role of the tax transfer system and the introduction of the Carbon Tax.  It also includes the issue raised by UnionsWA in relation to the gender pay gap and the reliance of women on the minimum wage, where FWA’s conclusion at [231] was that given women are disproportionately represented amongst the low paid, an increase in minimum wages is likely to promote pay equity, although moderate changes in award rates of pay would be expected to have only a small effect on the overall differences in earnings between males and females.  This accords with our own conclusion.

 

94       The evidence of Professor Preston, and the submissions of UnionsWA however shows that although the national minimum wage has risen over the past decade at about the same rate as the WPI, that cannot be said of the WA minimum wage.  We have earlier not accepted UnionsWA’s reliance on AWOTE as an appropriate measure for this purpose.  However, we do consider that it is appropriate to refer to the WPI movement in WA, taking into account that WPI also includes some measure of mining and resource wages which are not representative of wages generally.  We note also the WACOSS material regarding financial stress in low income families being experienced in WA.

 

95       We also note the extent to which the FWA Minimum Wage Panel has considered specific award-reliant industries, retail: accommodation and food. FWA specifically addressed retail, manufacturing and tourism which are expected to be adversely affected by the ongoing global uncertainty, high Australian dollar, consumer caution and changes in expenditure patterns. At [98], FWA stated:

 

In assessing the available economic information, we have looked at developments in the economy as a whole and paid particular attention to developments in the award-reliant industries. It is in these industries where the minimum wage has greatest application and where the greatest practical impact of minimum wage increases might be felt. In specifically addressing information concerning the award-reliant industries, we remain aware of the fact that changes in award rates of pay continue to have a substantial influence beyond those industries.

 

96       In our case too we look at the WA economy as a whole and pay particular attention to the information before us regarding those industry sectors which are likely to employ minimum wage dependent employees. 

 

CONCLUSION

 

97       Our past decisions setting the WA minimum wage have paid particular regard to the State of the WA economy.  We are obliged to do so by s 50A(3)(b) of the Act, however we point out that we have been responsive in the past to the State’s economic performance and to movements in the cost of living and wage rates generally.  Where we have been able to do so, we have given a real increase to the minimum wage, considering that to do so gives effect to the obligation to meet the needs of the low paid and contribute to improved living standards for employees.

 

98       Where the state of the WA economy has been such that we have not been able to do so, we have at least been able to maintain its real value relative to CPI in WA, even though that measure is criticised by UnionsWA and WACOSS.

 

99       There is no evidence that these decisions have been inappropriate to the circumstances.

 

100    In 2011, our considerations under s 50A(3) of the Act resulted in an increase which was much the same as the increase awarded in the FWA Annual Wage Review 2010-11.  On that occasion, the relative positions of the WA economy and of the national economy were similar.  That is not the case on this occasion.  As the evidence from the WA Department of Treasury shows, conditions in WA are stronger than they are nationally, WA’s annual CPI is greater than the national, its unemployment rate is lower, male and female participation rates are higher, its youth unemployment rate is lower, and its WPI and AWE are higher, than nationally.

 

101    Additionally, over the last decade the WA minimum wage has not kept pace with the WPI, in contrast to the national minimum wage which has risen over the last decade at about the same rate as the WPI.

 

102    In the context of the current strength of the WA economy, and taking into consideration the need -

  • “to meet the needs of the low paid”;
  • “to contribute to improved living standards for employees”;
  • “to protect employees who may be unable to reach an industrial agreement”; and
  • “to provide equal remuneration for men and women for work of equal or comparable value”,

we consider an increase to the WA minimum wage greater than awarded nationally is warranted.

 

103    As to the size of the increase, we are obliged to balance many competing and almost irreconcilable issues.  We conclude, as the Annual Wage Review 2011-12 has concluded for the national minimum wage, that we too should give a real increase to the WA minimum wage.  For that reason, we consider the increase suggested by CCIWA, and in turn, the increase submitted by the Hon Minister to maintain the real value of the WA minimum wage, on this occasion do not satisfy the considerations in s 50A(3) of the Act.

 

104    Correspondingly, we consider UnionsWA’s submission that the setting of the WA minimum wage should be significantly influenced by its past or present relativity to AWOTE not to be appropriate.

 

105    The lower rate of increase in the WA minimum wage relative to the WPI is explainable by reference to the higher wages in the mining and resource sectors in WA.  In both sets of data, there is an influence of high wages in the mining and resource sectors which we do not see as representative of earnings growth generally.

 

106   Further, the patchy growth in some award-reliant sectors of the WA economy and difficulties being experienced in some sectors, including hospitality and tourism, shows a limited capacity to afford to pay an increase which significantly seeks to address the lower level of the minimum wage in WA relative to wage rates in WA.  And of course, any increase to the WA minimum wage widens the gap between it and the national minimum wage.

 

107   Although we consider an increase to the WA minimum wage greater than awarded nationally is warranted, we are acutely conscious that we must balance considerations of the capacity of employers to pay with the need for the WA minimum wage to meet the needs of the low paid, provide fair wage standards and indeed to contribute to improved living standards for employees.  We have decided to increase the WA minimum wage by 3.4%, representing an increase of $20.60 per week to the WA minimum wage.  This is 0.5%, or $3.50 more than that awarded in the Annual Wage Review 2011-12.

 

108   This is an increase less than the increase in wage rates generally in WA, and we think it will not affect the WA economy or have a measurable effect on the level of employment, inflation and productivity in WA. Although s 50A(3)(a)(i) and (iii) in particular suggest that it might be desirable to further remedy the decline of the relative position of the WA minimum wage to wages generally in the community, any greater increase we might have awarded has been conditioned by the evidence of some award-reliant industry sectors in WA which are not performing as well as some other sectors.

 

109   The adjustment will increase the gap between the WA and national minimum wages which has existed since the 2011 State Wage order, although only marginally.

 

Date of Operation

 

110    The presumption in s 50A(5) of the Act is 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 2012.

 

Consequent Variations to Awards

 

111    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.

 

112    On this occasion, we consider award rates of wages should be varied by 3.4% because we appreciate that our past flat-dollar increases inevitably will have had the effect of compressing relativities between wage rates in awards.  We also appreciate, as submitted by CCIWA, that many awards do require the attention of the parties to those awards if they are to be modernised, however, in the meantime, employers and employees in award-reliant industries in WA are still bound by them.  We have taken into account that the application of the percentage increase to awards gives a greater increase to those on higher award rates than those on the minimum wage, and that the corresponding cost to employers.  The increase is able to be absorbed into any overaward payment such that it 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.

 

The Minimum Weekly Rate of Pay Applicable to Apprentices and Trainees

 

113   Section 50A(3)(a)(vi) requires the Commission to take into consideration the need to encourage ongoing skills development.  The Hon Minister submits that in the past seven years, the overall number of apprenticeships commenced has risen and the percentage of people over the age of 21 commencing apprenticeships has increased significantly, and that previous State minimum wage increases for apprentices and trainees have not had a significant impact on the number of apprenticeships and traineeships being undertaken in WA.

 

114   We note the submissions of UnionsWA and WACOSS that on this occasion we should award the full increase to apprentices and trainees.  However in the absence of evidence from which we could reach a conclusion regarding the effect of doing so on the need to encourage ongoing skills development, we are not persuaded to do so.  The Hon Minister refers to the FWA review of modern awards which will include apprentice, trainee and junior rates; the outcome of the review as it relates to apprentice and trainee wages and conditions may be a matter which can be taken into account in our consideration of s 50A(3)(a)(vi) in the next State Wage order case.

 

Industry/Skill Levels

 

115    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 2012 State Wage order to issue.

 

THE STATE WAGE PRINCIPLES

 

116   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 2012 to issue remains unchanged from the Statement of Principles July 2011 apart from the necessary and consequential amendments to Principle 9.

 

MINUTE OF PROPOSED GENERAL ORDER

 

117   A minute of proposed General Order now issues.  The Commission should be advised by 2.00pm on 13 June 2012 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 14 June 2012.