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

Document Type: Decision

Matter Number: APPL 1/2015

Matter Description: 2015 State Wage Order pursuant to section 50A of the Act

Industry: Other

Jurisdiction: Commission in Court Session

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

Delivery Date: 11 Jun 2015

Result: 2015 State Wage Order issued

Citation: 2015 WAIRC 00435

WAIG Reference: 95 WAIG 679

DOCX | 97kB
2015 WAIRC 00435
2015 STATE WAGE ORDER PURSUANT TO SECTION 50A OF THE ACT
WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

CITATION : 2015 WAIRC 00435

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

HEARD
:
TUESDAY, 2 JUNE 2015; WEDNESDAY, 3 JUNE 2015

DELIVERED : THURSDAY, 11 JUNE 2015

FILE NO. : APPL 1 OF 2015

BETWEEN
:
ON THE COMMISSION'S OWN MOTION

CatchWords : State Wage order - Commission's own motion - Minimum wage for employees under Minimum Conditions of Employment Act 1993 - Award rates of wage - Award minimum wage - State wage principles
Legislation : Industrial Relations Act 1979 s50A, s 50A(3), s 50A(3)(a)(i)-(v) & (vii), s 50A(3)(a) & (d)-(f), Minimum Conditions of Employment Act 1993 s 12, Fair Work Act 2009 (Cth) s 3, s 3(a), s 284(1)
Result : 2015 State Wage Order issued
REPRESENTATION:


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

Mr P Moss and Ms L Smith on behalf of the Chamber of Commerce and Industry of WA (Inc)

Mr K Singh and Dr T Dymond on behalf of UnionsWA

Case(s) referred to in reasons:
FAIR WORK COMMISSION ANNUAL WAGE REVIEW 2014-15 [2015] FWCFB 3500
FAIR WORK COMMISSION ANNUAL WAGE REVIEW 2011-12 [2012] FWA 5166
STATE WAGE ORDER DECISION [2013] WAIRC 00347; (2013) 93 WAIG 467
State Wage Order Decision [2012] WAIRC 00346; (2012) 92 WAIG 557

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 18 – 19 April 2015, 22 April 2015 and 4 – 10 May 2015, and on the Commission’s website and in the WA Industrial Gazette on 22 April 2015 ((2015) 95 WAIG 458) inviting submissions from interested persons. We set out below an outline of the submissions received.
SUBMISSIONS
The Hon. Minister for Commerce
3 The Minister notes that the Commission is required to consider a range of social and economic factors including the needs and living standards of the low paid, the capacity of employers as a whole to bear the costs of increased wages and the state of the economy of WA. Economic growth in WA has begun to moderate from very strong rates experienced in recent years. There has been a notable softening in domestic economic conditions as business investment tapers from a peak in 201213. This is flowing through to more moderate labour market conditions. Unemployment is gradually increasing, and in June 2014 wages began to decline in real terms for the first time since 2006. Leading indicators are consistent with expectations that employment growth will remain modest in the near term. It is the Minister’s submission that the current economic circumstances warrant a greater degree of wage restraint.
4 Nonetheless, the Minister recognises the importance of providing a fair system of wages which meets the needs of the low paid. The Minister submits it is appropriate to adjust the WA minimum wage in line with the Department of Treasury’s most recently published figure for estimated actual growth in the Perth Consumer Price Index (CPI) in 201415 and that adult award rates of pay be adjusted by the same flat dollar amount. The Treasury forecast is 2 per cent which would result in the current minimum wage of $665.90 per week being increased by $13.30 to $679.20 per week. State adult award wages would then be increased by a flat dollar amount of $13.30 per week.
5 The Minister refers to Treasury’s overview of the economy and notes that in recent years the WA economy has grown at a very strong pace, supported by unprecedented levels of investment which have lifted the productive capacity of the economy and laid the foundation for the export phase of growth. However, conditions in the WA domestic economy have softened and are expected to remain subdued over the next two years.
6 The Minister referred to operating conditions for WA businesses, observing that there is little specific data available to assess the health of those businesses likely to be affected by the State Wage Order, however the total industry income from the sales of goods and services in WA has declined for three consecutive quarters to December 2014, the first consecutive quarterly declines since mid2009. The Gross Operating Surplus (GOS) plus Gross Mixed Income (GMI) measure also suggests that some sectors are facing a more challenging trading environment. Declines in the total industry income from the sales of goods and services were recorded in several industries known to employ significant numbers of awardreliant employees such as Retail trade, Accommodation and food services, Administrative and support services, and Other services.
7 There is a heightened risk that excessive increases to minimum and award wages could impede the ability of employers to maintain and create job opportunities. The exact relationship between changes in the minimum wage and employment levels is unknown, nevertheless, it is reasonable to suppose that there is a point at which rising wages would have an impact on employment, and the prevailing economic conditions also affect the capacity of employers to meet higher wage costs. The Minister submits that an adjustment to the WA minimum wage in line with CPI and an equivalent flat dollar adjustment to State award wages would provide a fair increase to employees while reducing the risks for employers that might result from a real wage rise at the current time.
Chamber of Commerce and Industry WA
8 CCIWA submits that WA employers and employees are facing a significantly more challenging economic environment compared to this time last year. This is characterised by:
(a) A substantial decline in WA’s economic performance which has seen WA trailing most of the other states and territories in terms of the growth of State Final Demand (SFD).
(b) A significant drop in business confidence with employers reducing capital expenditure and employment levels. Wage costs continue to be the key priority issue for employers in an environment of cost reduction.
(c) A significant increase in unemployment levels, with a spike in redundancies. The opportunity for future employment is also diminishing due to a fall in the job vacancy rates.
(d) Diminished job opportunities which has negatively affected consumer confidence, resulting in a shift towards paying off debt in preference to spending and by changes in spending patterns, is having a direct impact on the retail and hospitality industry.
(e) A substantial decline in wage increases, with employees showing a clear preference for job security over increases to wages.
(f) Extremely low levels of inflation which have meant that the cost of living for WA employees has not significantly changed compared to this time last year. There have been falls in a number of key expenditure items including fuel, accommodation and grocery items.
9 CCIWA therefore believes that the Commission should focus on the needs of those who are looking for work and those whose jobs could be lost or hours of work reduced as a result of increases to the award rates of pay and the WA minimum wage.
10 In the context of the generally high impact that wages costs have upon small businesses, particularly in the retail, hospitality and other servicebased industries, private sector employers in the WA industrial relations system are likely to be small businesses and these account for 97 per cent of all businesses in WA. Whilst small unincorporated businesses reflect a very small proportion of the total WA economy, under the right conditions many of these businesses have the potential to grow and prosper, thus delivering greater benefits to the economy as a whole. This potential is stymied where they are faced with greater cost barriers compared to larger competitors.
11 The WA minimum wage is currently $25.00 per week higher than the national minimum wage, in part derived from the stronger economic performance of WA compared to the other States and territories. The basis for maintaining this difference no longer exists within the context of the current economic climate. CCIWA’s consideration of the different statutory considerations particularly with regard to 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, leads CCIWA to submit that there should be no increase to either the WA minimum wage or the award rates of pay.
12 CCIWA submits that the WA minimum wage will continue to provide an effective safety net for the low paid given the significant reduction in the level of inflation along with falls in the cost of accommodation and fuel. CCIWA points out that since 2006 the WA minimum wage has increased by 32 per cent compared to an increase in inflation of 27.8 per cent between March 2006 and March 2015. No increase would still see low paid employees better off with the minimum wage for WA remaining higher than the national minimum wage which, in WA, provides the safety net for the majority of WA employers. No increase will help relieve pressure on those employers whose businesses are also affected by the economic slowdown.
13 CCIWA presented detailed submissions on the state of the economy, the capacity of employers to increase wages, and the system of fair wages and conditions. It tendered information on business expectations which showed a significant decline in expectations for the next quarter and next year. It showed the key issue for employers is wages costs.
UnionsWA
14 UnionsWA contends that the Commission should make a substantial real wage increase for awardreliant workers. This is essential to address the ever widening gap between low paid workers and the rest of the workforce in WA. UnionsWA advocates for a $30.00 per week increase to the WA minimum wage, the same amount for award rates from Levels C14 to C10, and a 3.9 per cent increase for higher rates to C5. UnionsWA’s preferred position would see the weekly minimum wage of $665.90 increase to $695.90 per week.
15 UnionsWA presented data to support its contention that vulnerable groups of employees are overrepresented within the private sector of the State industrial relations system. These employees are less likely to negotiate their own agreements and more likely to be award reliant, and therefore the outcome of the State Wage Case is a major opportunity for them to share in the benefits of WA’s leading position within the Australian economy.
16 UnionsWA emphasised that it seeks a percentage increase rather than a flat dollar increase, presenting data showing that there has been a small, but noticeable, compression of wage rates between 2010 and 2014 using a comparison between the pay scales of the Metal Trades (General) Award.
17 It submits that WA remains a highly unequal State in terms of income distribution between individuals, between households and between genders, and an increase to the WA minimum wage should constitute a real increase in order to address these gaps. UnionsWA says that Australia’s safety net used to be distinctively robust such that in 1992 Australia’s minimum wage was 55.7 per cent of the average full time wage; by 2003 it had fallen to around 50 per cent of the average wage. For low paid workers, some costs have more impact than others, for example the differential impact of housing costs on the low paid compared to other income groups. It referred to a recently published report on rental affordability by Anglicare.
18 UnionsWA addressed the statutory criteria in s 50A of the Act. It also presented data on the state of the WA and the Australian economies. It submits that low wages growth is a drag on the economy overall and cannot be justified simply by claims that ‘at least inflation is low’. The benefits of low inflation for consumers can only be fully realised if purchasing power is maintained. Given that workers on lower incomes have more propensity to spend their additional earnings, a strong increase to the WA minimum wage would be an important signal to the wider economy that consumer spending can be maintained. UnionsWA submitted that there is evidence to suggest that while WA is no longer the leading economy of the nation, it is still the strongest State in terms of Gross State Product. The strength of retail spending is seen as particularly important.
19 UnionsWA called Mr Shane Dirou, the Executive Officer of the WA No Interest Loans Network Inc and the WA Low Interest Loans Network Inc to provide direct evidence of the minimum wage as a complement to the Australian tax transfer system, reasonable wages as a facilitator of personal responsibility, the value of fair wages for making financial literacy meaningful, and the value of fair wages for relieving financial pressure on other household members. Mr Dirou gave evidence that No Interest Loans Network provides no interest loans to people on low income. The majority of these persons are holders of a health-care card, however the organisation also provides significant loan facilities to low wage earners. They assist over 1,000 individuals and families each year. In recent times, the organisation has been struggling to keep up with demand for loans by people on low incomes.
20 Mr Dirou gave evidence that the minimum wage should complement the welfare system because many young people on the minimum wage do not rely on welfare, rather they provide for themselves instead of heading to the Centrelink office. A real increase to the minimum wage makes independence for young adults closer to reality. People on the minimum wage do not earn enough to be treated as having the required earning capacity to simply borrow funds from a bank or credit society.
21 In Mr Dirou’s evidence, WA is building a generation of ‘moochers’ who have no choice other than to rely on their parents’ generosity, largely due to the minimum wage not keeping up with the cost of living in WA. WA is ranked the second highest in terms of cost of living which impacts upon a majority of our lowest paid workers greater than others in the community. Many of the workers on the minimum wage are not full time workers but rather parttime or casual employees, which impacts on their ability to earn a higher wage to provide a decent standard of living and move out of home. In Mr Dirou’s opinion, raising the minimum wage by $30.00 per week, instead of just CPI, will enable financially capable individuals to be less reliant on welfare and services, and to place money into the economy which will kickstart it.
WA Council of Social Service
22 WACOSS points out it is the leading peak organisation for the community services sector in WA. It notes that many organisations in the community services sector are still incorporated entities without significant or substantial trading or financial activities and are therefore subject to the State industrial relations system. It has an interest in ensuring that the wages of all low paid employees, including those employed in the community sector, keep pace with the cost of living and community standards. It considers the minimum wage to be a vital means of protecting low income workers from poverty, as well as contributing to the delivery of economic benefits to the wider WA community.
23 WACOSS submits that an increase of $30.00 per week in the WA minimum wage rate and minimum award rates is consistent with a need to maintain a fair system of wages and conditions in the current WA context and is a very reasonable increase which takes into account current economic conditions.
24 The primary basis for WACOSS’s claim is the cost of living pressures facing low income households in WA. Over the period of the recent mining boom in WA, the WA population experienced extraordinary increases in many nondiscretionary living costs, most notably housing. While many in the WA population also benefited from significant salary increases over the same period, these benefits were not spread equally across the population and many low income households fell further behind as a result and are still trying to catch up.
25 With the end of the mining boom and the subsequent tightening of economic and fiscal conditions in WA, growth in some, but not all, major household costs has started to slow, however many of these costs have not fallen relative to the amount they grew over the time of the mining boom in particular. As such, the many low wage workers who achieved little relative benefit during the boom period have fallen further and further behind.
26 WACOSS contends that it has been many years since the minimum wage decision has delivered a demonstrable improvement to living standards for low wage employees. In reality, the minimum wage decisions have consistently fallen short of what WACOSS has considered, and submitted, as necessary for low wage employees to actually keep up with cost of living increases. As a result, the standards of living of those on the lowest wages have fallen further behind community expectations and standards.
27 WACOSS’s analysis shows that low income earners are already struggling to stretch their full time minimum wage salaries to cover the cost of living in WA. Every extra dollar a low wage worker earns is more than likely to end up boosting demand for goods and services, and WACOSS suggests that a $30.00 per week increase in the WA minimum wage will increase the spending power of those with the largest marginal propensity to consume, that is, those on lower incomes. The resulting increased spending will help drive growth in retail spending, improve consumer confidence and help drive the economy. WACOSS encourages the Commission to pay particular attention to the opportunity this State Wage Case provides to deliver ‘improved standards of living for employees’ by awarding an increase of $30.00 per week.
28 WACOSS submitted a detailed submission regarding who an increase in the WA minimum wage assists, the cost of living in WA and income inequality and attached its 2014 Cost of Living Report.
Meri Forrest
29 The Commission received an email submission from Meri Forrest, saying that the minimum wage of $665.00 is vastly inadequate and that if politicians had to pay rent and feed themselves and a child on the paltry amount for a month, they would be more likely to give adequate increases.
SUBMISSIONS IN REPLY
The Hon. Minister for Commerce
30 The Minister submits that although UnionsWA accurately states the WA economy is projected to grow by almost $40 billion over the forecast period, it should be read in the context of the State Budget forecasts for Gross State Product (GSP) growth in percentage terms. Specifically, GSP is expected to grow at the slowest rate of growth since 199091, well below the longrun trend growth of 4.6 per cent per annum over the five years to 201819. The State Budget papers also highlight a marked contraction in the State’s domestic economy as measured by the SFD which fell by 2.2 per cent in 201314 and is forecast to contract further by 2.5 per cent in 201415 and 1.25 per cent in 201516. This reflects a substantial decline in business investment and subdued growth in household consumption which are flowing through to a softer local labour market.
31 In relation to CCIWA’s contention that the cost of living for WA employees has not significantly changed compared to this time last year, the projection in annual average terms for the Perth CPI is that it will be 2 per cent higher in 201415.
Chamber of Commerce and Industry of Western Australia
32 CCIWA agrees with the Minister’s acknowledgement that ‘it is important that minimum and award wage increases do not threaten the capacity of employers to sustain and create employment’. In CCIWA’s view, given the precarious nature of the labour market, even an increase in line with inflation will have a negative impact on employment.
33 CCIWA believes Treasury’s forecast of 2 per cent inflation is an overestimation; CCIWA believes that the CPI for the 201415 period will reach 1.5 per cent.
34 CCIWA considers that the increases sought by UnionsWA and WACOSS are exceedingly high and do not reflect the current circumstances facing the low paid or the economy. They would result in reduced working hours and lost jobs for low paid employees as well as establishing a barrier to employment for young workers and the long term unemployed. Given the substantial decline in the WA and national economies since this time last year, CCIWA submits that the claim of UnionsWA and WACOSS is irresponsible and would have a significant detrimental effect on those employers and employees to whom the Order would apply. It points out that UnionsWA has not considered the high level of unemployment in its submissions, nor established any basis for the formulation of its position.
35 CCIWA presented submissions on who is likely to be impacted by the State Wage Case. It also submits that in the current economic environment, there is a strong need to focus on the cost impact of any increase to award rates of pay and that, if any increase is granted, it should be a flat dollar increase because it provides a proportionately higher benefit to the low paid compared to a percentage increase which provides a greater monetary benefit to those employees on higher award classifications and also applies greater pressure on employers who need to focus on the need to reduce costs.
36 CCIWA also addressed wage inequality, the objective of the need to protect employees who may be unable to reach an industrial agreement, and cost of living for the low paid. It addressed encouraging ongoing skill development, equal remuneration and the capacity of employers to bear costs of increased wages and replied in detail to the WACOSS submission.
UnionsWA
37 UnionsWA, in response to the Minister’s submission, states that increases to the minimum wage based on CPI measures alone will not satisfy s 50A(3)(a)(ii) – (iv) of the Act. It endorses WACOSS’s position that the increase in the cost of essential items is hardest felt by low income households. Granting no increase would continue the decline in the proportion of the WA minimum wage compared to average weekly earnings, not the Wage Price Index (WPI). It submits that the CCIWA’s submission of a zero increase to the minimum wage is contrary to every part of s 50A(3) of the Act.
38 Further, the WA State Budget for 201415 increased household fees and charges by around 6.6 per cent which is still higher than the minimum wage increase being asked for by the Minister. The increase sought by UnionsWA and WACOSS would best meet the needs of the low paid when meeting cost increases to essential services. Federal Budget changes will be a ‘live issue’ for 201516 and should remain a consideration for the Commission when determining to meet the needs of the low paid and contribute to improved living standards.
39 UnionsWA notes that there has been a small, but noticeable, compression of wage rates over the period between 2010 and 2014 and that the compression has been more pronounced at the higher rates than the lower rates. It submits its claim seeks to address both the desire to target increases of most benefit to those employees who are actually on the minimum wage and the compression of relativities within awards. It considers its claim is therefore superior to the Minister’s claim. UnionsWA says that the Minister’s submission, that a greater degree of wage restraint is necessary to support employers in the current economic conditions, is not supported by the WA Treasury attachment which spoke about the decline in purchasing power. This decline will not be arrested by a CPIonly increase. It is important that an increase to the level of the minimum wage makes a contribution to increasing consumption.
THE STATUTORY CRITERIA
40 The Act in s 50A(3) obliges the Commission to take into consideration:
(a) the need to —
(i) ensure that Western Australians have a system of fair wages and conditions of employment; and
(ii) meet the needs of the low paid; and
(iii) provide fair wage standards in the context of living standards generally prevailing in the community; and
(iv) contribute to improved living standards for employees; and
(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;
and
(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; and
(c) to the extent that it is relevant, the state of the national economy; and
(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; and
(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; and
(f) relevant decisions of other industrial courts and tribunals; and
(g) any other matters the Commission considers relevant.
41 The submissions before us also addressed each of these considerations.
Ensuring that Western Australians have a system of fair wages and conditions of employment, providing fair wage standards in the context of living standards generally prevailing in the community, and meeting the needs of the low paid
42 The Minister submits it is difficult to determine which employees constitute the low paid group and what level of minimum wage would meet the variety of personal, family and household circumstances amongst low paid employees. Maintenance of the real value of the WA minimum wage is an important element in providing fair wages in the context of community standards. A flat dollar adjustment to minimum and award wages would ensure that the greatest benefit of this year’s State Wage Order is directed to the lowest paid.
43 CCIWA says that the CPI provides the most reliable measure of increases to the cost of living and over the past 12 months there has been a substantial decline in the level of inflation, currently sitting at 1.4 per cent for Perth in the year to March 2015. This also reflects a substantial decrease in the costs of a number of key components of the index. There has been a decline of petrol prices and a shift in housing affordability with a fall in the medium rental prices. The increase in vacancies means that the stock of affordable rental properties will increase as those who can afford to upgrade rental properties or purchase their own home do so. CCIWA cautioned against ‘unpacking’ the various components of CPI.
44 CCIWA submits that strong competition between two major retailers has resulted in a reduction in prices in both major outlets. Australia has the highest minimum rate of pay compared to any other OECD member country. Oncosts such as penalty rates and allowances further improve the living standard of WA employees. Consideration needs to be given to a combination of both minimum wages and the tax transfer system in providing an effective safety net.
45 CCIWA asks the Commission to consider the impact that a high minimum wage has on the ability for people to move from social security benefits to paid employment because a high minimum wage can act as a barrier to entry to the workforce. Increases to the minimum award wage through the State Wage Case are unlikely to be a key factor in the decision of most individuals to seek employment. There is a high level of unemployment currently seen across both WA and Australia, and the high cost of employing people contributes to levels of employment. The cost of labour makes up such a large proportion of costs, and large cost savings are made by reducing the size of the labour force. Major companies are consistently downsizing their operations. Job cuts in the mining and resources sector have an impact on local businesses and jobs. Keeping the minimum wage at a level which allows employers to maintain staffing levels or provide employment opportunities to the unemployed is therefore vital.
46 CCIWA submits that for small businesses in the State system, the minimum rate of pay is higher than those applicable to their larger competitors in the national system, which has a direct impact on their ability to compete and operate profitably. Small businesses are vulnerable, and a key reason for small business failure is an inability to cope with costs and an increase in debt.
47 In relation to the tax transfer system, CCIWA refers to a report which examined the interaction between the national minimum wage and the tax transfer system which found that although between January 1986 and January 2012 there was a minimum $7.67 per week real growth in the minimum wage, the disposable income of a single person working for the minimum wage would have increased in real terms by $53.00 per week due to an almost halving of the income tax paid by that person.
48 UnionsWA notes that for low paid employees some costs have more impact than others, a key example being the differential impact of housing costs. There is a need to maintain a minimum wage with a high purchasing power. A substantial increase, well above CPI inflation, is required.
49 WACOSS says the minimum wage process of annual review and adjustment is imperative to protecting the lowest paid workers within our community. Research undertaken by the Fair Work Australia, which is reasonably comparable for the purposes of the WA minimum wage, indicated that between 10 per cent and 11 per cent of all adult employees earned between 100 per cent and 120 per cent of the federal minimum wage. Of the employees below, on or slightly above the minimum wage:
- 51 per cent were women compared with 47 per cent of the total workforce;
- 58 per cent were partnered, and approximately half of these had dependent children;
- 5 per cent were sole parents with dependent children;
- 14 per cent worked less than 30 hours per week;
- 11 per cent worked in the healthcare and social assistance industries;
- The industries which had the most employees were Accommodation and Food services, Healthcare and social assistance, and Retail trades.
50 Occupations with the most employees earning below, at, or just above the minimum wage were labourers, community and personal service workers, sales workers, technicians and trade workers. Community members who are affected by the ability of wage increases to contribute to a ‘fairer’ system of wages and conditions include:
- workers in the WA community sector;
- women;
- young people; and
- people in insecure work arrangements.
51 WACOSS examined these in detail. With respect to the cost of living, WACOSS sees the plight of low income individuals and households - in particular, those who have struggled to achieve and maintain an acceptable standard of living by WA standards whilst working full time. Low wages today hinder the ability of households to develop financial resilience which in turn increases the likelihood that households will be less financially secure later in life, and will place increased pressure on the welfare system and the wider economy into the future. The increase in the cost of essential items is hardest felt by low income households.
52 WACOSS referred to its Cost of Living Report, submitting that the unaffordability of housing in WA and the ongoing unaffordability of rental property housing must be included in the Commission’s considerations. The proposed $109.00 per year increase in compulsory third party premiums equates to an additional weekly cost of approximately $2.00 per week, and this alone is 7 per cent of the WACOSS total claim of $30.00 per week. This highlights the importance of delivering WACOSS’s full $30.00 per week claim if the Commission is to seek to improve employees’ standards of living.
53 CCIWA says that it is important to note that the greater part of WACOSS’s submission considers the impact of various matters on those on ‘low incomes’, which is a broad definition and includes those who are also reliant on sources of income other than paid employment. CCIWA does not consider that increases to the minimum wage have been effective in addressing the gender pay gap issue. The more effective means of addressing affordable childcare is the tax transfer system. It is also unclear how a $30 increase to the WA minimum wage will improve the resilience and self-sufficiency of low paid workers. Rather, it may well increase the precarious nature of their employment because in the situation of a downturn in business, it is easier to adjust labour costs by reducing the hours of work of, or terminating, casual employees than it is to reduce the hours or terminate permanent employees. One of the areas in which there has been a noticeable reduction is rental and housing affordability. There has been a decline in the cost of electricity in July 2014. The cost of utilities is reflected in CPI and is therefore considered by the Commission in its previous State Wage Order decisions.
Protecting employees who may be unable to reach an industrial agreement
54 The Minister submits that protecting vulnerable employees is clearly an important aspect of the Commission’s wage setting function however the minimum wage for low paid employees should allow scope for negotiation of agreements which lead to productivity improvements. A CPI based adjustment should protect the needs of the low paid while not reducing the impetus for employees and employers to pursue bargaining.
55 UnionsWA submits that increases to the minimum wage are more likely to encourage bargaining in lower wage sectors, and at any rate do not constitute the principal ‘incentive’ to embark upon bargaining in individual workplaces. The Commission should put no weight on claims that a substantial minimum wage increase will act to discourage bargaining.

Encouraging ongoing skills development
56 The Minister submits that since apprentice numbers peaked in 2010, apprenticeship commencements have decreased by 16.1 per cent overall. The total number of apprentices in training across the State has fallen slightly over the last year. There has been an 8.9 per cent decrease in the number of traineeship commencements in 2014. Since the recent peak in traineeship commencements in 2012, commencements have reduced overall by 20.8 per cent. The total number of employees currently in training in WA decreased slightly as at 31 December 2014. The Minister urges the Commission to consider the potential impact of any minimum wage increase on the willingness of employers to engage staff in training arrangements.
57 In relation to encouraging ongoing skills development, CCIWA points out that apprentice wages are still a significant part of the cost of employing an apprentice and this cost increases as a proportion of total costs as the apprenticeship progresses. Apprentices are frequently supervised by award-based employees whose wages will either be directly or indirectly impacted upon by the State Wage Case Order decision, thus increasing the cost of supervision. There is a need for caution in increasing the costs of engaging an apprentice.
58 UnionsWA submits that unless regular and generous increases in apprentices wages flow from minimum wage increases, apprenticeships will become increasingly unattractive. UnionsWA argues that a substantial wage increase that seeks to address the disparity between minimum rates and average weekly earnings will play its part in making apprenticeships more attractive thereby encouraging greater skills development. This has been recognised in the national system and should be recognised in the State system. It provided data about course fees.
59 WACOSS submits that the full rate of the increase to the minimum wage must be applied to both junior and adult wages. To provide only a proportion of the minimum wage increase would be unfair as it would mean that the Commission would be failing to meet the needs of the youngest and lowest paid full time workers.
Providing equal remuneration for men and women for work of equal or comparable value
60 The Minister submits that the gender pay gap in Western Australia increased from 23.6 per cent in November 2013 to 25.6 per cent in November 2014 compared to 17.1 per cent to 18.8 per cent nationally over the same period. In both cases, the widening of the gap reflects male average earnings having increased at a faster rate than earnings for females.
61 UnionsWA urges us to have regard to gender pay inequity more broadly noting that in WA the gender pay gap can be seen to exceed the national gender pay gap on every available measure. It recognises that while the minimum wage plays only a modest role in reducing the gender pay gap, very little else will work to reduce it without regular, substantial real increases to the minimum wage.
The state of the economy of Western Australia
62 We again express our thanks to the WA Department of Treasury for providing its analysis of WA’s economy and for making available Mr David Christmas, Director of the Economic and Revenue Forecasting Division, to give evidence in these proceedings. The evidence is of assistance to the Commission in our consideration of the corresponding analyses of the WA and national economies in the submissions before us.
63 The WA economy as measured by GSP grew at an average of 5.9 per cent per annum over the three years to 201314, but it is expected to moderate to 3.25 per cent in 201415 and to ease further to 2 per cent by 201516. Strong contributions from the external sector are expected to be moderated by a weak domestic economy as measured by SFD which contracted by 2.2 per cent in 201314. Domestic activity is forecast to decline further in 201415 and 201516, and remain unchanged in 201617. This will be the first time on record that SFD will have contracted over two or more consecutive financial years.
64 The primary reason for the weakness is a tapering of investment from unprecedented levels reflecting the gradual completion of construction on major resource projects and recent sharp falls in commodity prices, particularly iron ore and oil, which has reduced the probability of major new resource investment projects emerging. The substantial decline in key commodity prices has also reduced revenue for mineral and energy producers leading to cost cutting and impacting on the growth in household incomes.
65 Annual growth in household spending has eased to its weakest pace since 2009 and is expected to remain below the long run average over the near term, constrained by lower wage and steadier population growth. Growth in dwelling investment is expected to ease. The sustained weakness in the domestic economy is expected to result in GSP growth remaining below trend out to 201819.
66 There is a rising unemployment rate, subdued growth in full time hiring and a slowing of wage growth to its weakest pace on record. Employment growth is expected to grow at a more moderate pace than in recent years while the unemployment rate is expected to peak at 6.25 per cent in 201516. Furthermore, wages growth will likely remain subdued consistent with business’ efforts to rein in costs.
67 WA’s population growth has eased. Inflation in Perth has been weak over the first part of 201415, mainly constrained by falling automotive fuel prices and the removal of the carbon tax from 1 July 2015. Inflation is expected to grow by 2 per cent in 201415 before returning to the middle of the Reserve Bank of Australia’s target band by 201617.
68 We reproduce the table of major economic aggregates for WA referred to by Mr Christmas.
Table 1.1: Major Economic Aggregates, Annual Growth (%)(a)

2013-14
2014-15
2015-16
2016-17
2017-18
2018-19

Actual
Estimated
Budget
Forward
Forward
Forward


Actual
Estimate
Estimate
Estimate
Estimate
State Final Demand (SFD)
-2.2
-2.5
-1.25
0.0
1.0
2.0
Gross State Product (GSP)
5.5
3.25
2.0
3.5
2.75
2.75
Employment
1.1
2.5
1.75
1.75
2.0
2.0
Unemployment rate(b)
4.8
5.5
6.25
6.0
5.75
5.25
Consumer Price Index (CPI)
3.0
2.0
2.25
2.5
2.5
2.5
Wage Price Index (WPI)
2.8
2.25
2.75
3.0
3.25
3.5
Population
2.6
1.9
2.0
2.1
2.2
2.2
(a) Annual average growth unless otherwise stated.
(b) Average rate over the year.
Source: 2015-16 Budget, Budget Paper No 3
(Submission of the Hon. Minister for Commerce
Attachment A, p 2)
69 WA Treasury believes economic growth is expected to slow to a below-trend pace over the coming years, with strong contributions from exports moderated by a further tapering of business investment from unprecedented levels. Growth is forecast to slow to 2 per cent in 201516 before lifting modestly over the following years. Activity in WA’s domestic economy has moderated. The recent fall in SFD compares to a 1.2 per cent growth in the national domestic economy over 2014. In the case of business investment, the decline was less severe at the national level. Household consumption has shown the weakest annual growth since 2009, growing by a very modest 1.6 per cent in 2014. Retail trade and sales of motor vehicles have been subdued.
70 Conditions in WA’s labour market have remained relatively subdued over the past year with employment growing below trend and the unemployment rate drifting higher. Despite this, the State’s labour market continues to outperform the national equivalent. Employment grew by 2.2 per cent in annual average terms to April 2015, which is below the historical average of 2.7 per cent per annum. We set out the information on the annual average change in persons employed by industry sector as provided in the Hon. Minister’s submissions.

71 Annual growth was mainly underpinned by part time employment which grew by a robust 4.4 per cent in the year to April. Conversely, full time hiring was weaker at 1.4 per cent indicating that underlying labour market conditions remain soft. A number of service sector industries such as Professional services, Arts and recreation, and Retail trade showed an annual employment growth. Trends in job vacancy measures for WA have declined over recent months and remain at low levels.
72 WA’s unemployment rate has increased, averaging 5.6 per cent over the four months to April 2015. This is an increase from 5.2 per cent in 2014. The State’s unemployment rate remains the lowest of all States and below the national rate. WA’s unemployment rate is forecast to grow to 5.5 per cent in 201415 and 6.25 per cent in 201516.
73 Annual growth in the State’s WPI moderated from 3.1 per cent in March 2014 to just 2.2 per cent in March 2015, the slowest growth on record since 1998-99. Inflation at 2.3 per cent in the year to March meant that wages as measured by the WPI fell by 0.1 per cent in real terms, the first fall in real wages since 2006. There was a significant moderation in private sector wages which grew by just 2.1 per cent in March 2015, the weakest on record.
74 The slowdown in annual wages growth has been more pronounced in WA than nationally. Historically, growth in WA’s WPI has exceeded the national equivalent during periods of stronger economic conditions in the State relative to national growth. Wage growth in WA is expected to be more closely aligned with growth at the national level over the coming years. The State’s WPI is expected to grow by 2.25 per cent in 201415, well below the long run average of 3.9 per cent per annum.
75 Inflation as measured by growth in the CPI in Perth has eased in annual average terms to 2.3 per cent in the March quarter 2015, down from 3 per cent over 201314 and slightly higher than growth at the national level. The CPI is expected to remain subdued at 2 per cent in 201415 and 2.25 per cent in 201516.
National economic outlook
76 Growth in the Australian economy continued at below trend pace over the past year as business investment waned further. Gross Domestic Product (GDP) grew by 2.7 per cent over 2014, which is lower than the long run average growth of 3.2 per cent, but up from 2.1 per cent growth in 2013. Labour market conditions at the national level remain subdued by historical standards, employment increasing by 1.2 per cent to April 2015 while the unemployment rate remained above 6 per cent.
Capacity of employers to pay
77 The Minister submits that while there is little specific data available to assess the health of those businesses likely to be affected by the State Wage Order, there is evidence to suggest that WA businesses have been affected by the softening domestic economy. The GOS plus GMI measure produced by the Australian Bureau of Statistics also suggests some sectors are facing a more challenging trading environment. While that measure recorded an improvement in a number of industries in 201314, it recorded a decline in several industries known to employ significant numbers of award-reliant employees such as Retail trade Accommodation and food services, Administrative and support services, and Other services.
78 In the Minister’s view, in these circumstances there is a heightened risk that excessive increases to minimum and award wages could impede the ability of employers to maintain and create job opportunities. The exact relationship between changes in the minimum wage and employment levels is unknown, nonetheless it is reasonable to suppose that there is a point at which rising wages would have an impact on employment and that prevailing economic conditions also affect the capacity of employers to meet higher wage costs.
79 CCIWA says the Minister’s concern is reflected in the decline in the employment intentions of businesses which continue to be in negative territory, meaning businesses are continuing to shrink the size of their workforce. CCIWA is of the view that an increase to the WA minimum wage will result in a reduction in the number of people employed or hours of work offered to staff.
80 UnionsWA submits that the Commonwealth government has recently provided a major stimulus to boost businesses more likely to be in the State system. It freezes increases to the superannuation guarantee contribution and insofar as they are considered an employment cost, this should be considered as a contribution to employers’ capacities to pay.
81 CCIWA responds that it is difficult to understand how a $30.00 per week increase in award rates of pay can be absorbed into the government’s proposed small business tax relief package. The package is capped at $1,000 per annum which does not cover the $1,500 per annum wage increase which would result from UnionsWA’s $30.00 claim. Further, the intention of that package is to encourage small businesses to invest, take on new staff and grow. Increasing the wages of existing staff will substantially reduce the ability for small businesses to use the tax savings to help generate jobs or increase working hours.
The Fair Work Commission Annual Wage Review 2014-15
82 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 State Wage Order decision that the Fair Work Commission Annual Wage Review is a relevant and significant consideration for the purposes of s 50A(3)(f) of the Act.
83 We maintain that view and consider the Fair Work Commission (FWC) Annual Wage Review 2014-15 [2015] FWCFB 3500, which increased the national minimum wage by 2.5 per cent from $640.90 per week to $656.90 per week from 1 July 2015, an increase of $16.00 per week, to be a relevant and significant consideration.
CONSIDERATION
84 Previous State Wage Order 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 preferring one or more considerations in it to the exclusion of the other considerations. The considerations under s 50A of the Act are not easily reconciled. They require balancing. All of the measures, as they are encompassed within the considerations we are obliged to take into account, are relevant to our decision.
85 The respective submissions of CCIWA and UnionsWA, together with the submission by WACOSS, emphasise those considerations which support the views they hold. However, the weight to be given to one consideration may well be balanced by the weight to be given to the other considerations.
86 Our obligation to meet the needs of the low paid (s 50A(3)(a)(ii)) and to contribute to improved living standards for employees (s 50A(3)(a)(iv)) are strong indicators that the submission that there be no increase to the WA minimum wage should not be accepted. The need to protect employees who may be unable to reach an industrial agreement (s 50A(3)(a)(v)), given the evidence of the growth in wages generally in the community, also suggests that awarding no increase would not meet that consideration.
87 We recognise that unemployment in WA is rising and understand the submission that no increase to the WA minimum wage may increase employment opportunities. However, it is by no means clear that the rising unemployment is in the industry sectors most likely to be affected by the WA minimum wage. The evidence before us of the growth in employment in the Retail trade, Health care and social assistance, Accommodation and food services and Wholesale trade suggest that some of the employment in those sectors which had been lost to the more highly paid mining sector may be returning.
88 Moreover, the link between minimum wage increases and the level of employment is complex. In the years since 2006, when this Commission was obliged by amendments to the Act to set a WA minimum wage in the absence of a national minimum wage, there is no evidence suggesting that the increases to the WA minimum wage since 2006 have materially affected the industry sectors most likely to be affected by it.
89 We recognise, and have previously recognised, 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. This gives recognition to the WACOSS submission that the minimum wage process of annual review and adjustment is imperative to protecting the lowest paid workers within our community. We consider the evidence of Mr Dirou, and the submissions of WACOSS to be helpful to our considerations even though they do not address directly the circumstances of employees in WA who are on, or just above, the WA minimum wage.
90 The concept of fairness inherent in the need to ensure that Western Australians have a system of fair wages and conditions of employment (s 50A(3)(a)(i)) and provide fair wage standards in the context of living standards generally prevailing in the community (s 50A(3)(a)(iii)) brings into consideration that wages generally in the community, and the national minimum wage, have increased.
91 We have recognised that an increase to the WA minimum wage contributes to providing equal remuneration for men and women for work of equal or comparable value (s 50A(3)(a)(vii)) and have noted the distinction between this consideration and the gender pay gap. 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 dependent on annual increases to the minimum wage.
92 We therefore do not accept the submission that we should award no increase to the WA minimum wage.
93 The submissions of UnionsWA and WACOSS, and perhaps the brief submission of Meri Forrest, together seek a significant increase to the minimum wage. We recognise the validity of their submissions however they cannot be determinative of the decision we are obliged to make under s 50A(3) of the Act to the exclusion of all other considerations.
94 We also are obliged to consider the capacity of employers as a whole to bear the costs of increased wages, salaries and other remuneration (s 50A(3)(d)), and recognise that any increase we award will be an additional employment cost to employers. A significant increase will be a significant cost and this must be a relevant consideration given the evidence that wage costs continue to be the key priority issue for employers in an environment of cost reduction.
95 The employment effects of the decision we make will depend upon many factors. There is no evidence before us that our previous minimum wage decisions have had a direct impact on levels of employment, inflation or productivity. We consider this may be explained by the 2006 Plowman report which concluded, amongst other things, that there has been little minimum wage effect on the economy as a whole, and weak effect on those sectors with higher levels of low paid employees. Minimum wage increases have had only minor effects on employment.
96 However it is significant that Professor Plowman suggests that aggregate demand in the WA economy moderates, to a considerable extent, any minimum wage effects. Except for 2009, since 2006, the WA economy as a whole has been in a relatively strong position, including compared to the national economy, and this is likely to have moderated the effects of past increases to the WA minimum wage.
97 On this occasion the economic circumstances of WA are significantly different from previous years. For the first time on record the State’s domestic economy as measured by SFD has contracted over two or more consecutive financial years, and the forecast is that domestic activity is expected to decline further in 201415 and 201516 and remain unchanged in 201617. The State’s economy as a whole including exports as measured by GSP is certainly more positive although it is forecast to grow at the slowest rate of growth since 199091, well below longrun trend growth of 4.6 per cent per annum over the five years to 201819.
98 On previous occasions, we have pointed to the strength of the WA economy, and its strength relative to the national economy, to justify awarding an increase to the minimum wage which may exceed the increase given to the national minimum wage. Now WA’s GSP growth is more in line with growth in the national economy and growth in the national economy is likely to exceed growth in the WA economy.
99 We have taken into account the considerations in s 50A(3)(a) of the Act, and are aware of the need to ensure that the Western Australian award framework represents a system of fair wages and conditions of employment (s 50A(3)(e)). We take into account the estimated impact on the representative household from the WA Budget papers, noting as CCIWA points out, that some of the cost increases, for example to utilities, are costs which employers as well as employees have to bear.
100 We consider there is much to be said for the submission of the Minister that in the current economic circumstances there should be a greater degree of wage restraint.
101 We give considerable weight too to the increase to the national minimum wage from the FWC Annual Wage Review 2014-15. The timing of the Annual Wage Review and the date of operation of the minimum wage set by the FWC is contemporaneous with the obligations on us under s 50A of the Act. The national minimum wage applies to the vast majority of minimum wage employees in WA and is set after a comprehensive examination of information, including information directly relevant to the economy of WA, and that it is reached according to comparable legislative considerations.
102 In both its written submissions and its submissions following the FWC Annual Wage Review 2014-15, UnionsWA contended that the differences in language between s 284(1) of the Fair Work Act 2009 (Cth) (the FW Act) and s 50A(3) of the Act, especially in relation to consideration of living standards of people on the minimum wage and the award system, are of some significance. In both the 2012 and 2013 WA State Wage decisions, we referred to the “substantial overlap” between the requirements of s 284(1) of the FW Act and s 50A(3) of the Act, in terms of considerations to be taken into account: (([2012] WAIRC 00344; (2012) 92 WAIG 557); ([2013] WAIRC 00347; (2013) 93 WAIG 467)). We remain of that view. While it is correct to say there is some difference in emphasis in the respective statutory provisions, it also needs to be borne in mind that s 284(1) of the FW Act is to be read with the objects of the FW Act in s 3: Annual Wage Review 2011-12 [2012] FWA 5000. Amongst other things, the objects of the FW Act in s 3 include “ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions…through…minimum wage orders” (s 3(a)).
103 Given that we are required to balance a range of considerations under s 50A(3) other than those in par (a) we do not consider that from the terms of the legislation alone we are required to award a higher increase or maintain a higher minimum wage in WA. Each WA State Wage Case will require consideration by the Commission of the circumstances prevailing at the time.
104 The difference between the level of the WA and national minimum wages is not an irrelevant consideration. It is an issue which has been regularly raised in previous State Wage Cases as well as this one. To award a significant increase to the WA minimum wage which, in the case of the UnionsWA and WACOSS claim, would result in the WA minimum wage being $39.00 per week higher that the national minimum wage, will disproportionately increase the wage costs of employers in the WA system compared to their counterparts in WA in the national system both in WA and elsewhere in Australia.
105 The balancing of all the considerations under s 50A(3) considerably reduces the opportunity for the WA minimum wage, which applies to such a small proportion of WA minimum wage earners, to be able to address many of the issues relied upon by UnionsWA and WACOSS. There have been real increases to the WA minimum wage since 2006 even if those increases have consistently fallen short of what Unions WA and WACOSS have considered, and submitted, as necessary for low wage employees to actually keep up with cost of living increases. We have observed in previous decisions that the WA minimum wage has only a limited capacity to address issues of housing affordability and the gender pay gap.
106 We place considerable weight upon the submissions we receive, including those which are consistently made each year, and the decision we make depends, as it should, very much on equity, good conscience, and the substantial merits of the case presented. It must be acknowledged that the ability to award significant real wage increases to the WA minimum wage is not unconstrained.
DECISION
107 After considering all of the evidence and the submissions before us on this occasion, we conclude that we should award a lesser increase than we awarded in our 2014 decision.
108 We have decided that the WA minimum wage should be increased by $14.00 per week to $679.90 per week. This is an increase of 2.1 per cent.
109 The operation of 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.
110 The WA minimum wage remains higher than the national minimum wage by $23.00 per week, although a consequence of our decision is that the gap between the two minimum wages is reduced.
111 We have generally preferred to increase award rates of pay by a flat-dollar amount because we consider a flat increase targets those employees who are on the minimum wage or slightly above it and it 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. We are aware that this will over time compress award relativities.
112 On this occasion, UnionsWA has demonstrated the level of compression at higher wages levels in the Metal Trades (General) Award. We are persuaded on this occasion to adjust award wage rates by 2.1 per cent. We take into account that a percentage increase to award rates will give a greater increase to higher award rates than the minimum wage, and the corresponding cost to employers. We observe that the increase is able to be absorbed into any over award payment such that it will apply only to employees who are paid the award wage; any wage paid over the award wage is able to be used to offset the increase. The rounding of calculations in awards is to be in accordance with the methodology in Appendix A to the Reasons for Decision in the 2013 State Wage Order ([2013] WAIRC 00347; (2013) 93 WAIG 467 at 476).
113 It is open to any party to seek to vary an award to address issues which arise from the compression of relativities. An application to do so does not undermine this, or previous State Wage Order decisions and can be dealt with by a single commissioner.
114 We are not persuaded on this occasion by the UnionsWA and WACOSS submissions that we should apply the full rate of the increase to junior wages. In particular, we are uncertain of the employment effects of doing so, and nothing put on this occasion has reassured us that it is appropriate to do so on this occasion. We have noted in the 2012 State Wage Order decision ([2012] WAIRC 00346; (2012) 92 WAIG 557) the absence of evidence from which we could reach a conclusion regarding the effect of doing so on the need to encourage ongoing skills development. If we are to be asked to apply the outcome of the national review of apprentice and trainee wages and conditions then a case will need to be presented. This can be presented in advance of the next State Wage Case so that its result may be incorporated into the decision to issue on that occasion.
INDUSTRY/SKILL LEVELS
115 The Minister circulated to the UnionsWA and CCIWA a newly revised list of industry/skill level classifications as provided by the Department of Training and Workforce Development. The newly revised list no longer includes traineeship names. Instead, it lists training packages, their National Qualification Codes and the relevant Australian Qualification Framework (AQF) certificate levels, grouped by level in alphabetical order based on the training package code.
116 The Minister advised that each traineeship undertaken in WA is allocated an industry/skill level based on the training package to which it belongs and the applicable AQF certificate level. The industry/skill level is then used, in combination with a trainee’s age and years out of school, to determine the appropriate minimum wage for award-free trainees. In some cases, traineeships belonging to the same training package are classified at different industry/skill level, due to differing AQF certificate levels.
117 Each training package has a three letter identifier code, known as a National Qualification Code. When employers and trainees enter into a training contract to establish a traineeship, the first section of the contract spells out the title and level of the qualification and the National Qualification Code, and the first three letters of the alphanumeric code denote the relevant training package.
118 When seeking the appropriate minimum wage for an award-free trainee, the relevant industry/skill level for a traineeship can be identified by matching the first three letters of the National Qualification Code and the AQF Certificate Level of the qualification on the training contract with the Level A, B or C section of the Industry/Skill level list.
119 There is no objection to those revisions and we consider it is appropriate to incorporate the list in the order to issue. We express our thanks to the Minister for circulating the newly revised list well in advance of the hearing.
THE STATE WAGE PRINCIPLES
120 No person suggested that any change is required to be made to the State Wage Principles. Section 50A(1)(d) of the Act obliges the Commission to set out a statement of principles to be applied and followed in relation to the exercise of jurisdiction to set the wages, salaries, allowances or other remuneration of employees or the prices to be paid in respect of their employment. The Statement of Principles July 2015 to issue remains unchanged from the Statement of Principles July 2014 apart from the necessary and consequential amendments to Principle 9.
MINUTE OF PROPOSED GENERAL ORDER
121 A minute of proposed General Order now issues. The Commission should be advised by 2.00pm on 15 June 2015 whether or not a speaking to the minutes is requested. If a speaking to the minutes is necessary, it will be dealt with on the papers and written submissions should be received by 10.00am on 16 June 2015.
Commission's Own Motion -v- (Not applicable)

2015 STATE WAGE ORDER PURSUANT TO SECTION 50A OF THE ACT

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

 

CITATION : 2015 WAIRC 00435

 

CORAM

: Chief Commissioner A R Beech

 Acting Senior Commissioner P E Scott

 Commissioner S J Kenner

 Commissioner J L Harrison

 Commissioner S M Mayman

 

HEARD

:

Tuesday, 2 June 2015; WEDNESDAY, 3 JUNE 2015

 

DELIVERED : THURSday, 11 june 2015

 

FILE NO. : APPL 1 OF 2015

 

BETWEEN

:

on the commission's Own Motion

 

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

Legislation : Industrial Relations Act 1979 s 50A, s 50A(3), s 50A(3)(a)(i)-(v) & (vii), s 50A(3)(a) & (d)-(f), Minimum Conditions of Employment Act 1993 s 12, Fair Work Act 2009 (Cth) s 3, s 3(a), s 284(1)

Result : 2015 State Wage Order issued

Representation:

 


 

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

 

Mr P Moss and Ms L Smith on behalf of the Chamber of Commerce and Industry of WA (Inc)

 

Mr K Singh and Dr T Dymond on behalf of UnionsWA

 

Case(s) referred to in reasons:

Fair Work Commission Annual Wage Review 2014-15 [2015] FWCFB 3500

Fair Work Commission Annual Wage Review 2011-12 [2012] FWA 5166

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

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


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 18 – 19 April 2015, 22 April 2015 and 4 – 10 May 2015, and on the Commission’s website and in the WA Industrial Gazette on 22 April 2015 ((2015) 95 WAIG 458) inviting submissions from interested persons.  We set out below an outline of the submissions received.

SUBMISSIONS

The Hon. Minister for Commerce

3         The Minister notes that the Commission is required to consider a range of social and economic factors including the needs and living standards of the low paid, the capacity of employers as a whole to bear the costs of increased wages and the state of the economy of WA.  Economic growth in WA has begun to moderate from very strong rates experienced in recent years.  There has been a notable softening in domestic economic conditions as business investment tapers from a peak in 201213.  This is flowing through to more moderate labour market conditions.  Unemployment is gradually increasing, and in June 2014 wages began to decline in real terms for the first time since 2006.  Leading indicators are consistent with expectations that employment growth will remain modest in the near term.  It is the Minister’s submission that the current economic circumstances warrant a greater degree of wage restraint. 

4         Nonetheless, the Minister recognises the importance of providing a fair system of wages which meets the needs of the low paid.  The Minister submits it is appropriate to adjust the WA minimum wage in line with the Department of Treasury’s most recently published figure for estimated actual growth in the Perth Consumer Price Index (CPI) in 201415 and that adult award rates of pay be adjusted by the same flat dollar amount.  The Treasury forecast is 2 per cent which would result in the current minimum wage of $665.90 per week being increased by $13.30 to $679.20 per week.  State adult award wages would then be increased by a flat dollar amount of $13.30 per week. 

5         The Minister refers to Treasury’s overview of the economy and notes that in recent years the WA economy has grown at a very strong pace, supported by unprecedented levels of investment which have lifted the productive capacity of the economy and laid the foundation for the export phase of growth.  However, conditions in the WA domestic economy have softened and are expected to remain subdued over the next two years. 

6         The Minister referred to operating conditions for WA businesses, observing that there is little specific data available to assess the health of those businesses likely to be affected by the State Wage Order, however the total industry income from the sales of goods and services in WA has declined for three consecutive quarters to December 2014, the first consecutive quarterly declines since mid2009.  The Gross Operating Surplus (GOS) plus Gross Mixed Income (GMI) measure also suggests that some sectors are facing a more challenging trading environment.  Declines in the total industry income from the sales of goods and services were recorded in several industries known to employ significant numbers of awardreliant employees such as Retail trade, Accommodation and food services, Administrative and support services, and Other services. 

7         There is a heightened risk that excessive increases to minimum and award wages could impede the ability of employers to maintain and create job opportunities.  The exact relationship between changes in the minimum wage and employment levels is unknown, nevertheless, it is reasonable to suppose that there is a point at which rising wages would have an impact on employment, and the prevailing economic conditions also affect the capacity of employers to meet higher wage costs.  The Minister submits that an adjustment to the WA minimum wage in line with CPI and an equivalent flat dollar adjustment to State award wages would provide a fair increase to employees while reducing the risks for employers that might result from a real wage rise at the current time. 

Chamber of Commerce and Industry WA

8         CCIWA submits that WA employers and employees are facing a significantly more challenging economic environment compared to this time last year.  This is characterised by: 

(a) A substantial decline in WA’s economic performance which has seen WA trailing most of the other states and territories in terms of the growth of State Final Demand (SFD). 

(b) A significant drop in business confidence with employers reducing capital expenditure and employment levels.  Wage costs continue to be the key priority issue for employers in an environment of cost reduction. 

(c) A significant increase in unemployment levels, with a spike in redundancies.  The opportunity for future employment is also diminishing due to a fall in the job vacancy rates. 

(d) Diminished job opportunities which has negatively affected consumer confidence, resulting in a shift towards paying off debt in preference to spending and by changes in spending patterns, is having a direct impact on the retail and hospitality industry. 

(e) A substantial decline in wage increases, with employees showing a clear preference for job security over increases to wages. 

(f) Extremely low levels of inflation which have meant that the cost of living for WA employees has not significantly changed compared to this time last year.  There have been falls in a number of key expenditure items including fuel, accommodation and grocery items. 

9         CCIWA therefore believes that the Commission should focus on the needs of those who are looking for work and those whose jobs could be lost or hours of work reduced as a result of increases to the award rates of pay and the WA minimum wage. 

10      In the context of the generally high impact that wages costs have upon small businesses, particularly in the retail, hospitality and other servicebased industries, private sector employers in the WA industrial relations system are likely to be small businesses and these account for 97 per cent of all businesses in WA.  Whilst small unincorporated businesses reflect a very small proportion of the total WA economy, under the right conditions many of these businesses have the potential to grow and prosper, thus delivering greater benefits to the economy as a whole.  This potential is stymied where they are faced with greater cost barriers compared to larger competitors. 

11      The WA minimum wage is currently $25.00 per week higher than the national minimum wage, in part derived from the stronger economic performance of WA compared to the other States and territories.  The basis for maintaining this difference no longer exists within the context of the current economic climate.  CCIWA’s consideration of the different statutory considerations particularly with regard to 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, leads CCIWA to submit that there should be no increase to either the WA minimum wage or the award rates of pay. 

12      CCIWA submits that the WA minimum wage will continue to provide an effective safety net for the low paid given the significant reduction in the level of inflation along with falls in the cost of accommodation and fuel.  CCIWA points out that since 2006 the WA minimum wage has increased by 32 per cent compared to an increase in inflation of 27.8 per cent between March 2006 and March 2015.  No increase would still see low paid employees better off with the minimum wage for WA remaining higher than the national minimum wage which, in WA, provides the safety net for the majority of WA employers.  No increase will help relieve pressure on those employers whose businesses are also affected by the economic slowdown. 

13      CCIWA presented detailed submissions on the state of the economy, the capacity of employers to increase wages, and the system of fair wages and conditions.  It tendered information on business expectations which showed a significant decline in expectations for the next quarter and next year.  It showed the key issue for employers is wages costs.   

UnionsWA

14      UnionsWA contends that the Commission should make a substantial real wage increase for awardreliant workers.  This is essential to address the ever widening gap between low paid workers and the rest of the workforce in WA.  UnionsWA advocates for a $30.00 per week increase to the WA minimum wage, the same amount for award rates from Levels C14 to C10, and a 3.9 per cent increase for higher rates to C5.  UnionsWA’s preferred position would see the weekly minimum wage of $665.90 increase to $695.90 per week. 

15      UnionsWA presented data to support its contention that vulnerable groups of employees are overrepresented within the private sector of the State industrial relations system.  These employees are less likely to negotiate their own agreements and more likely to be award reliant, and therefore the outcome of the State Wage Case is a major opportunity for them to share in the benefits of WA’s leading position within the Australian economy. 

16      UnionsWA emphasised that it seeks a percentage increase rather than a flat dollar increase, presenting data showing that there has been a small, but noticeable, compression of wage rates between 2010 and 2014 using a comparison between the pay scales of the Metal Trades (General) Award. 

17      It submits that WA remains a highly unequal State in terms of income distribution between individuals, between households and between genders, and an increase to the WA minimum wage should constitute a real increase in order to address these gaps.  UnionsWA says that Australia’s safety net used to be distinctively robust such that in 1992 Australia’s minimum wage was 55.7 per cent of the average full time wage; by 2003 it had fallen to around 50 per cent of the average wage.  For low paid workers, some costs have more impact than others, for example the differential impact of housing costs on the low paid compared to other income groups.  It referred to a recently published report on rental affordability by Anglicare.   

18      UnionsWA addressed the statutory criteria in s 50A of the Act.  It also presented data on the state of the WA and the Australian economies.  It submits that low wages growth is a drag on the economy overall and cannot be justified simply by claims that ‘at least inflation is low’.  The benefits of low inflation for consumers can only be fully realised if purchasing power is maintained.  Given that workers on lower incomes have more propensity to spend their additional earnings, a strong increase to the WA minimum wage would be an important signal to the wider economy that consumer spending can be maintained.  UnionsWA submitted that there is evidence to suggest that while WA is no longer the leading economy of the nation, it is still the strongest State in terms of Gross State Product.  The strength of retail spending is seen as particularly important. 

19      UnionsWA called Mr Shane Dirou, the Executive Officer of the WA No Interest Loans Network Inc and the WA Low Interest Loans Network Inc to provide direct evidence of the minimum wage as a complement to the Australian tax transfer system, reasonable wages as a facilitator of personal responsibility, the value of fair wages for making financial literacy meaningful, and the value of fair wages for relieving financial pressure on other household members.  Mr Dirou gave evidence that No Interest Loans Network provides no interest loans to people on low income.  The majority of these persons are holders of a health-care card, however the organisation also provides significant loan facilities to low wage earners.  They assist over 1,000 individuals and families each year.  In recent times, the organisation has been struggling to keep up with demand for loans by people on low incomes. 

20      Mr Dirou gave evidence that the minimum wage should complement the welfare system because many young people on the minimum wage do not rely on welfare, rather they provide for themselves instead of heading to the Centrelink office.  A real increase to the minimum wage makes independence for young adults closer to reality.  People on the minimum wage do not earn enough to be treated as having the required earning capacity to simply borrow funds from a bank or credit society. 

21      In Mr Dirou’s evidence, WA is building a generation of ‘moochers’ who have no choice other than to rely on their parents’ generosity, largely due to the minimum wage not keeping up with the cost of living in WA.  WA is ranked the second highest in terms of cost of living which impacts upon a majority of our lowest paid workers greater than others in the community.  Many of the workers on the minimum wage are not full time workers but rather parttime or casual employees, which impacts on their ability to earn a higher wage to provide a decent standard of living and move out of home.  In Mr Dirou’s opinion, raising the minimum wage by $30.00 per week, instead of just CPI, will enable financially capable individuals to be less reliant on welfare and services, and to place money into the economy which will kickstart it. 

WA Council of Social Service

22      WACOSS points out it is the leading peak organisation for the community services sector in WA.  It notes that many organisations in the community services sector are still incorporated entities without significant or substantial trading or financial activities and are therefore subject to the State industrial relations system.  It has an interest in ensuring that the wages of all low paid employees, including those employed in the community sector, keep pace with the cost of living and community standards.  It considers the minimum wage to be a vital means of protecting low income workers from poverty, as well as contributing to the delivery of economic benefits to the wider WA community. 

23      WACOSS submits that an increase of $30.00 per week in the WA minimum wage rate and minimum award rates is consistent with a need to maintain a fair system of wages and conditions in the current WA context and is a very reasonable increase which takes into account current economic conditions. 

24      The primary basis for WACOSS’s claim is the cost of living pressures facing low income households in WA.  Over the period of the recent mining boom in WA, the WA population experienced extraordinary increases in many nondiscretionary living costs, most notably housing.  While many in the WA population also benefited from significant salary increases over the same period, these benefits were not spread equally across the population and many low income households fell further behind as a result and are still trying to catch up. 

25      With the end of the mining boom and the subsequent tightening of economic and fiscal conditions in WA, growth in some, but not all, major household costs has started to slow, however many of these costs have not fallen relative to the amount they grew over the time of the mining boom in particular.  As such, the many low wage workers who achieved little relative benefit during the boom period have fallen further and further behind. 

26      WACOSS contends that it has been many years since the minimum wage decision has delivered a demonstrable improvement to living standards for low wage employees.  In reality, the minimum wage decisions have consistently fallen short of what WACOSS has considered, and submitted, as necessary for low wage employees to actually keep up with cost of living increases.  As a result, the standards of living of those on the lowest wages have fallen further behind community expectations and standards. 

27      WACOSS’s analysis shows that low income earners are already struggling to stretch their full time minimum wage salaries to cover the cost of living in WA.  Every extra dollar a low wage worker earns is more than likely to end up boosting demand for goods and services, and WACOSS suggests that a $30.00 per week increase in the WA minimum wage will increase the spending power of those with the largest marginal propensity to consume, that is, those on lower incomes.  The resulting increased spending will help drive growth in retail spending, improve consumer confidence and help drive the economy.  WACOSS encourages the Commission to pay particular attention to the opportunity this State Wage Case provides to deliver ‘improved standards of living for employees’ by awarding an increase of $30.00 per week. 

28      WACOSS submitted a detailed submission regarding who an increase in the WA minimum wage assists, the cost of living in WA and income inequality and attached its 2014 Cost of Living Report. 

Meri Forrest

29      The Commission received an email submission from Meri Forrest, saying that the minimum wage of $665.00 is vastly inadequate and that if politicians had to pay rent and feed themselves and a child on the paltry amount for a month, they would be more likely to give adequate increases. 

SUBMISSIONS IN REPLY

The Hon. Minister for Commerce

30      The Minister submits that although UnionsWA accurately states the WA economy is projected to grow by almost $40 billion over the forecast period, it should be read in the context of the State Budget forecasts for Gross State Product (GSP) growth in percentage terms.  Specifically, GSP is expected to grow at the slowest rate of growth since 199091, well below the longrun trend growth of 4.6 per cent per annum over the five years to 201819.  The State Budget papers also highlight a marked contraction in the State’s domestic economy as measured by the SFD which fell by 2.2 per cent in 201314 and is forecast to contract further by 2.5 per cent in 201415 and 1.25 per cent in 201516.  This reflects a substantial decline in business investment and subdued growth in household consumption which are flowing through to a softer local labour market. 

31      In relation to CCIWA’s contention that the cost of living for WA employees has not significantly changed compared to this time last year, the projection in annual average terms for the Perth CPI is that it will be 2 per cent higher in 201415. 

Chamber of Commerce and Industry of Western Australia

32      CCIWA agrees with the Minister’s acknowledgement that ‘it is important that minimum and award wage increases do not threaten the capacity of employers to sustain and create employment’.  In CCIWA’s view, given the precarious nature of the labour market, even an increase in line with inflation will have a negative impact on employment. 

33      CCIWA believes Treasury’s forecast of 2 per cent inflation is an overestimation; CCIWA believes that the CPI for the 201415 period will reach 1.5 per cent. 

34      CCIWA considers that the increases sought by UnionsWA and WACOSS are exceedingly high and do not reflect the current circumstances facing the low paid or the economy.  They would result in reduced working hours and lost jobs for low paid employees as well as establishing a barrier to employment for young workers and the long term unemployed.  Given the substantial decline in the WA and national economies since this time last year, CCIWA submits that the claim of UnionsWA and WACOSS is irresponsible and would have a significant detrimental effect on those employers and employees to whom the Order would apply.  It points out that UnionsWA has not considered the high level of unemployment in its submissions, nor established any basis for the formulation of its position. 

35      CCIWA presented submissions on who is likely to be impacted by the State Wage Case.  It also submits that in the current economic environment, there is a strong need to focus on the cost impact of any increase to award rates of pay and that, if any increase is granted, it should be a flat dollar increase because it provides a proportionately higher benefit to the low paid compared to a percentage increase which provides a greater monetary benefit to those employees on higher award classifications and also applies greater pressure on employers who need to focus on the need to reduce costs. 

36      CCIWA also addressed wage inequality, the objective of the need to protect employees who may be unable to reach an industrial agreement, and cost of living for the low paid.  It addressed encouraging ongoing skill development, equal remuneration and the capacity of employers to bear costs of increased wages and replied in detail to the WACOSS submission. 

UnionsWA

37      UnionsWA, in response to the Minister’s submission, states that increases to the minimum wage based on CPI measures alone will not satisfy s 50A(3)(a)(ii) – (iv) of the Act.  It endorses WACOSS’s position that the increase in the cost of essential items is hardest felt by low income households.  Granting no increase would continue the decline in the proportion of the WA minimum wage compared to average weekly earnings, not the Wage Price Index (WPI).   It submits that the CCIWA’s submission of a zero increase to the minimum wage is contrary to every part of s 50A(3) of the Act. 

38      Further, the WA State Budget for 201415 increased household fees and charges by around 6.6 per cent which is still higher than the minimum wage increase being asked for by the Minister.  The increase sought by UnionsWA and WACOSS would best meet the needs of the low paid when meeting cost increases to essential services.  Federal Budget changes will be a ‘live issue’ for 201516 and should remain a consideration for the Commission when determining to meet the needs of the low paid and contribute to improved living standards. 

39      UnionsWA notes that there has been a small, but noticeable, compression of wage rates over the period between 2010 and 2014 and that the compression has been more pronounced at the higher rates than the lower rates.  It submits its claim seeks to address both the desire to target increases of most benefit to those employees who are actually on the minimum wage and the compression of relativities within awards.  It considers its claim is therefore superior to the Minister’s claim.  UnionsWA says that the Minister’s submission, that a greater degree of wage restraint is necessary to support employers in the current economic conditions, is not supported by the WA Treasury attachment which spoke about the decline in purchasing power.  This decline will not be arrested by a CPIonly increase.  It is important that an increase to the level of the minimum wage makes a contribution to increasing consumption. 

THE STATUTORY CRITERIA

40      The Act in s 50A(3) obliges the Commission to take into consideration:

 (a) the need to 

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

 (ii) meet the needs of the low paid; and

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

 (iv) contribute to improved living standards for employees; and

 (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;

and

 (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; and

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

 (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; and

 (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; and

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

 (g) any other matters the Commission considers relevant.

41      The submissions before us also addressed each of these considerations. 

Ensuring that Western Australians have a system of fair wages and conditions of employment, providing fair wage standards in the context of living standards generally prevailing in the community, and meeting the needs of the low paid

42      The Minister submits it is difficult to determine which employees constitute the low paid group and what level of minimum wage would meet the variety of personal, family and household circumstances amongst low paid employees.  Maintenance of the real value of the WA minimum wage is an important element in providing fair wages in the context of community standards.  A flat dollar adjustment to minimum and award wages would ensure that the greatest benefit of this year’s State Wage Order is directed to the lowest paid.

43      CCIWA says that the CPI provides the most reliable measure of increases to the cost of living and over the past 12 months there has been a substantial decline in the level of inflation, currently sitting at 1.4 per cent for Perth in the year to March 2015.  This also reflects a substantial decrease in the costs of a number of key components of the index.  There has been a decline of petrol prices and a shift in housing affordability with a fall in the medium rental prices.  The increase in vacancies means that the stock of affordable rental properties will increase as those who can afford to upgrade rental properties or purchase their own home do so.  CCIWA cautioned against ‘unpacking’ the various components of CPI.

44      CCIWA submits that strong competition between two major retailers has resulted in a reduction in prices in both major outlets.  Australia has the highest minimum rate of pay compared to any other OECD member country.  Oncosts such as penalty rates and allowances further improve the living standard of WA employees.  Consideration needs to be given to a combination of both minimum wages and the tax transfer system in providing an effective safety net. 

45      CCIWA asks the Commission to consider the impact that a high minimum wage has on the ability for people to move from social security benefits to paid employment because a high minimum wage can act as a barrier to entry to the workforce.  Increases to the minimum award wage through the State Wage Case are unlikely to be a key factor in the decision of most individuals to seek employment.  There is a high level of unemployment currently seen across both WA and Australia, and the high cost of employing people contributes to levels of employment.  The cost of labour makes up such a large proportion of costs, and large cost savings are made by reducing the size of the labour force.  Major companies are consistently downsizing their operations.  Job cuts in the mining and resources sector have an impact on local businesses and jobs.  Keeping the minimum wage at a level which allows employers to maintain staffing levels or provide employment opportunities to the unemployed is therefore vital. 

46      CCIWA submits that for small businesses in the State system, the minimum rate of pay is higher than those applicable to their larger competitors in the national system, which has a direct impact on their ability to compete and operate profitably.  Small businesses are vulnerable, and a key reason for small business failure is an inability to cope with costs and an increase in debt. 

47      In relation to the tax transfer system, CCIWA refers to a report which examined the interaction between the national minimum wage and the tax transfer system which found that although between January 1986 and January 2012 there was a minimum $7.67 per week real growth in the minimum wage, the disposable income of a single person working for the minimum wage would have increased in real terms by $53.00 per week due to an almost halving of the income tax paid by that person.

48      UnionsWA notes that for low paid employees some costs have more impact than others, a key example being the differential impact of housing costs.  There is a need to maintain a minimum wage with a high purchasing power.  A substantial increase, well above CPI inflation, is required. 

49      WACOSS says the minimum wage process of annual review and adjustment is imperative to protecting the lowest paid workers within our community.  Research undertaken by the Fair Work Australia, which is reasonably comparable for the purposes of the WA minimum wage, indicated that between 10 per cent and 11 per cent of all adult employees earned between 100 per cent and 120 per cent of the federal minimum wage.  Of the employees below, on or slightly above the minimum wage: 

        51 per cent were women compared with 47 per cent of the total workforce;

        58 per cent were partnered, and approximately half of these had dependent children;

        5 per cent were sole parents with dependent children;

        14 per cent worked less than 30 hours per week;

        11 per cent worked in the healthcare and social assistance industries;

        The industries which had the most employees were Accommodation and Food services, Healthcare and social assistance, and Retail trades. 

50      Occupations with the most employees earning below, at, or just above the minimum wage were labourers, community and personal service workers, sales workers, technicians and trade workers.  Community members who are affected by the ability of wage increases to contribute to a ‘fairer’ system of wages and conditions include: 

-          workers in the WA community sector;

-          women;

-          young people; and

-          people in insecure work arrangements. 

51      WACOSS examined these in detail.  With respect to the cost of living, WACOSS sees the plight of low income individuals and households - in particular, those who have struggled to achieve and maintain an acceptable standard of living by WA standards whilst working full time.  Low wages today hinder the ability of households to develop financial resilience which in turn increases the likelihood that households will be less financially secure later in life, and will place increased pressure on the welfare system and the wider economy into the future.  The increase in the cost of essential items is hardest felt by low income households. 

52      WACOSS referred to its Cost of Living Report, submitting that the unaffordability of housing in WA and the ongoing unaffordability of rental property housing must be included in the Commission’s considerations.  The proposed $109.00 per year increase in compulsory third party premiums equates to an additional weekly cost of approximately $2.00 per week, and this alone is 7 per cent of the WACOSS total claim of $30.00 per week.  This highlights the importance of delivering WACOSS’s full $30.00 per week claim if the Commission is to seek to improve employees’ standards of living. 

53      CCIWA says that it is important to note that the greater part of WACOSS’s submission considers the impact of various matters on those on ‘low incomes’, which is a broad definition and includes those who are also reliant on sources of income other than paid employment.  CCIWA does not consider that increases to the minimum wage have been effective in addressing the gender pay gap issue.  The more effective means of addressing affordable childcare is the tax transfer system.  It is also unclear how a $30 increase to the WA minimum wage will improve the resilience and self-sufficiency of low paid workers.  Rather, it may well increase the precarious nature of their employment because in the situation of a downturn in business, it is easier to adjust labour costs by reducing the hours of work of, or terminating, casual employees than it is to reduce the hours or terminate permanent employees.  One of the areas in which there has been a noticeable reduction is rental and housing affordability.  There has been a decline in the cost of electricity in July 2014.  The cost of utilities is reflected in CPI and is therefore considered by the Commission in its previous State Wage Order decisions.

Protecting employees who may be unable to reach an industrial agreement

54      The Minister submits that protecting vulnerable employees is clearly an important aspect of the Commission’s wage setting function however the minimum wage for low paid employees should allow scope for negotiation of agreements which lead to productivity improvements.  A CPI based adjustment should protect the needs of the low paid while not reducing the impetus for employees and employers to pursue bargaining. 

55      UnionsWA submits that increases to the minimum wage are more likely to encourage bargaining in lower wage sectors, and at any rate do not constitute the principal ‘incentive’ to embark upon bargaining in individual workplaces. The Commission should put no weight on claims that a substantial minimum wage increase will act to discourage bargaining.

 

Encouraging ongoing skills development

56      The Minister submits that since apprentice numbers peaked in 2010, apprenticeship commencements have decreased by 16.1 per cent overall.  The total number of apprentices in training across the State has fallen slightly over the last year.  There has been an 8.9 per cent decrease in the number of traineeship commencements in 2014.  Since the recent peak in traineeship commencements in 2012, commencements have reduced overall by 20.8 per cent.  The total number of employees currently in training in WA decreased slightly as at 31 December 2014.  The Minister urges the Commission to consider the potential impact of any minimum wage increase on the willingness of employers to engage staff in training arrangements. 

57      In relation to encouraging ongoing skills development, CCIWA points out that apprentice wages are still a significant part of the cost of employing an apprentice and this cost increases as a proportion of total costs as the apprenticeship progresses.  Apprentices are frequently supervised by award-based employees whose wages will either be directly or indirectly impacted upon by the State Wage Case Order decision, thus increasing the cost of supervision.  There is a need for caution in increasing the costs of engaging an apprentice. 

58      UnionsWA submits that unless regular and generous increases in apprentices wages flow from minimum wage increases, apprenticeships will become increasingly unattractive.  UnionsWA argues that a substantial wage increase that seeks to address the disparity between minimum rates and average weekly earnings will play its part in making apprenticeships more attractive thereby encouraging greater skills development. This has been recognised in the national system and should be recognised in the State system.  It provided data about course fees.

59      WACOSS submits that the full rate of the increase to the minimum wage must be applied to both junior and adult wages.  To provide only a proportion of the minimum wage increase would be unfair as it would mean that the Commission would be failing to meet the needs of the youngest and lowest paid full time workers.

Providing equal remuneration for men and women for work of equal or comparable value

60      The Minister submits that the gender pay gap in Western Australia increased from 23.6 per cent in November 2013 to 25.6 per cent in November 2014 compared to 17.1 per cent to 18.8 per cent nationally over the same period. In both cases, the widening of the gap reflects male average earnings having increased at a faster rate than earnings for females.

61      UnionsWA urges us to have regard to gender pay inequity more broadly noting that in WA the gender pay gap can be seen to exceed the national gender pay gap on every available measure.  It recognises that while the minimum wage plays only a modest role in reducing the gender pay gap, very little else will work to reduce it without regular, substantial real increases to the minimum wage.

The state of the economy of Western Australia

62      We again express our thanks to the WA Department of Treasury for providing its analysis of WA’s economy and for making available Mr David Christmas, Director of the Economic and Revenue Forecasting Division, to give evidence in these proceedings.  The evidence is of assistance to the Commission in our consideration of the corresponding analyses of the WA and national economies in the submissions before us.

63      The WA economy as measured by GSP grew at an average of 5.9 per cent per annum over the three years to 201314, but it is expected to moderate to 3.25 per cent in 201415 and to ease further to 2 per cent by 201516.  Strong contributions from the external sector are expected to be moderated by a weak domestic economy as measured by SFD which contracted by 2.2 per cent in 201314.  Domestic activity is forecast to decline further in 201415 and 201516, and remain unchanged in 201617.  This will be the first time on record that SFD will have contracted over two or more consecutive financial years. 

64      The primary reason for the weakness is a tapering of investment from unprecedented levels reflecting the gradual completion of construction on major resource projects and recent sharp falls in commodity prices, particularly iron ore and oil, which has reduced the probability of major new resource investment projects emerging.  The substantial decline in key commodity prices has also reduced revenue for mineral and energy producers leading to cost cutting and impacting on the growth in household incomes. 

65      Annual growth in household spending has eased to its weakest pace since 2009 and is expected to remain below the long run average over the near term, constrained by lower wage and steadier population growth.  Growth in dwelling investment is expected to ease.  The sustained weakness in the domestic economy is expected to result in GSP growth remaining below trend out to 201819. 

66      There is a rising unemployment rate, subdued growth in full time hiring and a slowing of wage growth to its weakest pace on record.  Employment growth is expected to grow at a more moderate pace than in recent years while the unemployment rate is expected to peak at 6.25 per cent in 201516.  Furthermore, wages growth will likely remain subdued consistent with business’ efforts to rein in costs. 

67      WA’s population growth has eased.  Inflation in Perth has been weak over the first part of 201415, mainly constrained by falling automotive fuel prices and the removal of the carbon tax from 1 July 2015.  Inflation is expected to grow by 2 per cent in 201415 before returning to the middle of the Reserve Bank of Australia’s target band by 201617. 

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

Table 1.1: Major Economic Aggregates, Annual Growth (%)(a)

 

2013-14

2014-15

2015-16

2016-17

2017-18

2018-19

 

Actual

Estimated

Budget

Forward

Forward

Forward

 

 

Actual

Estimate

Estimate

Estimate

Estimate

State Final Demand (SFD)

-2.2

-2.5

-1.25

0.0

1.0

2.0

Gross State Product (GSP)

5.5

3.25

2.0

3.5

2.75

2.75

Employment

1.1

2.5

1.75

1.75

2.0

2.0

Unemployment rate(b)

4.8

5.5

6.25

6.0

5.75

5.25

Consumer Price Index (CPI)

3.0

2.0

2.25

2.5

2.5

2.5

Wage Price Index (WPI)

2.8

2.25

2.75

3.0

3.25

3.5

Population

2.6

1.9

2.0

2.1

2.2

2.2

(a) Annual average growth unless otherwise stated.

(b) Average rate over the year.

Source: 2015-16 Budget, Budget Paper No 3

(Submission of the Hon. Minister for Commerce
Attachment A, p 2)

69      WA Treasury believes economic growth is expected to slow to a below-trend pace over the coming years, with strong contributions from exports moderated by a further tapering of business investment from unprecedented levels.  Growth is forecast to slow to 2 per cent in 201516 before lifting modestly over the following years.  Activity in WA’s domestic economy has moderated.  The recent fall in SFD compares to a 1.2 per cent growth in the national domestic economy over 2014.  In the case of business investment, the decline was less severe at the national level.  Household consumption has shown the weakest annual growth since 2009, growing by a very modest 1.6 per cent in 2014.  Retail trade and sales of motor vehicles have been subdued. 

70      Conditions in WA’s labour market have remained relatively subdued over the past year with employment growing below trend and the unemployment rate drifting higher.  Despite this, the State’s labour market continues to outperform the national equivalent.  Employment grew by 2.2 per cent in annual average terms to April 2015, which is below the historical average of 2.7 per cent per annum.  We set out the information on the annual average change in persons employed by industry sector as provided in the Hon. Minister’s submissions.

I:\NSS2PC\L19-SouthWest-APC4400\Pages from COURT 000151 2015-0015  APPL 1 2015 - Written Submissions - Minister for Commerce - State Wage Case (Attachment A Treasury Economic Outlook).png

71      Annual growth was mainly underpinned by part time employment which grew by a robust 4.4 per cent in the year to April.  Conversely, full time hiring was weaker at 1.4 per cent indicating that underlying labour market conditions remain soft.  A number of service sector industries such as Professional services, Arts and recreation, and Retail trade showed an annual employment growth.  Trends in job vacancy measures for WA have declined over recent months and remain at low levels. 

72      WA’s unemployment rate has increased, averaging 5.6 per cent over the four months to April 2015.  This is an increase from 5.2 per cent in 2014.  The State’s unemployment rate remains the lowest of all States and below the national rate.  WA’s unemployment rate is forecast to grow to 5.5 per cent in 201415 and 6.25 per cent in 201516. 

73      Annual growth in the State’s WPI moderated from 3.1 per cent in March 2014 to just 2.2 per cent in March 2015, the slowest growth on record since 1998-99.  Inflation at 2.3 per cent in the year to March meant that wages as measured by the WPI fell by 0.1 per cent in real terms, the first fall in real wages since 2006.  There was a significant moderation in private sector wages which grew by just 2.1 per cent in March 2015, the weakest on record. 

74      The slowdown in annual wages growth has been more pronounced in WA than nationally.  Historically, growth in WA’s WPI has exceeded the national equivalent during periods of stronger economic conditions in the State relative to national growth.  Wage growth in WA is expected to be more closely aligned with growth at the national level over the coming years.  The State’s WPI is expected to grow by 2.25 per cent in 201415, well below the long run average of 3.9 per cent per annum. 

75      Inflation as measured by growth in the CPI in Perth has eased in annual average terms to 2.3 per cent in the March quarter 2015, down from 3 per cent over 201314 and slightly higher than growth at the national level.  The CPI is expected to remain subdued at 2 per cent in 201415 and 2.25 per cent in 201516. 

National economic outlook

76      Growth in the Australian economy continued at below trend pace over the past year as business investment waned further.  Gross Domestic Product (GDP) grew by 2.7 per cent over 2014, which is lower than the long run average growth of 3.2 per cent, but up from 2.1 per cent growth in 2013.  Labour market conditions at the national level remain subdued by historical standards, employment increasing by 1.2 per cent to April 2015 while the unemployment rate remained above 6 per cent.

Capacity of employers to pay

77      The Minister submits that while there is little specific data available to assess the health of those businesses likely to be affected by the State Wage Order, there is evidence to suggest that WA businesses have been affected by the softening domestic economy.  The GOS plus GMI measure produced by the Australian Bureau of Statistics also suggests some sectors are facing a more challenging trading environment.  While that measure recorded an improvement in a number of industries in 201314, it recorded a decline in several industries known to employ significant numbers of award-reliant employees such as Retail trade Accommodation and food services, Administrative and support services, and Other services. 

78      In the Minister’s view, in these circumstances there is a heightened risk that excessive increases to minimum and award wages could impede the ability of employers to maintain and create job opportunities.  The exact relationship between changes in the minimum wage and employment levels is unknown, nonetheless it is reasonable to suppose that there is a point at which rising wages would have an impact on employment and that prevailing economic conditions also affect the capacity of employers to meet higher wage costs. 

79      CCIWA says the Minister’s concern is reflected in the decline in the employment intentions of businesses which continue to be in negative territory, meaning businesses are continuing to shrink the size of their workforce.  CCIWA is of the view that an increase to the WA minimum wage will result in a reduction in the number of people employed or hours of work offered to staff. 

80      UnionsWA submits that the Commonwealth government has recently provided a major stimulus to boost businesses more likely to be in the State system.  It freezes increases to the superannuation guarantee contribution and insofar as they are considered an employment cost, this should be considered as a contribution to employers’ capacities to pay. 

81      CCIWA responds that it is difficult to understand how a $30.00 per week increase in award rates of pay can be absorbed into the government’s proposed small business tax relief package.  The package is capped at $1,000 per annum which does not cover the $1,500 per annum wage increase which would result from UnionsWA’s $30.00 claim.  Further, the intention of that package is to encourage small businesses to invest, take on new staff and grow.  Increasing the wages of existing staff will substantially reduce the ability for small businesses to use the tax savings to help generate jobs or increase working hours. 

The Fair Work Commission Annual Wage Review 2014-15

82      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 State Wage Order decision that the Fair Work Commission Annual Wage Review is a relevant and significant consideration for the purposes of s 50A(3)(f) of the Act. 

83      We maintain that view and consider the Fair Work Commission (FWC) Annual Wage Review 2014-15 [2015] FWCFB 3500, which increased the national minimum wage by 2.5 per cent from $640.90 per week to $656.90 per week from 1 July 2015, an increase of $16.00 per week, to be a relevant and significant consideration.

CONSIDERATION

84      Previous State Wage Order 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 preferring one or more considerations in it to the exclusion of the other considerations.  The considerations under s 50A of the Act are not easily reconciled.  They require balancing. All of the measures, as they are encompassed within the considerations we are obliged to take into account, are relevant to our decision. 

85      The respective submissions of CCIWA and UnionsWA, together with the submission by WACOSS, emphasise those considerations which support the views they hold.   However, the weight to be given to one consideration may well be balanced by the weight to be given to the other considerations. 

86      Our obligation to meet the needs of the low paid (s 50A(3)(a)(ii)) and to contribute to improved living standards for employees (s 50A(3)(a)(iv)) are strong indicators that the submission that there be no increase to the WA minimum wage should not be accepted.  The need to protect employees who may be unable to reach an industrial agreement (s 50A(3)(a)(v)), given the evidence of the growth in wages generally in the community, also suggests that awarding no increase would not meet that consideration. 

87      We recognise that unemployment in WA is rising and understand the submission that no increase to the WA minimum wage may increase employment opportunities.  However, it is by no means clear that the rising unemployment is in the industry sectors most likely to be affected by the WA minimum wage.  The evidence before us of the growth in employment in the Retail trade, Health care and social assistance, Accommodation and food services and Wholesale trade suggest that some of the employment in those sectors which had been lost to the more highly paid mining sector may be returning.

88      Moreover, the link between minimum wage increases and the level of employment is complex.  In the years since 2006, when this Commission was obliged by amendments to the Act to set a WA minimum wage in the absence of a national minimum wage, there is no evidence suggesting that the increases to the WA minimum wage since 2006 have materially affected the industry sectors most likely to be affected by it.

89      We recognise, and have previously recognised, 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.  This gives recognition to the WACOSS submission that the minimum wage process of annual review and adjustment is imperative to protecting the lowest paid workers within our community.  We consider the evidence of Mr Dirou, and the submissions of WACOSS to be helpful to our considerations even though they do not address directly the circumstances of employees in WA who are on, or just above, the WA minimum wage.

90      The concept of fairness inherent in the need to ensure that Western Australians have a system of fair wages and conditions of employment (s 50A(3)(a)(i)) and provide fair wage standards in the context of living standards generally prevailing in the community (s 50A(3)(a)(iii)) brings into consideration that wages generally in the community, and the national minimum wage, have increased.

91      We have recognised that an increase to the WA minimum wage contributes to providing equal remuneration for men and women for work of equal or comparable value (s 50A(3)(a)(vii)) and have noted the distinction between this consideration and the gender pay gap.  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 dependent on annual increases to the minimum wage. 

92      We therefore do not accept the submission that we should award no increase to the WA minimum wage.

93      The submissions of UnionsWA and WACOSS, and perhaps the brief submission of Meri Forrest, together seek a significant increase to the minimum wage.  We recognise the validity of their submissions however they cannot be determinative of the decision we are obliged to make under s 50A(3) of the Act to the exclusion of all other considerations. 

94      We also are obliged to consider the capacity of employers as a whole to bear the costs of increased wages, salaries and other remuneration (s 50A(3)(d)), and recognise that any increase we award will be an additional employment cost to employers.  A significant increase will be a significant cost and this must be a relevant consideration given the evidence that wage costs continue to be the key priority issue for employers in an environment of cost reduction. 

95      The employment effects of the decision we make will depend upon many factors.  There is no evidence before us that our previous minimum wage decisions have had a direct impact on levels of employment, inflation or productivity.  We consider this may be explained by the 2006 Plowman report which concluded, amongst other things, that there has been little minimum wage effect on the economy as a whole, and weak effect on those sectors with higher levels of low paid employees.  Minimum wage increases have had only minor effects on employment. 

96      However it is significant that Professor Plowman suggests that aggregate demand in the WA economy moderates, to a considerable extent, any minimum wage effects.  Except for 2009, since 2006, the WA economy as a whole has been in a relatively strong position, including compared to the national economy, and this is likely to have moderated the effects of past increases to the WA minimum wage.

97      On this occasion the economic circumstances of WA are significantly different from previous years.  For the first time on record the State’s domestic economy as measured by SFD has contracted over two or more consecutive financial years, and the forecast is that domestic activity is expected to decline further in 201415 and 201516 and remain unchanged in 201617.  The State’s economy as a whole including exports as measured by GSP is certainly more positive although it is forecast to grow at the slowest rate of growth since 199091, well below longrun trend growth of 4.6 per cent per annum over the five years to 201819.

98      On previous occasions, we have pointed to the strength of the WA economy, and its strength relative to the national economy, to justify awarding an increase to the minimum wage which may exceed the increase given to the national minimum wage.  Now WA’s GSP growth is more in line with growth in the national economy and growth in the national economy is likely to exceed growth in the WA economy.  

99      We have taken into account the considerations in s 50A(3)(a) of the Act, and are aware of the need to ensure that the Western Australian award framework represents a system of fair wages and conditions of employment (s 50A(3)(e)).  We take into account the estimated impact on the representative household from the WA Budget papers, noting as CCIWA points out, that some of the cost increases, for example to utilities, are costs which employers as well as employees have to bear.

100   We consider there is much to be said for the submission of the Minister that in the current economic circumstances there should be a greater degree of wage restraint.

101   We give considerable weight too to the increase to the national minimum wage from the FWC Annual Wage Review 2014-15.  The timing of the Annual Wage Review and the date of operation of the minimum wage set by the FWC is contemporaneous with the obligations on us under s 50A of the Act.  The national minimum wage applies to the vast majority of minimum wage employees in WA and is set after a comprehensive examination of information, including information directly relevant to the economy of WA, and that it is reached according to comparable legislative considerations.  

102   In both its written submissions and its submissions following the FWC Annual Wage Review 2014-15, UnionsWA contended that the differences in language between s 284(1) of the Fair Work Act 2009 (Cth) (the FW Act) and s 50A(3) of the Act, especially in relation to consideration of living standards of people on the minimum wage and the award system, are of some significance.  In both the 2012 and 2013 WA State Wage decisions, we referred to the “substantial overlap” between the requirements of s 284(1) of the FW Act and s 50A(3) of the Act, in terms of considerations to be taken into account: (([2012] WAIRC 00344; (2012) 92 WAIG 557); ([2013] WAIRC 00347; (2013) 93 WAIG 467)).  We remain of that view.  While it is correct to say there is some difference in emphasis in the respective statutory provisions, it also needs to be borne in mind that s 284(1) of the FW Act is to be read with the objects of the FW Act in s 3: Annual Wage Review 2011-12 [2012] FWA 5000. Amongst other things, the objects of the FW Act in s 3 include “ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions…through…minimum wage orders” (s 3(a)).

103   Given that we are required to balance a range of considerations under s 50A(3) other than those in par (a) we do not consider that from the terms of the legislation alone we are required to award a higher increase or maintain a higher minimum wage in WA.  Each WA State Wage Case will require consideration by the Commission of the circumstances prevailing at the time. 

104   The difference between the level of the WA and national minimum wages is not an irrelevant consideration.  It is an issue which has been regularly raised in previous State Wage Cases as well as this one.  To award a significant increase to the WA minimum wage which, in the case of the UnionsWA and WACOSS claim, would result in the WA minimum wage being $39.00 per week higher that the national minimum wage, will disproportionately increase the wage costs of employers in the WA system compared to their counterparts in WA in the national system both in WA and elsewhere in Australia. 

105   The balancing of all the considerations under s 50A(3) considerably reduces the opportunity for the WA minimum wage, which applies to such a small proportion of WA minimum wage earners, to be able to address many of the issues relied upon by UnionsWA and WACOSS.  There have been real increases to the WA minimum wage since 2006 even if those increases have consistently fallen short of what Unions WA and WACOSS have considered, and submitted, as necessary for low wage employees to actually keep up with cost of living increases.  We have observed in previous decisions that the WA minimum wage has only a limited capacity to address issues of housing affordability and the gender pay gap. 

106   We place considerable weight upon the submissions we receive, including those which are consistently made each year, and the decision we make depends, as it should, very much on equity, good conscience, and the substantial merits of the case presented.  It must be acknowledged that the ability to award significant real wage increases to the WA minimum wage is not unconstrained.

DECISION

107   After considering all of the evidence and the submissions before us on this occasion, we conclude that we should award a lesser increase than we awarded in our 2014 decision. 

108   We have decided that the WA minimum wage should be increased by $14.00 per week to $679.90 per week.  This is an increase of 2.1 per cent. 

109   The operation of 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.  

110   The WA minimum wage remains higher than the national minimum wage by $23.00 per week, although a consequence of our decision is that the gap between the two minimum wages is reduced.

111   We have generally preferred to increase award rates of pay by a flat-dollar amount because we consider a flat increase targets those employees who are on the minimum wage or slightly above it and it 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.  We are aware that this will over time compress award relativities. 

112   On this occasion, UnionsWA has demonstrated the level of compression at higher wages levels in the Metal Trades (General) Award.  We are persuaded on this occasion to adjust award wage rates by 2.1 per cent.  We take into account that a percentage increase to award rates will give a greater increase to higher award rates than the minimum wage, and the corresponding cost to employers.  We observe that the increase is able to be absorbed into any over award payment such that it will apply only to employees who are paid the award wage; any wage paid over the award wage is able to be used to offset the increase.  The rounding of calculations in awards is to be in accordance with the methodology in Appendix A to the Reasons for Decision in the 2013 State Wage Order ([2013] WAIRC 00347; (2013) 93 WAIG 467 at 476).

113   It is open to any party to seek to vary an award to address issues which arise from the compression of relativities.  An application to do so does not undermine this, or previous State Wage Order decisions and can be dealt with by a single commissioner.

114   We are not persuaded on this occasion by the UnionsWA and WACOSS submissions that we should apply the full rate of the increase to junior wages.  In particular, we are uncertain of the employment effects of doing so, and nothing put on this occasion has reassured us that it is appropriate to do so on this occasion.  We have noted in the 2012 State Wage Order decision ([2012] WAIRC 00346; (2012) 92 WAIG 557) the absence of evidence from which we could reach a conclusion regarding the effect of doing so on the need to encourage ongoing skills development.  If we are to be asked to apply the outcome of the national review of apprentice and trainee wages and conditions then a case will need to be presented.  This can be presented in advance of the next State Wage Case so that its result may be incorporated into the decision to issue on that occasion.

INDUSTRY/SKILL LEVELS

115   The Minister circulated to the UnionsWA and CCIWA a newly revised list of industry/skill level classifications as provided by the Department of Training and Workforce Development.  The newly revised list no longer includes traineeship names. Instead, it lists training packages, their National Qualification Codes and the relevant Australian Qualification Framework (AQF) certificate levels, grouped by level in alphabetical order based on the training package code.

116   The Minister advised that each traineeship undertaken in WA is allocated an industry/skill level based on the training package to which it belongs and the applicable AQF certificate level. The industry/skill level is then used, in combination with a trainee’s age and years out of school, to determine the appropriate minimum wage for award-free trainees.  In some cases, traineeships belonging to the same training package are classified at different industry/skill level, due to differing AQF certificate levels.

117   Each training package has a three letter identifier code, known as a National Qualification Code. When employers and trainees enter into a training contract to establish a traineeship, the first section of the contract spells out the title and level of the qualification and the National Qualification Code, and the first three letters of the alphanumeric code denote the relevant training package.

118   When seeking the appropriate minimum wage for an award-free trainee, the relevant industry/skill level for a traineeship can be identified by matching the first three letters of the National Qualification Code and the AQF Certificate Level of the qualification on the training contract with the Level A, B or C section of the Industry/Skill level list.

119   There is no objection to those revisions and we consider it is appropriate to incorporate the list in the order to issue.  We express our thanks to the Minister for circulating the newly revised list well in advance of the hearing. 

THE STATE WAGE PRINCIPLES

120   No person suggested that any change is required to be made to the State Wage Principles.  Section 50A(1)(d) of the Act obliges the Commission to set out a statement of principles to be applied and followed in relation to the exercise of jurisdiction to set the wages, salaries, allowances or other remuneration of employees or the prices to be paid in respect of their employment.  The Statement of Principles July 2015 to issue remains unchanged from the Statement of Principles July 2014 apart from the necessary and consequential amendments to Principle 9.

MINUTE OF PROPOSED GENERAL ORDER

121   A minute of proposed General Order now issues.  The Commission should be advised by 2.00pm on 15 June 2015 whether or not a speaking to the minutes is requested.  If a speaking to the minutes is necessary, it will be dealt with on the papers and written submissions should be received by 10.00am on 16 June 2015.