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

Document Type: Decision

Matter Number: APPL 1/2014

Matter Description: 2014 State Wage Order pursuant to section 50A of the Act

Industry:

Jurisdiction: Commission in Court Session

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

Delivery Date: 13 May 2014

Result: 2014 State Wage Order issued

Citation: 2014 WAIRC 00471

WAIG Reference: 94 WAIG 641

DOC | 145kB
2014 WAIRC 00471
2014 STATE WAGE ORDER PURSUANT TO SECTION 50A OF THE ACT
WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

CITATION : 2014 WAIRC 00471

CORAM
: CHIEF COMMISSIONER A R BEECH
ACTING SENIOR COMMISSIONER P E SCOTT
COMMISSIONER S J KENNER
COMMISSIONER S M MAYMAN

HEARD
:
WEDNESDAY, 28 MAY 2014, FRIDAY, 6 JUNE 2014

DELIVERED : WEDNESDAY, 11 JUNE 2014

FILE NO. : APPL 1 OF 2014

BETWEEN
:
COMMISSION'S OWN MOTION
Applicant

AND

(NOT APPLICABLE)
Respondent

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 41, s 50A, Minimum Conditions of Employment Act 1993 s 12, Fair Work Act 2009 (Cth) s 284
Result : 2014 State Wage Order issued
REPRESENTATION:



Ms  M Williams and with her Ms C Purcell on behalf of the Hon Minister for Commerce

Mr P Moss and with him Ms D MeadAdams on behalf of the Chamber of Commerce and Industry of WA (Inc)

Mr S Dane and with him Dr T Dymond on behalf of UnionsWA


Case(s) referred to in reasons:
FAIR WORK COMMISSION ANNUAL WAGE REVIEW 2013-14 [2014] FWCFB 3500
State Wage Order Decision [2013] WAIRC 00347; (2013) 93 WAIG 467
State Wage Order Decision [2012] WAIRC 00346; (2012) 92 WAIG 557
State Wage Order Decision [2011] WAIRC 00399; (2011) 91 WAIG 1008

Reasons for Decision

INTRODUCTION
1 This is the unanimous decision of the Commission in Court Session. Section 50A of the Industrial Relations Act 1979 (the Act) requires the Commission before 1 July in each year, of its own motion, to make a General Order –
- setting the minimum weekly rate of pay applicable under s 12 of the Minimum Conditions of Employment Act 1993 to employees who have reached 21 years of age and who are not apprentices;
- setting the minimum weekly rates of pay applicable to apprentices;
- adjusting rates of wages paid under awards;
- varying each award affected by the General Order to ensure that the award is consistent with the order;
- making other consequential changes to specified awards if appropriate, and
- setting out a statement of principles to be applied and followed in relation to the exercise of jurisdiction under the Act to set the wages, salaries, allowances or other remuneration of employees or the prices to be paid in respect of their employment.
2 The Commission gave public notice of the hearing in local newspapers on 19, 23 and 28 April 2014, and on the Commission’s website and in the WA Industrial Gazette on 23 April 2014 ((2014) 94 WAIG 401) inviting submissions from interested persons. We set out below an outline of the submissions received.
The Hon Minister for Commerce
3 The Minister submits that the WA Government is committed to promoting flexible, fair and productive employment practices that serve the interests of employees, employers and the State as a whole. WA has experienced strong economic growth underpinned by high levels of business investment in recent years. However, as outlined by the Department of Treasury, business investment levels and employment growth have moderated significantly as a number of large resource projects move into the less labourintensive operational phase. Leading indicators of labour demand suggest employment growth in the State will remain subdued in the nearterm. It is therefore imperative that any adjustment to the State minimum and award rates of pay does not damage the viability of business enterprises or the willingness of employers to create new jobs. The Minister supports taking a balanced approach which accords appropriate significance to the impact of minimum wage and award rate adjustments on both employers and employees and any adjustment should be weighed against the capacity of employers, particularly in small business, to pay for wage increases.
4 The Minister notes that employers will soon bear the cost of another increase to compulsory employer superannuation contributions following the increase implemented in July 2013 which will be a considerable impost on employers, particularly those in small business. This year’s minimum wage increase should also be considered in the context of employer capacity to sustain a rise in minimum and award wages. Improving the performance and competitiveness of the State’s economy and supporting employers to sustain and create employment is critical to meeting the social and economic aims of the criteria set out in s 50A(3) of the Act.
5 In the Minister's view, current economic circumstances warrant a cautious approach to the State Wage Order.  While it is important that living standards for minimum and award wage earners are maintained, it is also crucial that the ability of employers to sustain and create jobs is not impeded by higher wage increases.  For these reasons, the Minister argues that an increase to State minimum and award wages in line with estimated actual CPI for the current financial year is the most responsible and appropriate course of action at the current time.  The most recent Treasury estimates of growth in the CPI for Perth, as published in the 201415 State Budget, would preserve the spending power of employees receiving minimum and award rates whilst ensuring that wage costs for employers remain sustainable. That Treasury estimate is 3 per cent, which would result in the current minimum wage of $645.90 per week being increased by $19.40 to $665.30 per week, with corresponding increases to award rates of pay for other classifications of employees. The Minister notes that the available information suggests that a relatively small proportion of Western Australian employees are reliant upon minimum and award rates. As such, it is unlikely that an increase to minimum and award wages in line with CPI would have a detrimental effect on employment, inflation or the economy. The State Wage Order does influence outcomes across the spectrum of pay setting arrangements by providing a floor for negotiation of individual or collective agreements in the State jurisdiction.
Chamber of Commerce and Industry of Western Australia (Inc)
6 CCIWA states that WA is the only State to which two different minimum rates of pay still apply within the private sector. The current difference between the State and national minimum wages is $23.70 per week which creates an uneven playing field for business. State based employers, who are often small businesses with a limited ability to absorb increased costs, have to pay higher award rates of pay compared to their often larger national system competitor.
7 Whilst growth within the WA economy has been strong in recent years, this is no longer the current economic climate, with the WA economy slowing in line with the national economy, particularly in comparison with recent years. Growth in the cost of living as measured by the CPI for Perth is largely in line with the national average. Consequently, CCIWA submits that the Commission should look to equalise the State minimum wage with the national minimum wage over a number of years. CCIWA proposes that this occur by taking into account the 2014 national minimum wage increase and then decreasing the percentage increase awarded by 1 per cent which, over a period of three to five years, will close the gap between the State and national minimum wages, subject to the discretion of the Commission.
8 CCIWA advocates for an increase to the State minimum wage which is lower than the rate of inflation on the basis that the current economic climate provides a strong argument for such an adjustment and also it is important to ensure that minimum wages do not act as a barrier for the unemployed. CCIWA also points to the high level of unemployment currently seen across both WA and Australia and states that the high cost of employing people contributes to levels of employment.
9 CCIWA believes that it is appropriate for there to be a restrained approach to adjusting State minimum wage and relevant award rates of pay to take into account the decline in the State economy.  This is particularly important for the small businesses that make up the majority of the State system who have not necessarily benefited from the resource boom.
10 In arriving at its position CCIWA carefully weighed the different statutory considerations and particularly the state of the WA economy and relevant national and international economic factors, particular industry sectors and businesses most affected by minimum wage decisions, the tax transfer system and superannuation impacts, and changes in the cost of living.
11 CCIWA also submits that any increases granted beyond that awarded through the national minimum wage review will have a very limited impact on the overall living standards of WA employees. Hence higher wages growth in the State system will have a negative impact upon the largely small businesses in the State system without a corresponding benefit to the overall standard of living of WA employees.
12 CCIWA states that the capacity of employers to increase wages is affected by the superannuation guarantee contribution rate increases. Superannuation is a direct cost to employers which affects an employer’s ability to increase an employee’s base rate of pay.
13 It is CCIWA’s opinion that the majority of employees who are covered by the State system would be covered by an award, and that employees in the retail and hospitality sector are largely award reliant. The introduction of seven day trading and the opportunity to trade until 9 pm on weekdays means that penalty rates now form part of many employers’ standard operating hours. However, the market in which small business currently operates has also changed with online competitors not having the same restrictions and being able to maintain a lower cost base. Therefore an increase to the base rate of pay of the award is compounded by the effect of penalty rates. Penalty rates have a large impact on the profitability of small business over weekend and public holiday periods.
14 CCIWA states that although growth in the WA economy remains strong, not everyone has benefitted from the resources boom, including employers, with a number of industries facing significant challenges. The current economic environment remains a challenge for WA businesses. The ability for a small employer to meet the cost of doing business is a key determinant in its survival. CCIWA submits that there is a lower rate of business survival in WA compared to Australia as a whole and increasing costs on business will further increase the pressure on business in WA in an already volatile period for business. Business is less confident about its future growth.
15 CCIWA points to the cost burden on business from the WA State Budget, with increases in electricity prices, water expenses, land tax and land fill levy directly impacting on employers.
16 CCIWA states that Australia currently has the highest minimum rate of pay compared to any other OECD member country. This has implications for the competitiveness of Australian industry within a global economy. CCIWA urges consideration to be given to a combination of both minimum wages and the tax transfer system in determining whether the current minimum wage provides an effective safety net.
17 CCIWA tendered the affidavit of Kendall Scott, Manager of the Employee Relations Advice Centre. Ms Scott attached call figures from the CCIWA Employee Relations Advice Centre reflecting calls recorded specifically in relation to redundancy from the period May 2012 to April 2013 and May 2013 to April 2014. Her evidence showed that between May 2012 and April to 2013 CCIWA received 1,621 calls with respect to redundancies, equating to 5.51 per cent of total calls; between May 2013 and April 2014 there were 2,226 calls, equating to 6.93 per cent of total calls.  This is showing a worrying increase in the number of employers who are considering the need to make employees redundant. CCIWA attached copies of the March Quarter 2014 Outlook publication.
UnionsWA
18 UnionsWA contends that the Commission should make a substantial real wage increase for award reliant workers, saying that it is essential to address the ever widening gap between low paid workers and the rest of the workforce in WA. UnionsWA advocates for a wage increase of 5.5 per cent which will increase the minimum wage by $35.52 per week. This increase will address the needs of the low paid, improve and maintain living standards, protect employees who are unable to bargain, and aims to address the gender pay gap.
19 UnionsWA states WA remains a highly unequal State in terms of income distribution between individuals, between households and between genders. In order to address these gaps, any increase to the State minimum wage should constitute a real increase.
20 UnionsWA contends that WA’s minimum wage should reflect its overall strong economic performance; it should also play its part in redressing the growing inequalities in WA society and while it is by no means the only response to these growing inequalities, other responses will not be adequate without a sufficient minimum wage increase.
21 UnionsWA argues that for low paid workers some costs have more impact than others and thus the State minimum wage should be increased higher than the movement in the all groups CPI. Reference was made to the recent State and Commonwealth budgets increasing key essential items well above CPI levels. UnionsWA refers to the April 2014 ‘State of the States’ economic performance report produced by CommSec which found that WA remains Australia’s best performing economy, leading the way on retail trade and is second strongest on economic growth. UnionsWA says that economic performance, alongside continuing strong population growth, supports its contention that business can afford such an increase.
22 UnionsWA points to the WA, and national, minimum wages deteriorating as a percentage of average weekly ordinary time earnings with WA doing worse than Australia as a whole despite having a higher minimum wage in absolute terms. The most recent release of the household income and income distribution survey for 201112 shows that WA remains more unequal than Australia as a whole. WA’s boom times have not ‘trickled down’ to the lowest income households. Minimum wage rates complement, rather than compete with, the tax transfer system. The work of Professor Peter Whiteford of the Social Policy Research Centre argues that the combination of Australia’s relatively high minimum wages and targeted family benefits also reduces child poverty among working families by more than any other country.
23 UnionsWA asks for a percentage increase rather than a flat increase as part of its general concern to maintain the real value of award rates.
24 Referring to the difference between the WA and national minimum wages, UnionsWA observes there is no evidence that the difference has been detrimental to WA’s economy. To set the WA minimum wage on par with the national minimum wage would mean that s 50A(3)(b), which requires the Commission to take into consideration the state of WA’s economy and the likely effect of its decision on the economy, and in particular on the level of employment, inflation and productivity in WA, would have little work to do and would be inconsistent with the functions given to the Commission.
25 UnionsWA says that WA’s unemployment rate of 4.9 per cent in April 2014 is the lowest of all states and this indicates that the WA economy has not suffered from having a State minimum wage that is higher than the national minimum wage. There is also no evidence that WA’s productivity has suffered from having a higher minimum wage.
26 UnionsWA provides data to support the contention that vulnerable groups of employees, being female, aged between 15 to 24 years and working part time, are over represented within the private sector of the State industrial relations system. Having a majority female workforce in these sections of the State industrial relations system is particularly significant given that WA’s gender earnings gap of 23.6 per cent continues to be far higher than the national gap of 17.1 per cent.
27 UnionsWA submits that WA’s labour productivity growth has been driven significantly by the rental hiring and real estate services industry, one of the industries most likely to include unincorporated business. UnionsWA provided a table showing that for these industries, labour productivity growth over the past five years has been to varying degrees positive in comparison with their national counterparts, and this is important as it substantially covers a period of time in which the WA State minimum wage has been higher than the national minimum wage. There is no evidence that the State minimum wage has been a burden for these industries.
28 UnionsWA noted that the number of businesses operating in the industries most likely to be impacted by the State minimum wage increased 3.4 per cent between 20078 to June 2012 with retail trade the only industry with business numbers that went backwards during this period; however, figures for retail turnover since 2008 appear to show that that industry continued to expand in WA during this time. UnionsWA concludes that neither the WA economy, nor those industries most likely to be impacted by the State minimum wage, have been adversely impacted by having a State minimum wage higher than the national minimum wage; indeed, they demonstrate the WA economy’s ability to sustain a higher State minimum wage. UnionsWA contends, however, that whilst the State economy is performing well there are serious concerns about how many Western Australians are actually sharing in the benefits of that performance. It refers to the most recent WA State Budget as adding to cost of living pressures. It joins with the WACOSS submission pointing out that dramatic increases in the cost of gas, electricity and water in recent years has meant that low income households who spend a greater portion of their income on utility bills are feeling the pressure of the rising cost of utilities more than other Western Australians.
29 UnionsWA urges the Commission to again conclude that growth in the State minimum wage is not keeping pace with the growth in wages generally in WA whether measured according to the WPI or to AWOTE. WA is the most unequal State in the country in terms of income distribution. The Commission should not award a lower increase to the minimum wage than it otherwise would by taking into account the impact of the superannuation guarantee rate increase. UnionsWA attached a copy of the ACTU submission to the Annual Wage Review 2013-2014, Fair Work Commission Research Report 7/2013 entitled Minimum wages and their role in the process and incentives to bargain and the ACTU Budget Briefing May 2014.
Australian Hotels Association (Western Australia)
30 AHAWA submits that the Commission should consider the wage increase to be awarded should take into account the superannuation guarantee increase of 0.25 per cent on 1 July 2013 as an added cost to small business that will put further strain on the costtowage ratio. It submits that the hospitality sector has been significantly impacted by the introduction of the carbon tax and that the profitability of hospitality businesses has been impacted up to 11.8 per cent due to the carbon tax alone. Utility expenses have also increased at a rate higher than expected because of the carbon tax and other general increases.
31 Trading conditions for hospitality businesses, which are generally small businesses and family owned and are more likely to be located in regional areas, are affected due to a downturn in the economy, a reduction in tourism and the impact of the high Australian dollar, all of which have not assisted small business in regional and rural WA.
32 AHAWA submits that the national and State minimum wage should be on an equivalent level and therefore the State minimum wage should remain stagnant, or alternatively transition this difference over the next two years until the federal minimum wage attains the same level as the State minimum wage.
33 AHAWA submits that if there is to be a wage increase, it should be a 1 per cent, or $6.46 per week, wage increase.
34 AHAWA notes that historically, hospitality is an award based industry and employees within it are more likely to be employed under the award system than in most other industries nationwide. Therefore, any adjustment to the minimum wage has a significantly greater impact on the hospitality and tourism sectors than other industries where there is less exposure to the award system.
35 AHAWA submits that the hospitality industry has experienced difficult conditions over recent periods, mainly because it operates on a 24 hour/7 day basis. It is highly labour intensive and as such is impacted by wage increases which affect not only the base rate but penalty rates as well. AHAWA members have wages costs some 65 per cent higher than the average Australian business because of these higher labour costs.
36 AHAWA also points to the increasing cost in operating a small business in hospitality as a result of the State Budget increases, including electricity, land tax, and water rates.
37 Businesses in regional areas will be continually exposed to significant increases in operational costs and worsening labour shortages in the foreseeable future. Regional businesses are generally small and primarily sole traders or small partnerships. These businesses often have few staff with the responsibility falling on proprietors to work longer hours.
Western Australian Council of Social Services Inc
38 WACOSS relies on s 50A(3)(a) of the Act to submit that an increase of $35 to the State minimum wage is consistent with the need to maintain a fair system of wages and conditions in the current WA context. It refers to the range of issues facing minimum wage workers in WA which were addressed by it in its 2013 State Wage Case submission, and carefully assesses the changing economic and workplace environment for these workers. Its current submission aims to provide the Commission with the best available data upon which to base its deliberations in the best interests not only of minimum wage workers and their families but also of the wider WA community. WACOSS considers minimum wages to be a vital means of protecting low income workers from poverty, the benefits of which are felt by minimum wage workers, their families, their children and society at large. It is important for the wages earned by full time minimum wage employees to be sufficient to ensure they have the capacity to meet their basic living costs while living with dignity and respect.
39 The primary focus of WACOSS’s claim is the increasing cost of living pressures in WA. Ultimately, WACOSS’s conclusion is that the living standards of the lowest paid members of our community have not improved in any significant way in the last 12 months and the current minimum wage does not currently reflect a fair wage in the context of living standards generally prevailing in the community.
40 WACOSS developed its submissions in relation particularly to income inequality in WA, noting that lower levels of income inequality deliver stronger economic growth. Lower levels of inequality also deliver better social outcomes. WACOSS remains concerned about the rate at which the gap between the State minimum wage rate and median pay levels continues to grow in WA: between November 2003 and November 2013, AWOTE increased by 79 per cent (from $905.50 to $1,620) but the State minimum wage only increased 44 per cent.
41 WACOSS submits that WA remains in a relatively strong economic position, however WACOSS’s analysis shows that the cost of essential services and items including housing, utilities and food has increased at a much faster rate than nonessential or discretionary and luxury items such as cars, computers and overseas holidays. The increase in the cost of essential items is hardest felt by low income households who spend a much higher proportion of their household income on essentials. It is the low income individuals and households in WA who are really struggling with the increases to the essential costs of living and are, or are at risk of, slipping into poverty. These are the people for whom increases to the rate of the State minimum wage really count.
42 WACOSS submits the lack of affordable housing and the ongoing increases in the cost of housing are the most pressing issues facing low income households in WA. High rental costs continue to place great pressure on low and medium income households and it is imperative that the State minimum wage be increased at a rate which reflects the rising cost of living in WA over recent years. WACOSS acknowledges that the urgent need to address the lack of affordable housing is outside the remit of the Commission, however, the high cost of housing must remain a key consideration for the Commission when regard is had to the need to provide fair wage standards in the context of living standards generally in the community. WACOSS also refers to utilities, food and transportation cost of living pressures which caused particular stress for households in WA.
43 WACOSS also submits that the level of the State minimum wage is significant to the WA community sector because community sector service providers play an important role in supporting vulnerable members of the WA community, including many who struggle to survive on low incomes due to the rising cost of living. For a long time the community sector in WA has been under resourced and community sector employees have been significantly underpaid. Minimum wage increases are significant for many workers within the female-employee dominated community sector. WACOSS also points to the equal remuneration orders by which the Commission amended the WA Social and Community Services Award and the Crisis Assistance and Supported Housing Award submitting that in the event of a weak minimum wage increase, community sector workers will effectively be losing some of the pay equity remedy they have just been awarded.
44 WACOSS also notes that WA consistently records the largest gender pay gap of any State in Australia, a gap much larger than the national average. WACOSS submits that it is broadly accepted that in Australia women are more likely than men to be reliant on the minimum wage. Significant contributors to this are the disproportionate responsibility women have for unpaid work, including the care of elderly people, children and adults with disabilities, and grandchildren, and their lower pay relative to men. WACOSS says that the most recent figures from November 2013 show that the male ordinary time earnings are 30.9 per cent higher than those of females in WA, compared with a 20.6 per cent difference nationally. Therefore, the Commission’s decision relating to the setting of the State minimum wage is of particular significance to female workers in WA.
45 Further, WACOSS argues that by increasing the minimum wage the resilience and self-sufficiency of low paid workers would be improved to the benefit of the national welfare system and the community more broadly. WACOSS believes that given the decreasing relevance of junior wages in WA, the full rate of the increase to the minimum wage must be applied to both junior and adult wage rates, and not a proportion of the minimum wage increase. WACOSS attached the Cost of Living Report 2013.
Mr Archie W Marshall
46 In a written submission, Mr Marshall submitted that the minimum basic wage for persons over 18 years of age should be abolished. Mr Marshall believes that it is a disadvantage to many marginal people who become unemployable as a result. All people should be paid what they are worth and that is to a large extent up to them. The best employees will get the best jobs and vice versa to the advantage of both employers and employees. Mr Marshall states that high wages fixed by regulation prevent many new business ventures starting at all and thus denying the employment of marginal people, earning taxable income and providing service to the customers of those businesses. He believes that a minimum wage for persons over 18 creates a sense of entitlement and does nothing to help create a work ethic in young people. Young people who cannot find work due to the high wages required will tend to do little to improve their chances of getting a job and will likely turn to crime and other antisocial activities due to boredom and a sense of hopelessness. Mr Marshall set out some of his personal history and submits that while he has no academic qualifications, his extensive experience entitles him to an opinion which is to abandon the regulated wage system and release the potential of all people to better themselves.
The Statutory Criteria
47 The Act obliges the Commission to set a minimum wage. Section 50A(1)(a) states:
(1) The Commission shall before 1 July in each year, of its own motion make a General Order (the State Wage order) —
(a) setting —
(i) the minimum weekly rate of pay applicable under section 12 of the Minimum Conditions of Employment Act to employees who have reached 21 years of age and who are not apprentices;
(ii) the minimum weekly rate or rates of pay applicable under section 14 of the MCE Act to apprentices.
48 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.
49 The operation of the Fair Work Act 2009 (Cth) (the FW Act) means that the order which will issue from this decision will apply only to employers in the private sector, and local governments in WA, which are not trading or financial corporations and the public sector.
Mr Marshall’s Submission
50 The Commission is obliged to apply the law as it stands and, relevantly, the law is that the Commission must set a minimum wage each year for persons over 18 years of age. Whether or not the minimum basic wage for persons over 18 years of age should be abolished is a matter for the WA Parliament. Even if the WA minimum wage was abolished, there would still be a national minimum wage applying in WA to employees employed by employers covered by the national industrial relations system. Mr Marshall’s submission therefore cannot be considered by the Commission.
Coverage of the State Wage Order
51 Each of the persons appearing made some submissions on the accuracy of the data available which allows the estimate to be made of the numbers of employers and employees covered by the WA industrial relations system. The differences between the submissions are matters of detail and no person submitted that it was necessary for the Commission to decide those differences for the purpose of this matter.
52 In our 2013 decision ([2013] WAIRC 00347; (2013) 93 WAIG 467) we referred to the conclusion of the late Professor David Plowman, from the Graduate School of Management at the University of Western Australia It is with sadness that we note Professor Plowman died in December 2013. At the request of the Commission in 2006 when s 50A of the Act was passed Professor Plowman prepared a report on the effects of past statutory minimum wage adjustments on the number of persons employed, the number of unemployed persons seeking work, job vacancies, average weekly ordinary earnings, the level of inflation, the profit share, and the level of investment in Western Australia. We note here that his report has been recognised by the Commission, and persons appearing, in successive State Wage Cases as providing a definitive and accurate analysis.
in 2006 that about 2.2 per cent of the WA workforce would be directly affected by the State minimum wage adjustment and possibly 4 per cent of the WA workforce could be affected in differing degrees by the adjustments to other wages to maintain established relativities. There has not been a change in the available data which suggests his conclusion needs to be revisited here. We see no reason not to continue to regard his conclusion as valid for the purpose of our considerations.
CONSIDERATION
53 We have set out above a summary of the respective submissions. UnionsWA points to the WA and national minimum wages as a proportion of AWOTE to show that WA is doing worse than Australia as a whole despite having a higher minimum wage in absolute terms. It develops a submission based upon measures of inequality from ABS data and argues strongly that an increase to the WA minimum wage arrests the relative decline of the minimum wage compared to wages generally and to assist other measures which go to inequality. The submissions particularly from WACOSS, and also UnionsWA, go to relative measures of the increase in the cost of essential services and items including housing, utilities and food compared with nonessential or discretionary and luxury items and that low income households spend a much higher proportion of their household income on essentials.
54 While low income households do not necessarily equate with employees who receive the WA minimum wage, the submissions present another context in which to set the minimum wage. They provide relevant information to the Commission which is helpful when endeavouring to measure the needs of the low paid, subject to an understanding of what the data measures.
55 The need 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, raise the concept of fairness. Fairness is a relative concept. The WA minimum wage has been set by properly taking into account all of the considerations in s 50A(3)(a) of the Act. The level of the WA minimum wage may be assessed by comparing it with a range of economic indicators.
56 The WA minimum wage has steadily increased in real terms since the 2006 amendment to the Act which required the Commission to set a minimum wage for WA taking into account a number of considerations. The increase to the WA minimum wage over time has been greater than the increase in the Perth CPI although not as great as the increase in wages generally as measured by the WPI, and significantly less than wages as measured by the AWOTE index (Minister’s written submission p 16 Figure 3).
57 However, our past decisions have made clear our view that the proper application of s 50A(3)(a) of the Act means that we do not, and cannot, set the WA minimum wage by reference to one particular measure. All of the measures, as they are encompassed within the considerations we are obliged to take into account, are relevant to our decision. These considerations, as reflected particularly in the respective submissions of UnionsWA and WACOSS on the one hand, and CCIWA and AHAWA on the other, necessarily require balancing by us.
58 In that context, UnionsWA and WACOSS emphasise the decline in the WA minimum wage relative to wage movements in WA as measured by the WPI and the AWOTE. We have endeavoured to point out that the need in s 50A(3)(a) of the Act for the Commission 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 means this is a relevant, but not a determinative, consideration. Necessarily, the considerations in s 50A(3)(a) will not all point to the one result - there is likely to be tension between the economic, social and other considerations which the Commission is obliged to take into account. It is not resolved by adopting a rule such as increases to the WA minimum wage must be equal to wage movements in WA as measured by the WPI or the AWOTE. The Act requires the Commission to take into account each of the relevant statutory considerations.
59 A submission common to the positions of CCIWA and AHAWA, that we should order a lesser increase than might otherwise be warranted so that the WA minimum wage aligns over time with the national minimum wage, attracts a similar comment. In essence, the submission repeats their respective submissions in 2013. We repeat our conclusion in the 2013 State Wage Order decision that not to increase the WA minimum wage in order to allow it to align with the national minimum wage if the considerations in s 50A(3) of the Act otherwise warrant an increase would be inconsistent with the requirements imposed on the Commission by s 50A(3).
60 Between 1980, when the Act was proclaimed, and 2006 the Commission was required to consider the then National Wage Decision whenever it was made and give effect to it unless there were good reasons not to do so (s 51). That nexus with the national wage decision was broken in 2006 with the demise of national wage decisions. The Act was amended in 2006 in s 50A to require the Commission to set a minimum wage for WA each year to operate from 1 July. At the time of that amendment, there was no national wage decision as such and s 50A does not contemplate what is now the Annual Wage Review of the Fair Work Commission (FWC). For this reason s 50A(3) does not refer to the level of the national minimum wage as a matter to be taken into consideration when setting the WA minimum wage.
61 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. If the Parliament wanted the WA minimum wage to be set by reference to the level of the national minimum wage this should be reflected in the Act. The requirements imposed on the Commission by the Act to take into account the need to meet the needs of the low paid, and to contribute to improved living standards for employees, are requirements which make it difficult, in our view, for a submission that the WA minimum wage be allowed to stagnate, or reduce, because it is higher than the level of the national minimum wage, to be able to be validly considered. No person appearing sought to persuade us that our view of the proper application of s 50A(3)(a) is incorrect.
62 Section 50A(3)(f) requires the Commission to take into consideration relevant decisions of other courts and tribunals and we have used this as a means for us to take the Annual Wage Review of the Fair Work Commission into consideration, as we do so later in these reasons.
63 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, makes the national minimum wage relevant. There will be those who assess it as too low, as in UnionsWA’s submission, and those who assess it as too high; however for these proceedings, we recognise that it applies in WA and nationally.
64 In particular, it applies to businesses in WA, and their employees, in industry sectors, and in small businesses, which are trading corporations. The corporate structure of a business provides no basis for minimum wage setting purposes to validly differentiate between such national system employers and their employees in WA, and those businesses and their employees who are in the WA industrial relations system. If fairness is a relative concept then in fairness we must take into account and give due weight to the minimum wage that the majority of minimum wage employees receive in WA, and indeed throughout the country including by employees of sole traders, partnerships and unincorporated businesses in States other than WA. It should be noted, that those employees in WA who are reliant on the national minimum wage bear the same cost of living increases as those employees who are reliant on the WA minimum wage.
65 The regular setting of the WA minimum wage according to the proper application of s 50A(3)(a) of the Act has resulted in the WA minimum wage being higher than the national minimum wage because of differences between the relevant Commonwealth legislation and the Act, particularly since 2006. This requires us to consider the state of the economy of WA which has at times been quite different from the state of the national economy.
66 In the absence of any legislative requirement in the Act to take the level of the national minimum wage into consideration in setting the WA minimum wage, it is likely that there will be a gap between the two. Moreover, the requirement in s 50(3)(a)(ii) of the Act for us to take into account the need to contribute to improved living standards for employees, and the performance of the WA economy to that of the performance of the national economy, suggests it is likely that the WA minimum wage will remain higher than the national minimum wage over time.
67 However if the size of the gap between the two can be demonstrated as actually causing employers who are in the WA industrial relations system a practical, and not just a theoretical, detriment with the potential to affect any of the considerations in s 50A(3), s 50A(3)(g) together with s 26(1)(a) of the Act, it may permit this to be taken into account by the Commission in setting the WA minimum wage each year.
68 We do not have the evidence before us on this occasion to show that this point has been reached.
69 To return to the submissions which are before us, it must follow that when considering, as we are obliged to, the capacity of employers as a whole to bear costs of increased wages we accept that employers in the WA system who pay the minimum wage are paying a higher minimum wage than employers in WA in the national system, and nationally, who pay the minimum wage. The weight to be attached to the difference between the two minimum wages in WA is not clear. The full difference is apparent for employers who pay the minimum wage although it is not clearly established by the submissions before us what the significance of it is for employers in the WA system who pay above the minimum wage.
70 We recognise the need for wage increases resulting from the State Wage Orders not to act as a disincentive for employers and employees to pursue productivity improvements at the enterprise level. CCIWA submits that the opportunity for enterprise bargaining in small business is limited under the WA industrial relations system, and the impact of the State Wage Order on this is not able to be determined. Further, increasing minimum rates of pay to actual rates will reduce the opportunity for employers to pay over-award payments to individual employees to reflect individual levels of performance.
71 We recognise that the registration of an industrial agreement under s 41 of the Act requires a union to be party to the agreement to be registered and that union presence in small business is relatively insignificant. However we noted in the 2013 State Wage Order decision the evidence of Professor Barrett that there may be different responses of small business employers to an increase in the minimum wage including some opportunity for informal arrangements to be discussed. We note that we have not been provided with any evidence which would lead to the conclusion that the increases to the WA minimum wage since s 50A commenced in 2006 have discouraged productivity improvements at the workplace level. There will be employees who are unable to bargain for increased wages and we consider that the adjustment arising from this decision will protect those employees.
Encouraging Ongoing Skills Development
72 Section 50A(3)(a)(vi) requires the Commission to take into consideration the need to encourage ongoing skills development. We here set out table 10 in the Minister’s submission:
Apprenticeships commenced in Western Australia
January 2006 – December 2013
Year
Under 21 years
21 years and over
Total
Proportion of 21 years and over
2006
6,949
1,968
8,917
22.1%
2007
7,026
2,377
9,403
25.3%
2008
6,581
2,198
8,779
25.0%
2009
5,294
1,817
7,111
25.6%
2010
7,647
2,708
10,355
26.2%
2011
6,907
2,925
9,832
29.7%
2012
6,456
3,220
9,676
33.3%
2013
5,923
2,780
8,703
31.9%
73 We note that there has been a decline in the number of apprenticeships commenced in WA since 2010. In submissions, the Minister stated the categories of building and construction, automotive and metals, and manufacturing and services trades have all experienced a decrease in the number of apprentices in training since March 2008, although the metals and automotive trades has had a modest recovery since 2010, and there was a relatively strong take-up of electrical apprentices was due to the demand for electrical tradespeople during the construction phase of major projects in the resources sector.
74 There has been a decline in the number of traineeships commenced in WA in 2013 compared to previous years.
75 There is no submission that it is previous State minimum wage increases for apprentices and trainees resulting from State Wage Orders which have discouraged their uptake in WA. We note also that there has been no adjustment in WA awards to the standard relativity in State awards between the trade rate and the rates prescribed for first and second year apprentices.
76 We note the evidence (Minister submission p 31 Figure 4) showing that the average unemployment rate for 15-24 year olds looking for full time work has increased. The Commission should be mindful of the potential for minimum wage increases to affect employment opportunities for young people. WACOSS draws attention to the concept of junior rates and sees them as an anachronism, saying that a wage should be set according to competence rather than age. We see that as an issue going beyond the effect of a minimum wage adjustment and we do not accede to the WACOSS submission that junior wages receive the full amount of any increase to be awarded. We will continue to apply any increase proportionately to junior employees.
Providing Equal Remuneration for Men and Women for Work of Equal or Comparable Value
77 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. The distinction between this consideration and the gender pay gap has been recognised in previous State wage proceedings. We have recognised that in the private sector in Australia, women are much more likely than men to be dependent on the award rate and therefore annual increases to the minimum wage. The gender pay gap in WA has been estimated at 23.6 per cent, higher than the national average of 17.1 per cent. CCIWA submits that the gender pay gap has fallen by 2.8 per cent in the past 12 months.
78 We stated in the 2011 State Wage Order decision 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. We nevertheless 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.
79 Section 50A(3)(a) as a whole means that the requirement on us in s 50A(3)(a)(vii) of the Act, the need to ensure equal remuneration for men and women for work of equal or comparable value, also needs to be balanced with the other considerations in s 50A(3). In principle, an increase to the minimum wage will assist, at least to some extent, in reducing the gender pay gap for those female employees within the State jurisdiction.
The State of the Economy of Western Australia
80 We are obliged to take into consideration the state of the economy of WA. We express our thanks to the WA Department of Treasury for providing its analysis of WA’s economy, and in the context of the national and international economies. The evidence given by Mr David Christmas, Director of the Economic Revenue and Forecasting Division is seen by the Commission as of significant importance given the requirement in s 50A to have consideration to the state of the WA economy and, to the extent that it is relevant, the state of the national economy. This assists us in our consideration of the corresponding analyses of the WA and national economies in the submissions before us.
81 In summary, growth of the State's domestic economy is expected to moderate from very strong growth rates in recent years, including 5 per cent in 2012/13, to fairly flat growth in State Final Demand in the next two years, and a gradual increase to 2.2 per cent by the end of the budget period.  Gross State Product (GSP) is also expected to moderate but not to the same extent and then to strengthen in the next two years.
82 Employment growth is forecast to ease in 2013/14 and remain subdued over the following years, reflecting the transition from a labourintensive investment phase of growth to a less labourintensive production phase of growth. Wages growth as measured by WA Wage Price Index is forecast to remain below average, reflecting greater capacity in the labour market.  The rate of inflation is expected to pick up in 2013 and 2014 but remain broadly within the Reserve Bank target of 2 to 3 per cent. Dwelling investment is one of the strong growth areas of the economy with dwelling investment increasing by 10.6 per cent in the calendar year of 2013, and forecasted to grow by 14 per cent in the financial year 2013/14.  Household consumption is the single largest component of GSP and is projected to grow by 3 per cent in 2013/14, increasing to 3.75 per cent per annum by the end of the budget period. The available information suggests that business investment peaked in 2012/13 and is likely to taper off in coming years, although the level of investment is expected to remain high. 
83 We reproduce the table of major economic aggregates for WA referred to by Mr Christmas.
WESTERN AUSTRALIAN FORECASTS
Major Economic Aggregates, Annual Growth (a) (%)

2012-13
Actual
2013-14
Estimated Actual
2014-15
Budget Estimate
2015-16
Forward Estimate
2016-17
Forward Estimate
2017-18
Forward Estimate
State Final Demand (SFD)
5.0
0.25
0.0
0.75
1.5
2.0
Gross State Product (GSP)
5.1
3.75
2.75
3.0
4.25
5.0
Employment
3.5
1.5
1.5
1.75
1.75
2.0
Unemployment rate (b)
4.4
5.0
5.5
5.25
5.0
4.75
Wage price index (WPI)
4.0
3.25
3.25
3.5
3.5
3.75
Consumer price index (CPI)
2.3
3.0
2.75
2.5
2.5
2.5
(a) Annual average growth unless otherwise stated
(b) Average rate over the year
Source: 2014-15 Budget, Budget Paper No.3
84 With respect to labour productivity in WA, the evidence before us from both Mr Christmas and also from the UnionsWA submission is that productivity is not easy to measure at the State level. We acknowledge UnionsWA’s submission that in the year to 2013 WA’s labour productivity increased by 2.9 per cent. However, we think prudence should be exercised in attempting to reach any conclusions on the material before us.
85 The Commission has been responsive in the past to the State’s economic performance as providing a context 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. Overall, the evidence before us, particularly from the Department of Treasury, but also the information from CCIWA and UnionsWA, is that according to current economic indicators the WA economy has softened but continues to grow, however not as rapidly as it has grown in the past two years. Both inflation as measured by the CPI for Perth, and wages growth as measured by WPI, have slowed.
The State of the National Economy
86 Mr Christmas’s evidence was that the Commonwealth Treasury projects the Australian economy will grow by 2.75 per cent in 2013/14 and 2.5 per cent in 2014/15. These rates are below the average growth of 2.9 per cent over the past decade and the Commonwealth Treasury is also expecting growth to dip and then strengthen as the economy transitions from resource-investment led growth to broader sources of growth over the coming years. The Commonwealth also expects softer employment growth in that transition period and is forecasting the unemployment rate to peak at 6.25 per cent in 2014 and 2015/16. Consumer prices are projected to grow by 3.25 per cent this year before softening to around 2.5 per cent in the following years. 
The Capacity of Employers as a Whole to Bear Costs of Increased Wages
87 The Minister’s submission showed that profits for WA businesses as a whole decreased by $8.66 billion in the year to June 2013, a decline in overall profitability of 6.5 per cent. A number of industries in WA experienced an overall improvement in profitability over that period however an overall decline was recorded in half of all industry sectors. Nevertheless all sectors as measured by the Gross Operating Surplus plus Gross Mixed Income measure produced by the ABS, remain profitable. We accept that this data reveals little about the profitability or otherwise of individual businesses.
88 We take into account that the superannuation contribution rate will increase a further 0.25 per cent in July 2014 which represents a direct cost to employers and which affects their capacity to increase wages. There is some evidence, particularly from CCIWA, to suggest that small business finds the economic environment challenging.
89 The evidence from the CCIWA Employee Relations Advice Centre indicates a rising trend in enquiries regarding redundancies although we consider the trend is not necessarily directly related to increases in the WA minimum or award wages.
90 We take into consideration the AHAWA submission that the highly labour intensive hospitality industry has experienced difficult conditions over recent periods, mainly because it operates on a 24 hour/7 day basis and to the increasing cost of operating a small business in hospitality as a result of the State Budget increases, including electricity, land tax, landfill levy and water rates. There are additional costs too for businesses in regional areas.
91 Both CCIWA and AHAWA included in their respective submissions that the effect of any increase to the minimum wage is compounded by the effect of penalty rates. We recognise the effect of penalty rates, and other award provisions, on overall costs to employers but do not consider them to be an issue directly relevant to the setting of the minimum wage.
92 When considering the setting of the WA minimum wage, the Commission 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 who are award-reliant. The Minister’s submission suggests that employment trends in WA’s award-reliant industries differ widely. Of the two biggest employing award reliant industries, there appears to be a growing availability of work in the accommodation and food services sector, while employment in the retail trade sector, which employs nearly 10 per cent of WA's workforce, has declined by 1.4 per cent on average over the last year.
The Fair Work Commission Annual Wage Review 2013-2014
93 Section 50A(3)(f) requires the Commission to take into consideration relevant decisions of other courts and tribunals. No person sought to persuade us that we were incorrect in our conclusion in the 2012 and 2103 State Wage Order decision that the Annual Wage Review of the FWC is a relevant and significant consideration.
94 In the 2013 State Wage Order decision at 69 we said:
We noted in our 2012 decision ([2012] WAIRC 00346 at [90]; (2012) 92 WAIG 557 at 566) that 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 substantial overlap between the considerations of FWC’s Minimum Wage Panel and the considerations we are obliged by s 50A(3) to take into account. Further, the timing of the Annual Wage Review and the date of operation of the minimum wage to be set by FWC is contemporaneous with the obligations on this Commission under s 50A of the Act.
95 We consider the FWC Annual Wage Review 2013-14, which increased the national minimum wage by 3.0 per cent from $622.20 to $640.90 per week from 1 July 2014, an increase of $18.70 per week, to be a relevant and significant consideration.
CONCLUSIONS
96 The obligation imposed on the Commission requires a balancing of many differing considerations. The respective submissions before us each urge us to give preference, or greater weight, to their position to the exclusion of those who disagree with them.
97 The evidence is that the WA economy has grown above average for the last two years, however growth has moderated. Even though the WA economy is slowing, WA growth rates are at or above national rates. Growth is expected to be similar to, or stronger than, growth through much of the 1990s. Unemployment in WA has increased although it is still less than for Australia as a whole. While consumer spending increased in 2013, spending on hotels, cafes and restaurants, and recreation and culture, both dropped slightly.
98 We recognise, and have recognised previously, that increasing the WA minimum wage assists in meeting the needs of the low paid, contributes to improved living standards for employees, provides a wage increase to those employees who may be unable to reach an industrial agreement and assists in a limited way to lessen the gender pay gap in WA. The increase of 5.5 per cent to the WA minimum wage urged upon us by UnionsWA and WACOSS is supported by well-argued submissions.
99 However, that is not all we are obliged to consider. We also recognise, as we stated in the 2013 State Wage Order decision at 77, that the assessment of whether the minimum wage, and award wages generally, ensure WA has a system of fair wages and conditions of employment, and the need to provide fair wage standards in the context of living standards generally prevailing in the community, includes taking account of the national minimum wage operating in WA and the extent to which the WA minimum wage is higher.
100 The information and submissions from CCIWA, and in relation to the hospitality sector AHAWA, assist us to take into consideration the capacity of employers as a whole to bear the cost of increased wages, salaries, allowances and other remuneration. While we set a minimum wage to apply in WA, in practice it is a minimum wage applicable to certain sectors of the economy only and many employers directly affected are small businesses.
101 The extra cost to employers from 1 July 2014 from the increase to compulsory employee contributions to superannuation is an employment cost which we take into account and which moderates the increase we would otherwise award, as was the case in the FWC Annual Wage Review 2013-14 when it awarded a 3 per cent, or $18.40 per week, increase to the national minimum wage. This, together with the overall softening of the WA economy, in terms of projected economic growth, combined with lower wages outcomes as measured by the WPI, increasing unemployment, and the additional cost impost on business of the increase in the superannuation contribution rate from 1 July this year, cause us to adopt a cautious approach to any adjustment to the State minimum wage on this occasion. We consider the comment of the Minister of the importance of improving the performance and competitiveness of the WA economy to be timely. We need to be confident about the effect of the increase to be awarded upon the WA economy and, in particular, on the level of employment, inflation and productivity in WA.
102 An increase to the WA minimum wage should not have negative consequences for either employees or employers. We refer again to the conclusions of Professor Plowman in relation to the operation of the WA minimum wage in the period 1990 to 2005 which suggests that there has been little minimum wage effect on the economy as a whole, and weak effects on those sectors with higher levels of low paid employees. We consider the Minister’s view that an increase to the WA minimum and award wages in line with estimated actual CPI for the current financial year of 3 per cent, which would result in the current minimum wage of $645.90 per week being increased by $19.40 to $665.30 per week has much to commend it.  It is a view not inconsistent with the conclusion of the Fair Work Commission when it adjusted the national minimum wage by 3 per cent.
103 A 3 per cent increase to the WA minimum wage is slightly less than the actual movement of the Perth CPI to the March quarter 2014. We again favour a flat-dollar increase rather than a percentage increase because:-
(a) We consider a flat increase targets those employees who are on the minimum wage or slightly above it; and
(b) A flat increase has the potential to result in a lower overall cost to an employer compared to a percentage adjustment because the increase is not compounded when applied to award rates of pay.
104 We have decided the proper application of all of the considerations in s 50A(3)(a) of the Act warrants an increase of $20.00 per week to the WA minimum wage.
105 Even with weaker conditions in the State’s economy and labour market the aggregate impact of the proposed increase is likely to be small. The number of employees directly affected is estimated at 2.2 per cent of the WA workforce and is thus relatively small. It is within the range of adjustments to the WA minimum wage which we have awarded in previous years and we are confident it will not have a negative effect on the WA economy and on the level of employment, inflation and productivity in WA. Even taking into account the extra cost to employers from 1 July 2014 from the increase to compulsory employee contributions to superannuation, we consider it to be within the capacity to pay of employers as a whole.
106 There was no direct evidence of issues having arisen from any compression of award relativities from past flat-dollar increases. We observe that it is open to any party to seek to vary an award to address issues which arise from any compression of relativities.
107 We have referred earlier to our concern that s 50A(3) of the Act means it is likely that the WA minimum wage will remain higher than the national minimum wage over time. This decision inevitably results in the gap between the WA minimum wage and the national minimum wage increasing by $1.30 to $25.00 per week. For the reasons we have given earlier in this decision, we anticipate this being comprehensively addressed by those appearing in the 2015 State Wage Case.
108 The WA minimum wage to operate from the first pay period on or after 1 July 2014 will be $665.90 per week for adult employees.
109 We are obliged by s 50A(4) to ensure, to the extent possible, that there is consistency and equity in relation to the variation of awards. No person appearing submitted that we should not correspondingly adjust rates of wages paid under awards. Given that position, and the role of awards in providing fair wage standards, we will adjust award wages by $20.00 per week from the first pay period on or after 1 July 2014. The increase will apply only to employees who are paid the award wage; any wage paid over the award wage is able to be used to offset the increase.
The Minimum Weekly Rate of Pay Applicable to Apprentices and Trainees
110 No person appearing submitted that we should vary the manner in which the increase to the WA minimum wage is usually applied to apprentices or trainees. We propose to apply the increase in this State Wage Order to adult apprentices, other apprentices and to trainees in accordance with the usual practice of the Commission.
Industry/Skill Levels
111 As in previous State Wage Order proceedings, the Minister has provided the Commission with 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 2014 State Wage order to issue.
THE STATE WAGE PRINCIPLES
112 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. No person suggested that any change is required to be made to the Statement of Principles set out in the 2013 State Wage Order. We set out the Statement of Principles July 2014 to issue. They are unchanged from the Statement of Principles July 2013 apart from the necessary and consequential amendments to Principle 9.
MINUTE OF PROPOSED GENERAL ORDER
113 A minute of proposed General Order now issues. The Commission should be advised by 2.00 pm on Friday, 13 June 2014 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 10.00 am on Monday, 16 June 2014.
_________________________
Commission's Own Motion -v- (Not applicable)

2014 STATE WAGE ORDER PURSUANT TO SECTION 50A OF THE ACT

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

 

CITATION : 2014 WAIRC 00471

 

CORAM

: Chief Commissioner A R Beech

 Acting Senior Commissioner P E Scott

 Commissioner S J Kenner

 Commissioner S M Mayman

 

HEARD

:

Wednesday, 28 May 2014, Friday, 6 June 2014

 

DELIVERED : Wednesday, 11 June 2014

 

FILE NO. : APPL 1 OF 2014

 

BETWEEN

:

Commission's Own Motion

Applicant

 

AND

 

(Not applicable)

Respondent

 

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 1979 s 26, s 41, s 50A, Minimum Conditions of Employment Act 1993 s 12, Fair Work Act 2009 (Cth) s 284     

Result : 2014 State Wage Order issued

Representation:

 


 

Ms  M Williams and with her Ms C Purcell on behalf of the Hon Minister for Commerce

 

Mr P Moss and with him Ms D MeadAdams on behalf of the Chamber of Commerce and Industry of WA (Inc)

 

Mr S Dane and with him Dr T Dymond on behalf of UnionsWA

 

 

Case(s) referred to in reasons:

Fair Work Commission Annual Wage Review 2013-14 [2014] FWCFB 3500

State Wage Order Decision [2013] WAIRC 00347; (2013) 93 WAIG 467

State Wage Order Decision [2012] WAIRC 00346; (2012) 92 WAIG 557

State Wage Order Decision [2011] WAIRC 00399; (2011) 91 WAIG 1008


Reasons for Decision

 

INTRODUCTION

1          This is the unanimous decision of the Commission in Court Session.  Section 50A of the Industrial Relations Act 1979 (the Act) requires the Commission before 1 July in each year, of its own motion, to make a General Order –

-          setting the minimum weekly rate of pay applicable under s 12 of the Minimum Conditions of Employment Act 1993 to employees who have reached 21 years of age and who are not apprentices;

-          setting the minimum weekly rates of pay applicable to apprentices;

-          adjusting rates of wages paid under awards;

-          varying each award affected by the General Order to ensure that the award is consistent with the order;

-          making other consequential changes to specified awards if appropriate, and

-          setting out a statement of principles to be applied and followed in relation to the exercise of jurisdiction under the Act to set the wages, salaries, allowances or other remuneration of employees or the prices to be paid in respect of their employment. 

2          The Commission gave public notice of the hearing in local newspapers on 19, 23 and 28 April 2014, and on the Commission’s website and in the WA Industrial Gazette on 23 April 2014 ((2014) 94 WAIG 401) inviting submissions from interested persons.  We set out below an outline of the submissions received.

The Hon Minister for Commerce

3          The Minister submits that the WA Government is committed to promoting flexible, fair and productive employment practices that serve the interests of employees, employers and the State as a whole.  WA has experienced strong economic growth underpinned by high levels of business investment in recent years.  However, as outlined by the Department of Treasury, business investment levels and employment growth have moderated significantly as a number of large resource projects move into the less labourintensive operational phase.  Leading indicators of labour demand suggest employment growth in the State will remain subdued in the nearterm.  It is therefore imperative that any adjustment to the State minimum and award rates of pay does not damage the viability of business enterprises or the willingness of employers to create new jobs.  The Minister supports taking a balanced approach which accords appropriate significance to the impact of minimum wage and award rate adjustments on both employers and employees and any adjustment should be weighed against the capacity of employers, particularly in small business, to pay for wage increases. 

4          The Minister notes that employers will soon bear the cost of another increase to compulsory employer superannuation contributions following the increase implemented in July 2013 which will be a considerable impost on employers, particularly those in small business.  This year’s minimum wage increase should also be considered in the context of employer capacity to sustain a rise in minimum and award wages.  Improving the performance and competitiveness of the State’s economy and supporting employers to sustain and create employment is critical to meeting the social and economic aims of the criteria set out in s 50A(3) of the Act. 

5          In the Minister's view, current economic circumstances warrant a cautious approach to the State Wage Order.  While it is important that living standards for minimum and award wage earners are maintained, it is also crucial that the ability of employers to sustain and create jobs is not impeded by higher wage increases.  For these reasons, the Minister argues that an increase to State minimum and award wages in line with estimated actual CPI for the current financial year is the most responsible and appropriate course of action at the current time.  The most recent Treasury estimates of growth in the CPI for Perth, as published in the 201415 State Budget, would preserve the spending power of employees receiving minimum and award rates whilst ensuring that wage costs for employers remain sustainable.  That Treasury estimate is 3 per cent, which would result in the current minimum wage of $645.90 per week being increased by $19.40 to $665.30 per week, with corresponding increases to award rates of pay for other classifications of employees.  The Minister notes that the available information suggests that a relatively small proportion of Western Australian employees are reliant upon minimum and award rates.  As such, it is unlikely that an increase to minimum and award wages in line with CPI would have a detrimental effect on employment, inflation or the economy.  The State Wage Order does influence outcomes across the spectrum of pay setting arrangements by providing a floor for negotiation of individual or collective agreements in the State jurisdiction.

Chamber of Commerce and Industry of Western Australia (Inc)

6          CCIWA states that WA is the only State to which two different minimum rates of pay still apply within the private sector.  The current difference between the State and national minimum wages is $23.70 per week which creates an uneven playing field for business.  State based employers, who are often small businesses with a limited ability to absorb increased costs, have to pay higher award rates of pay compared to their often larger national system competitor.

7          Whilst growth within the WA economy has been strong in recent years, this is no longer the current economic climate, with the WA economy slowing in line with the national economy, particularly in comparison with recent years.  Growth in the cost of living as measured by the CPI for Perth is largely in line with the national average.  Consequently, CCIWA submits that the Commission should look to equalise the State minimum wage with the national minimum wage over a number of years.  CCIWA proposes that this occur by taking into account the 2014 national minimum wage increase and then decreasing the percentage increase awarded by 1 per cent which, over a period of three to five years, will close the gap between the State and national minimum wages, subject to the discretion of the Commission. 

8          CCIWA advocates for an increase to the State minimum wage which is lower than the rate of inflation on the basis that the current economic climate provides a strong argument for such an adjustment and also it is important to ensure that minimum wages do not act as a barrier for the unemployed.  CCIWA also points to the high level of unemployment currently seen across both WA and Australia and states that the high cost of employing people contributes to levels of employment. 

9          CCIWA believes that it is appropriate for there to be a restrained approach to adjusting State minimum wage and relevant award rates of pay to take into account the decline in the State economy.  This is particularly important for the small businesses that make up the majority of the State system who have not necessarily benefited from the resource boom.

10       In arriving at its position CCIWA carefully weighed the different statutory considerations and particularly the state of the WA economy and relevant national and international economic factors, particular industry sectors and businesses most affected by minimum wage decisions, the tax transfer system and superannuation impacts, and changes in the cost of living. 

11       CCIWA also submits that any increases granted beyond that awarded through the national minimum wage review will have a very limited impact on the overall living standards of WA employees.  Hence higher wages growth in the State system will have a negative impact upon the largely small businesses in the State system without a corresponding benefit to the overall standard of living of WA employees. 

12       CCIWA states that the capacity of employers to increase wages is affected by the superannuation guarantee contribution rate increases.  Superannuation is a direct cost to employers which affects an employer’s ability to increase an employee’s base rate of pay. 

13       It is CCIWA’s opinion that the majority of employees who are covered by the State system would be covered by an award, and that employees in the retail and hospitality sector are largely award reliant.  The introduction of seven day trading and the opportunity to trade until 9 pm on weekdays means that penalty rates now form part of many employers’ standard operating hours.  However, the market in which small business currently operates has also changed with online competitors not having the same restrictions and being able to maintain a lower cost base.  Therefore an increase to the base rate of pay of the award is compounded by the effect of penalty rates.  Penalty rates have a large impact on the profitability of small business over weekend and public holiday periods. 

14       CCIWA states that although growth in the WA economy remains strong, not everyone has benefitted from the resources boom, including employers, with a number of industries facing significant challenges.  The current economic environment remains a challenge for WA businesses.  The ability for a small employer to meet the cost of doing business is a key determinant in its survival.  CCIWA submits that there is a lower rate of business survival in WA compared to Australia as a whole and increasing costs on business will further increase the pressure on business in WA in an already volatile period for business.  Business is less confident about its future growth.

15       CCIWA points to the cost burden on business from the WA State Budget, with increases in electricity prices, water expenses, land tax and land fill levy directly impacting on employers. 

16       CCIWA states that Australia currently has the highest minimum rate of pay compared to any other OECD member country.  This has implications for the competitiveness of Australian industry within a global economy.  CCIWA urges consideration to be given to a combination of both minimum wages and the tax transfer system in determining whether the current minimum wage provides an effective safety net. 

17      CCIWA tendered the affidavit of Kendall Scott, Manager of the Employee Relations Advice Centre.  Ms Scott attached call figures from the CCIWA Employee Relations Advice Centre reflecting calls recorded specifically in relation to redundancy from the period May 2012 to April 2013 and May 2013 to April 2014.  Her evidence showed that between May 2012 and April to 2013 CCIWA received 1,621 calls with respect to redundancies, equating to 5.51 per cent of total calls; between May 2013 and April 2014 there were 2,226 calls, equating to 6.93 per cent of total calls.  This is showing a worrying increase in the number of employers who are considering the need to make employees redundant.  CCIWA attached copies of the March Quarter 2014 Outlook publication.

UnionsWA

18       UnionsWA contends that the Commission should make a substantial real wage increase for award reliant workers, saying that it is essential to address the ever widening gap between low paid workers and the rest of the workforce in WA.  UnionsWA advocates for a wage increase of 5.5 per cent which will increase the minimum wage by $35.52 per week.  This increase will address the needs of the low paid, improve and maintain living standards, protect employees who are unable to bargain, and aims to address the gender pay gap.

19       UnionsWA states WA remains a highly unequal State in terms of income distribution between individuals, between households and between genders.  In order to address these gaps, any increase to the State minimum wage should constitute a real increase. 

20       UnionsWA contends that WA’s minimum wage should reflect its overall strong economic performance; it should also play its part in redressing the growing inequalities in WA society and while it is by no means the only response to these growing inequalities, other responses will not be adequate without a sufficient minimum wage increase. 

21       UnionsWA argues that for low paid workers some costs have more impact than others and thus the State minimum wage should be increased higher than the movement in the all groups CPI.  Reference was made to the recent State and Commonwealth budgets increasing key essential items well above CPI levels.  UnionsWA refers to the April 2014 ‘State of the States’ economic performance report produced by CommSec which found that WA remains Australia’s best performing economy, leading the way on retail trade and is second strongest on economic growth.  UnionsWA says that economic performance, alongside continuing strong population growth, supports its contention that business can afford such an increase. 

22       UnionsWA points to the WA, and national, minimum wages deteriorating as a percentage of average weekly ordinary time earnings with WA doing worse than Australia as a whole despite having a higher minimum wage in absolute terms.  The most recent release of the household income and income distribution survey for 201112 shows that WA remains more unequal than Australia as a whole.  WA’s boom times have not ‘trickled down’ to the lowest income households.  Minimum wage rates complement, rather than compete with, the tax transfer system.  The work of Professor Peter Whiteford of the Social Policy Research Centre argues that the combination of Australia’s relatively high minimum wages and targeted family benefits also reduces child poverty among working families by more than any other country. 

23       UnionsWA asks for a percentage increase rather than a flat increase as part of its general concern to maintain the real value of award rates. 

24       Referring to the difference between the WA and national minimum wages, UnionsWA observes there is no evidence that the difference has been detrimental to WA’s economy.  To set the WA minimum wage on par with the national minimum wage would mean that s 50A(3)(b), which requires the Commission to take into consideration the state of WA’s economy and the likely effect of its decision on the economy, and in particular on the level of employment, inflation and productivity in WA, would have little work to do and would be inconsistent with the functions given to the Commission. 

25       UnionsWA says that WA’s unemployment rate of 4.9 per cent in April 2014 is the lowest of all states and this indicates that the WA economy has not suffered from having a State minimum wage that is higher than the national minimum wage.  There is also no evidence that WA’s productivity has suffered from having a higher minimum wage. 

26       UnionsWA provides data to support the contention that vulnerable groups of employees, being female, aged between 15 to 24 years and working part time, are over represented within the private sector of the State industrial relations system.  Having a majority female workforce in these sections of the State industrial relations system is particularly significant given that WA’s gender earnings gap of 23.6 per cent continues to be far higher than the national gap of 17.1 per cent. 

27       UnionsWA submits that WA’s labour productivity growth has been driven significantly by the rental hiring and real estate services industry, one of the industries most likely to include unincorporated business.  UnionsWA provided a table showing that for these industries, labour productivity growth over the past five years has been to varying degrees positive in comparison with their national counterparts, and this is important as it substantially covers a period of time in which the WA State minimum wage has been higher than the national minimum wage.  There is no evidence that the State minimum wage has been a burden for these industries. 

28       UnionsWA noted that the number of businesses operating in the industries most likely to be impacted by the State minimum wage increased 3.4 per cent between 20078 to June 2012 with retail trade the only industry with business numbers that went backwards during this period; however, figures for retail turnover since 2008 appear to show that that industry continued to expand in WA during this time.  UnionsWA concludes that neither the WA economy, nor those industries most likely to be impacted by the State minimum wage, have been adversely impacted by having a State minimum wage higher than the national minimum wage; indeed, they demonstrate the WA economy’s ability to sustain a higher State minimum wage.  UnionsWA contends, however, that whilst the State economy is performing well there are serious concerns about how many Western Australians are actually sharing in the benefits of that performance.  It refers to the most recent WA State Budget as adding to cost of living pressures.  It joins with the WACOSS submission pointing out that dramatic increases in the cost of gas, electricity and water in recent years has meant that low income households who spend a greater portion of their income on utility bills are feeling the pressure of the rising cost of utilities more than other Western Australians. 

29       UnionsWA urges the Commission to again conclude that growth in the State minimum wage is not keeping pace with the growth in wages generally in WA whether measured according to the WPI or to AWOTE.  WA is the most unequal State in the country in terms of income distribution.  The Commission should not award a lower increase to the minimum wage than it otherwise would by taking into account the impact of the superannuation guarantee rate increase.  UnionsWA attached a copy of the ACTU submission to the Annual Wage Review 2013-2014, Fair Work Commission Research Report 7/2013 entitled Minimum wages and their role in the process and incentives to bargain and the ACTU Budget Briefing May 2014.

Australian Hotels Association (Western Australia)

30       AHAWA submits that the Commission should consider the wage increase to be awarded should take into account the superannuation guarantee increase of 0.25 per cent on 1 July 2013 as an added cost to small business that will put further strain on the costtowage ratio.  It submits that the hospitality sector has been significantly impacted by the introduction of the carbon tax and that the profitability of hospitality businesses has been impacted up to 11.8 per cent due to the carbon tax alone.  Utility expenses have also increased at a rate higher than expected because of the carbon tax and other general increases. 

31       Trading conditions for hospitality businesses, which are generally small businesses and family owned and are more likely to be located in regional areas, are affected due to a downturn in the economy, a reduction in tourism and the impact of the high Australian dollar, all of which have not assisted small business in regional and rural WA. 

32       AHAWA submits that the national and State minimum wage should be on an equivalent level and therefore the State minimum wage should remain stagnant, or alternatively transition this difference over the next two years until the federal minimum wage attains the same level as the State minimum wage. 

33       AHAWA submits that if there is to be a wage increase, it should be a 1 per cent, or $6.46 per week, wage increase. 

34       AHAWA notes that historically, hospitality is an award based industry and employees within it are more likely to be employed under the award system than in most other industries nationwide.  Therefore, any adjustment to the minimum wage has a significantly greater impact on the hospitality and tourism sectors than other industries where there is less exposure to the award system. 

35       AHAWA submits that the hospitality industry has experienced difficult conditions over recent periods, mainly because it operates on a 24 hour/7 day basis.  It is highly labour intensive and as such is impacted by wage increases which affect not only the base rate but penalty rates as well.  AHAWA members have wages costs some 65 per cent higher than the average Australian business because of these higher labour costs. 

36       AHAWA also points to the increasing cost in operating a small business in hospitality as a result of the State Budget increases, including electricity, land tax, and water rates. 

37       Businesses in regional areas will be continually exposed to significant increases in operational costs and worsening labour shortages in the foreseeable future.  Regional businesses are generally small and primarily sole traders or small partnerships.  These businesses often have few staff with the responsibility falling on proprietors to work longer hours. 

Western Australian Council of Social Services Inc

38       WACOSS relies on s 50A(3)(a) of the Act to submit that an increase of $35 to the State minimum wage is consistent with the need to maintain a fair system of wages and conditions in the current WA context.  It refers to the range of issues facing minimum wage workers in WA which were addressed by it in its 2013 State Wage Case submission, and carefully assesses the changing economic and workplace environment for these workers.  Its current submission aims to provide the Commission with the best available data upon which to base its deliberations in the best interests not only of minimum wage workers and their families but also of the wider WA community.  WACOSS considers minimum wages to be a vital means of protecting low income workers from poverty, the benefits of which are felt by minimum wage workers, their families, their children and society at large.  It is important for the wages earned by full time minimum wage employees to be sufficient to ensure they have the capacity to meet their basic living costs while living with dignity and respect. 

39       The primary focus of WACOSS’s claim is the increasing cost of living pressures in WA.  Ultimately, WACOSS’s conclusion is that the living standards of the lowest paid members of our community have not improved in any significant way in the last 12 months and the current minimum wage does not currently reflect a fair wage in the context of living standards generally prevailing in the community. 

40       WACOSS developed its submissions in relation particularly to income inequality in WA, noting that lower levels of income inequality deliver stronger economic growth.  Lower levels of inequality also deliver better social outcomes.  WACOSS remains concerned about the rate at which the gap between the State minimum wage rate and median pay levels continues to grow in WA: between November 2003 and November 2013, AWOTE increased by 79 per cent (from $905.50 to $1,620) but the State minimum wage only increased 44 per cent. 

41       WACOSS submits that WA remains in a relatively strong economic position, however WACOSS’s analysis shows that the cost of essential services and items including housing, utilities and food has increased at a much faster rate than nonessential or discretionary and luxury items such as cars, computers and overseas holidays.  The increase in the cost of essential items is hardest felt by low income households who spend a much higher proportion of their household income on essentials.  It is the low income individuals and households in WA who are really struggling with the increases to the essential costs of living and are, or are at risk of, slipping into poverty.  These are the people for whom increases to the rate of the State minimum wage really count. 

42       WACOSS submits the lack of affordable housing and the ongoing increases in the cost of housing are the most pressing issues facing low income households in WA.  High rental costs continue to place great pressure on low and medium income households and it is imperative that the State minimum wage be increased at a rate which reflects the rising cost of living in WA over recent years.  WACOSS acknowledges that the urgent need to address the lack of affordable housing is outside the remit of the Commission, however, the high cost of housing must remain a key consideration for the Commission when regard is had to the need to provide fair wage standards in the context of living standards generally in the community.  WACOSS also refers to utilities, food and transportation cost of living pressures which caused particular stress for households in WA. 

43       WACOSS also submits that the level of the State minimum wage is significant to the WA community sector because community sector service providers play an important role in supporting vulnerable members of the WA community, including many who struggle to survive on low incomes due to the rising cost of living.  For a long time the community sector in WA has been under resourced and community sector employees have been significantly underpaid.  Minimum wage increases are significant for many workers within the female-employee dominated community sector.  WACOSS also points to the equal remuneration orders by which the Commission amended the WA Social and Community Services Award and the Crisis Assistance and Supported Housing Award submitting that in the event of a weak minimum wage increase, community sector workers will effectively be losing some of the pay equity remedy they have just been awarded. 

44       WACOSS also notes that WA consistently records the largest gender pay gap of any State in Australia, a gap much larger than the national average.  WACOSS submits that it is broadly accepted that in Australia women are more likely than men to be reliant on the minimum wage.  Significant contributors to this are the disproportionate responsibility women have for unpaid work, including the care of elderly people, children and adults with disabilities, and grandchildren, and their lower pay relative to men.  WACOSS says that the most recent figures from November 2013 show that the male ordinary time earnings are 30.9 per cent higher than those of females in WA, compared with a 20.6 per cent difference nationally.  Therefore, the Commission’s decision relating to the setting of the State minimum wage is of particular significance to female workers in WA. 

45       Further, WACOSS argues that by increasing the minimum wage the resilience and self-sufficiency of low paid workers would be improved to the benefit of the national welfare system and the community more broadly.  WACOSS believes that given the decreasing relevance of junior wages in WA, the full rate of the increase to the minimum wage must be applied to both junior and adult wage rates, and not a proportion of the minimum wage increase.  WACOSS attached the Cost of Living Report 2013. 

Mr Archie W Marshall

46       In a written submission, Mr Marshall submitted that the minimum basic wage for persons over 18 years of age should be abolished.  Mr Marshall believes that it is a disadvantage to many marginal people who become unemployable as a result.  All people should be paid what they are worth and that is to a large extent up to them.  The best employees will get the best jobs and vice versa to the advantage of both employers and employees.  Mr Marshall states that high wages fixed by regulation prevent many new business ventures starting at all and thus denying the employment of marginal people, earning taxable income and providing service to the customers of those businesses.  He believes that a minimum wage for persons over 18 creates a sense of entitlement and does nothing to help create a work ethic in young people.  Young people who cannot find work due to the high wages required will tend to do little to improve their chances of getting a job and will likely turn to crime and other antisocial activities due to boredom and a sense of hopelessness.  Mr Marshall set out some of his personal history and submits that while he has no academic qualifications, his extensive experience entitles him to an opinion which is to abandon the regulated wage system and release the potential of all people to better themselves.

The Statutory Criteria

47       The Act obliges the Commission to set a minimum wage.  Section 50A(1)(a) states:

(1) The Commission shall before 1 July in each year, of its own motion make a General Order (the State Wage order) 

 (a) setting 

  (i) the minimum weekly rate of pay applicable under section 12 of the Minimum Conditions of Employment Act to employees who have reached 21 years of age and who are not apprentices;

  (ii) the minimum weekly rate or rates of pay applicable under section 14 of the MCE Act to apprentices.

48       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.

49       The operation of the Fair Work Act 2009 (Cth) (the FW Act) means that the order which will issue from this decision will apply only to employers in the private sector, and local governments in WA, which are not trading or financial corporations and the public sector.   

Mr Marshall’s Submission

50       The Commission is obliged to apply the law as it stands and, relevantly, the law is that the Commission must set a minimum wage each year for persons over 18 years of age.  Whether or not the minimum basic wage for persons over 18 years of age should be abolished is a matter for the WA Parliament.  Even if the WA minimum wage was abolished, there would still be a national minimum wage applying in WA to employees employed by employers covered by the national industrial relations system.  Mr Marshall’s submission therefore cannot be considered by the Commission.

Coverage of the State Wage Order

51       Each of the persons appearing made some submissions on the accuracy of the data available which allows the estimate to be made of the numbers of employers and employees covered by the WA industrial relations system.  The differences between the submissions are matters of detail and no person submitted that it was necessary for the Commission to decide those differences for the purpose of this matter. 

52       In our 2013 decision ([2013] WAIRC 00347; (2013) 93 WAIG 467) we referred to the conclusion of the late Professor David Plowman, from the Graduate School of Management at the University of Western Australia[1] in 2006 that about 2.2 per cent of the WA workforce would be directly affected by the State minimum wage adjustment and possibly 4 per cent of the WA workforce could be affected in differing degrees by the adjustments to other wages to maintain established relativities.  There has not been a change in the available data which suggests his conclusion needs to be revisited here.  We see no reason not to continue to regard his conclusion as valid for the purpose of our considerations.

CONSIDERATION

53       We have set out above a summary of the respective submissions.  UnionsWA points to the WA and national minimum wages as a proportion of AWOTE to show that WA is doing worse than Australia as a whole despite having a higher minimum wage in absolute terms.  It develops a submission based upon measures of inequality from ABS data and argues strongly that an increase to the WA minimum wage arrests the relative decline of the minimum wage compared to wages generally and to assist other measures which go to inequality.  The submissions particularly from WACOSS, and also UnionsWA, go to relative measures of the increase in the cost of essential services and items including housing, utilities and food compared with nonessential or discretionary and luxury items and that low income households spend a much higher proportion of their household income on essentials. 

54       While low income households do not necessarily equate with employees who receive the WA minimum wage, the submissions present another context in which to set the minimum wage.  They provide relevant information to the Commission which is helpful when endeavouring to measure the needs of the low paid, subject to an understanding of what the data measures. 

55       The need 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, raise the concept of fairness.  Fairness is a relative concept.  The WA minimum wage has been set by properly taking into account all of the considerations in s 50A(3)(a) of the Act.  The level of the WA minimum wage may be assessed by comparing it with a range of economic indicators. 

56       The WA minimum wage has steadily increased in real terms since the 2006 amendment to the Act which required the Commission to set a minimum wage for WA taking into account a number of considerations.  The increase to the WA minimum wage over time has been greater than the increase in the Perth CPI although not as great as the increase in wages generally as measured by the WPI, and significantly less than wages as measured by the AWOTE index (Minister’s written submission p 16 Figure 3). 

57       However, our past decisions have made clear our view that the proper application of s 50A(3)(a) of the Act means that we do not, and cannot, set the WA minimum wage by reference to one particular measure.  All of the measures, as they are encompassed within the considerations we are obliged to take into account, are relevant to our decision.  These considerations, as reflected particularly in the respective submissions of UnionsWA and WACOSS on the one hand, and CCIWA and AHAWA on the other, necessarily require balancing by us.

58       In that context, UnionsWA and WACOSS emphasise the decline in the WA minimum wage relative to wage movements in WA as measured by the WPI and the AWOTE.  We have endeavoured to point out that the need in s 50A(3)(a) of the Act for the Commission 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 means this is a relevant, but not a determinative, consideration.    Necessarily, the considerations in s 50A(3)(a) will not all point to the one result - there is likely to be tension between the economic, social and other considerations which the Commission is obliged to take into account. It is not resolved by adopting a rule such as increases to the WA minimum wage must be equal to wage movements in WA as measured by the WPI or the AWOTE.  The Act requires the Commission to take into account each of the relevant statutory considerations.

59       A submission common to the positions of CCIWA and AHAWA, that we should order a lesser increase than might otherwise be warranted so that the WA minimum wage aligns over time with the national minimum wage, attracts a similar comment.  In essence, the submission repeats their respective submissions in 2013.  We repeat our conclusion in the 2013 State Wage Order decision that not to increase the WA minimum wage in order to allow it to align with the national minimum wage if the considerations in s 50A(3) of the Act otherwise warrant an increase would be inconsistent with the requirements imposed on the Commission by s 50A(3).

60       Between 1980, when the Act was proclaimed, and 2006 the Commission was required to consider the then National Wage Decision whenever it was made and give effect to it unless there were good reasons not to do so (s 51).  That nexus with the national wage decision was broken in 2006 with the demise of national wage decisions.  The Act was amended in 2006 in s 50A to require the Commission to set a minimum wage for WA each year to operate from 1 July.  At the time of that amendment, there was no national wage decision as such and s 50A does not contemplate what is now the Annual Wage Review of the Fair Work Commission (FWC).  For this reason s 50A(3) does not refer to the level of the national minimum wage as a matter to be taken into consideration when setting the WA minimum wage. 

61       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.  If the Parliament wanted the WA minimum wage to be set by reference to the level of the national minimum wage this should be reflected in the Act.  The requirements imposed on the Commission by the Act to take into account the need to meet the needs of the low paid, and to contribute to improved living standards for employees, are requirements which make it difficult, in our view, for a submission that the WA minimum wage be allowed to stagnate, or reduce, because it is higher than the level of the national minimum wage, to be able to be validly considered.  No person appearing sought to persuade us that our view of the proper application of s 50A(3)(a) is incorrect. 

62       Section 50A(3)(f) requires the Commission to take into consideration relevant decisions of other courts and tribunals and we have used this as a means for us to take the Annual Wage Review of the Fair Work Commission into consideration, as we do so later in these reasons. 

63       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, makes the national minimum wage relevant.  There will be those who assess it as too low, as in UnionsWA’s submission, and those who assess it as too high; however for these proceedings, we recognise that it applies in WA and nationally.

64       In particular, it applies to businesses in WA, and their employees, in industry sectors, and in small businesses, which are trading corporations.  The corporate structure of a business provides no basis for minimum wage setting purposes to validly differentiate between such national system employers and their employees in WA, and those businesses and their employees who are in the WA industrial relations system.  If fairness is a relative concept then in fairness we must take into account and give due weight to the minimum wage that the majority of minimum wage employees receive in WA, and indeed throughout the country including by employees of sole traders, partnerships and unincorporated businesses in States other than WA.  It should be noted, that those employees in WA who are reliant on the national minimum wage bear the same cost of living increases as those employees who are reliant on the WA minimum wage. 

65       The regular setting of the WA minimum wage according to the proper application of s 50A(3)(a) of the Act has resulted in the WA minimum wage being higher than the national minimum wage because of differences between the relevant Commonwealth legislation and the Act, particularly since 2006.  This requires us to consider the state of the economy of WA which has at times been quite different from the state of the national economy.

66       In the absence of any legislative requirement in the Act to take the level of the national minimum wage into consideration in setting the WA minimum wage, it is likely that there will be a gap between the two.  Moreover, the requirement in s 50(3)(a)(ii) of the Act for us to take into account the need to contribute to improved living standards for employees, and the performance of the WA economy to that of the performance of the national economy, suggests it is likely that the WA minimum wage will remain higher than the national minimum wage over time. 

67       However if the size of the gap between the two can be demonstrated as actually causing employers who are in the WA industrial relations system a practical, and not just a theoretical, detriment with the potential to affect any of the considerations in s 50A(3), s 50A(3)(g) together with s 26(1)(a) of the Act, it may permit this to be taken into account by the Commission in setting the WA minimum wage each year. 

68       We do not have the evidence before us on this occasion to show that this point has been reached.

69       To return to the submissions which are before us, it must follow that when considering, as we are obliged to, the capacity of employers as a whole to bear costs of increased wages we accept that employers in the WA system who pay the minimum wage are paying a higher minimum wage than employers in WA in the national system, and nationally, who pay the minimum wage.  The weight to be attached to the difference between the two minimum wages in WA is not clear.  The full difference is apparent for employers who pay the minimum wage although it is not clearly established by the submissions before us what the significance of it is for employers in the WA system who pay above the minimum wage.

70       We recognise the need for wage increases resulting from the State Wage Orders not to act as a disincentive for employers and employees to pursue productivity improvements at the enterprise level.  CCIWA submits that the opportunity for enterprise bargaining in small business is limited under the WA industrial relations system, and the impact of the State Wage Order on this is not able to be determined.  Further, increasing minimum rates of pay to actual rates will reduce the opportunity for employers to pay over-award payments to individual employees to reflect individual levels of performance.

71       We recognise that the registration of an industrial agreement under s 41 of the Act requires a union to be party to the agreement to be registered and that union presence in small business is relatively insignificant.  However we noted in the 2013 State Wage Order decision the evidence of Professor Barrett that there may be different responses of small business employers to an increase in the minimum wage including some opportunity for informal arrangements to be discussed.  We note that we have not been provided with any evidence which would lead to the conclusion that the increases to the WA minimum wage since s 50A commenced in 2006 have discouraged productivity improvements at the workplace level.  There will be employees who are unable to bargain for increased wages and we consider that the adjustment arising from this decision will protect those employees.  

Encouraging Ongoing Skills Development

72       Section 50A(3)(a)(vi) requires the Commission to take into consideration the need to encourage ongoing skills development.  We here set out table 10 in the Minister’s submission:

Apprenticeships commenced in Western Australia
January 2006 – December 2013

Year

Under 21 years

21 years and over

Total

Proportion of 21 years and over

2006

6,949

1,968

8,917

22.1%

2007

7,026

2,377

9,403

25.3%

2008

6,581

2,198

8,779

25.0%

2009

5,294

1,817

7,111

25.6%

2010

7,647

2,708

10,355

26.2%

2011

6,907

2,925

9,832

29.7%

2012

6,456

3,220

9,676

33.3%

2013

5,923

2,780

8,703

31.9%

73       We note that there has been a decline in the number of apprenticeships commenced in WA since 2010.  In submissions, the Minister stated the categories of building and construction, automotive and metals, and manufacturing and services trades have all experienced a decrease in the number of apprentices in training since March 2008, although the metals and automotive trades has had a modest recovery since 2010, and there was a relatively strong take-up of electrical apprentices was due to the demand for electrical tradespeople during the construction phase of major projects in the resources sector.

74       There has been a decline in the number of traineeships commenced in WA in 2013 compared to previous years.

75       There is no submission that it is previous State minimum wage increases for apprentices and trainees resulting from State Wage Orders which have discouraged their uptake in WA.  We note also that there has been no adjustment in WA awards to the standard relativity in State awards between the trade rate and the rates prescribed for first and second year apprentices. 

76       We note the evidence (Minister submission p 31 Figure 4) showing that the average unemployment rate for 15-24 year olds looking for full time work has increased.  The Commission should be mindful of the potential for minimum wage increases to affect employment opportunities for young people.  WACOSS draws attention to the concept of junior rates and sees them as an anachronism, saying that a wage should be set according to competence rather than age.  We see that as an issue going beyond the effect of a minimum wage adjustment and we do not accede to the WACOSS submission that junior wages receive the full amount of any increase to be awarded.  We will continue to apply any increase proportionately to junior employees.

Providing Equal Remuneration for Men and Women for Work of Equal or Comparable Value

77       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.  The distinction between this consideration and the gender pay gap has been recognised in previous State wage proceedings.  We have recognised that in the private sector in Australia, women are much more likely than men to be dependent on the award rate and therefore annual increases to the minimum wage.  The gender pay gap in WA has been estimated at 23.6 per cent, higher than the national average of 17.1 per cent.   CCIWA submits that the gender pay gap has fallen by 2.8 per cent in the past 12 months.

78       We stated in the 2011 State Wage Order decision 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.  We nevertheless 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. 

79       Section 50A(3)(a) as a whole means that the requirement on us in s 50A(3)(a)(vii) of the Act, the need to ensure equal remuneration for men and women for work of equal or comparable value, also needs to be balanced with the other considerations in s 50A(3).  In principle, an increase to the minimum wage will assist, at least to some extent, in reducing the gender pay gap for those female employees within the State jurisdiction.

The State of the Economy of Western Australia

80       We are obliged to take into consideration the state of the economy of WA.  We express our thanks to the WA Department of Treasury for providing its analysis of WA’s economy, and in the context of the national and international economies.  The evidence given by Mr David Christmas, Director of the Economic Revenue and Forecasting Division is seen by the Commission as of significant importance given the requirement in s 50A to have consideration to the state of the WA economy and, to the extent that it is relevant, the state of the national economy.  This assists us in our consideration of the corresponding analyses of the WA and national economies in the submissions before us.

81       In summary, growth of the State's domestic economy is expected to moderate from very strong growth rates in recent years, including 5 per cent in 2012/13, to fairly flat growth in State Final Demand in the next two years, and a gradual increase to 2.2 per cent by the end of the budget period.  Gross State Product (GSP) is also expected to moderate but not to the same extent and then to strengthen in the next two years.

82       Employment growth is forecast to ease in 2013/14 and remain subdued over the following years, reflecting the transition from a labourintensive investment phase of growth to a less labourintensive production phase of growth.   Wages growth as measured by WA Wage Price Index is forecast to remain below average, reflecting greater capacity in the labour market.  The rate of inflation is expected to pick up in 2013 and 2014 but remain broadly within the Reserve Bank target of 2 to 3 per cent.  Dwelling investment is one of the strong growth areas of the economy with dwelling investment increasing by 10.6 per cent in the calendar year of 2013, and forecasted to grow by 14 per cent in the financial year 2013/14.  Household consumption is the single largest component of GSP and is projected to grow by 3 per cent in 2013/14, increasing to 3.75 per cent per annum by the end of the budget period.  The available information suggests that business investment peaked in 2012/13 and is likely to taper off in coming years, although the level of investment is expected to remain high. 

83       We reproduce the table of major economic aggregates for WA referred to by Mr Christmas.

WESTERN AUSTRALIAN FORECASTS
Major Economic Aggregates, Annual Growth (a) (%)

 

2012-13

Actual

2013-14

Estimated Actual

2014-15

Budget Estimate

2015-16

Forward Estimate

2016-17

Forward Estimate

2017-18

Forward Estimate

State Final Demand (SFD)

5.0

0.25

0.0

0.75

1.5

2.0

Gross State Product (GSP)

5.1

3.75

2.75

3.0

4.25

5.0

Employment

3.5

1.5

1.5

1.75

1.75

2.0

Unemployment rate (b)

4.4

5.0

5.5

5.25

5.0

4.75

Wage price index (WPI)

4.0

3.25

3.25

3.5

3.5

3.75

Consumer price index (CPI)

2.3

3.0

2.75

2.5

2.5

2.5

(a) Annual average growth unless otherwise stated

(b) Average rate over the year

Source: 2014-15 Budget, Budget Paper No.3

84      With respect to labour productivity in WA, the evidence before us from both Mr Christmas and also from the UnionsWA submission is that productivity is not easy to measure at the State level.  We acknowledge UnionsWA’s submission that in the year to 2013 WA’s labour productivity increased by 2.9 per cent.  However, we think prudence should be exercised in attempting to reach any conclusions on the material before us.

85      The Commission has been responsive in the past to the State’s economic performance as providing a context 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.  Overall, the evidence before us, particularly from the Department of Treasury, but also the information from CCIWA and UnionsWA, is that according to current economic indicators the WA economy has softened but continues to grow, however not as rapidly as it has grown in the past two years.   Both inflation as measured by the CPI for Perth, and wages growth as measured by WPI, have slowed. 

The State of the National Economy

86       Mr Christmas’s evidence was that the Commonwealth Treasury projects the Australian economy will grow by 2.75 per cent in 2013/14 and 2.5 per cent in 2014/15.  These rates are below the average growth of 2.9 per cent over the past decade and the Commonwealth Treasury is also expecting growth to dip and then strengthen as the economy transitions from resource-investment led growth to broader sources of growth over the coming years.  The Commonwealth also expects softer employment growth in that transition period and is forecasting the unemployment rate to peak at 6.25 per cent in 2014 and 2015/16.  Consumer prices are projected to grow by 3.25 per cent this year before softening to around 2.5 per cent in the following years. 

The Capacity of Employers as a Whole to Bear Costs of Increased Wages

87       The Minister’s submission showed that profits for WA businesses as a whole decreased by $8.66 billion in the year to June 2013, a decline in overall profitability of 6.5 per cent.  A number of industries in WA experienced an overall improvement in profitability over that period however an overall decline was recorded in half of all industry sectors.  Nevertheless all sectors as measured by the Gross Operating Surplus plus Gross Mixed Income measure produced by the ABS, remain profitable.  We accept that this data reveals little about the profitability or otherwise of individual businesses.  

88       We take into account that the superannuation contribution rate will increase a further 0.25 per cent in July 2014 which represents a direct cost to employers and which affects their capacity to increase wages.  There is some evidence, particularly from CCIWA, to suggest that small business finds the economic environment challenging. 

89       The evidence from the CCIWA Employee Relations Advice Centre indicates a rising trend in enquiries regarding redundancies although we consider the trend is not necessarily directly related to increases in the WA minimum or award wages.

90       We take into consideration the AHAWA submission that the highly labour intensive hospitality industry has experienced difficult conditions over recent periods, mainly because it operates on a 24 hour/7 day basis and to the increasing cost of operating a small business in hospitality as a result of the State Budget increases, including electricity, land tax, landfill levy and water rates.  There are additional costs too for businesses in regional areas.

91       Both CCIWA and AHAWA included in their respective submissions that the effect of any increase to the minimum wage is compounded by the effect of penalty rates.  We recognise the effect of penalty rates, and other award provisions, on overall costs to employers but do not consider them to be an issue directly relevant to the setting of the minimum wage.

92       When considering the setting of the WA minimum wage, the Commission 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 who are award-reliant.  The Minister’s submission suggests that employment trends in WA’s award-reliant industries differ widely.  Of the two biggest employing award reliant industries, there appears to be a growing availability of work in the accommodation and food services sector, while employment in the retail trade sector, which employs nearly 10 per cent of WA's workforce, has declined by 1.4 per cent on average over the last year.

The Fair Work Commission Annual Wage Review 2013-2014

93       Section 50A(3)(f) requires the Commission to take into consideration relevant decisions of other courts and tribunals.  No person sought to persuade us that we were incorrect in our conclusion in the 2012 and 2103 State Wage Order decision that the Annual Wage Review of the FWC is a relevant and significant consideration. 

94       In the 2013 State Wage Order decision at 69 we said:

We noted in our 2012 decision ([2012] WAIRC 00346 at [90]; (2012) 92 WAIG 557 at 566) that 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 substantial overlap between the considerations of FWC’s Minimum Wage Panel and the considerations we are obliged by s 50A(3) to take into account.  Further, the timing of the Annual Wage Review and the date of operation of the minimum wage to be set by FWC is contemporaneous with the obligations on this Commission under s 50A of the Act. 

95       We consider the FWC Annual Wage Review 2013-14, which increased the national minimum wage by 3.0 per cent from $622.20 to $640.90 per week from 1 July 2014, an increase of $18.70 per week, to be a relevant and significant consideration.

CONCLUSIONS

96       The obligation imposed on the Commission requires a balancing of many differing considerations.  The respective submissions before us each urge us to give preference, or greater weight, to their position to the exclusion of those who disagree with them.

97       The evidence is that the WA economy has grown above average for the last two years, however growth has moderated.  Even though the WA economy is slowing, WA growth rates are at or above national rates.  Growth is expected to be similar to, or stronger than, growth through much of the 1990s.  Unemployment in WA has increased although it is still less than for Australia as a whole.  While consumer spending increased in 2013, spending on hotels, cafes and restaurants, and recreation and culture, both dropped slightly.

98       We recognise, and have recognised previously, that increasing the WA minimum wage assists in meeting the needs of the low paid, contributes to improved living standards for employees, provides a wage increase to those employees who may be unable to reach an industrial agreement and assists in a limited way to lessen the gender pay gap in WA.  The increase of 5.5 per cent to the WA minimum wage urged upon us by UnionsWA and WACOSS is supported by well-argued submissions.

99       However, that is not all we are obliged to consider.  We also recognise, as we stated in the 2013 State Wage Order decision at 77, that the assessment of whether the minimum wage, and award wages generally, ensure WA has a system of fair wages and conditions of employment, and the need to provide fair wage standards in the context of living standards generally prevailing in the community, includes taking account of the national minimum wage operating in WA and the extent to which the WA minimum wage is higher.

100    The information and submissions from CCIWA, and in relation to the hospitality sector AHAWA, assist us to take into consideration the capacity of employers as a whole to bear the cost of increased wages, salaries, allowances and other remuneration.  While we set a minimum wage to apply in WA, in practice it is a minimum wage applicable to certain sectors of the economy only and many employers directly affected are small businesses. 

101   The extra cost to employers from 1 July 2014 from the increase to compulsory employee contributions to superannuation is an employment cost which we take into account and which moderates the increase we would otherwise award, as was the case in the FWC Annual Wage Review 2013-14 when it awarded a 3 per cent, or $18.40 per week, increase to the national minimum wage.  This, together with the overall softening of the WA economy, in terms of projected economic growth, combined with lower wages outcomes as measured by the WPI, increasing unemployment, and the additional cost impost on business of the increase in the superannuation contribution rate from 1 July this year, cause us to adopt a cautious approach to any adjustment to the State minimum wage on this occasion.  We consider the comment of the Minister of the importance of improving the performance and competitiveness of the WA economy to be timely.  We need to be confident about the effect of the increase to be awarded upon the WA economy and, in particular, on the level of employment, inflation and productivity in WA. 

102   An increase to the WA minimum wage should not have negative consequences for either employees or employers.  We refer again to the conclusions of Professor Plowman in relation to the operation of the WA minimum wage in the period 1990 to 2005 which suggests that there has been little minimum wage effect on the economy as a whole, and weak effects on those sectors with higher levels of low paid employees.  We consider the Minister’s view that an increase to the WA minimum and award wages in line with estimated actual CPI for the current financial year of 3 per cent, which would result in the current minimum wage of $645.90 per week being increased by $19.40 to $665.30 per week has much to commend it.  It is a view not inconsistent with the conclusion of the Fair Work Commission when it adjusted the national minimum wage by 3 per cent.

103   A 3 per cent increase to the WA minimum wage is slightly less than the actual movement of the Perth CPI to the March quarter 2014.  We again favour a flat-dollar increase rather than a percentage increase because:-

(a) We consider a flat increase targets those employees who are on the minimum wage or slightly above it; and

(b) A flat increase has the potential to result in a lower overall cost to an employer compared to a percentage adjustment because the increase is not compounded when applied to award rates of pay.

104   We have decided the proper application of all of the considerations in s 50A(3)(a) of the Act warrants an increase of $20.00 per week to the WA minimum wage.

105   Even with weaker conditions in the State’s economy and labour market the aggregate impact of the proposed increase is likely to be small.  The number of employees directly affected is estimated at 2.2 per cent of the WA workforce and is thus relatively small.  It is within the range of adjustments to the WA minimum wage which we have awarded in previous years and we are confident it will not have a negative effect on the WA economy and on the level of employment, inflation and productivity in WA.  Even taking into account the extra cost to employers from 1 July 2014 from the increase to compulsory employee contributions to superannuation, we consider it to be within the capacity to pay of employers as a whole.    

106    There was no direct evidence of issues having arisen from any compression of award relativities from past flat-dollar increases.  We observe that it is open to any party to seek to vary an award to address issues which arise from any compression of relativities.

107    We have referred earlier to our concern that s 50A(3) of the Act means it is likely that the WA minimum wage will remain higher than the national minimum wage over time.  This decision inevitably results in the gap between the WA minimum wage and the national minimum wage increasing by $1.30 to $25.00 per week.  For the reasons we have given earlier in this decision, we anticipate this being comprehensively addressed by those appearing in the 2015 State Wage Case. 

108    The WA minimum wage to operate from the first pay period on or after 1 July 2014 will be $665.90 per week for adult employees.

109    We are obliged by s 50A(4) to ensure, to the extent possible, that there is consistency and equity in relation to the variation of awards.  No person appearing submitted that we should not correspondingly adjust rates of wages paid under awards.  Given that position, and the role of awards in providing fair wage standards, we will adjust award wages by $20.00 per week from the first pay period on or after 1 July 2014.  The increase will apply only to employees who are paid the award wage; any wage paid over the award wage is able to be used to offset the increase.

The Minimum Weekly Rate of Pay Applicable to Apprentices and Trainees

110    No person appearing submitted that we should vary the manner in which the increase to the WA minimum wage is usually applied to apprentices or trainees.  We propose to apply the increase in this State Wage Order to adult apprentices, other apprentices and to trainees in accordance with the usual practice of the Commission.

Industry/Skill Levels

111    As in previous State Wage Order proceedings, the Minister has provided the Commission with 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 2014 State Wage order to issue.

THE STATE WAGE PRINCIPLES

112    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.  No person suggested that any change is required to be made to the Statement of Principles set out in the 2013 State Wage Order.  We set out the Statement of Principles July 2014 to issue.  They are unchanged from the Statement of Principles July 2013 apart from the necessary and consequential amendments to Principle 9.

MINUTE OF PROPOSED GENERAL ORDER

113    A minute of proposed General Order now issues.  The Commission should be advised by 2.00 pm on Friday, 13 June 2014 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 10.00 am on Monday, 16 June 2014.

_________________________