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

Document Type: Decision

Matter Number: APPL 1/2021

Matter Description: 2021 State Wage Order pursuant to section 50A of the Act

Industry: Various

Jurisdiction: Commission in Court Session

Member/Magistrate name: Chief Commissioner S J Kenner, Commissioner T Emmanuel, Commissioner T B Walkington

Delivery Date: 17 May 2021

Result: 2021 State Wage Order issued

Citation: 2021 WAIRC 00173

WAIG Reference: 101 WAIG 459

DOCX | 153kB
2021 WAIRC 00173
2021 STATE WAGE ORDER PURSUANT TO SECTION 50A OF THE ACT
WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

CITATION : 2021 WAIRC 00173

CORAM
: CHIEF COMMISSIONER S J KENNER
COMMISSIONER T EMMANUEL
COMMISSIONER T B WALKINGTON

HEARD
:
THURSDAY, 20 MAY 2021
FRIDAY, 18 JUNE 2021
WRITTEN SUBMISSIONS: 11 MAY 2021; 18 MAY 2021; 4 JUNE 2021

DELIVERED : THURSDAY, 24 JUNE 2021

FILE NO. : APPL 1 OF 2021

BETWEEN
:
COMMISSION'S OWN MOTION
Applicant

AND

(NOT APPLICABLE)
Respondent

Catchwords : State Wage order – Commission’s own motion – Minimum wage for employees under the Minimum Conditions of Employment Act 1993 – Award rates of wage – Award minimum wage – State wage principles
Legislation : Fair Work Act 2009 (Cth)
Industrial Relations Act 1979 (WA)
Minimum Conditions of Employment Act 1993 (WA)
Result : 2021 State Wage Order issued
REPRESENTATION:
Mr B Entrekin on behalf of the Hon. Minister for Industrial Relations
Mr P Moss on behalf of the Chamber of Commerce and Industry of Western Australia Limited
Dr T Dymond on behalf of UnionsWA
Mr C Twomey on behalf of the Western Australian Council of Social Service Inc


Case(s) referred to in reasons:
2012 State Wage Case [2012] WAIRC 00346; (2012) 92 WAIG 557
2014 State Wage Case [2014] WAIRC 00471; (2014) 94 WAIG 641
2015 State Wage Case [2015] WAIRC 00435; (2015) 95 WAIG 679
2016 State Wage Case [2016] WAIRC 00358; (2016) 96 WAIG 636
2018 State Wage Case [2018] WAIRC 00363; (2018) 98 WAIG 263
2019 State Wage Case [2019] WAIRC 00290; (2019) 99 WAIG 509
2020 State Wage Case [2020] WAIRC 00361; (2020) 100 WAIG 409
Annual Wage Review 201920 [2020] FWCFB 3501
Annual Wage Review 2020-21 [2021] FWCFB 3500


Reasons for Decision
Background
1 The year of 2020 was, by any measure, an extraordinary year. The outbreak of the coronavirus pandemic had a major impact on workplaces throughout the country. Governments, both Commonwealth and State, introduced unprecedented emergency measures, both health and economic, in an endeavour to respond. The impact on employment and the cloud of economic uncertainty created by the pandemic, was referred to by the Commission in Court Session in the 2020 State Wage Case [2020] WAIRC 00361; (2020) 100 WAIG 409. When citing the Western Australian Treasury analysis, it was said at pars 17 to 19 as follows:
17 The 2020 State Wage Case – Economic Conditions and Outlook was prepared by the Western Australian Department of Treasury and provided to us by Mr Christmas. It is dated 12 May 2020. This statement notes:
The COVID-19 outbreak is likely to affect the economy in a number of ways. Social distancing and related restrictions to control the spread of COVID-19 have had a direct impact on the domestic economy, with sharp declines in consumer and business confidence, weak conditions in the housing market, widespread job losses and some downward revisions to business investment expectations.
Forecasting the economic impact of COVID-19 is challenging because there is no prior experience of this type of shock. The risks to economic growth for the State weigh heavily on the downside. Activity in the State’s domestic economy is likely to be significantly lower than projected at mid-year Review and will continue to contract in the short to mid-term. However, the impact on GSP, which includes net exports, is likely to be smaller than for the domestic economy, given the State’s mining exports have held up well to date.
Current business operating restrictions and weaker demand in various sectors of the domestic economy have led to extensive job losses and firms limiting new hiring decisions. This presents downward risks to the employment growth outlook relative to the Mid-Year Review projections in the near term. Consistent with downside risks to employment and job losses to date, the unemployment rate is likely to be substantially higher, particularly in the short term, than forecast at Mid-year Review.
Population growth is likely to be significantly weaker than previously anticipated at Mid-year Review in the near term, as the closing of the international borders. Net interstate migration and net international migration are expected to lift once interstate and international borders are re-opened, although likely at a slower pace than previously forecast.
18 The initial submissions were made on 12 May 2020. At that time, the parties who made submissions to the Commission were not in a position to properly analyse the economic effects on the labour market of the COVID-19 outbreak because of the rapidly changing environment and because the economic and social situation had changed so dramatically in a short period in March. A further opportunity for submissions was provided so that interested persons could address the latest available information provided in the National Accounts data for the March quarter 2020. However, this too is interim data and the situation continues to evolve.
19 The Minister said in his submission of 12 May 2020 that ‘[m]any businesses are operating in unchartered waters and there is a significant degree of uncertainty as to when conditions will return to normal’.
2 In its decision, the Commission in Court Session decided that in balancing the statutory criteria in s 50A of the Industrial Relations Act 1979 (WA), an increase in the State Minimum Wage (SMW) of 1.75% should be awarded. As with the Fair Work Commission, when increasing the Federal Minimum Wage (FMW), there was a deferral of the timing of the increase. The Fair Work Commission staggered the increase in the FMW in three stages, being 1 July 2020, 1 November 2020 and 1 February 2021, depending upon the modern award grouping allocated. The Commission in Court Session, because of the level of uncertainty surrounding the impact of the pandemic and the effect of government stimulus measures, deferred the 1.75% increase in the SMW to 1 January 2021.
3 The Commission in Court Session is now required to make a State Wage Order to come into effect on 1 July 2021. For the purposes of these proceedings, submissions were invited from s 50 parties and other interested persons in the usual way. We have received submissions from the Minister; the Chamber of Commerce and Industry of Western Australia; UnionsWA; the Western Australian Council of Social Service Inc; and also, from Professor Preston at the University of Western Australia, who has provided two papers to the Commission. One is in relation to the labour market in Western Australia in 2020 and the other deals with trends in wages for young adults.
4 We have also received a presentation from Mr Christmas, the Director of the Economic and Revenue Forecasting Division at the Western Australian Department of Treasury. We are grateful to all of those who have assisted us in our deliberations on this occasion.
Contentions of the parties
The Minister
5 In summary, in his submissions, the Minister contended that employees in Western Australia should have a modern framework of wages and conditions of employment. This framework should support dignified and secure employment, which protects employees' interests. It is noted that the pandemic had a substantial impact on the State, leading to the Commission deferring the increase to the SMW in 2020, to 1 January 2021, in recognition of the adverse impact of the pandemic on many industries.
6 Despite this however, and the substantial contraction in the State and national economies in the course of 2020, the Minister submitted that the containment of the spread of the virus enabled the lifting of restrictions in the second half of 2020. Whilst acknowledging some industry sectors continue to be adversely affected by restrictions, the Minister submitted that the navigation of the pandemic in Western Australia has led to a stronger recovery than predicted.
7 Given this situation, the Minister contended that a fair and balanced outcome in this year's State Wage Case would be an increase in the SMW by $19.20 per week, or approximately 2.5%. It was submitted that such an increase would provide a lift in wages for minimum and award wage earners and would not put at risk the present recovery from the pandemic.
8 The Minister canvassed the outlook for the Western Australian economy and the labour market. In an overall sense, the Minister noted that from the largest contraction in the State's economy in its history in the June quarter 2020, an increase in household spending, a resurgent residential construction sector and a strong performance by the mining and resources sector in the second half of 2020, has brought the State's economy back onto a growth path. This has been assisted by the very large Government stimulus programmes and industry assistance, such as the State Government's Building Bonus and the Commonwealth Government's HomeBuilder grant schemes.
9 Whilst acknowledging the impact of the five-day lockdown in February 2021 and the Anzac Day lockdown in April 2021 on some businesses, overall, the Minister contended that they are unlikely to have any material impact on Gross State Product (GSP), as they were brief and many industries were able to continue to operate largely unaffected.
10 In terms of the labour market, the Minister submitted that overall, the major loss of jobs that occurred at the height of the pandemic restrictions in the period February to May 2020, has now been recovered. In this respect, he contended that most labour market indices had been restored to prepandemic levels. Growth in employment is trending upwards and spare capacity in the labour market is reducing, as shown by falling underemployment levels. These trends are against the background of low inflation and low wages growth generally.
11 The Minister also referred to the ABS Single Touch Payroll (STP) series, introduced during the early stages of the pandemic, in order to give real time data on weekly payroll and jobs. This series, started in April 2020, shows that between midMarch 2020 and early April 2021, a 3.6% increase in payroll jobs was recorded for Western Australia, compared to a national increase of 1%. At the same time, wages grew by 0.7% in Western Australia, compared to national wages growth of 2%. Whilst subject to the caveat that not all businesses participate in the STP system, this is a further measure of labour market performance.
12 In addressing the statutory criteria in s 50A(3) of the Act, the Minister submitted that a relevant consideration is the principle of equal renumeration for work of equal or comparable value. It is noted that over the 12 months to November 2020, the gap between male and female earnings increased from 22.4% to 22.9%. Over the corresponding period nationally, the gender pay gap fell from 13.9% to 13.4%. As measured by Average Weekly Ordinary Time Earnings (AWOTE), the Minister noted that Western Australia still has the largest gender pay gap in the country. Accepting that the reasons for this are complex, the Minister submitted that sustainable and fair adjustments to the SMW can assist in reducing this differential.
13 In terms of the capacity of employers to pay, the Minister submitted that as an indicator of the health of businesses, the Gross Operating Surplus (GOS) plus Gross Mixed Income (GMI) ABS series provides some insights for the financial year to 30 June 2020. This data shows that a number of industry sectors recorded an improvement in overall profitability with only one, agriculture, showing a sizeable decline. In recognition of the strength of commodity prices, the mining and resources sector showed the strongest performance. However, as recognised by the Minister, given the size of the economic stimulus particularly through the JobKeeper scheme, caution needs to be adopted in using this measure as a true indication of underlying business health.
14 A particular factor in the Minister's submissions, is the needs of the low paid and the maintenance of living standards, in comparison to living standards generally in the community. In this context, the Minister submitted that many low paid employees depend on SMW increases decided in these proceedings, as their only means of meeting increases in costs of living. It was noted that this also includes those employees not covered by an award, and who are paid in accordance with the minimum wage under the Minimum Conditions of Employment Act 1993 (WA). Given that these employees are undoubtedly low paid, and do not have the protections afforded to those covered by an award, the Minister contended that an increase in the SMW for this group of employees can assist in reducing financial disadvantage.
15 Additionally, as most unincorporated businesses in the accommodation and food services and retail industry sectors do not seem to avail themselves of the Commission's jurisdiction in relation to registered industrial agreements, the Minister submitted that this suggests that employers in these sectors, are most likely to be guided by the relevant State award, for wage determination purposes.
16 In terms of skills development, the Minister referred to the requirement on the Commission to have regard to encouraging skills development in the making of a State Wage Order. Data referred to by the Minister showed a continuing trend of increasing apprenticeship commencements to a total of 8,528 for 2020, an increase from 7,069 in 2019 and from 6,424 in 2016. Similarly, a decline in Traineeships registered over the period 2012 - 2019 has been arrested with 2020 recording an increase in Traineeship commencements. The total numbers of employees in either apprenticeships or in training, increased by 17.9% between 2019 and 2020.
The Chamber of Commerce and Industry of Western Australia
17 The Chamber in summary, contended that the uncertainty associated with the pandemic over the last 12 months remains. This is especially so for small businesses most affected by the SWC decision, in the hospitality and retail sectors. The Chamber submitted that it is these sectors in particular that have felt the greatest impact from restrictions imposed to control the spread of the virus. Additionally, it was submitted that the differential between the SMW and the FMW adds to the disadvantage experienced by these industry sectors.
18 Given this situation, and the ongoing prospect of restrictions and lockdowns being imposed, the Chamber submitted that there should be no increase in the SMW and award rates of pay on this occasion. In the alternative, should the Commission decide to increase the SMW, then the operative date should be deferred, and the quantum should be expressed as a flat dollar amount. The Chamber submitted that the UnionsWA and the Council claims were a risk to jobs and the working hours of small business employees.
19 In terms of stimulus measures, the Chamber referred to the major role played by the Commonwealth JobKeeper programme and cited Reserve Bank of Australia (RBA) research to the effect that without it, job losses at the peak of the pandemic would have been twice as high. In this respect, of the JobKeeper applications processed in April 2020, the Chamber submitted that the highest proportion were in award reliant industries such as accommodation and food services (54%); healthcare and social assistance (35%) and retail (30%).
20 The impact of lockdowns has been a major issue for businesses in Western Australia. The initial lockdown in 2020, according to the Chamber, had an estimated $3.3 billion impact on the Western Australian economy, based on State Final Demand (SFD) figures over the March and June quarters of 2020. The February 2021 five-day lockdown was estimated to have cost the economy $420 million and the April 2021 lockdown, led to an estimated loss in revenue for hospitality industry businesses of approximately $100 million. The Chamber made the point that the two lockdowns this year occurred at a time when most businesses were no longer eligible for JobKeeper assistance.
21 Based on surveys of members, the Chamber said a constant retort from businesses, affected by the February and April 2021 restrictions, was revenue loss; loss of perishable stock; and ongoing costs including for permanent staff. The tenor of the Chamber's submissions on this point was that the accommodation and food services and retail sectors bear the brunt of the costs when restrictions are imposed and these costs generally are not recovered once restrictions are lifted.
22 As to s 50A(3)(a)(i) of the Act, regarding a fair system of wages and conditions of employment for Western Australians, the Chamber contended that the differential between the SMW and the FMW, although it has substantially reduced over time, remains unfair on small business in the State jurisdiction. In this respect too, the Chamber noted the observations of the Commission in the 2020 State Wage Case, that the sectors most reliant on State awards, are the most impacted by pandemic-imposed restrictions. In considering the Western Australian economy, the Chamber submitted that the Commission should consider the performance of those industry sectors that are most likely to be affected by the decision. In connection with fair wages and conditions, the Chamber contended that based on increases in the SMW in the last five years, from 2015 to 2020, the SMW has increased by 13.7%. This is compared to growth in CPI for Perth over the same period of 5.2% and 9.8% for growth in the WPI. Thus, over this period, the SMW has delivered real wage increases to award and minimum wage reliant employees significantly above inflation and average wages growth.
23 A factor which the Chamber submitted the Commission should consider in determining the SMW, is the rise in statutory superannuation contributions from 9.5% to 10%, from 1 July 2021. Given this is a direct cost to employers, which has been recognised in the past by the Commission as moderating any increases in the SMW, it should do so on this occasion too.
24 As to the Western Australian economy, the Chamber submitted that the underlying strength of the recovery, has been driven by the mining and resources sector, combined with the very high levels of Government stimulus payments. Notwithstanding this, the Chamber contended that projected growth in GSP and SFD, is still below that forecast prior to the onset of the pandemic and the recovery must be viewed in this light. The Chamber also noted the divergence in profitability between incorporated and unincorporated businesses, with the latter being much less profitable over recent years.
25 In terms of labour market indicators, the Chamber submitted that whilst the data suggests a recovery in jobs lost since the height of the pandemic, considerable volatility is evident. Furthermore, for present purposes, in the accommodation and food services and retail sectors, whilst job losses in the former have been recovered, a greater proportion of part time employment is evident, reflecting what the Chamber submitted to be uncertainty amongst employers, because of the prospect of further restrictions being imposed. As for the retail sector, job losses from the first half of 2020 have not been recovered and there remains a substantial shortfall. The Chamber also noted the low levels of inflation and wages growth, as reflected in the Minister's submissions.
UnionsWA
26 The submission by UnionsWA was that the Western Australian and national economies are recovering and the circumstances warrant a substantial increase in the SMW. To address what UnionsWA see as a widening gap between the low paid and other employees in Western Australia, UnionsWA submitted that an increase in the SMW of 4% or $30.40, whichever is the greater, is justified.
27 In particular, in support of its position, UnionsWA referred to the RBA Statement on Monetary Policy, May 2021, which discusses the need for an "upside scenario" to encourage economic growth. According to this approach, the encouragement of an increase in consumption will support private investment, which will in turn lead to a reduction in unemployment and an increase in wages growth. Accordingly, UnionsWA contended that a substantial increase in the SMW will contribute to consumption growth and support the "upside scenario" posited by the RBA.
28 In terms of the needs of the low paid, fair wages and conditions and improved living standards for employees, UnionsWA made a number of submissions. It was contended that the economy in Australia is expanding and jobs growth has recovered, to be higher than the prepandemic level. ABS Weekly Payroll Jobs and Wages Australia data between 10 March and 24 April 2021 show Western Australian jobs growth being up by 4.5%, one of the highest in the country. It was contended that jobs growth has been particularly strong for small business in Western Australia, compared to nationally.
29 Correspondingly however, UnionsWA submitted that wages growth in Western Australia has been flat. Applying principles of monopsonistic labour market theory, UnionsWA contended that the high jobs growth coupled with little or no wages growth, demonstrated that employers in this State have labour market power and are "price makers" rather than "price takers". This is all the more reason why, according to UnionsWA, the SMW needs to be increased so that employees can achieve a wage increase that the labour market will not provide.
30 Noting that the 1.75% increase in the SMW from the 2020 State Wage Case decision did not take effect until 1 January 2021, UnionsWA submitted that as the cost of living increased over this period, employees' living standards effectively fell, contrary to s 50A(3)(a)(iv) of the Act. As a result, Unions WA submitted that the needs of the low paid were not met and there should be no delay on this occasion.
31 In terms of the cost of living, UnionsWA referred the Commission to an ABS experimental series developed in late 2020, disaggregating CPI into measures of Nondiscretionary and Discretionary inflation nationally. This attempted to draw a distinction between essential and nonessential expenditure classes. UnionsWA referred to the ABS conclusions that over the period 2012 to 2019, the set of Nondiscretionary goods and services increased by slightly more than the Discretionary set of goods and services, but when tobacco was excluded, the gap was significant with a 14.8% increase for Nondiscretionary items as opposed to 6.4% for Discretionary items. UnionsWA obtained data for Perth, and the differential between Nondiscretionary and Discretionary inflation, adjusted for tobacco in the same way, led to a difference of 12.9% and 8.7% respectively. UnionsWA therefore contended that the divergence between these measures of inflation is a useful guide as to the cost of essential items and the needs of the low paid, in setting the SMW.
32 As to the criterion of equal pay for work of equal or comparable value, UnionsWA noted the continued existence of a large gender pay gap in Western Australia, compared to that nationally. Based on research by J R Bray in Reflections on the Evolution of the Minimum Wage in Australia: Options for the Future (October 2013), UnionsWA submitted that this research suggests a likely over representation of female employees in the State industrial relations system. As such, SMW increases are important for this group of employees to provide adequate pay.
33 Given the analysis of those most likely to be covered by the State industrial relations system, UnionsWA contended that as there is a high level of award reliance, an increase in the SMW as claimed, will assist this group of employees who are unable to negotiate their own arrangements and also benefit those in lower income households.
The Western Australian Council of Social Services
34 The Council contended that the SMW is a vital means of protecting low-income employees from poverty. The Council submitted that an adequate SMW will support a decent standard of living for employees and their families. Accordingly, the Council, consistent with the UnionsWA position, argued that the SMW should be increased by 4% or $30.40 per week.
35 In terms of the economic context, the Council submitted that the State has been successful in weathering the economic impact of the pandemic and the economy is now performing strongly. Correspondingly, the Council submitted that the cost of living, in particular housing costs, are leading to an affordability crisis for the low paid.
36 The Council contended that while recognising the uncertainty caused by the outbreak of the pandemic last year, and the need for the Commission to defer the increase in the SMW, no such circumstances exist 12 months on. An increase in the SMW is necessary to meet the needs of the low paid in Western Australia.
37 The focus of the Council's submission was the cost of living for low-income households and the most vulnerable in the community. This included a particular focus on housing, food costs and energy. The Council referred to its Cost of Living Report 2020, in support of its submissions. This report models five low-income household types and analysed the sufficiency of their income to afford a basic standard of living, in accordance with community standards.
38 In general terms, the Council noted that at the time of this year's State Wage Case, whilst living costs in terms of rents, food and beverages have increased, Commonwealth and State Government financial supports have been removed, making it harder for low-income earners to make ends meet. Housing costs over the period 2018 to 2020 have increased significantly, along with a contraction in rental vacancy rates. The Council submitted that based on current data, weekly median rents for a unit and for a house represent 51% and 57% respectively of the SMW. On this basis, a minimum wage household would qualify as being in a state of severe housing stress.
39 In terms of the current market, the 2020 Rental Affordability Snapshot examined rental affordability in the Perth metropolitan area and in the regions. This report showed only a very small percentage of properties for rent in Perth and the Southwest region, as being affordable for minimum wage earners and none in the Northwest. The Council contended that this situation is made worse by the recent ending of the moratorium on rental evictions and rental increases. Further material provided to the Commission by the Council, referred to the formation of a Housing Emergency Response Group on 1 April 2021, to press the State Government for urgent assistance for those most affected by the current situation.
40 In terms of food costs and the maintenance of "food security", it was contended by the Council that based on the Suncorp 2020 Cost of Food Report given average weekly food costs in Western Australia of $266, this amounts to approximately 40% of weekly income after tax, for an adult minimum wage earner. It was submitted that in this situation, a minimum wage earner must substantially cut back on other spending, to maintain a healthy diet in accordance with community standards. Evidence of food security stress is found in an increasing number of people, since March 2021, turning to emergency food relief, especially since the wind back of pandemic income support.
41 Accordingly, the Council submitted that an increase in the SMW can assist in avoiding food insecurity.
42 Meeting energy costs is cited by the Council as a significant impact on the wellbeing of minimum wage households. Given the percentage of income spent on energy of households in debt, in 2019, costs were approximately $113 per week on utilities, with power the highest component at $58 per week. It is to be noted that these are 2019 figures and since, in response to the pandemic, the State Government has implemented measures such as a doubling of the Energy Assistance Payment and implemented a freeze on all household charges and fees, along with a moratorium on electricity disconnections. Additionally, a $600 electricity bill credit was made available from 1 November 2020. The Council contended however, that this credit has now been used up and an increase in the SMW will assist low-income households in meeting their energy costs.
43 The Council also referred to relative poverty, in terms of those households experiencing entrenched financial disadvantage, whilst a family member is working full time. Reference was made to the ACOSS and UNSW Sydney (2020) Report Poverty in Australia 2020: Part 2 - Who is Affected? This refers to more than 1 million Australians who work full time, but remain in relative poverty, suggesting that the minimum wage is insufficient. Additionally, the Council referred to those working in secondary employment as being further evidence of this. A consequence of this situation is rising child poverty, and the impact on child development as they grow up. The Council referred to a case study of a single mother with two children working at a grocery store on minimum wages. Her fortnightly income, with income support payments, is $1,200, of which $700 is spent on rent. The $500 balance is spread over the cost of food, petrol, and school fees for her children. She has no money for "luxuries".
44 As part of the impact of relative poverty, the Council referred to what it says is the growing gap between the SMW and the Western Australian AWOTE. The Council submitted that the erosion of the "minimum wage bite", that being the ratio of the SMW to median or average wages, is inconsistent with the criteria s 50A(3) of the Act, that the SMW meet the needs of the low paid and contribute to an improvement in standards of living.
45 Overall, the Council contended that given the strengthening of Western Australia's economy, with data on increased retail spending and a tightening labour market, there should be no barrier to a significant increase in the SMW to enable low paid households to better meet their living costs, without having negative effects on employment levels or workforce participation.
Professor Preston
46 Professor Preston has provided the Commission with two papers which she has authored and coauthored. The first, entitled "The West Australian Labour Market and Gender Equity Post-Covid", canvasses the impact of the pandemic on female employment in 2020. The paper notes the differential impact of the pandemic on jobs for women and men.
47 In relation to job growth for women, it is noted that this has been predominantly in part time employment and in lower skill level jobs. In the case of men, the growth in jobs has been full time and in higher skilled positions. The paper also refers to the underutilisation rate among female employees and that the gender pay gap has widened. Allied to this, is the low level of wages growth in Western Australia, especially for women. The paper also notes the high level of female employment in the industry sectors covered by the State Wage Order, such as accommodation and food services, retail, arts and recreation services and the health and social services sectors.
48 The second paper, "The Evolving Wage Structure of Young Adults in Australia: 2001 to 2019", examines wages growth for young adults aged 25 to 34 years of age, in the context of the return on investment for educational qualifications achieved. It is noted that wages growth over the early 2000s for this cohort was strong, however, from 2010/11 - 2018/19 wages growth has been flat.
49 The paper concludes that the return on investment associated with attaining degree level qualifications for young adults has been falling over the period examined. This is postulated to be causally related to an increase in supply of degree qualified employees, but also it may be associated with a decline in educational quality more generally.
50 We thank Professor Preston for bringing these two papers to our attention for the purposes of these proceedings.
Consideration
Coverage of the State Wage Order
51 The consideration that we gave to this issue in the 2020 State Wage Case at [197] - [204] and our conclusion that there is a high degree of award reliance in this State in the industries of accommodation and food services, retail trade, arts, recreation and health and community services, remains. UnionsWA also referred to the Interim Report - Ministerial Review of the State Industrial Relations System, suggesting that the number of employees in the State industrial relations system is potentially between 21.7% and 36.2% of all employees in the State.
52 We note too, the tables of award reliance included in both the UnionsWA and Minister's submissions up to February 2021, and the two tables in the Minister's submissions in relation to the top 10 most frequently accessed awards summaries prepared by Wageline and the top 10 most discussed awards in calls to Wageline. All of this material, whilst not enabling an assessment of the number of employees subject to the State industrial relations system with any level of certainty, suggests that it remains significant. We consider that the conclusions of the Commission in the 2016 State Wage Case [2016] WAIRC 00358; (2016) 96 WAIG 636 at [144] - [149] remain relevant. In that decision we said:
144 There are varying views on the basis for calculating the number of employees and employers covered by the State industrial relations system and affected by the State Wage order. In the private sector, they are employees of sole traders, partnerships, some trusts and incorporated businesses which are not trading or financial corporations. In addition, there are State public sector employees.
145 We note that the State Wage Order deals not merely with the minimum wage for award free employees but also award covered employees and also award rates. It will directly affect some and will have indirect effects on others. It covers the rates for juniors, apprentices and trainees, and sets out the Principles to be applied to a range of types of claims which might come before the Commission, so as to guide the parties in pursuing, and the Commission in deciding, those claims.
146 While the State Wage order deals with more than the minimum wage, this is its most direct effect, along with setting the increase for award rates. Therefore, its most direct effect is on award free and award covered employees and their employers. It also provides a floor and, what some have described as, a signalling effect to those not directly covered, for their wage setting. So while the numbers actually covered or directly affected by the minimum wage is difficult to determine, it is clearly of significance to many employers and employees, either directly or indirectly.
147 Those employees dependent on the minimum wage are more likely to be employed in small businesses.
148 As UnionsWA submits, it is likely that vulnerable groups of employees are overrepresented within the private sector of the state industrial relations system, partly due to them being employed in small private sector businesses.
149 In terms of low income households, UnionsWA refers to the Productivity Commission’s report, noting that: Employees in the lowest income groups are more likely to be on the minimum wage than those in higher income groups (and by more than a fivefold factor) (figure 4.8). So, while most people in the lowest quintile are not in work (and therefore do not receive any wages), almost half of those who are in work are paid at a minimum rate.
53 We have also previously observed that employers and employees in the State industrial relations system do not generally avail themselves of the making of industrial agreements. In the 2018 State Wage Case [2018] WAIRC 00363; (2018) 98 WAIG 263 we said at [192] - [198] as follows:
Enterprise bargaining
192 We are required to consider the need to protect employees who are unable to reach an industrial agreement (s 50A(3)(a)(v)) and to have regard to the need to encourage employers, employees and organisations to reach agreements appropriate to the needs of enterprises and the employees in those enterprises (s 26(1)(d)(vii)).
193 The Commission's records identify that in those areas that are subject to the State Wage order, employers and employees do not generally bargain for an enterprise agreement. Only 53 applications were made to register industrial agreements in the 2016-17 financial year (see Report of the Chief Commissioner of The Western Australian Industrial Relations Commission 2016-17, page 17-18): … 33 of these relate to independent schools, and the remainder relate to not for profit organisations including political parties and community and legal centres. Three relate to one particular unincorporated private hospital.
194 The trend at the national level and the lack of any real level of agreement-making amongst State system employers and unions confirms the significance of the State Wage order to State system private sector employees.
195 Those covered by awards have not received pay increases through those awards other than from the State Wage order (see the 2016-17 Annual Report of the Chief Commissioner, page 18).
196 UnionsWA says that it is most likely that increases in the SMW will act as a spur to bargaining, particularly for award-free employees where a signal is needed as to what constitutes an acceptable wage. It refers to studies by the Commonwealth Department of Employment and the evidence before us by Professor Rowena Barrett in 2013.
197 In last year's decision ([2017] WAIRC 00330; (2017) 97 WAIG 693), we found that 'in particular industries and industrial pay negotiations, the increases awarded through the State Wage Case are used as guides or signals for increases in rates of pay to significant numbers of employees beyond those directly covered by the State Wage order. In many industries, the award is not merely the safety net above which actual rates of pay are negotiated, but may constitute the actual rates paid' [200]. This situation is reinforced this year, and particularly given the absence of a discernible level of industrial agreement negotiation in the sectors and awards where most low-paid work is found.
198 In light of this material, we conclude that an overwhelming proportion of State system private sector employees receive an increase in their rate of pay only by one of three methods:
(1) the SMW contained in the MCE Act through the State Wage Case;
(2) the increase in award rates of pay through the State Wage order; or
(3) the signalling effect of those increases.
54 Nothing has been put to us in these proceedings to cause us to alter our views in relation to the coverage and effect of the State Wage Order for present purposes. We reach this conclusion, notwithstanding the submissions put to us in relation to the s 50A(3)(c)(v) criterion, referred to below.
Statutory requirements
55 By s 50A(1) of the Act, the Commission is required before 1 July each year, to make a general order setting minimum rates of pay prescribed for classes of employees under the Minimum Conditions of Employment Act 1993 (WA) and to adjust rates of wages payable under awards. Additionally, the Commission is required to prescribe a Statement of Principles, by which the Commission’s jurisdiction under the Act is to be exercised in relation to the setting of wages, salaries, allowances, or other remuneration for employees.
56 By s 50A(3) the Commission is required, in performing its functions in making such a general order, to take into consideration a range of factors. These include the need to: ensure that Western Australians have a system of fair wages and conditions of employment; to meet the needs of the low paid; to provide fair wage standards in the context of living standards generally prevailing in the community; to contribute to improved living standards for employees; to protect employees who may be unable to reach an industrial agreement; to encourage ongoing skills development; and to provide equal remuneration for men and women for work of equal or comparable value.
57 Additionally, the Commission is required to also consider a range of economic factors including the state of the economy of Western Australia and the likely effect of its decision on that economy, in particular, the level of employment, inflation and productivity; the national economy to the extent it is relevant; and the capacity of employers as a whole to bear the cost of any increase in wages, salaries, allowances and other remuneration. Additional considerations include the need to ensure that Western Australians have an award framework that represents fair wages and conditions of employment; relevant decisions of other industrial courts and tribunals and finally, any other matter that the Commission considers to be relevant.
58 The statutory criteria set out in s 50A(3) of the Act are not accorded any particular precedence, one to the other. The Commission is required to balance each of them in its deliberations. It is trite to observe that the Commission’s jurisdiction under s 50A is also to be exercised in accordance with s 26(1) of the Act.
Fair wages and conditions of employment; provide fair wage standards in the context of living standards in the community generally and contribute to improving living standards for employees.
59 The statutory framework in s 50A(3)(a) emphasises the obligation on the Commission to consider the concept of fairness. For the purposes of s 50A(3)(a)(i), fairness is relative and requires a balance between the interests of both employees and employers. The Chamber submitted that the gap between the SMW and the FMW, which is presently $6.20 per week, was unfair and inconsistent with this statutory criterion. As we have previously observed however, if the Commission considers that the circumstances before us warrant an increase to the SMW, to not do so, despite a differential with the FMW, would be at odds with the obligation imposed on us under s 50A(3)(a) of the Act.
60 As we noted in the 2014 State Wage Case [2014] WAIRC 00471; (2014) 94 WAIG 641 at [59] - [61], the Act was amended in 2006 to break the nexus with the national wage decision. Section 50A primarily requires the Commission to set the SMW with regard to the circumstances existing in Western Australia, and not by reference to the FMW specifically, although s 50A(3)(f) requires us to take into consideration the Annual Wage Review of the Fair Work Commission. We also recognise, as we did in the 2014 State Wage Case, that in this State most employees are employed by employers that are trading corporations. Those employers pay a minimum wage to their employees which is presently $6.20 lower than the SMW, in circumstances where the cost of living is the same as for employees in the State system. We restate that the concept of relative fairness requires us to have regard to the level of the FMW. We note however, that the difference between the SMW and the FMW has narrowed considerably since 2014, when the SMW was $25.00 higher.
61 The statutory obligation in s 50A(3)(a)(iii) requires the Commission to consider the provision of fair wage standards in the context of living standards generally prevailing in the community, as a part of a benchmark against which to assess fair wages and conditions of employment. A logical measure of the changes in living conditions generally in the community, are changes in the cost of living, over the year prior to these proceedings. Contributing to improved living standards under s 50A(3)(a)(iv), means enabling those employees affected by the SMW and award rates of pay, to improve their living circumstances, relative to the cost of living generally, through adjustments to wage rates.
62 We are mindful of the fact, as noted earlier in these reasons, that small business employers in the sectors covered by the State Wage Order include those most impacted by the pandemic restrictions. This was also noted by the Commission in the 2020 State Wage Case. However, this also needs to be seen in the context of the recovery of the Western Australian economy and the demand for goods, as is apparent in the strength of the retail sector, for example. Already noted too, is the strong rebound in spending in the accommodation, food services and retail sectors, which, whilst it may still be lagging somewhat in terms of employment growth compared to prepandemic levels, is evidence of improved consumer demand and confidence. Household spending has significantly increased since the 2020 State Wage Case.
63 In terms of living standards in the community and the need to contribute to the improvement of those standards, the Council and UnionsWA point to the cost of living for the low paid, and in particular, the cost of housing, including in the regions. With the increasing costs and decreasing availability of rental properties, median rent as a percentage of the SMW for low-income earners now consume over 50% of their income. This is combined with escalating food costs and rising food insecurity. The Minister too, recognises that many low paid employees, including those not covered by State awards, rely on increases in the SMW to meet the challenges they face, in terms of day to day living expenses.
64 In terms of prevailing living standards and the extent to which they can be enhanced, a measure relied upon by the Commission consistently is the CPI indices
65 Excluding the electricity component, which we accept is appropriate given its distorting effect, as noted earlier, the CPI for Perth for the March quarter 2021 increased by 1% and by 1.5% in annual average terms. However, given the substantial increase in costs of living, especially in housing, for the low paid, as set out in some detail in the Council submission, both the Council and UnionsWA urge the Commission to not solely rely upon CPI, especially given its volatility arising from the impact of the implementation and withdrawal of assistance measures, and the State Government's one-off electricity credit.
66 In last years’ State Wage Case, we invited submissions from the parties on the appropriateness of using the CPI as a measure of the cost of living and inflation. Various alternatives were proposed including the Council's Cost of Living Reports; the Household Financial Consumption Expenditure index published with the National Accounts; and the ABS series Analytical Living Costs Indices. We noted on that occasion, that the latter two of these cost of living measures, tended to display similar price movements over time as the CPI measure. Whilst concluding that it is not perfect, we then observed that the CPI is as good a measure as any, to gauge price changes in the basket of goods measured for Perth. We said however, and restate, that this is not the only consideration for us to take into account in assessing the cost of living.
67 In the circumstances before the Commission on this occasion, and in assessing fairness in accordance with s 50A(3)(a)(i) of the Act and the criteria in s 50A(3)(a)(iii) and (iv), we consider that regard should be had to the disproportionate impact on the low paid of increased housing costs as submitted by the Council. We have consistently declined to "unpack" the CPI as an appropriate broad measure of increases in living costs generally. However, acknowledging the caveats placed on it by the Chamber concerning inclusions in the categories of expenditure, the publication by the ABS in November 2020, of an experimental series comparing both Nondiscretionary and Discretionary CPI movements (those items considered essential as opposed to those more discretionary in nature), can be of some assistance.
68 The Council contended also that due to the delay in the increase in the SMW arising from last year's decision, a comparison can only be made between AWOTE as at November 2020 and the SMW as at February 2021, without being able to account for any change in AWOTE over this period. As at February 2021, the SMW was 41.3% of the November 2020 AWOTE. By comparison, as at November 2005, the same relativity was 47.6%. Further, the Council referred to the relevant comparison nationally as being a ratio of 44%. The Council also referred to the Fair Work Commission benchmark for determining the low paid, at two thirds of the median adult full time ordinary earnings rate. It was contended that the SMW has fallen well below this level. Accordingly, the Council submitted that this relative decline, despite Australia having, in overall terms, relatively high minimum wages by international standards, is at odds with meeting the needs of the low paid and to provide for fair wages in the context of living standards generally in the community.
69 We have expressed some reservations in the past, as to comparisons between the WPI and the level of the SMW with AWOTE, given the potential distorting effect of high incomes in the mining and resources sector. However, in its submissions, the Council again refers to what it describes as the growing disparity between the level of the SMW and median pay levels as contributing to income inequality in Western Australia. Despite this qualification, the differential is a consideration in the Commission's assessment of living standards generally in the community and the need to contribute to their improvement.
Meeting the needs of the low paid
70 In terms of s 50A(3)(a)(ii), the criterion requires the Commission to consider the need to "meet the needs of the low paid". The comparable provision in s 284(1)(c) of the Fair Work Act 2009 (Cth) requires the Fair Work Commission to take into account "relative living standards and the needs of the low paid", in similar terms to ss 50A(3)(a)(ii), (iii) and (iv). In the Annual Wage Review 201920 [2020] FWCFB 3501, at [360], the majority stated:
Assessing the needs of the low paid involves analysing the extent to which lowpaid workers are able to purchase the essential items necessary for achieving a decent standard of living for them and their families, and to allow them to participate in community life, assessed against contemporary norms. The risk of poverty is also relevant in addressing the needs of the low paid.
71 In terms of what is meant by the need to "meet the needs of the low paid" under s 50A(3)(a)(ii) of the Act, we consider that the above description is also apposite to the Commission's consideration in relation to this criterion. As noted in the 2015 State Wage Case [2015] WAIRC 00435; (2015) 95 WAIG 679 at [102], there is a substantial overlap between the requirements of s 284(1) of the FW Act and s 50A(3) of the Act, which we have previously recognised and which we reaffirm on this occasion.
72 The fact that, as pointed out by the Chamber in its submissions, the Commission has, since 2015 to 2020, increased the SMW by amounts greater than the cumulative Perth CPI and WPI over the same period, is evidence that these increases in the SMW have contributed to the needs of the low paid and have provided an improvement in living standards for employees covered by the State Wage Order. In our decision in the 2020 State Wage Case, we also noted that over the last 10 years, the SMW has increased by 34%. In terms of the cost of living as measured by the CPI for Perth, this has risen by about 20% over the same period. Thus, we reaffirm our view that past increases in the SMW in Western Australia have, on this measure, contributed to meeting the needs of the low paid. As part of considering these factors, the Commission has also consistently assessed the underlying strength of the State economy and the requirement in s 50A(3)(b) of the Act, to have regard to the effect of its decisions on the level of employment.
73 In meeting this criterion, and also, the need to contribute to an improvement in living standards in s 50A(3)(a)(iv) considered above, increases in the SMW, reflecting increases in the cost of living, and the particular challenges for low- income employees, have been a consistent feature of decisions of the Commission in making a State Wage Order. It is recognised, however, that the SMW alone cannot address all the needs of the low paid. Necessarily, matters such as the alleviation of acute housing stress, emphasised by the Council on this occasion, rely heavily on the interaction of tax and transfer payments and other initiatives, as a part of the social welfare system.
Protecting employees unable to reach an industrial agreement
74 Since 2018, the Commission has observed in successive State Wage Cases, as noted at [53] above, that the degree of bargaining for industrial agreements in those industry sectors most affected by the State Wage Order has been minimal. We concluded in the 2020 State Wage Case, in restating our view from the 2018 State Wage Case, that the principal means of wage increases in the State industrial relations system are the SMW in the MCE Act; increases in State award rates of pay; and the signalling effect of such increases.
75 Whilst recognising these factors, on this occasion the Chamber also contended that the signalling effect of both the SMW and the FMW has been subdued due to the impact of the pandemic. The Chamber cited ABS WPI figures from the June quarter 2018 through to and including the December quarter 2020, in terms of contributions made by enterprise agreements, individual arrangements and awards. The Chamber contended that individual arrangements, being identified by the ABS as more immediately impacted by the pandemic, reflected wage freezes, and negotiated reductions in pay, as similarly noted by the RBA in its February 2021 Statement on Monetary Policy.
76 Thus, the Chamber contended that in the current circumstances, the prospect of any signalling effect of the SMW is much reduced.
77 This was contested by UnionsWA. In referring to the same ABS data, UnionsWA contended that the weaker signalling effect is not for the reason suggested by the Chamber, but rather, is due to the delayed implementation of the SMW and FMW increases from 2020. It was submitted that the normal timing of SMW and FMW increases shows up in the September quarter ABS WPI figures, as shown on the chart at [4.18] of the UnionsWA submissions in reply, referred to by both parties. This shows the much larger proportionate contribution of awards to the WPI in the September quarters in 2018 and 2019, respectively.
78 Reference was also made by UnionsWA to the Minister's submissions to the effect that an analysis of registration of current industrial agreements by the Commission, confirms that smaller, unincorporated businesses in the hospitality and retail sectors do not use industrial agreements at the present time. The Minister also submitted that such businesses were likely to be guided by State awards (either directly or indirectly) in setting wages for their employees.
79 Whilst the pandemic may well have had some impact on the wages and salaries of those governed by individual arrangements more broadly, we are not persuaded to fundamentally alter our views previously expressed, that the setting of the SMW has some signalling effect in the Western Australian labour market for those employers and employees in the State industrial relations system. Furthermore, the absence of agreement making and reliance on the SMW and award rates of pay, in the industry sectors most impacted by the State Wage Order, means that an increase in the SMW and award rates arising from these proceedings will add to the protections afforded to such employees.
Encourage ongoing skills development
80 We have already noted earlier in these reasons a substantial increase in the take up of apprenticeships, from about 2016 to date. This is very encouraging. Likewise, is the arresting of the downward trend in traineeship commencements, with an upturn in the number of commencements for 2020.
81 As referred to by the Chamber in its submissions, there has been substantial Commonwealth and State Government support to employers to bolster apprenticeship and traineeship commencements. This can only be positive and is in part at least, a recognition of the commitment required by employers to take on new apprentices and trainees, and the additional costs involved, associated with the supervision of apprentices and trainees in the early stages of their employment.
82 Whilst also recognising that supervision is the largest cost for employers in engaging apprentices and trainees, UnionsWA cited research by the National Centre for Vocational Education Research, The Cost of Training Apprentices, (6 April 2009). This confirmed the relationship between supervision and employer costs, but noted that once an apprentice becomes more productive, this tends to neutralise the employer's direct wages costs. UnionsWA also contended that regular and substantial increases in the SMW and award rates of pay are important in attracting people to take up apprenticeships and traineeships, given that there is often an opportunity cost for employees, in foregoing other potentially higher paying employment.
83 We acknowledge the importance of employer assistance measures to encourage the offering of apprenticeships and traineeships. The recent, sustained improvement in apprenticeship commencements suggests to us that regular and modest increases in the SMW have not acted as a disincentive to ongoing skills development in workplaces in this State, that are subject to the State Wage Order.
Equal remuneration for men and women for work of equal or comparable value
84 Section 50A(3)(a)(vii) requires the Commission to consider the need to provide equal remuneration for men and women for work of equal or comparable value. The Minister contended that in this jurisdiction, women tend to be more reliant on award wages than men. We accept this to be so. The Minister also noted that in comparing AWOTE data from November 2019 to November 2020, the gap between male and female earnings increased from 22.4% to 22.9%, with Western Australia still having the largest gender pay gap of all the States and Territories. It was accepted by the Minister that there are complex reasons for the gender pay gap in this State.
85 In connection with this issue, UnionsWA referred to Professor Preston’s paper “The Western Australian Labour Market and Gender Equity Post-Covid”, commenting on the gender pay gap in Western Australia. UnionsWA noted that Professor Preston contended that the State Government's Wages Policy has led to slow wage growth over past years in the public sector, which has also likely led to an increase in the gender pay gap. Accordingly, constraints on increases in the SMW in the private sector would have the same effect. The submission was also made by UnionsWA that the material in the Minister's submissions, referred to above, leads to the need for a much larger increase in the SMW than contended by the Minister.
86 Likewise, the Council maintained that in the health and social services sectors for example, approximately 82% of the workforce are women but despite this, the gender pay gap remains at 9.6% and it is not improving.
87 We have previously recognised the existence of the gender pay gap in Western Australia and that, at least in part, there are industry compositional reasons for this. As we noted in the 2012 State Wage Case [2012] WAIRC 00346; (2012) 92 WAIG 557 at [54] - [58], and as we have restated since, there are limits to which increases in the SMW, which only directly affects a narrow range of industries and a relatively small number of employees, can have any material impact on the gender pay gap existing more broadly across all industries in the State. However, in recognition of the high level of female employment in the State industrial relations system, we remain of the view that increases in the SMW can assist in reducing the gender pay gap amongst this cohort of employees.
88 We also refer to Principle 8 - Equal Remuneration for Men and Women for Work of Equal or Comparable Value, introduced into the State Wage Principles in the 2019 State Wage Case [2019] WAIRC 00290; (2019) 99 WAIG 509. We draw attention to this, and the capacity for parties to make an application to the Commission under this Principle, for the Commission to inquire into and determine the matter.
Capacity of employers as a whole to bear the cost of increases in wages and conditions of employment
89 Section 50A(3)(d) requires the Commission to take into consideration the capacity of employers, as a whole, to bear the costs of increased wages, salaries, allowances, and other remuneration. The Minister submitted that in the absence of specific information on the health of individual businesses, GOS plus GMI prepared by the ABS, can provide some assistance in gauging the relative performance of industries operating in Western Australia.
90 The most recent data available is for the 2019-2020 financial year, taking into account the initial period of the pandemic, but not the subsequent recovery in the second half of the year. This information for 2019-2020, which the Commission has referred to and relied upon in past State Wages Cases, is set out at Table 6 of the Minister's submissions on p 15 as follows:
Table 6: Gross Operating Surplus (GOS) and Gross Mixed Income (GMI) by industry, WA, current prices, 2019 and 2020*
Industry
GOS + GMI June 2019
($m)
GOS + GMI June 2020
($m)
Annual Increase ($m)
Annual Increase (%)





Agriculture, forestry and fishing
4,696
4,025
-671
-14.3
Mining
91,814
117,350
25,536
27.8
Manufacturing
5,240
5,149
-91
-1.7
Electricity, gas, water and waste services
2,992
3,021
29
1.0
Construction
5,334
5,644
310
5.8
Wholesale trade
3,386
3,319
-67
-2.0
Retail trade
2,630
3,049
419
15.9
Accommodation and food services
1,297
1,272
-25
-1.9
Transport, postal and warehousing
4,920
4,983
63
1.3
Information media and telecommunications
1,624
1,831
207
12.7
Financial and insurance services
7,801
7,757
-44
-0.6
Rental, hiring and real estate services
2,890
2,817
-73
-2.5
Professional, scientific and technical services
3,606
4,271
665
18.4
Administrative and support services
825
911
86
10.4
Public administration and safety
1,680
1,789
109
6.5
Education and training
998
1,025
27
2.7
Health care and social assistance
2,141
2,109
-32
-1.5
Arts and recreation services
514
531
17
3.3
Other services
1,338
1,473
135
10.1
Total all industries
159,880
186,847
26,967
16.9
Total industries excl. mining
68,066
69,497
1,413
2.1
*ABS (2020), Australian National Accounts: State Accounts, 2019-20, Catalogue 5220.0, Time Series, Table 6 (original data)
91 It is acknowledged by the Minister that the most substantial contribution to the overall performance on the above measures was from the mining sector. The all-industries growth figure of 16.9%, excluding mining, resulted in growth of 2.1%. Also noted in the Minister's submissions is the fact that during the first half of 2020, businesses were in receipt of the Commonwealth JobKeeper payments and also other industry assistance. The industries of accommodation and food services and retail were substantial recipients of this support and therefore, the Minister submitted that some caution is required in assessing this data.
92 Subject to this caveat, it is to be noted that the retail industry recorded positive profitability growth of 15.9%. The accommodation and food services sectors recorded negative growth of 1.9%. Arts and recreation services also recorded positive growth of 3.3%, as did the majority of other industry sectors.
93 The Chamber contended that the data in Table 6 largely reflected the very substantial level of government pandemic support. With the withdrawal of this support, the Chamber submitted that profits are likely to fall to a more normal or subnormal level. As referred to earlier in these reasons, the Chamber also drew a distinction between the profitability of incorporated and unincorporated businesses over the past five years, in real terms. Total business gross operating profits for incorporated businesses grew by 8.4% per annum on average as opposed to growth of 1.5% per annum on average for unincorporated businesses.
94 UnionsWA also acknowledged the challenges for businesses in 2020, and that the difficulties are not yet over. However, in citing the recent NAB SME (Small and Medium Enterprises) Business Survey: Quarter 1 2021, UnionsWA noted business confidence and conditions in this sector in Western Australia "were well into positive territory for WA" (UnionsWA submissions [9.2]). UnionsWA also pointed to measures announced in the Federal Budget on 6 October 2020, favourable to small businesses.
95 As part of its contentions as to the capacity to pay and cost impacts, the Chamber also referred to the upcoming increase in employer statutory superannuation contributions from 9.5% to 10% from 1 July 2021. The Chamber maintained that this will be a direct cost for employers, and, in the case of award covered employees, the increased superannuation contributions will include penalties and loadings, which is especially relevant to retail and hospitality industry employees, given their hours of work. The inclusion of increased superannuation contributions as a relevant consideration was disputed by UnionsWA, which urged the Commission to focus on the improvement of living standards for employees currently, and not benefits that are due to take effect prospectively, after retirement.
96 We have in the past taken into consideration the impact of increases in statutory superannuation contributions for employees, as a direct cost to employers, and as a relevant factor in moderating an increase in the SMW: 2014 State Wage Case at [88] and [101]. We are not minded to alter this view. Whilst statutory superannuation contributions are a deferred benefit for employees, which take effect on retirement, they are a present and ongoing cost to employers. We maintain the view that such increases should have a moderating influence on an increase in the SMW.
97 The analysis of GOS plus GMI for Western Australia in the above table suggests that a number of industries in the State industrial relations system remained profitable to June 2020. Whilst recognising that many employers in this State received the benefit of substantial government financial assistance, when combined with the other information before us, in relation to the recovery in employment, hours worked, household consumption (including in those industries most affected by the State Wage Order), and consumer and business confidence, we consider that the underlying strength of the recovery in the Western Australian economy supports the conclusion that employers as a whole have the capacity to bear the cost of any increase in the SMW resulting from these proceedings.
The state of the Western Australian economy
98 This criterion was given considerable focus by the parties in their submissions, given the impact of the onset of the pandemic last year, and changes that have occurred since that time. The economic impact of the coronavirus pandemic on the State was significant. The 2021 State Wage Case – Economic Conditions and Outlook as Attachment 1 to the Minister’s submissions, (based on the 2020-21 Prelection Financial Projections Statement), notes that the onset of the pandemic in March 2020, and the necessary social distancing measures implemented, had the effect of reducing the capacity of many businesses, leading to temporary or permanent closure. Consequently, many employees were stood down or lost their jobs. Working from home became commonplace. Levels of underemployment were high.
99 A consequence of this was the largest contraction in the State’s economy ever recorded. The June quarter 2020 measure of the domestic economy, SFD, fell by 6.2%. Unemployment peaked at a very high level of 8.7% in June 2020, reflecting the loss of 103,000 jobs over the period from February to May 2020. Household spending slumped by 11.1%.
100 The unprecedented response to the pandemic by the Commonwealth and State Governments, in terms of economic stimulus measures such as JobKeeper and JobSeeker, and targeted industry assistance packages, has aided in the recovery of the State’s economy more quickly than anticipated. The Economic Conditions and Outlook notes that by March 2021 for example, in aggregate terms, the jobs lost in this State at the height of the pandemic have now been recovered. Coupled with the suppression of the virus in the community, consumer and business confidence in the State has returned. This is despite the five-day lockdown in the Perth, Peel and Southwest regions in February 2021 and the three-day lockdown over the Anzac Day long weekend, in April 2021.
101 The State’s mining and resources sector, especially iron ore, has been particularly robust over the year since March 2020, which has contributed substantially to both the State and national economies through higher royalty and tax revenue streams. Mr Christmas noted the strength of commodity prices, driven by the strong economic recovery in China, one of the few global economies to grow during the pandemic. Reflecting growing confidence levels in the Australian economy, the Australian/US dollar value has recovered from a 17-year low in April 2020. The residential construction sector has also strengthened significantly, aided by Commonwealth and State stimulus measures. Other State jurisdictions, except Victoria, have also experienced a more rapid recovery than anticipated.
102 The key metrics of the State’s overall economic performance and future projections now follow. Unless otherwise stated, the tables and graphs are drawn from the Economic Conditions and Outlook and also Mr Christmas’ presentation document, 2021 State Wage Case The Western Australian Economy, 20 May 2021, made available to the Commission and the parties. In summary, inflation remains benign, well below the Reserve Bank of Australia’s target range of 23%. Wage growth in aggregate terms, remains subdued. The major economic aggregates and annual growth figures are set out at Table 1 below. It is noted that CPI figures for 2020-21 and 2021-22 exclude the electricity sub-sector, given the distorting effect of the State Government’s one off $600 electricity bonus to households, from the October 2020 State Budget.
Table 1 – Major Economic Aggregates, Annual Growth (%)

2019-20

2020-21
2021-22
2022-23
2023-24

Actual
PFPS Estimate
Forward Estimate
Forward Estimate
Forward Estimate
State Final Demand
0.8
2.25
3.75
2.25
3.0
Gross State Product
1.4
2.0
2.75
1.25
1.5
Employment
0.4
1.5
1.5
1.75
1.5
Unemployment rate (a)
6.1
6.5
6.0
5.5
5.5
Consumer Price Index (b)
1.3
1.5
1.75
1.75
2.0
Wage Price Index
1.7
1.5
1.75
2.0
2.25
Population (c)
1.5
0.8
0.7
1.0
1.3
(a) Data expressed as annual average during the financial year.
(b) CPI growth rates in 2020-21 and 2021-22 are based on the total index excluding the electricity sub-sector.
(c) Actual for 2019-20 based on ABS Cat. No. 3101.0
Source: Western Australia 2020-21 Pre-election Financial Projections Statement and Australian Bureau of Statistics
103 In terms of current economic conditions, Mr Christmas referred to the heavy fall in both SFD and merchandise exports by mid-2020. However, since that time, both have recovered to pre-pandemic levels. Comparing the December quarter 2019 and the December quarter 2020, the domestic economy is now 1.2% larger. Mr Christmas referred to merchandise exports growth of 11% in the December quarter 2020, which also now exceeds the pre-pandemic level. Household consumption has also bounced back from its June quarter 2020 low, although Mr Christmas noted that those sectors exposed to international borders remain significantly challenged. Spending in hotels, cafes and restaurants has recovered strongly, but has not quite yet reached its level in the March 2020 quarter. Retail spending has been very strong throughout the pandemic, with Mr Christmas noting that this has been supported by stimulus measures and the shift away from international and domestic travel, to spending on goods in Western Australia. Additionally, Mr Christmas agreed that increased retail spending has also been aided by increasing consumer confidence.
104 The performance of the housing market has been particularly strong, in terms of both building approvals and housing finance, aided by Commonwealth and State stimulus measures. Business investment has also been growing.
105 In terms of the outlook for growth, Treasury forecasts, as summarised by Mr Christmas, suggests GSP will grow by 2% in 2020-21, as opposed to 1.4% in 2019-20. Further strengthening is forecast for 2021-22 where GSP is projected to be 2.75%. Mr Christmas noted that household consumption and business investment are expected to remain robust. Consumer spending is forecast to grow modestly in 2020-21 by 0.25%, due to strengthening in retail spending in the September and December quarters of 2020 and more positive consumer sentiment. Overall, Mr Christmas noted that the domestic economy is forecast to grow by its fastest rate in eight years in 2020-21, whilst being modest in historical trend terms.
106 Treasury expects retail spending and consumer confidence to remain positive in the March and June quarters of 2021. This is despite the gradual withdrawal of Government stimulus measures, which to an extent, have been offset by an increase in household savings in 2020 and also record low interest rates for borrowers.
107 In addition to consumer spending, the domestic economy is expected to be supported by modest levels of housing investment in 2020-21 of 0.75%, before growing substantially to a projected high of a 21.75% increase for 2021-22, on the back of high levels of land sales, boosted by the Commonwealth and State government land and housing stimulus packages, referred to above. Business investment has grown strongly in 2019-20 and is anticipated to grow modestly for 2020-21 and 2021-22, before accelerating in 2023-24 to grow by 4.75%. As with consumer sentiment, business sentiment has strengthened since the depths of the pandemic, with the recent NAB Business Survey showing that business confidence has risen to one of the highest levels over the last 10 years. The most recent NAB Monthly Business Survey May 2021 (released on 8 June 2021) points to continued strong business conditions and confidence in Western Australia.
108 The Western Australian labour market has also recovered strongly since the onset of the pandemic. The Treasury forecast for employment growth for 2020-21 is 1.5%, with increasing growth projected for the outyears. As noted earlier in these reasons, the very high levels of job losses which occurred over the period February to May 2020, which were associated with the restrictions imposed in response to the pandemic, have now been largely recovered. A large percentage of these initial job losses entailed part time employees in industries most affected, including accommodation and food services and the retail industry. The impact of JobKeeper however, enabled many businesses to continue to trade and increase hours of work for employees as business conditions improved. It is noted that the recovery in employment has been more pronounced for part time rather than full time employees.
109 The recovery in employment and hours worked has been robust, from the lowest point during the pandemic, to now both being at record levels. By industry, Mr Christmas noted that accommodation and food services have completely recovered overall, however the sub-data shows hotels, taverns and bars have fallen short of pre-pandemic levels, while restaurants, cafes and takeaway establishments have exceeded pre-pandemic levels of employment. As noted, retail spending had been very high, but employment numbers remain lower than prepandemic levels. Whilst as referred to in the Minister’s submissions, some caution is needed due to a lack of seasonal adjustment in the figures and the impact of the five-day lockdown in February 2021, the employment by industry figures over the period February 2020 to February 2021, show that many industry sectors have recovered employment to pre-pandemic levels. These are set out in Table 2 – Employment by industry in WA (000s), February 2020 – February 2021, at p 8 of the Minister’s submission, and is as follows:

Table 2 – Employment by industry in WA (000s), February 2020 – February 2021
TOTAL EMPLOYED (‘000)
Feb-20
May-20
Aug-20
Nov-20
Feb-21
Agriculture, forestry and fishing
34.8
36.2
36.7
37.4
28.6
Mining
115.5
101.5
114.2
121.2
113.3
Manufacturing
72.4
73.7
77.2
75.4
83.7
Electricity, gas, water and waste services
15.5
27.3
23.5
22.9
27.9
Construction
120.7
128.6
124.6
117.6
111.5
Wholesale Trade
43.7
40.4
31.2
42.4
47.2
Retail Trade
130.1
111.2
112.7
126.8
113.8
Accommodation and food services
96.3
68.4
81.7
89.9
96.9
Transport, postal and warehousing
69.0
55.3
53.2
64.4
71.0
Information media and telecommunications
14.4
12.5
15.4
11.2
10.1
Financial and insurance services
31.2
29.2
28.2
29.7
32.5
Rental, hiring and real estate services
25.7
32.4
24.8
22.0
22.9
Professional, scientific and technical services
107.6
105.3
108.9
111.3
101.6
Administrative and support services
38.9
36.1
43.2
45.7
38.4
Public administration and safety
98.6
92.9
105.8
87.7
78.2
Education and training
111.7
104.1
110.4
117.8
106.3
Health care and social assistance
171.3
159.5
174.0
183.3
205.8
Arts and recreation services
23.3
17.5
21.9
22.0
20.4
Other services
63.8
56.8
59.3
56.7
60.6
Total
1384.4
1288.8
1347.0
1385.3
1370.6

110 Updated figures for the labour market were published in the ABS Labour Force Survey on 20 May 2021 and the parties were invited to make further brief submissions on the material. In seasonally adjusted terms, the number of employed persons fell in April 2021 by 14,400, a reduction of 1.0 %. The Minister noted that this followed a 2.7 % increase from March 2021. Both the Minister and the Chamber observed that these losses were predominantly in part time jobs, with employment in full time jobs falling by 2,000 persons. Whilst it was anticipated that the cessation of the JobKeeper scheme on 28 March 2021 would have some impact on employment levels, the Minister submitted that according to the ABS analysis of the April labour force data, no clear aggregate impact of the cessation of the scheme was apparent from the March and April changes in employment and hours of work data. The ABS noted that there were no major changes in the indicators that had been used during the course of the pandemic, such as employees not working any hours or working reduced hours or substantial outflows of persons from employment across broad population groups. Despite this fall for April 2021, both the Minister and UnionsWA noted in their submissions that overall, total employment in Western Australia is still above pre-pandemic levels.
111 Consistent with the fall in employment for April 2021, the latest ABS labour market data also shows a fall in total hours worked by 3.2 % (as opposed to a rise of 10.1 % for March 2021), which the Chamber submitted reflected the impact of the three-day lockdown over the Anzac Day long weekend in April 2021. However, the Minister noted in his submissions that this would not be captured in the April figures, as the reference period for the ABS Labour Force Survey was 4 to 17 April 2021. Despite the April reduction in employment and aggregate hours worked, UnionsWA submitted that based on the April 2021 ABS data, overall employment in Western Australia increased by 5.7 % and the total number of unemployed persons fell by 17.1 % over the year.
112 In terms of unemployment and underemployment, the Minister submitted that whilst the three-day lockdown in April 2021 would not be captured in the latest ABS unemployment figures for the reason noted above, the previous short lockdown in February 2021, did not appear have any material impact on the unemployment rate. The Western Australian monthly unemployment rate is still well below the national rate. In terms of underemployment, the rate for Western Australia remains below the national rate, despite an uptick during the February lockdown, and is currently 7.1 % for April 2021, compared to 7.8% nationally. Western Australia has the lowest underemployment rate of all the States.
113 A further measure of jobs data introduced by the ABS and the ATO at the early stages of the pandemic, is the Weekly Payroll Jobs and Wages Data series. This uses the recent STP system to assess the impact of the pandemic on jobs on a regular basis. As already mentioned, whilst not all Western Australian small businesses use the STP system, and thus this needs to add a note of caution to the data, over the period 14 March 2020 to 10 April 2021, there was a 3.6% increase in payroll jobs in Western Australia, which is above the national figure of 1.0%. A comparative table, setting out Western Australia’s performance on this measure with the other States and Territories and the national performance, is at Table 3 – Change in payroll jobs and total wages – by State, as follows:
Table 3 – Change in payroll jobs and total wages – by State*

Payroll jobs
Total wages

Change between 14 Mar 2020 and 10 Apr 2021
Change between 14 Mar 2020 and 10 Apr 2021
New South Wales
0.4%
0.7%
Victoria
0.5%
3.9%
Queensland
0.6%
1.9%
South Australia
2.8%
3.2%
Western Australia
3.6%
0.7%
Tasmania
0.7%
1.0%
Northern Territory
4.6%
4.6%
Australian Capital Territory
0.8%
3.1%
Australia
1.0%
2.0%

*ABS (2021), Weekly Payroll Jobs and Changes in Australia, week ending 10 April 2021
114 In terms of recent data up to 24 April 2021, the ABS Weekly Payroll Jobs and Wages Data in fortnightly terms, does show some volatility in weekly jobs , reflecting the impact of the pandemic. This was pointed out by the Chamber in its submissions in reply, which, at p 5, contains Graph 1 - Indexed Number of Payroll Jobs and Total Wages, Western Australia and Australia, as follows:

Graph 1 - Indexed number of payroll jobs and total wages,
Western Australia and Australia

ABS (11 May 2021) Weekly Payroll Jobs and Wages in Australia

115 As to job vacancies, these are now also at a very high level, after a sharp decline in response to the pandemic. They are at their highest level in eight years. Mr Christmas said this bodes well for future employment growth. We also note that in the National Skills Commission Internet Vacancy Index preliminary report for May 2021, job advertisements (seasonally adjusted) are up 46% nationally. Western Australia recorded the highest increase of all the States with job advertisements being up by 68.9% on pre-COVID levels. Both the ANZ Australian Job Advertisements Series (released on 7 June 2021) and the NAB Monthly Business Survey May 2021 series point to similar, strong jobs growth.
116 Whilst remaining above its pre-pandemic rate in annual average terms, the unemployment rate has fallen sharply over recent months. As at the date of the hearing on 20 May 2021, the rate was 4.9%, seasonally adjusted. At the same time as rising employment and hours worked, wages growth, as measured by the WPI, has remained subdued. This is not a new development, as Mr Christmas referred to wage growth being below 2% since 2014-15. In terms of the latest data, WPI increased by 0.4% for the March quarter 2021, and by 1.5% in annual average terms, in line with Treasury forecasts. Despite a general tightening in the labour market and some evidence of skills shortages emerging in some sectors, Mr Christmas noted that this has yet to translate into the headline measure of wage growth. Mr Christmas noted that over the medium term, the expectation is that wages growth will lift, as the labour market improves with continued improvement in the overall economy.
117 The overall key labour force metrics for March 2021 demonstrate the strength of the recovery in the labour market since about mid-2020. We set out below Table 1 – Key labour force figures – WA, March 2021 (seasonally adjusted) in the Minister’s submissions at p 5.
Table 1 – Key labour force figures – WA, March 2021

March 2021
February 2021
March 2020
Total employment
1,402,000
1,369,400
1,373,900
Unemployment rate
4.8%
6.0%
5.4%
Participation rate
68.4%
67.7%
67.9%
Underemployment rate
7.4%
8.7%
9.7%
Total hours worked (millions)
195,182.2
178,810.6
190,380.6
118 The updated figures, reflecting the fall in total employment for April 2021 and a comparison with the national figures, including the slight fall in the labour participation rate, are set out at Table 3: Labour Force – April 2021 on p 8 of the Minister’s supplementary submissions, as follows:

Table 3: Labour Force – April 2021

WA
AUS
Total employment
1,391,800
13,040,400
Full time employment
923,200
8,889,500
Part time employment
468,600
4,150,900
Aggregate hours worked
189,854,600
1,793,448,600
Unemployment rate (%)
4.9
5.5
Underemployment rate (%)
7.1
7.8
Participation rate (%)
68.0
66.0
119 Similarly, as with WPI, inflation remains subdued and well below the RBA’s target range of 2-3%. Perth CPI for the March quarter 2021 increased by 1%. Treasury notes that excluding electricity, the CPI for Perth in annual average terms, in March 2021, was 1.5%. Inflation is projected to rise to 1.75% in 2021-22 and 2% in 2022-23. In particular, Mr Christmas referred to the significant volatility in the inflation figures on a monthly basis, reflecting the introduction and then withdrawal of stimulus measures such a free day care and the one-off State Government $600 electricity bonus. Mr Christmas indicated the forecast is for inflation to gradually pick up towards the RBA target range of 2-3% by 2023-24.
120 Mr Christmas said that while the current conditions in the economy remain favourable, risks to the outlook remain. He referred to the possibility of a further significant outbreak of the virus in the community, requiring a sustained lockdown. The further withdrawal of fiscal support is another, along with a decline in global growth. Ongoing negligible migration into the State also poses some downside risk, in terms of the level of demand in the economy.
121 With the unwinding of fiscal support, primarily through the ending of the JobKeeper scheme, the impact on the economy has not been as large as expected. Employment numbers have remained relatively buoyant and working hours have not collapsed. Mr Christmas noted that thus far, the ending of JobKeeper has not had a discernible impact on the economy and the labour market, however he observed that available data is national only and that also, it may take another quarter or two, to get a better assessment of the impact.
122 From the National Accounts data published on 2 June 2021, Unions WA and the Minister referred to the trend of growing strength in the Western Australian economy continuing, with SFD rising 3.0% for the March quarter 2021, and 3.8% in annual terms. This monthly growth was the strongest of all the States and Territories. Underpinning this strong performance, was business investment by the mining industry and small business, in heavy machinery and vehicles. The Minister contended that the State’s domestic economy is now 3.8% larger than it was in the March quarter 2020. Whilst acknowledging the growth in the domestic economy, the Chamber contended, consistent with its earlier submissions, that this has been driven primarily by the mining and resources sector, as reflected in industry contributions to GSP growth (see Graph 4 – Industry contribution to GSP growth – Western Australia at p 7 of the Chamber’s supplementary submissions).
123 Updated figures show household consumption being up by 0.3% for the March quarter 2021, in terms of discretionary spending on services such as hotels, cafes and restaurants and the arts and culture, as noted in the Minister’s submissions. The Minister submitted that this period included the five-day lockdown in February 2021, which most likely moderated the quarterly growth in household consumption. In this context, UnionsWA noted that household consumption expenditure in Western Australia is at the lower end compared to other States, reinforcing its contention that a boost in wages would bolster growth. State Final Demand figures across the States and Territories, incorporating the National Accounts data, are set out at Table 1: State Final Demand, March Quarter 2021, percentage changes, in the Minister’s supplementary submissions, at p 4 as follows:
Table 1: State Final Demand, March Quarter 2021, percentage changes

NSW
VIC
QLD
SA
WA
TAS
NT
ACT
AUS
(a)
Final consumption expenditure









  General government
-1.5
-0.8
0.0
-0.1
0.6
0.7
1.7
-0.1
-0.5
  Households
1.0
3.2
-0.3
0.5
0.3
1.9
-0.9
0.6
1.2
Gross fixed capital formation









  Business investment
5.6
0.2
-3.3
3.4
11.5
2.2
-17.8
-5.6
4.0
  Dwelling investment
9.6
1.7
10.8
6.9
7.3
2.5
1.7
7.8
6.4
  Government investment
0.2
5.8
3.4
8.4
4.5
0.5
-3.8
-1.9
2.9
State final demand
1.5
2.3
0.4
1.4
3.0
1.6
-1.9
0.5
1.6
(a) Australia estimates relate to Domestic final demand.
124 We conclude that overall, the Western Australian economy has weathered the pandemic well and is returning to positive growth. Consumer and business sentiment has rebounded. However, as the Anzac Day long weekend lockdown in Perth and the most recent lockdown in Melbourne demonstrate, further outbreaks represent a risk to the ongoing recovery. It must be recognised that such outbreaks have an impact on industry sectors such as accommodation and food services in particular. Additionally, a further risk to the outlook as noted by Treasury, is the impact of the winding back of stimulus measures such as the Commonwealth JobKeeper scheme. Whilst early indications are that the overall economic recovery will ameliorate any adverse impact of the withdrawal of stimulus measures, and the most recent ABS labour force data tend to support the view that there has not been any clear aggregate impact, some level of volatility in the State economy is likely.
The state of the national economy
125 Section 50A(3)(c) of the Act requires the Commission to take into consideration, to the extent that it is relevant, the state of the national economy.
126 Whilst the national economy suffered its largest contraction on record for the June quarter 2020 of minus 7%, it has rebounded strongly and much faster than expected. As set out in the Economic Conditions and Outlook, since the MidYear Economic and Fiscal Outlook 2020-21 was published, the national economy has grown even further, from the projected Gross Domestic Product (GDP) growth of 0.75% to 1.25% for 2020-21 and an upward revision of 4.25% for 2021-22. Unemployment has fallen rapidly to 5.6% in the March quarter 2021, compared to the forecast rate of 7.25%. The 2020-21 unemployment rate for the full year is projected to be 5.5%, falling to 5% in 2021-22.
127 Inflation is projected to pick up to 3.5% for 2020-21, compared to minus 0.3% for 2019-20, before settling back to 1.5% for 2021-22. As with the Western Australian labour market, wages growth is forecast to remain subdued, with WPI to be 1.25% for 2020-21, rising to 1.5% in 2021-22 and 2.25% in 2022-23. Household consumption and housing investment has been strong. Both UnionsWA and the Minister in their respective submissions in reply, noted that the Commonwealth Budget projections of 11 May 2021, suggested the overall national outlook is positive, with strong growth forecast in the labour market. Whilst this strength of the recovery in the national economy is noted, the RBA has sounded some caution, that growth is projected to be uneven, reflecting the impact of the pandemic in a range of areas.
128 The National Accounts show a continued strengthening in the national economy. Gross Domestic Product rose by 1.8% in the March quarter 2021. Private investment grew by 5.3% and household spending has increased by 1.2%, with spending on services being up by 2.4%. Overall, economic activity is above the prepandemic levels. The Minister noted the main driver of growth in the national economy being private investment (business driven), in terms of machinery and equipment purchases, and household consumption, in terms of housing investment. UnionsWA submitted that the data demonstrates the States and Territories, except the ACT, show continued economic improvement. Variability in industry performance was also noted by the Chamber, in the context of the ABS observations on productivity in the National Accounts. Those industry sectors most exposed to the pandemic, including accommodation, food services and the arts and recreation, whilst they are rebounding following restrictions easing, are still operating at lower than pre-pandemic levels.
Western Australian award framework that represents a system of fair wages and conditions of employment
129 Section s 50A(3)(e) requires the need for the Commission to ensure that the Western Australian award framework represents a system of fair wages and conditions of employment. There was no suggestion on this occasion that any increase in the SMW should not flow into State awards. We have done so in all prior State Wage Orders, as part of maintaining minimum award rates of pay and a fair system of award wages and conditions of employment.
Relevant decisions of other industrial courts and tribunals
Fair Work Commission decision
130 On 16 June 2021, the Fair Work Commission handed down its Annual Wage Review 2020-21: [2021] FWCFB 3500. In doing so, the Fair Work Commission noted the very different circumstances applying to its deliberations this year, compared to those in the Annual Wage Review 2019-20. It was accepted in the main by those participating in the proceedings that the current performance of the economy has exceeded expectations and the Fair Work Commission observed that “The Australian economy has recovered to a greater extent and more quickly than anticipated": at [24].
131 The Fair Work Commission also acknowledged that there were risks to the outlook, especially COVID19 outbreaks requiring containment measures. In considering the requirements of s 284 of the FW Act, the Fair Work Commission concluded that an increase in the FMW was warranted on this occasion, higher than that granted in last year's Annual Wage Review. The FMW and minimum award rates have been increased by 2.5%, increasing the FMW to $772.60 per week.
132 As to the timing of the wage adjustments, the Fair Work Commission has adopted a similar but varied approach to the "industry clusters" considered in the Annual Wage Review 2019-20. Informed by research conducted by Professor Borland of the University of Melbourne, industry groupings of "fully recovered", "almost recovered" and "lagging recovery", have been adopted. Within these broad groupings, the Fair Work Commission noted that there exists some variation in subsectors of industries at the individual modern award level.
133 Relevantly for present purposes, some modern awards in the accommodation and food services, the arts and recreation sectors, and some sub-sectors relating to the retail industry, remain in the "lagging recovery" category, and will have the wage increase deferred to 1 November 2021. Others, including in the general retail sector, notably small businesses impacted most by COVID19 lockdowns and restrictions, have had the wage increase deferred to 1 September 2021.
134 The parties were given an opportunity to make submissions on the Fair Work Commission decision. The Minister contended that the Fair Work Commission decision was equitable and considered. It was submitted that as with the rejection of the ACTU claim of a 3.5% increase, the Minister reiterated that the UnionsWA claim in these proceedings should also be refused. The Minister maintained that his contention of a $19.20 per week increase was fair and reasonable. In terms of timing, the Minister submitted there should be no delay in the implementation of the increase to the SMW in this jurisdiction. He contended the capacity of the Fair Work Commission to stagger increases by modern award groups under the FW Act, is not available to the Commission in the same manner. In any event, to do so would be inequitable to those employees employed in a business not subject to the negative impact of future lockdowns.
135 The Chamber submitted, consistent with its earlier submissions that the Commission should not increase the SMW as the Fair Work Commission has done. As to the Minister’s submissions regarding the staggering of any increase by award, the Chamber agreed that given the terms of the Act in this jurisdiction, only one effective date should be determined. For reasons it has previously identified in its written and oral submissions, and those referred to by the Fair Work Commission applying to the accommodation and food services sectors especially, the Chamber submitted that any increase in the SMW should be deferred to 1 November 2021.
136 UnionsWA contended that its claim should be granted in full and from 1 July 2021, despite the Fair Work Commission decision. It was contended by Unions WA that last year’s decision, with the delay in implementation, effectively led to no increase in the SMW for six months. Given that the most recent National Accounts figures showed Western Australia had the strongest State economy, there could be no justification to delay any increase in the SMW in this jurisdiction, as the Fair Work Commission has done.
Conclusions
137 On balance, to accede to the Chamber’s submission that there be no increase in the SMW on this occasion, would involve failing to apply the statutory requirements in ss 50A(3)(a)(iii) and (iv) of the Act, and would not be taking into consideration meeting the needs of the low paid, under s 50A(3)(a)(ii). It would mean, given increases in the cost of living, that minimum wage employees would have an effective wage reduction.
138 We have in most recent years, as noted above, granted increases in the SMW in excess of the cost of living such that employees covered by the State Wage Order have had real wage increases. Economic considerations are important, and we have had regard to our obligation under s 50A(3)(b) of the Act to consider the state of the Western Australian economy and to grant real increases in the SMW, when the economy supports this.
139 Necessarily, given the unique circumstances of last year's State Wage Case and the case this year, the economic consequences of the pandemic have been a most important consideration. This is both in terms of the damaging impact of the outbreak of the pandemic and the subsequent recovery in this State and nationally. The Western Australian economy overall has recovered much more strongly that was anticipated in last year’s State Wage Case. The most recent data before us, points to ongoing recovery and growth.
140 In last year's decision, in considering the uncertainty, we awarded an increase in the SMW at the same level as that awarded by the Fair Work Commission in its Annual Wage Review. We also delayed its introduction. Given the economic recovery underway in Western Australia, which is one of the strongest of all the States and Territories, and is somewhat stronger than the national economy, we consider that a real increase in the SMW can be justified on this occasion. This conclusion must involve our obligation to consider the needs of the low paid, prevailing living standards and an improvement in living standards, where it can be economically sustained. In doing so, we are also very conscious of the need for us to consider the capacity of employers to bear the costs of any increase in the SMW. The considerations we are required to weigh in the balance under s 50A(3) of the Act are, as we have previously observed, both competing and almost irreconcilable: State Wage Case 2012 at [103].
141 We accept that until such time as the impacts of the pandemic are completely past us, and in particular, high levels of vaccination are achieved throughout the State, there is the ongoing risk of disruption, in particular industry sectors covered by the State Wage Order, such as accommodation, food services, retail and the arts and recreation sectors. However, we consider that it is likely as time goes on that any further outbreaks are more contained, with impacts on affected businesses minimized.
142 We also note that the overall Western Australian economic recovery from the pandemic and the recovery of the national economy are similar. Both economies are showing increasing strength, particularly in jobs growth overall. At the same time, we also recognise the contentions advanced by UnionsWA, and as observed by Mr Christmas in his evidence, that the strength in jobs growth has not translated into growth in wages, as represented by measures such as the WPI. This is despite the emergence of some tightening in the Western Australian labour market and skills shortages in some industry sectors.
143 Balancing of all the factors we must consider under s 50A(3) of the Act, we have decided to increase the SMW by 2.5 %. The SMW will increase to $779.00 per week. Award rates of pay will also be adjusted by 2.5%.
144 As to whether there should be a delay in the implementation of the increase as submitted by the Chamber, the Fair Work Commission in the Annual Wage Review 2020-21 deferred the implementation of the adjustment for those employees subject to the General Retail Industry Award 2020 to 1 September 2021. For those employees subject to 22 different modern awards within various industries including aviation, tourism, theatre and performance, sports, restaurants and licenced clubs, the deferral was to 1 November 2021. This was on the basis of the impact COVID-19 response measures have had in different industries and sub-industries. It is not possible to replicate this outcome in the statutory framework applicable to the State Wage Order. State awards do not mirror the coverage of the national modern awards, and the implication of the State wage adjustment into State awards, would result in logistical impracticalities in applying a deferment to some groups or categories of employees.
145 We also note that many economic indicators and data are reported on an Australia wide basis and are not disaggregated for the States. Therefore, in determining an operative date, we are not able to disaggregate the economic indicators nor the impact on businesses and employees within industries or sub-industries in the State system.
146 A determination must be made by the Commission that applies to all industries, businesses and employees. The application of a deferred adjustment will result in some employees receiving a wage increase months after their national system counterparts. Similarly, a determination not to defer an increase, will result in wage increases being applied some months before the national modern award adjustments are made.
147 In 2020 we deferred the increase in the SMW by six months, noting that a deferral would allow time for the effects of the lifting of restrictions to develop and stabilise. The Commission also noted that it assisted in balancing the various considerations that the Commission was required to consider. This decision was made in the context of a situation that was unprecedented and was compared unfavourably with previous economic crises. The only other occasion this Commission has deferred an increase was in 2009, in a situation described as the worst economic downturn in the global economy since the Second World War. In 2020, we noted that expectations were for a situation much worse than that experienced in 2009. Thus, on the two occasions the Commission has deferred the operative date of an increase in the SMW, the circumstances have been exceptional, and the situation at the time and the forecasts, were dire.
148 The situation presented to the Commission in this year’s submissions note that the forecasted economic downturn was not as significant as that predicted at the time of last year’s State Wage Decision. The forecast economic indicators presented this year are considerably more positive than those for 2009 and 2020. Whilst acknowledging that there remains some risk of outbreaks and associated measures applied in response that may limit economic activity, we are not convinced the situation is exceptional. There is a broad consensus that the State’s economic recovery is well underway, that there has been significant improvement, and economic indicators have exceeded expectations.
149 In balancing the various factors that we are required to consider we have determined that the operative date of the increase in the SMW will be 1 July 2021.
Two-year apprenticeships
150 The Minister has drawn to our attention a present gap in the State Wage Order, to the effect that award free apprentices undertaking a two-year apprenticeship are not covered by the order.
151 Whilst an amendment was made to the Building Trades (Construction) Award to provide for two-year apprenticeships, an apprenticeship in concreting was not covered. As this apprenticeship falls outside the scope of the award, the Minister sought an amendment to the State Wage Order to provide for this, in terms of s 50B(3) of the Act. Given that the Commission has linked award free apprenticeship rates to the Metal Trades (General) Award for a four-year apprenticeship, the Minister suggests that the same apply for the two-year apprenticeship, at the rate of pay for the second and third years, respectively.
152 The Chamber agrees with this course, as does UnionsWA, although UnionsWA contended that the rates of pay should reflect its claim for an increase in the SMW and award rates.
153 We agree with the Minster's proposal that the State Wage Order be varied to include a new provision for award free apprentices undertaking a two-year apprenticeship. The rates of pay should reflect the second- and third-year rates of a four-year apprenticeship. We thank the Minister for bringing this matter to our attention and also for providing to us an updated industry skill list for 2021, as Attachment C to the Minister's submissions.
Statement of principles
154 The State Wage Order made each year is required, by s 50A(1)(d) of the Act, to be accompanied by a statement of principles to be applied and followed in relation to the exercise of jurisdiction under the Act in setting wages, salaries, allowances or other remuneration of employees or the prices to be paid in respect of their employment.
155 No party has sought any changes to the existing Statement of Principles issued in the 2020 State Wage Case and nor do we propose any be made.
Minutes of proposed General Order
156 A minute of proposed general order, giving effect to our reasons for decision, is now published. Should any party wish to speak to the minutes of the proposed general order, the Commission should be informed and they should set out the issues they wish to raise in writing, by 12 noon Monday, 28 June 2021.


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

2021 STATE WAGE ORDER PURSUANT TO SECTION 50A OF THE ACT

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

 

CITATION : 2021 WAIRC 00173

 

CORAM

: Chief Commissioner S J Kenner

 Commissioner T Emmanuel

 Commissioner T B Walkington

 

HEARD

:

THURSDAY, 20 MAY 2021

FRIDAY, 18 JUNE 2021

WRITTEN SUBMISSIONS: 11 MAY 2021; 18 MAY 2021; 4 JUNE 2021

 

DELIVERED : THURSDAY, 24 JUNE 2021

 

FILE NO. : APPL 1 OF 2021

 

BETWEEN

:

COMMISSION'S OWN MOTION

Applicant

 

AND

 

(NOT APPLICABLE)

Respondent

 

Catchwords : State Wage order – Commission’s own motion – Minimum wage for employees under the Minimum Conditions of Employment Act 1993 – Award rates of wage – Award minimum wage – State wage principles

Legislation : Fair Work Act 2009 (Cth)

Industrial Relations Act 1979 (WA)

Minimum Conditions of Employment Act 1993 (WA)

Result : 2021 State Wage Order issued

Representation:

Mr B Entrekin on behalf of the Hon. Minister for Industrial Relations

Mr P Moss on behalf of the Chamber of Commerce and Industry of Western Australia Limited

Dr T Dymond on behalf of UnionsWA

Mr C Twomey on behalf of the Western Australian Council of Social Service Inc

 

 

Case(s) referred to in reasons:

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

2014 State Wage Case [2014] WAIRC 00471; (2014) 94 WAIG 641

2015 State Wage Case [2015] WAIRC 00435; (2015) 95 WAIG 679

2016 State Wage Case [2016] WAIRC 00358; (2016) 96 WAIG 636

2018 State Wage Case [2018] WAIRC 00363; (2018) 98 WAIG 263

2019 State Wage Case [2019] WAIRC 00290; (2019) 99 WAIG 509

2020 State Wage Case [2020] WAIRC 00361; (2020) 100 WAIG 409

Annual Wage Review 201920 [2020] FWCFB 3501

Annual Wage Review 2020-21 [2021] FWCFB 3500

 


Reasons for Decision

Background

1         The year of 2020 was, by any measure, an extraordinary year. The outbreak of the coronavirus pandemic had a major impact on workplaces throughout the country. Governments, both Commonwealth and State, introduced unprecedented emergency measures, both health and economic, in an endeavour to respond.  The impact on employment and the cloud of economic uncertainty created by the pandemic, was referred to by the Commission in Court Session in the 2020 State Wage Case [2020] WAIRC 00361; (2020) 100 WAIG 409. When citing the Western Australian Treasury analysis, it was said at pars 17 to 19 as follows:

17 The 2020 State Wage Case – Economic Conditions and Outlook was prepared by the Western Australian Department of Treasury and provided to us by Mr Christmas. It is dated 12 May 2020. This statement notes:

The COVID-19 outbreak is likely to affect the economy in a number of ways. Social distancing and related restrictions to control the spread of COVID-19 have had a direct impact on the domestic economy, with sharp declines in consumer and business confidence, weak conditions in the housing market, widespread job losses and some downward revisions to business investment expectations.

Forecasting the economic impact of COVID-19 is challenging because there is no prior experience of this type of shock. The risks to economic growth for the State weigh heavily on the downside. Activity in the State’s domestic economy is likely to be significantly lower than projected at mid-year Review and will continue to contract in the short to mid-term. However, the impact on GSP, which includes net exports, is likely to be smaller than for the domestic economy, given the State’s mining exports have held up well to date.

Current business operating restrictions and weaker demand in various sectors of the domestic economy have led to extensive job losses and firms limiting new hiring decisions. This presents downward risks to the employment growth outlook relative to the Mid-Year Review projections in the near term. Consistent with downside risks to employment and job losses to date, the unemployment rate is likely to be substantially higher, particularly in the short term, than forecast at Mid-year Review.

Population growth is likely to be significantly weaker than previously anticipated at Mid-year Review in the near term, as the closing of the international borders. Net interstate migration and net international migration are expected to lift once interstate and international borders are re-opened, although likely at a slower pace than previously forecast.

18 The initial submissions were made on 12 May 2020. At that time, the parties who made submissions to the Commission were not in a position to properly analyse the economic effects on the labour market of the COVID-19 outbreak because of the rapidly changing environment and because the economic and social situation had changed so dramatically in a short period in March. A further opportunity for submissions was provided so that interested persons could address the latest available information provided in the National Accounts data for the March quarter 2020. However, this too is interim data and the situation continues to evolve.

19 The Minister said in his submission of 12 May 2020 that ‘[m]any businesses are operating in unchartered waters and there is a significant degree of uncertainty as to when conditions will return to normal’.

2         In its decision, the Commission in Court Session decided that in balancing the statutory criteria in s 50A of the Industrial Relations Act 1979 (WA), an increase in the State Minimum Wage (SMW) of 1.75% should be awarded.  As with the Fair Work Commission, when increasing the Federal Minimum Wage (FMW), there was a deferral of the timing of the increase.  The Fair Work Commission staggered the increase in the FMW in three stages, being 1 July 2020, 1 November 2020 and 1 February 2021, depending upon the modern award grouping allocated. The Commission in Court Session, because of the level of uncertainty surrounding the impact of the pandemic and the effect of government stimulus measures, deferred the 1.75% increase in the SMW to 1 January 2021.

3         The Commission in Court Session is now required to make a State Wage Order to come into effect on 1 July 2021. For the purposes of these proceedings, submissions were invited from s 50 parties and other interested persons in the usual way.  We have received submissions from the Minister; the Chamber of Commerce and Industry of Western Australia; UnionsWA; the Western Australian Council of Social Service Inc; and also, from Professor Preston at the University of Western Australia, who has provided two papers to the Commission. One is in relation to the labour market in Western Australia in 2020 and the other deals with trends in wages for young adults.

4         We have also received a presentation from Mr Christmas, the Director of the Economic and Revenue Forecasting Division at the Western Australian Department of Treasury.  We are grateful to all of those who have assisted us in our deliberations on this occasion.

Contentions of the parties

The Minister

5         In summary, in his submissions, the Minister contended that employees in Western Australia should have a modern framework of wages and conditions of employment.  This framework should support dignified and secure employment, which protects employees' interests. It is noted that the pandemic had a substantial impact on the State, leading to the Commission deferring the increase to the SMW in 2020, to 1 January 2021, in recognition of the adverse impact of the pandemic on many industries.

6         Despite this however, and the substantial contraction in the State and national economies in the course of 2020, the Minister submitted that the containment of the spread of the virus enabled the lifting of restrictions in the second half of 2020.  Whilst acknowledging some industry sectors continue to be adversely affected by restrictions, the Minister submitted that the navigation of the pandemic in Western Australia has led to a stronger recovery than predicted.

7         Given this situation, the Minister contended that a fair and balanced outcome in this year's State Wage Case would be an increase in the SMW by $19.20 per week, or approximately 2.5%.  It was submitted that such an increase would provide a lift in wages for minimum and award wage earners and would not put at risk the present recovery from the pandemic.

8         The Minister canvassed the outlook for the Western Australian economy and the labour market.  In an overall sense, the Minister noted that from the largest contraction in the State's economy in its history in the June quarter 2020, an increase in household spending, a resurgent residential construction sector and a strong performance by the mining and resources sector in the second half of 2020, has brought the State's economy back onto a growth path. This has been assisted by the very large Government stimulus programmes and industry assistance, such as the State Government's Building Bonus and the Commonwealth Government's HomeBuilder grant schemes.

9         Whilst acknowledging the impact of the five-day lockdown in February 2021 and the Anzac Day lockdown in April 2021 on some businesses, overall, the Minister contended that they are unlikely to have any material impact on Gross State Product (GSP), as they were brief and many industries were able to continue to operate largely unaffected.

10      In terms of the labour market, the Minister submitted that overall, the major loss of jobs that occurred at the height of the pandemic restrictions in the period February to May 2020, has now been recovered.  In this respect, he contended that most labour market indices had been restored to prepandemic levels.  Growth in employment is trending upwards and spare capacity in the labour market is reducing, as shown by falling underemployment levels. These trends are against the background of low inflation and low wages growth generally.

11      The Minister also referred to the ABS Single Touch Payroll (STP) series, introduced during the early stages of the pandemic, in order to give real time data on weekly payroll and jobs.  This series, started in April 2020, shows that between midMarch 2020 and early April 2021, a 3.6% increase in payroll jobs was recorded for Western Australia, compared to a national increase of 1%.  At the same time, wages grew by 0.7% in Western Australia, compared to national wages growth of 2%. Whilst subject to the caveat that not all businesses participate in the STP system, this is a further measure of labour market performance.

12      In addressing the statutory criteria in s 50A(3) of the Act, the Minister submitted that a relevant consideration is the principle of equal renumeration for work of equal or comparable value.  It is noted that over the 12 months to November 2020, the gap between male and female earnings increased from 22.4% to 22.9%.  Over the corresponding period nationally, the gender pay gap fell from 13.9% to 13.4%.  As measured by Average Weekly Ordinary Time Earnings (AWOTE), the Minister noted that Western Australia still has the largest gender pay gap in the country.  Accepting that the reasons for this are complex, the Minister submitted that sustainable and fair adjustments to the SMW can assist in reducing this differential.

13      In terms of the capacity of employers to pay, the Minister submitted that as an indicator of the health of businesses, the Gross Operating Surplus (GOS) plus Gross Mixed Income (GMI) ABS series provides some insights for the financial year to 30 June 2020.  This data shows that a number of industry sectors recorded an improvement in overall profitability with only one, agriculture, showing a sizeable decline.  In recognition of the strength of commodity prices, the mining and resources sector showed the strongest performance.  However, as recognised by the Minister, given the size of the economic stimulus particularly through the JobKeeper scheme, caution needs to be adopted in using this measure as a true indication of underlying business health.

14      A particular factor in the Minister's submissions, is the needs of the low paid and the maintenance of living standards, in comparison to living standards generally in the community.  In this context, the Minister submitted that many low paid employees depend on SMW increases decided in these proceedings, as their only means of meeting increases in costs of living.  It was noted that this also includes those employees not covered by an award, and who are paid in accordance with the minimum wage under the Minimum Conditions of Employment Act 1993 (WA).  Given that these employees are undoubtedly low paid, and do not have the protections afforded to those covered by an award, the Minister contended that an increase in the SMW for this group of employees can assist in reducing financial disadvantage.

15      Additionally, as most unincorporated businesses in the accommodation and food services and retail industry sectors do not seem to avail themselves of the Commission's jurisdiction in relation to registered industrial agreements, the Minister submitted that this suggests that employers in these sectors, are most likely to be guided by the relevant State award, for wage determination purposes.

16      In terms of skills development, the Minister referred to the requirement on the Commission to have regard to encouraging skills development in the making of a State Wage Order.  Data referred to by the Minister showed a continuing trend of increasing apprenticeship commencements to a total of 8,528 for 2020, an increase from 7,069 in 2019 and from 6,424 in 2016.  Similarly, a decline in Traineeships registered over the period 2012 - 2019 has been arrested with 2020 recording an increase in Traineeship commencements. The total numbers of employees in either apprenticeships or in training, increased by 17.9% between 2019 and 2020.

The Chamber of Commerce and Industry of Western Australia

17      The Chamber in summary, contended that the uncertainty associated with the pandemic over the last 12 months remains. This is especially so for small businesses most affected by the SWC decision, in the hospitality and retail sectors.  The Chamber submitted that it is these sectors in particular that have felt the greatest impact from restrictions imposed to control the spread of the virus.  Additionally, it was submitted that the differential between the SMW and the FMW adds to the disadvantage experienced by these industry sectors.

18      Given this situation, and the ongoing prospect of restrictions and lockdowns being imposed, the Chamber submitted that there should be no increase in the SMW and award rates of pay on this occasion.  In the alternative, should the Commission decide to increase the SMW, then the operative date should be deferred, and the quantum should be expressed as a flat dollar amount.  The Chamber submitted that the UnionsWA and the Council claims were a risk to jobs and the working hours of small business employees.

19      In terms of stimulus measures, the Chamber referred to the major role played by the Commonwealth JobKeeper programme and cited Reserve Bank of Australia (RBA) research to the effect that without it, job losses at the peak of the pandemic would have been twice as high.  In this respect, of the JobKeeper applications processed in April 2020, the Chamber submitted that the highest proportion were in award reliant industries such as accommodation and food services (54%); healthcare and social assistance (35%) and retail (30%).

20      The impact of lockdowns has been a major issue for businesses in Western Australia.  The initial lockdown in 2020, according to the Chamber, had an estimated $3.3 billion impact on the Western Australian economy, based on State Final Demand (SFD) figures over the March and June quarters of 2020.  The February 2021 five-day lockdown was estimated to have cost the economy $420 million and the April 2021 lockdown, led to an estimated loss in revenue for hospitality industry businesses of approximately $100 million.  The Chamber made the point that the two lockdowns this year occurred at a time when most businesses were no longer eligible for JobKeeper assistance.

21      Based on surveys of members, the Chamber said a constant retort from businesses, affected by the February and April 2021 restrictions, was revenue loss; loss of perishable stock; and ongoing costs including for permanent staff.  The tenor of the Chamber's submissions on this point was that the accommodation and food services and retail sectors bear the brunt of the costs when restrictions are imposed and these costs generally are not recovered once restrictions are lifted.

22      As to s 50A(3)(a)(i) of the Act, regarding a fair system of wages and conditions of employment for Western Australians, the Chamber contended that the differential between the SMW and the FMW, although it has substantially reduced over time, remains unfair on small business in the State jurisdiction.  In this respect too, the Chamber noted the observations of the Commission in the 2020 State Wage Case, that the sectors most reliant on State awards, are the most impacted by pandemic-imposed restrictions. In considering the Western Australian economy, the Chamber submitted that the Commission should consider the performance of those industry sectors that are most likely to be affected by the decision. In connection with fair wages and conditions, the Chamber contended that based on increases in the SMW in the last five years, from 2015 to 2020, the SMW has increased by 13.7%.  This is compared to growth in CPI for Perth over the same period of 5.2% and 9.8% for growth in the WPI.  Thus, over this period, the SMW has delivered real wage increases to award and minimum wage reliant employees significantly above inflation and average wages growth.

23      A factor which the Chamber submitted the Commission should consider in determining the SMW, is the rise in statutory superannuation contributions from 9.5% to 10%, from 1 July 2021.  Given this is a direct cost to employers, which has been recognised in the past by the Commission as moderating any increases in the SMW, it should do so on this occasion too.

24      As to the Western Australian economy, the Chamber submitted that the underlying strength of the recovery, has been driven by the mining and resources sector, combined with the very high levels of Government stimulus payments.  Notwithstanding this, the Chamber contended that projected growth in GSP and SFD, is still below that forecast prior to the onset of the pandemic and the recovery must be viewed in this light.  The Chamber also noted the divergence in profitability between incorporated and unincorporated businesses, with the latter being much less profitable over recent years.

25      In terms of labour market indicators, the Chamber submitted that whilst the data suggests a recovery in jobs lost since the height of the pandemic, considerable volatility is evident.  Furthermore, for present purposes, in the accommodation and food services and retail sectors, whilst job losses in the former have been recovered, a greater proportion of part time employment is evident, reflecting what the Chamber submitted to be uncertainty amongst employers, because of the prospect of further restrictions being imposed.  As for the retail sector, job losses from the first half of 2020 have not been recovered and there remains a substantial shortfall. The Chamber also noted the low levels of inflation and wages growth, as reflected in the Minister's submissions.

UnionsWA

26      The submission by UnionsWA was that the Western Australian and national economies are recovering and the circumstances warrant a substantial increase in the SMW.  To address what UnionsWA see as a widening gap between the low paid and other employees in Western Australia, UnionsWA submitted that an increase in the SMW of 4% or $30.40, whichever is the greater, is justified.

27      In particular, in support of its position, UnionsWA referred to the RBA Statement on Monetary Policy, May 2021, which discusses the need for an "upside scenario" to encourage economic growth. According to this approach, the encouragement of an increase in consumption will support private investment, which will in turn lead to a reduction in unemployment and an increase in wages growth.  Accordingly, UnionsWA contended that a substantial increase in the SMW will contribute to consumption growth and support the "upside scenario" posited by the RBA.

28      In terms of the needs of the low paid, fair wages and conditions and improved living standards for employees, UnionsWA made a number of submissions.  It was contended that the economy in Australia is expanding and jobs growth has recovered, to be higher than the prepandemic level.  ABS Weekly Payroll Jobs and Wages Australia data between 10 March and 24 April 2021 show Western Australian jobs growth being up by 4.5%, one of the highest in the country.  It was contended that jobs growth has been particularly strong for small business in Western Australia, compared to nationally.

29      Correspondingly however, UnionsWA submitted that wages growth in Western Australia has been flat. Applying principles of monopsonistic labour market theory, UnionsWA contended that the high jobs growth coupled with little or no wages growth, demonstrated that employers in this State have labour market power and are "price makers" rather than "price takers".  This is all the more reason why, according to UnionsWA, the SMW needs to be increased so that employees can achieve a wage increase that the labour market will not provide.

30      Noting that the 1.75% increase in the SMW from the 2020 State Wage Case decision did not take effect until 1 January 2021, UnionsWA submitted that as the cost of living increased over this period, employees' living standards effectively fell, contrary to s 50A(3)(a)(iv) of the Act.  As a result, Unions WA submitted that the needs of the low paid were not met and there should be no delay on this occasion.

31      In terms of the cost of living, UnionsWA referred the Commission to an ABS experimental series developed in late 2020, disaggregating CPI into measures of Nondiscretionary and Discretionary inflation nationally. This attempted to draw a distinction between essential and nonessential expenditure classes.  UnionsWA referred to the ABS conclusions that over the period 2012 to 2019, the set of Nondiscretionary goods and services increased by slightly more than the Discretionary set of goods and services, but when tobacco was excluded, the gap was significant with a 14.8% increase for Nondiscretionary items as opposed to 6.4% for Discretionary items. UnionsWA obtained data for Perth, and the differential between Nondiscretionary and Discretionary inflation, adjusted for tobacco in the same way, led to a difference of 12.9% and 8.7% respectively. UnionsWA therefore contended that the divergence between these measures of inflation is a useful guide as to the cost of essential items and the needs of the low paid, in setting the SMW.

32      As to the criterion of equal pay for work of equal or comparable value, UnionsWA noted the continued existence of a large gender pay gap in Western Australia, compared to that nationally. Based on research by J R Bray in Reflections on the Evolution of the Minimum Wage in Australia: Options for the Future (October 2013), UnionsWA submitted that this research suggests a likely over representation of female employees in the State industrial relations system. As such, SMW increases are important for this group of employees to provide adequate pay.

33      Given the analysis of those most likely to be covered by the State industrial relations system, UnionsWA contended that as there is a  high level of award reliance, an increase in the SMW as claimed, will assist this group of employees who are unable to negotiate their own arrangements and also benefit those in lower income households.

The Western Australian Council of Social Services

34      The Council contended that the SMW is a vital means of protecting low-income employees from poverty.  The Council submitted that an adequate SMW will support a decent standard of living for employees and their families.  Accordingly, the Council, consistent with the UnionsWA position, argued that the SMW should be increased by 4% or $30.40 per week.

35      In terms of the economic context, the Council submitted that the State has been successful in weathering the economic impact of the pandemic and the economy is now performing strongly. Correspondingly, the Council submitted that the cost of living, in particular housing costs, are leading to an affordability crisis for the low paid.

36      The Council contended that while recognising the uncertainty caused by the outbreak of the pandemic last year, and the need for the Commission to defer the increase in the SMW, no such circumstances exist 12 months on.  An increase in the SMW is necessary to meet the needs of the low paid in Western Australia.

37      The focus of the Council's submission was the cost of living for low-income households and the most vulnerable in the community.  This included a particular focus on housing, food costs and energy.  The Council referred to its Cost of Living Report 2020, in support of its submissions. This report models five low-income household types and analysed the sufficiency of their income to afford a basic standard of living, in accordance with community standards.

38      In general terms, the Council noted that at the time of this year's State Wage Case, whilst living costs in terms of rents, food and beverages have increased, Commonwealth and State Government financial supports have been removed, making it harder for low-income earners to make ends meet.  Housing costs over the period 2018 to 2020 have increased significantly, along with a contraction in rental vacancy rates.  The Council submitted that based on current data, weekly median rents for a unit and for a house represent 51% and 57% respectively of the SMW.  On this basis, a minimum wage household would qualify as being in a state of severe housing stress.

39      In terms of the current market, the 2020 Rental Affordability Snapshot examined rental affordability in the Perth metropolitan area and in the regions.  This report showed only a very small percentage of properties for rent in Perth and the Southwest region, as being affordable for minimum wage earners and none in the Northwest.  The Council contended that this situation is made worse by the recent ending of the moratorium on rental evictions and rental increases. Further material provided to the Commission by the Council, referred to the formation of a Housing Emergency Response Group on 1 April 2021, to press the State Government for urgent assistance for those most affected by the current situation.

40      In terms of food costs and the maintenance of "food security", it was contended by the Council that based on the Suncorp 2020 Cost of Food Report given average weekly food costs in Western Australia of $266, this amounts to approximately 40% of weekly income after tax, for an adult minimum wage earner.  It was submitted that in this situation, a minimum wage earner must substantially cut back on other spending, to maintain a healthy diet in accordance with community standards. Evidence of food security stress is found in an increasing number of people, since March 2021, turning to emergency food relief, especially since the wind back of pandemic income support.

41      Accordingly, the Council submitted that an increase in the SMW can assist in avoiding food insecurity.

42      Meeting energy costs is cited by the Council as a significant impact on the wellbeing of minimum wage households.  Given the percentage of income spent on energy of households in debt, in 2019, costs were approximately $113 per week on utilities, with power the highest component at $58 per week.  It is to be noted that these are 2019 figures and since, in response to the pandemic, the State Government has implemented measures such as a doubling of the Energy Assistance Payment and implemented a freeze on all household charges and fees, along with a moratorium on electricity disconnections.  Additionally, a $600 electricity bill credit was made available from 1 November 2020.  The Council contended however, that this credit has now been used up and an increase in the SMW will assist low-income households in meeting their energy costs.

43      The Council also referred to relative poverty, in terms of those households experiencing entrenched financial disadvantage, whilst a family member is working full time. Reference was made to the ACOSS and UNSW Sydney (2020) Report Poverty in Australia 2020:  Part 2 - Who is Affected?  This refers to more than 1 million Australians who work full time, but remain in relative poverty, suggesting that the minimum wage is insufficient.  Additionally, the Council referred to those working in secondary employment as being further evidence of this.  A consequence of this situation is rising child poverty, and the impact on child development as they grow up.  The Council referred to a case study of a single mother with two children working at a grocery store on minimum wages.  Her fortnightly income, with income support payments, is $1,200, of which $700 is spent on rent.  The $500 balance is spread over the cost of food, petrol, and school fees for her children.  She has no money for "luxuries".

44      As part of the impact of relative poverty, the Council referred to what it says is the growing gap between the SMW and the Western Australian AWOTE. The Council submitted that the erosion of the "minimum wage bite", that being the ratio of the SMW to median or average wages, is inconsistent with the criteria s 50A(3) of the Act, that the SMW meet the needs of the low paid and contribute to an improvement in standards of living.

45      Overall, the Council contended that given the strengthening of Western Australia's economy, with data on increased retail spending and a tightening labour market, there should be no barrier to a significant increase in the SMW to enable low paid households to better meet their living costs, without having negative effects on employment levels or workforce participation.

Professor Preston

46      Professor Preston has provided the Commission with two papers which she has authored and coauthored. The first, entitled "The West Australian Labour Market and Gender Equity Post-Covid", canvasses the impact of the pandemic on female employment in 2020. The paper notes the differential impact of the pandemic on jobs for women and men.

47      In relation to job growth for women, it is noted that this has been predominantly in part time employment and in lower skill level jobs.  In the case of men, the growth in jobs has been full time and in higher skilled positions.  The paper also refers to the underutilisation rate among female employees and that the gender pay gap has widened.  Allied to this, is the low level of wages growth in Western Australia, especially for women.  The paper also notes the high level of female employment in the industry sectors covered by the State Wage Order, such as accommodation and food services, retail, arts and recreation services and the health and social services sectors.

48      The second paper, "The Evolving Wage Structure of Young Adults in Australia:  2001 to 2019", examines wages growth for young adults aged 25 to 34 years of age, in the context of the return on investment for educational qualifications achieved.  It is noted that wages growth over the early 2000s for this cohort was strong, however, from 2010/11 - 2018/19 wages growth has been flat.

49      The paper concludes that the return on investment associated with attaining degree level qualifications for young adults has been falling over the period examined.  This is postulated to be causally related to an increase in supply of degree qualified employees, but also it may be associated with a decline in educational quality more generally.

50      We thank Professor Preston for bringing these two papers to our attention for the purposes of these proceedings.

Consideration

Coverage of the State Wage Order

51      The consideration that we gave to this issue in the 2020 State Wage Case at [197] - [204] and our conclusion that there is a high degree of award reliance in this State in the industries of accommodation and food services, retail trade, arts, recreation and health and community services, remains.  UnionsWA also referred to the Interim Report - Ministerial Review of the State Industrial Relations System, suggesting that the number of employees in the State industrial relations system is potentially between 21.7% and 36.2% of all employees in the State.

52      We note too, the tables of award reliance included in both the UnionsWA and Minister's submissions up to February 2021, and the two tables in the Minister's submissions in relation to the top 10 most frequently accessed awards summaries prepared by Wageline and the top 10 most discussed awards in calls to Wageline.  All of this material, whilst not enabling an assessment of the number of employees subject to the State industrial relations system with any level of certainty, suggests that it remains significant.  We consider that the conclusions of the Commission in the 2016 State Wage Case [2016] WAIRC 00358; (2016) 96 WAIG 636 at [144] - [149] remain relevant.  In that decision we said:

144 There are varying views on the basis for calculating the number of employees and employers covered by the State industrial relations system and affected by the State Wage order. In the private sector, they are employees of sole traders, partnerships, some trusts and incorporated businesses which are not trading or financial corporations. In addition, there are State public sector employees.

145 We note that the State Wage Order deals not merely with the minimum wage for award free employees but also award covered employees and also award rates. It will directly affect some and will have indirect effects on others. It covers the rates for juniors, apprentices and trainees, and sets out the Principles to be applied to a range of types of claims which might come before the Commission, so as to guide the parties in pursuing, and the Commission in deciding, those claims.

146 While the State Wage order deals with more than the minimum wage, this is its most direct effect, along with setting the increase for award rates. Therefore, its most direct effect is on award free and award covered employees and their employers. It also provides a floor and, what some have described as, a signalling effect to those not directly covered, for their wage setting. So while the numbers actually covered or directly affected by the minimum wage is difficult to determine, it is clearly of significance to many employers and employees, either directly or indirectly.

147 Those employees dependent on the minimum wage are more likely to be employed in small businesses.

148 As UnionsWA submits, it is likely that vulnerable groups of employees are overrepresented within the private sector of the state industrial relations system, partly due to them being employed in small private sector businesses.

149 In terms of low income households, UnionsWA refers to the Productivity Commission’s report, noting that: Employees in the lowest income groups are more likely to be on the minimum wage than those in higher income groups (and by more than a fivefold factor) (figure 4.8). So, while most people in the lowest quintile are not in work (and therefore do not receive any wages), almost half of those who are in work are paid at a minimum rate.

53      We have also previously observed that employers and employees in the State industrial relations system do not generally avail themselves of the making of industrial agreements.  In the 2018 State Wage Case [2018] WAIRC 00363; (2018) 98 WAIG 263 we said at [192] - [198] as follows:

Enterprise bargaining

192 We are required to consider the need to protect employees who are unable to reach an industrial agreement (s 50A(3)(a)(v)) and to have regard to the need to encourage employers, employees and organisations to reach agreements appropriate to the needs of enterprises and the employees in those enterprises (s 26(1)(d)(vii)).

193 The Commission's records identify that in those areas that are subject to the State Wage order, employers and employees do not generally bargain for an enterprise agreement. Only 53 applications were made to register industrial agreements in the 2016-17 financial year (see Report of the Chief Commissioner of The Western Australian Industrial Relations Commission 2016-17, page 17-18): … 33 of these relate to independent schools, and the remainder relate to not for profit organisations including political parties and community and legal centres. Three relate to one particular unincorporated private hospital.

194 The trend at the national level and the lack of any real level of agreement-making amongst State system employers and unions confirms the significance of the State Wage order to State system private sector employees.

195 Those covered by awards have not received pay increases through those awards other than from the State Wage order (see the 2016-17 Annual Report of the Chief Commissioner, page 18).

196 UnionsWA says that it is most likely that increases in the SMW will act as a spur to bargaining, particularly for award-free employees where a signal is needed as to what constitutes an acceptable wage. It refers to studies by the Commonwealth Department of Employment and the evidence before us by Professor Rowena Barrett in 2013.

197 In last year's decision ([2017] WAIRC 00330; (2017) 97 WAIG 693), we found that 'in particular industries and industrial pay negotiations, the increases awarded through the State Wage Case are used as guides or signals for increases in rates of pay to significant numbers of employees beyond those directly covered by the State Wage order. In many industries, the award is not merely the safety net above which actual rates of pay are negotiated, but may constitute the actual rates paid' [200]. This situation is reinforced this year, and particularly given the absence of a discernible level of industrial agreement negotiation in the sectors and awards where most low-paid work is found.

198 In light of this material, we conclude that an overwhelming proportion of State system private sector employees receive an increase in their rate of pay only by one of three methods:

(1) the SMW contained in the MCE Act through the State Wage Case;

(2) the increase in award rates of pay through the State Wage order; or

(3) the signalling effect of those increases.

54      Nothing has been put to us in these proceedings to cause us to alter our views in relation to the coverage and effect of the State Wage Order for present purposes.  We reach this conclusion, notwithstanding the submissions put to us in relation to the s 50A(3)(c)(v) criterion, referred to below.

Statutory requirements

55      By s 50A(1) of the Act, the Commission is required before 1 July each year, to make a general order setting minimum rates of pay prescribed for classes of employees under the Minimum Conditions of Employment Act 1993 (WA) and to adjust rates of wages payable under awards.  Additionally, the Commission is required to prescribe a Statement of Principles, by which the Commission’s jurisdiction under the Act is to be exercised in relation to the setting of wages, salaries, allowances, or other remuneration for employees.

56      By s 50A(3) the Commission is required, in performing its functions in making such a general order, to take into consideration a range of factors.  These include the need to: ensure that Western Australians have a system of fair wages and conditions of employment; to meet the needs of the low paid; to provide fair wage standards in the context of living standards generally prevailing in the community; to contribute to improved living standards for employees; to protect employees who may be unable to reach an industrial agreement; to encourage ongoing skills development; and to provide equal remuneration for men and women for work of equal or comparable value.

57      Additionally, the Commission is required to also consider a range of economic factors including the state of the economy of Western Australia and the likely effect of its decision on that economy, in particular, the level of employment, inflation and productivity; the national economy to the extent it is relevant; and the capacity of employers as a whole to bear the cost of any increase in wages, salaries, allowances and other remuneration.  Additional considerations include the need to ensure that Western Australians have an award framework that represents fair wages and conditions of employment; relevant decisions of other industrial courts and tribunals and finally, any other matter that the Commission considers to be relevant.

58      The statutory criteria set out in s 50A(3) of the Act are not accorded any particular precedence, one to the other.  The Commission is required to balance each of them in its deliberations.  It is trite to observe that the Commission’s jurisdiction under s 50A is also to be exercised in accordance with s 26(1) of the Act.

Fair wages and conditions of employment; provide fair wage standards in the context of living standards in the community generally and contribute to improving living standards for employees.

59      The statutory framework in s 50A(3)(a) emphasises the obligation on the Commission to consider the concept of fairness. For the purposes of s 50A(3)(a)(i), fairness is relative and requires a balance between the interests of both employees and employers. The Chamber submitted that the gap between the SMW and the FMW, which is presently $6.20 per week, was unfair and inconsistent with this statutory criterion.  As we have previously observed however, if the Commission considers that the circumstances before us warrant an increase to the SMW, to not do so, despite a differential with the FMW, would be at odds with the obligation imposed on us under s 50A(3)(a) of the Act.

60      As we noted in the 2014 State Wage Case [2014] WAIRC 00471; (2014) 94 WAIG 641 at [59] - [61], the Act was amended in 2006 to break the nexus with the national wage decision.  Section 50A primarily requires the Commission to set the SMW with regard to the circumstances existing in Western Australia, and not by reference  to the FMW specifically, although s 50A(3)(f) requires us to take into consideration the Annual Wage Review of the Fair Work Commission.  We also recognise, as we did in the 2014 State Wage Case, that in this State most employees are employed by employers that are trading corporations. Those employers pay a minimum wage to their employees which is presently $6.20 lower than the SMW, in circumstances where the cost of living is the same as for employees in the State system.  We restate that the concept of relative fairness requires us to have regard to the level of the FMW.  We note however, that the difference between the SMW and the FMW has narrowed considerably since 2014, when the SMW was $25.00 higher.

61      The statutory obligation in s 50A(3)(a)(iii) requires the Commission to consider the provision of fair wage standards in the context of living standards generally prevailing in the community, as a part of a benchmark against which to assess fair wages and conditions of employment.  A logical measure of the changes in living conditions generally in the community, are changes in the cost of living, over the year prior to these proceedings. Contributing to improved living standards under s 50A(3)(a)(iv), means enabling those employees affected by the SMW and award rates of pay, to improve their living circumstances, relative to the cost of living generally, through adjustments to wage rates.

62      We are mindful of the fact, as noted earlier in these reasons, that small business employers in the sectors covered by the State Wage Order include those most impacted by the pandemic restrictions.  This was also noted by the Commission in the 2020 State Wage Case.   However, this also needs to be seen in the context of the recovery of the Western Australian economy and the demand for goods, as is apparent in the strength of the retail sector, for example.  Already noted too, is the strong rebound in spending in the accommodation, food services and retail sectors, which, whilst it may still be lagging somewhat in terms of employment growth compared to prepandemic levels, is evidence of improved consumer demand and confidence. Household spending has significantly increased since the 2020 State Wage Case.

63      In terms of living standards in the community and the need to contribute to the improvement of those standards, the Council and UnionsWA point to the cost of living for the low paid, and in particular, the cost of housing, including in the regions. With the increasing costs and decreasing availability of rental properties, median rent as a percentage of the SMW for low-income earners now consume over 50% of their income.  This is combined with escalating food costs and rising food insecurity.  The Minister too, recognises that many low paid employees, including those not covered by State awards, rely on increases in the SMW to meet the challenges they face, in terms of day to day living expenses.

64      In terms of prevailing living standards and the extent to which they can be enhanced, a measure relied upon by the Commission consistently is the CPI indices

65      Excluding the electricity component, which we accept is appropriate given its distorting effect, as noted earlier, the CPI for Perth for the March quarter 2021 increased by 1% and by 1.5% in annual average terms.  However, given the substantial increase in costs of living, especially in housing, for the low paid, as set out in some detail in the Council submission, both the Council and UnionsWA urge the Commission to not solely rely upon CPI, especially given its volatility arising from the impact of the implementation and withdrawal of assistance measures, and the State Government's one-off electricity credit.

66      In last years’ State Wage Case, we invited submissions from the parties on the appropriateness of using the CPI as a measure of the cost of living and inflation. Various alternatives were proposed including the Council's Cost of Living Reports; the Household Financial Consumption Expenditure index published with the National Accounts; and the ABS series Analytical Living Costs Indices. We noted on that occasion, that the latter two of these cost of living measures, tended to display similar price movements over time as the CPI measure.  Whilst concluding that it is not perfect, we then observed that the CPI is as good a measure as any, to gauge price changes in the basket of goods measured for Perth. We said however, and restate, that this is not the only consideration for us to take into account in assessing the cost of living.

67      In the circumstances before the Commission on this occasion, and in assessing fairness in accordance with s 50A(3)(a)(i) of the Act and the criteria in s 50A(3)(a)(iii) and (iv), we consider that regard should be had to the disproportionate impact on the low paid of increased housing costs as submitted by the Council. We have consistently declined to "unpack" the CPI as an appropriate broad measure of increases in living costs generally. However, acknowledging the caveats placed on it by the Chamber concerning inclusions in the categories of expenditure, the publication by the ABS in November 2020, of an experimental series comparing both Nondiscretionary and Discretionary CPI movements (those items considered essential as opposed to those more discretionary in nature), can be of some assistance.

68      The Council contended also that due to the delay in the increase in the SMW arising from last year's decision, a comparison can only be made between AWOTE as at November 2020 and the SMW as at February 2021, without being able to account for any change in AWOTE over this period.  As at February 2021, the SMW was 41.3% of the November 2020 AWOTE.  By comparison, as at November 2005, the same relativity was 47.6%. Further, the Council referred to the relevant comparison nationally as being a ratio of 44%.  The Council also referred to the Fair Work Commission benchmark for determining the low paid, at two thirds of the median adult full time ordinary earnings rate.   It was contended that the SMW has fallen well below this level.  Accordingly, the Council submitted that this relative decline, despite Australia having, in overall terms, relatively high minimum wages by international standards, is at odds with meeting the needs of the low paid and to provide for fair wages in the context of living standards generally in the community.

69      We have expressed some reservations in the past, as to comparisons between the WPI and the level of the SMW with AWOTE, given the potential distorting effect of high incomes in the mining and resources sector.  However, in its submissions, the Council again refers to what it describes as the growing disparity between the level of the SMW and median pay levels as contributing to income inequality in Western Australia. Despite this qualification, the differential is a consideration in the Commission's assessment of living standards generally in the community and the need to contribute to their improvement.

Meeting the needs of the low paid

70      In terms of s 50A(3)(a)(ii), the criterion requires the Commission to consider the need to "meet the needs of the low paid". The comparable provision in s 284(1)(c) of the Fair Work Act 2009 (Cth) requires the Fair Work Commission to take into account "relative living standards and the needs of the low paid", in similar terms to ss 50A(3)(a)(ii), (iii) and (iv). In the Annual Wage Review 201920 [2020] FWCFB 3501, at [360], the majority stated:

Assessing the needs of the low paid involves analysing the extent to which lowpaid workers are able to purchase the essential items necessary for achieving a decent standard of living for them and their families, and to allow them to participate in community life, assessed against contemporary norms.  The risk of poverty is also relevant in addressing the needs of the low paid.

71      In terms of what is meant by the need to "meet the needs of the low paid" under s 50A(3)(a)(ii) of the Act, we consider that the above description is also apposite to the Commission's consideration in relation to this criterion.  As noted in the 2015 State Wage Case [2015] WAIRC 00435; (2015) 95 WAIG 679 at [102], there is a substantial overlap between the requirements of s 284(1) of the FW Act and s 50A(3) of the Act, which we have previously recognised and which we reaffirm on this occasion.

72      The fact that, as pointed out by the Chamber in its submissions, the Commission has, since 2015 to 2020, increased the SMW by amounts greater than the cumulative Perth CPI and WPI over the same period, is evidence that these increases in the SMW have contributed to the needs of the low paid and have provided an improvement in living standards for employees covered by the State Wage Order.  In our decision in the 2020 State Wage Case, we also noted that over the last 10 years, the SMW has increased by 34%.  In terms of the cost of living as measured by the CPI for Perth, this has risen by about 20% over the same period. Thus, we reaffirm our view that past increases in the SMW in Western Australia have, on this measure, contributed to meeting the needs of the low paid. As part of considering these factors, the Commission has also consistently assessed the underlying strength of the State economy and the requirement in s 50A(3)(b) of the Act, to have regard to the effect of its decisions on the level of employment.

73      In meeting this criterion, and also, the need to contribute to an improvement in living standards in s 50A(3)(a)(iv) considered above, increases in the SMW, reflecting increases in the cost of living, and the particular challenges for low- income employees, have been a consistent feature of decisions of the Commission in making a State Wage Order.  It is recognised, however, that the SMW alone cannot address all the needs of the low paid.  Necessarily, matters such as the alleviation of acute housing stress, emphasised by the Council on this occasion, rely heavily on the interaction of tax and transfer payments and other initiatives, as a part of the social welfare system.

Protecting employees unable to reach an industrial agreement

74      Since 2018, the Commission has observed in successive State Wage Cases, as noted at [53] above, that the degree of bargaining for industrial agreements in those industry sectors most affected by the State Wage Order has been minimal.  We concluded in the 2020 State Wage Case, in restating our view from the 2018 State Wage Case, that the principal means of wage increases in the State industrial relations system are the SMW in the MCE Act; increases in State award rates of pay; and the signalling effect of such increases.

75      Whilst recognising these factors, on this occasion the Chamber also contended that the signalling effect of both the SMW and the FMW has been subdued due to the impact of the pandemic.  The Chamber cited ABS WPI figures from the June quarter 2018 through to and including the December quarter 2020, in terms of contributions made by enterprise agreements, individual arrangements and awards.  The Chamber contended that individual arrangements, being identified by the ABS as more immediately impacted by the pandemic, reflected wage freezes, and negotiated reductions in pay, as similarly noted by the RBA in its February 2021 Statement on Monetary Policy.

76      Thus, the Chamber contended that in the current circumstances, the prospect of any signalling effect of the SMW is much reduced.

77      This was contested by UnionsWA.   In referring to the same ABS data, UnionsWA contended that the weaker signalling effect is not for the reason suggested by the Chamber, but rather, is due to the delayed implementation of the SMW and FMW increases from 2020.  It was submitted that the normal timing of SMW and FMW increases shows up in the September quarter ABS WPI figures, as shown on the chart at [4.18] of the UnionsWA submissions in reply, referred to by both parties. This shows the much larger proportionate contribution of awards to the WPI in the September quarters in 2018 and 2019, respectively.

78      Reference was also made by UnionsWA to the Minister's submissions to the effect that an analysis of registration of current industrial agreements by the Commission, confirms that smaller, unincorporated businesses in the hospitality and retail sectors do not use industrial agreements at the present time.  The Minister also submitted that such businesses were likely to be guided by State awards (either directly or indirectly) in setting wages for their employees.

79      Whilst the pandemic may well have had some impact on the wages and salaries of those governed by individual arrangements more broadly, we are not persuaded to fundamentally alter our views previously expressed, that the setting of the SMW has some signalling effect in the Western Australian labour market for those employers and employees in the State industrial relations system.  Furthermore, the absence of agreement making and reliance on the SMW and award rates of pay, in the industry sectors most impacted by the State Wage Order, means that an increase in the SMW and award rates arising from these proceedings will add to the protections afforded to such employees.

Encourage ongoing skills development

80      We have already noted earlier in these reasons a substantial increase in the take up of apprenticeships, from about 2016 to date.  This is very encouraging.  Likewise, is the arresting of the downward trend in traineeship commencements, with an upturn in the number of commencements for 2020.

81      As referred to by the Chamber in its submissions, there has been substantial Commonwealth and State Government support to employers to bolster apprenticeship and traineeship commencements.  This can only be positive and is in part at least, a recognition of the commitment required by employers to take on new apprentices and trainees, and the additional costs involved, associated with the supervision of apprentices and trainees in the early stages of their employment.

82      Whilst also recognising that supervision is the largest cost for employers in engaging apprentices and trainees, UnionsWA cited research by the National Centre for Vocational Education Research, The Cost of Training Apprentices, (6 April 2009). This confirmed the relationship between supervision and employer costs, but noted that once an apprentice becomes more productive, this tends to neutralise the employer's direct wages costs.  UnionsWA also contended that regular and substantial increases in the SMW and award rates of pay are important in attracting people to take up apprenticeships and traineeships, given that there is often an opportunity cost for employees, in foregoing other potentially higher paying employment.

83      We acknowledge the importance of employer assistance measures to encourage the offering of apprenticeships and traineeships. The recent, sustained improvement in apprenticeship commencements suggests to us that regular and modest increases in the SMW have not acted as a disincentive to ongoing skills development in workplaces in this State, that are subject to the State Wage Order.

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

84      Section 50A(3)(a)(vii) requires the Commission to consider the need to provide equal remuneration for men and women for work of equal or comparable value.  The Minister contended that in this jurisdiction, women tend to be more reliant on award wages than men.  We accept this to be so.  The Minister also noted that in comparing AWOTE data from November 2019 to November 2020, the gap between male and female earnings increased from 22.4% to 22.9%, with Western Australia still having the largest gender pay gap of all the States and Territories.  It was accepted by the Minister that there are complex reasons for the gender pay gap in this State.

85      In connection with this issue, UnionsWA referred to Professor Preston’s paper “The Western Australian Labour Market and Gender Equity Post-Covid”, commenting on the gender pay gap in Western Australia.  UnionsWA noted that Professor Preston contended that the State Government's Wages Policy has led to slow wage growth over past years in the public sector, which has also likely led to an increase in the gender pay gap. Accordingly, constraints on increases in the SMW in the private sector would have the same effect. The submission was also made by UnionsWA that the material in the Minister's submissions, referred to above, leads to the need for a much larger increase in the SMW than contended by the Minister.

86      Likewise, the Council maintained that in the health and social services sectors for example, approximately 82% of the workforce are women but despite this, the gender pay gap remains at 9.6% and it is not improving.

87      We have previously recognised the existence of the gender pay gap in Western Australia and that, at least in part, there are industry compositional reasons for this.  As we noted in the 2012 State Wage Case [2012] WAIRC 00346; (2012) 92 WAIG 557 at [54] - [58], and as we have restated since, there are limits to which increases in the SMW, which only directly affects a narrow range of industries and a relatively small number of employees, can have any material impact on the gender pay gap existing more broadly across all industries in the State.  However, in recognition of the high level of female employment in the State industrial relations system, we remain of the view that increases in the SMW can assist in reducing the gender pay gap amongst this cohort of employees.

88      We also refer to Principle 8 - Equal Remuneration for Men and Women for Work of Equal or Comparable Value, introduced into the State Wage Principles in the 2019 State Wage Case [2019] WAIRC 00290; (2019) 99 WAIG 509.  We draw attention to this, and the capacity for parties to make an application to the Commission under this Principle, for the Commission to inquire into and determine the matter.

Capacity of employers as a whole to bear the cost of increases in wages and conditions of employment

89      Section 50A(3)(d) requires the Commission to take into consideration the capacity of employers, as a whole, to bear the costs of increased wages, salaries, allowances, and other remuneration.  The Minister submitted that in the absence of specific information on the health of individual businesses, GOS plus GMI prepared by the ABS, can provide some assistance in gauging the relative performance of industries operating in Western Australia.

90      The most recent data available is for the 2019-2020 financial year, taking into account the initial period of the pandemic, but not the subsequent recovery in the second half of the year.  This information for 2019-2020, which the Commission has referred to and relied upon in past State Wages Cases, is set out at Table 6 of the Minister's submissions on p 15 as follows:

Table 6: Gross Operating Surplus (GOS) and Gross Mixed Income (GMI) by industry, WA, current prices, 2019 and 2020*

Industry

GOS + GMI June 2019
($m)

GOS + GMI June 2020
($m)

Annual Increase ($m)

Annual Increase (%)

 

 

 

 

 

Agriculture, forestry and fishing

4,696

4,025

-671

-14.3

Mining

91,814

117,350

25,536

27.8

Manufacturing

5,240

5,149

-91

-1.7

Electricity, gas, water and waste services

2,992

3,021

29

1.0

Construction

5,334

5,644

310

5.8

Wholesale trade

3,386

3,319

-67

-2.0

Retail trade

2,630

3,049

419

15.9

Accommodation and food services

1,297

1,272

-25

-1.9

Transport, postal and warehousing

4,920

4,983

63

1.3

Information media and telecommunications

1,624

1,831

207

12.7

Financial and insurance services

7,801

7,757

-44

-0.6

Rental, hiring and real estate services

2,890

2,817

-73

-2.5

Professional, scientific and technical services

3,606

4,271

665

18.4

Administrative and support services

825

911

86

10.4

Public administration and safety

1,680

1,789

109

6.5

Education and training

998

1,025

27

2.7

Health care and social assistance

2,141

2,109

-32

-1.5

Arts and recreation services

514

531

17

3.3

Other services

1,338

1,473

135

10.1

Total all industries

159,880

186,847

26,967

16.9

Total industries excl. mining

68,066

69,497

1,413

2.1

*ABS (2020), Australian National Accounts: State Accounts, 2019-20, Catalogue 5220.0, Time Series, Table 6 (original data)

91      It is acknowledged by the Minister that the most substantial contribution to the overall performance on the above measures was from the mining sector.  The all-industries growth figure of 16.9%, excluding mining, resulted in growth of 2.1%.  Also noted in the Minister's submissions is the fact that during the first half of 2020, businesses were in receipt of the Commonwealth JobKeeper payments and also other industry assistance. The industries of accommodation and food services and retail were substantial recipients of this support and therefore, the Minister submitted that some caution is required in assessing this data.

92      Subject to this caveat, it is to be noted that the retail industry recorded positive profitability growth of 15.9%.  The accommodation and food services sectors recorded negative growth of 1.9%.  Arts and recreation services also recorded positive growth of 3.3%, as did the majority of other industry sectors.

93      The Chamber contended that the data in Table 6 largely reflected the very substantial level of government pandemic support.  With the withdrawal of this support, the Chamber submitted that profits are likely to fall to a more normal or subnormal level.  As referred to earlier in these reasons, the Chamber also drew a distinction between the profitability of incorporated and unincorporated businesses over the past five years, in real terms.  Total business gross operating profits for incorporated businesses grew by 8.4% per annum on average as opposed to growth of 1.5% per annum on average for unincorporated businesses.

94      UnionsWA also acknowledged the challenges for businesses in 2020, and that the difficulties are not yet over.  However, in citing the recent NAB SME (Small and Medium Enterprises) Business Survey: Quarter 1 2021, UnionsWA noted business confidence and conditions in this sector in Western Australia "were well into positive territory for WA" (UnionsWA submissions [9.2]). UnionsWA also pointed to measures announced in the Federal Budget on 6 October 2020, favourable to small businesses.

95      As part of its contentions as to the capacity to pay and cost impacts, the Chamber also referred to the upcoming increase in employer statutory superannuation contributions from 9.5% to 10% from 1 July 2021.  The Chamber maintained that this will be a direct cost for employers, and, in the case of award covered employees, the increased superannuation contributions will include penalties and loadings, which is especially relevant to retail and hospitality industry employees, given their hours of work. The inclusion of increased superannuation contributions as a relevant consideration was disputed by UnionsWA, which urged the Commission to focus on the improvement of living standards for employees currently, and not benefits that are due to take effect prospectively, after retirement.

96      We have in the past taken into consideration the impact of increases in statutory superannuation contributions for employees, as a direct cost to employers, and as a relevant factor in moderating an increase in the SMW: 2014 State Wage Case  at [88] and [101]. We are not minded to alter this view. Whilst statutory superannuation contributions are a deferred benefit for employees, which take effect on retirement, they are a present and ongoing cost to employers.  We maintain the view that such increases should have a moderating influence on an increase in the SMW.

97      The analysis of GOS plus GMI for Western Australia in the above table suggests that a number of industries in the State industrial relations system remained profitable to June 2020.  Whilst recognising that many employers in this State received the benefit of substantial government financial assistance, when combined with the other information before us, in relation to the recovery in employment, hours worked, household consumption (including in those industries most affected by the State Wage Order), and consumer and business confidence, we consider that the underlying strength of the recovery in the Western Australian economy supports the conclusion that employers as a whole have the capacity to bear the cost of any increase in the SMW resulting from these proceedings.

The state of the Western Australian economy

98      This criterion was given considerable focus by the parties in their submissions, given the impact of the onset of the pandemic last year, and changes that have occurred since that time.  The economic impact of the coronavirus pandemic on the State was significant.  The 2021 State Wage Case – Economic Conditions and Outlook as Attachment 1 to the Minister’s submissions, (based on the 2020-21 Prelection Financial Projections Statement), notes that the onset of the pandemic in March 2020, and the necessary social distancing measures implemented, had the effect of reducing the capacity of many businesses, leading to temporary or permanent closure.  Consequently, many employees were stood down or lost their jobs.  Working from home became commonplace.  Levels of underemployment were high.

99      A consequence of this was the largest contraction in the State’s economy ever recorded.  The June quarter 2020 measure of the domestic economy, SFD, fell by 6.2%.  Unemployment peaked at a very high level of 8.7% in June 2020, reflecting the loss of 103,000 jobs over the period from February to May 2020.   Household spending slumped by 11.1%.

100   The unprecedented response to the pandemic by the Commonwealth and State Governments, in terms of economic stimulus measures such as JobKeeper and JobSeeker, and targeted industry assistance packages, has aided in the recovery of the State’s economy more quickly than anticipated.  The Economic Conditions and Outlook notes that by March 2021 for example, in aggregate terms, the jobs lost in this State at the height of the pandemic have now been recovered.  Coupled with the suppression of the virus in the community, consumer and business confidence in the State has returned. This is despite the five-day lockdown in the Perth, Peel and Southwest regions in February 2021 and the three-day lockdown over the Anzac Day long weekend, in April 2021.

101   The State’s mining and resources sector, especially iron ore, has been particularly robust over the year since March 2020, which has contributed substantially to both the State and national economies through higher royalty and tax revenue streams.  Mr Christmas noted the strength of commodity prices, driven by the strong economic recovery in China, one of the few global economies to grow during the pandemic. Reflecting growing confidence levels in the Australian economy, the Australian/US dollar value has recovered from a 17-year low in April 2020. The residential construction sector has also strengthened significantly, aided by Commonwealth and State stimulus measures.  Other State jurisdictions, except Victoria,  have also experienced a more rapid recovery than anticipated.

102   The key metrics of the State’s overall economic performance and future projections now follow.  Unless otherwise stated, the tables and graphs are drawn from the Economic Conditions and Outlook and also Mr Christmas’ presentation document, 2021 State Wage Case The Western Australian Economy, 20 May 2021, made available to the Commission and the parties.  In summary, inflation remains benign, well below the Reserve Bank of Australia’s target range of 23%.  Wage growth in aggregate terms, remains subdued.  The major economic aggregates and annual growth figures are set out at Table 1 below.  It is noted that CPI figures for 2020-21 and 2021-22 exclude the electricity sub-sector, given the distorting effect of the State Government’s one off $600 electricity bonus to households, from the October 2020 State Budget.

Table 1 – Major Economic Aggregates, Annual Growth (%)

 

2019-20

 

2020-21

2021-22

2022-23

2023-24

 

Actual

PFPS Estimate

Forward Estimate

Forward Estimate

Forward Estimate

State Final Demand

0.8

2.25

3.75

2.25

3.0

Gross State Product

1.4

2.0

2.75

1.25

1.5

Employment

0.4

1.5

1.5

1.75

1.5

Unemployment rate (a)

6.1

6.5

6.0

5.5

5.5

Consumer Price Index (b)

1.3

1.5

1.75

1.75

2.0

Wage Price Index

1.7

1.5

1.75

2.0

2.25

Population (c)

1.5

0.8

0.7

1.0

1.3

(a) Data expressed as annual average during the financial year.

(b) CPI growth rates in 2020-21 and 2021-22 are based on the total index excluding the electricity sub-sector.

(c) Actual for 2019-20 based on ABS Cat. No. 3101.0

Source: Western Australia 2020-21 Pre-election Financial Projections Statement and Australian Bureau of Statistics

103   In terms of current economic conditions, Mr Christmas referred to the heavy fall in both SFD and merchandise exports by mid-2020.  However, since that time, both have recovered to pre-pandemic levels.  Comparing the December quarter 2019 and the December quarter 2020, the domestic economy is now 1.2% larger.  Mr Christmas referred to merchandise exports growth of 11% in the December quarter 2020, which also now exceeds the pre-pandemic level. Household consumption has also bounced back from its June quarter 2020 low, although Mr Christmas noted that those sectors exposed to international borders remain significantly challenged. Spending in hotels, cafes and restaurants has recovered strongly, but has not quite yet reached its level in the March 2020 quarter.  Retail spending has been very strong throughout the pandemic, with Mr Christmas noting that this has been supported by stimulus measures and the shift away from international and domestic travel, to spending on goods in Western Australia.  Additionally, Mr Christmas agreed that increased retail spending has also been aided by increasing consumer confidence.

104   The performance of the housing market has been particularly strong, in terms of both building approvals and housing finance, aided by Commonwealth and State stimulus measures.  Business investment has also been growing.

105   In terms of the outlook for growth, Treasury forecasts, as summarised by Mr Christmas, suggests GSP will grow by 2% in 2020-21, as opposed to 1.4% in 2019-20.  Further strengthening is forecast for 2021-22 where GSP is projected to be 2.75%. Mr Christmas noted that household consumption and business investment are expected to remain robust. Consumer spending is forecast to grow modestly in 2020-21 by 0.25%, due to strengthening in retail spending in the September and December quarters of 2020 and more positive consumer sentiment.  Overall, Mr Christmas noted that the domestic economy is forecast to grow by its fastest rate in eight years in 2020-21, whilst being modest in historical trend terms.

106   Treasury expects retail spending and consumer confidence to remain positive in the March and June quarters of 2021.  This is despite the gradual withdrawal of Government stimulus measures, which to an extent, have been offset by an increase in household savings in 2020 and also record low interest rates for borrowers.

107   In addition to consumer spending, the domestic economy is expected to be supported by modest levels of housing investment in 2020-21 of 0.75%, before growing substantially to a projected high of a 21.75% increase for 2021-22, on the back of high levels of land sales, boosted by the Commonwealth and State government land and housing stimulus packages, referred to above. Business investment has grown strongly in 2019-20 and is anticipated to grow modestly for 2020-21 and 2021-22, before accelerating in 2023-24 to grow by 4.75%.  As with consumer sentiment, business sentiment has strengthened since the depths of the pandemic, with the recent NAB Business Survey showing that business confidence has risen to one of the highest levels over the last 10 years.  The most recent NAB Monthly Business Survey May 2021 (released on 8 June 2021) points to continued strong business conditions and confidence in Western Australia.

108   The Western Australian labour market has also recovered strongly since the onset of the pandemic.  The Treasury forecast for employment growth for 2020-21 is 1.5%, with increasing growth projected for the outyears.  As noted earlier in these reasons, the very high levels of job losses which occurred over the period February to May 2020, which were associated with the restrictions imposed in response to the pandemic, have now been largely recovered.  A large percentage of these initial job losses entailed part time employees in industries most affected, including accommodation and food services and the retail industry. The impact of JobKeeper however, enabled many businesses to continue to trade and increase hours of work for employees as business conditions improved.  It is noted that the recovery in employment has been more pronounced for part time rather than full time employees.

109   The recovery in employment and hours worked has been robust, from the lowest point during the pandemic, to now both being at record levels. By industry, Mr Christmas noted that accommodation and food services have completely recovered overall, however the sub-data shows hotels, taverns and bars have fallen short of pre-pandemic levels, while restaurants, cafes and takeaway establishments have exceeded pre-pandemic levels of employment. As noted, retail spending had been very  high, but employment numbers remain lower than prepandemic levels. Whilst as referred to in the Minister’s submissions, some caution is needed due to a lack of seasonal adjustment in the figures and the impact of the five-day lockdown in February 2021, the employment by industry figures over the period February 2020 to February 2021, show that many industry sectors have recovered employment to pre-pandemic levels.  These are set out in Table 2 – Employment by industry in WA (000s), February 2020 – February 2021, at p 8 of the Minister’s submission, and is as follows:

 

Table 2 – Employment by industry in WA (000s), February 2020 – February 2021

TOTAL EMPLOYED (‘000)

Feb-20

May-20

Aug-20

Nov-20

Feb-21

Agriculture, forestry and fishing

34.8

36.2

36.7

37.4

28.6

Mining

115.5

101.5

114.2

121.2

113.3

Manufacturing

72.4

73.7

77.2

75.4

83.7

Electricity, gas, water and waste services

15.5

27.3

23.5

22.9

27.9

Construction

120.7

128.6

124.6

117.6

111.5

Wholesale Trade

43.7

40.4

31.2

42.4

47.2

Retail Trade

130.1

111.2

112.7

126.8

113.8

Accommodation and food services

96.3

68.4

81.7

89.9

96.9

Transport, postal and warehousing

69.0

55.3

53.2

64.4

71.0

Information media and telecommunications

14.4

12.5

15.4

11.2

10.1

Financial and insurance services

31.2

29.2

28.2

29.7

32.5

Rental, hiring and real estate services

25.7

32.4

24.8

22.0

22.9

Professional, scientific and technical services

107.6

105.3

108.9

111.3

101.6

Administrative and support services

38.9

36.1

43.2

45.7

38.4

Public administration and safety

98.6

92.9

105.8

87.7

78.2

Education and training

111.7

104.1

110.4

117.8

106.3

Health care and social assistance

171.3

159.5

174.0

183.3

205.8

Arts and recreation services

23.3

17.5

21.9

22.0

20.4

Other services

63.8

56.8

59.3

56.7

60.6

Total

1384.4

1288.8

1347.0

1385.3

1370.6

 

110   Updated figures for the labour market were published in the ABS Labour Force Survey on 20 May 2021 and the parties were invited to make further brief submissions on the material.  In seasonally adjusted terms, the number of employed persons fell in April 2021 by 14,400, a reduction of 1.0 %.  The Minister noted that this followed a 2.7 % increase from March 2021.  Both the Minister and the Chamber observed that these losses were predominantly in part time jobs, with employment in full time jobs falling by 2,000 persons.  Whilst it was anticipated that the cessation of the JobKeeper scheme on 28 March 2021 would have some impact on employment levels, the Minister submitted that according to the ABS analysis of the April labour force data, no clear aggregate impact of the cessation of the scheme was apparent from the March and April changes in employment and hours of work data.  The ABS noted that there were no major changes in the indicators that had been used during the course of the pandemic, such as employees not working any hours or working reduced hours or substantial outflows of persons from employment across broad population groups.  Despite this fall for April 2021, both the Minister and UnionsWA noted in their submissions that overall, total employment in Western Australia is still above pre-pandemic levels.

111   Consistent with the fall in employment for April 2021, the latest ABS labour market data also shows a fall in total hours worked by 3.2 % (as opposed to a rise of 10.1 % for March 2021), which the Chamber submitted reflected the impact of the three-day lockdown over the Anzac Day long weekend in April 2021.  However, the Minister noted in his submissions that this would not be captured in the April figures, as the reference period for the ABS Labour Force Survey was 4 to 17 April 2021. Despite the April reduction in employment and aggregate hours worked, UnionsWA submitted that based on the April 2021 ABS data, overall employment in Western Australia increased by 5.7 % and the total number of unemployed persons fell by 17.1 % over the year.

112   In terms of unemployment and underemployment, the Minister submitted that whilst the three-day lockdown in April 2021 would not be captured in the latest ABS unemployment figures for the reason noted above, the previous short lockdown in February 2021, did not appear have any material impact on the unemployment rate.  The Western Australian monthly unemployment rate is still well below the national rate.  In terms of underemployment, the rate for Western Australia remains below the national rate, despite an uptick during the February lockdown, and is currently 7.1 % for April 2021, compared to 7.8% nationally.  Western Australia has the lowest underemployment rate of all the States.

113   A further measure of jobs data introduced by the ABS and the ATO at the early stages of the pandemic, is the Weekly Payroll Jobs and Wages Data series.  This uses the recent STP system to assess the impact of the pandemic on jobs on a regular basis.  As already mentioned, whilst not all Western Australian small businesses use the STP system, and thus this needs to add a note of caution to the data, over the period 14 March 2020 to 10 April 2021, there was a 3.6% increase in payroll jobs in Western Australia, which is above the national figure of 1.0%. A comparative table, setting out Western Australia’s performance on this measure with the other States and Territories and the national performance, is at Table 3 – Change in payroll jobs and total wages – by State, as follows:

Table 3 – Change in payroll jobs and total wages – by State*

 

Payroll jobs

Total wages

 

Change between 14 Mar 2020 and 10 Apr 2021

Change between 14 Mar 2020 and 10 Apr 2021

New South Wales

0.4%

0.7%

Victoria

0.5%

3.9%

Queensland

0.6%

1.9%

South Australia

2.8%

3.2%

Western Australia

3.6%

0.7%

Tasmania

0.7%

1.0%

Northern Territory

4.6%

4.6%

Australian Capital Territory

0.8%

3.1%

Australia

1.0%

2.0%

 

*ABS (2021), Weekly Payroll Jobs and Changes in Australia, week ending 10 April 2021

114   In terms of recent data up to 24 April 2021, the ABS Weekly Payroll Jobs and Wages Data in fortnightly terms, does show some volatility in weekly jobs , reflecting the impact of the pandemic.  This was pointed out by the Chamber in its submissions in reply, which, at p 5, contains Graph 1 - Indexed Number of Payroll Jobs and Total Wages, Western Australia and Australia, as follows:

 

Graph 1 - Indexed number of payroll jobs and total wages,

Western Australia and Australia

ABS (11 May 2021) Weekly Payroll Jobs and Wages in Australia

 

115   As to job vacancies, these are now also at a very high level, after a sharp decline in response to the pandemic. They are at their highest level in eight years. Mr Christmas said this bodes well for future employment growth. We also note that in the National Skills Commission Internet Vacancy Index preliminary report for May 2021, job advertisements (seasonally adjusted) are up 46% nationally.  Western Australia recorded the highest increase of all the States with job advertisements being up by 68.9% on pre-COVID levels. Both the ANZ Australian Job Advertisements Series (released on 7 June 2021) and the NAB Monthly Business Survey May 2021 series point to similar, strong jobs growth.

116   Whilst remaining above its pre-pandemic rate in annual average terms, the unemployment rate has fallen sharply over recent months.  As at the date of the hearing on 20 May 2021, the rate was 4.9%, seasonally adjusted.  At the same time as rising employment and hours worked, wages growth, as measured by the WPI, has remained subdued.  This is not a new development, as Mr Christmas referred to wage growth being below 2% since 2014-15. In terms of the latest data, WPI increased by 0.4% for the March quarter 2021, and by 1.5% in annual average terms, in line with Treasury forecasts. Despite a general tightening in the labour market and some evidence of skills shortages emerging in some sectors, Mr Christmas noted that this has yet to translate into the headline measure of wage growth.  Mr Christmas noted that over the medium term, the expectation is that wages growth will lift, as the labour market improves with continued improvement in the overall economy.

117   The overall key labour force metrics for March 2021 demonstrate the strength of the recovery in the labour market since about mid-2020.  We set out below Table 1 – Key labour force figures – WA, March 2021 (seasonally adjusted) in the Minister’s submissions at p 5.

                        Table 1 – Key labour force figures –   WA, March 2021

 

March 2021

February 2021

March 2020

Total employment

1,402,000

1,369,400

1,373,900

Unemployment rate

4.8%

6.0%

5.4%

Participation rate

68.4%

67.7%

67.9%

Underemployment rate

7.4%

8.7%

9.7%

Total hours worked (millions)

195,182.2

178,810.6

190,380.6

118   The updated figures, reflecting the fall in total employment for April 2021 and a comparison with the national figures, including the slight fall in the labour participation rate, are set out at Table 3: Labour Force – April 2021 on p 8 of the Minister’s supplementary submissions, as follows:

 

Table 3: Labour Force – April 2021

 

WA

AUS

Total employment

1,391,800

13,040,400

Full time employment

923,200

8,889,500

Part time employment

468,600

4,150,900

Aggregate hours worked

189,854,600

1,793,448,600

Unemployment rate (%)

4.9

5.5

Underemployment rate (%)

7.1

7.8

Participation rate (%)

68.0

66.0

119   Similarly, as with WPI, inflation remains subdued and well below the RBA’s target range of 2-3%.  Perth CPI for the March quarter 2021 increased by 1%. Treasury notes that excluding electricity, the CPI for Perth in annual average terms, in March 2021, was 1.5%.  Inflation is projected to rise to 1.75% in 2021-22 and 2% in 2022-23.  In particular, Mr Christmas referred to the significant volatility in the inflation figures on a monthly basis, reflecting the introduction and then withdrawal of stimulus measures such a free day care and the one-off State Government $600 electricity bonus.  Mr Christmas indicated the forecast is for inflation to gradually pick up towards the RBA target range of 2-3% by 2023-24.

120   Mr Christmas said that while the current conditions in the economy remain favourable, risks to the outlook remain.  He referred to the possibility of a further significant outbreak of the virus in the community, requiring a sustained lockdown.  The further withdrawal of fiscal support is another, along with a decline in global growth.  Ongoing negligible migration into the State also poses some downside risk, in terms of the level of demand in the economy.

121   With the unwinding of fiscal support, primarily through the ending of the JobKeeper scheme, the impact on the economy has not been as large as expected.  Employment numbers have remained relatively buoyant and working hours have not collapsed.  Mr Christmas noted that thus far, the ending of JobKeeper has not had a discernible impact on the economy and the labour market, however he observed that available data is national only and that also, it may take another quarter or two, to get a better assessment of the impact.

122   From the National Accounts data published on 2 June 2021, Unions WA and the Minister referred to the trend of growing strength in the Western Australian economy continuing, with SFD rising 3.0% for the March quarter 2021, and 3.8% in annual terms.  This monthly growth was the strongest of all the States and Territories.  Underpinning this strong performance, was business investment by the mining industry and small business, in heavy machinery and vehicles.  The Minister contended that the State’s domestic economy is now 3.8% larger than it was in the March quarter 2020.  Whilst acknowledging the growth in the domestic economy, the Chamber contended, consistent with its earlier submissions, that this has been driven primarily by the mining and resources sector, as reflected in industry contributions to GSP growth (see Graph 4 – Industry contribution to GSP growth – Western Australia at p 7 of the Chamber’s supplementary submissions).

123   Updated figures show household consumption being up by 0.3% for the March quarter 2021, in terms of discretionary spending on services such as hotels, cafes and restaurants and the arts and culture, as noted in the Minister’s submissions.  The Minister submitted that this period included the five-day lockdown in February 2021, which most likely moderated the quarterly growth in household consumption.  In this context, UnionsWA noted that household consumption expenditure in Western Australia is at the lower end compared to other States, reinforcing its contention that a boost in wages would bolster growth.  State Final Demand figures across the States and Territories, incorporating the National Accounts data, are set out at Table 1: State Final Demand, March Quarter 2021, percentage changes, in the Minister’s supplementary submissions, at p 4 as follows:

Table 1: State Final Demand, March Quarter 2021, percentage changes

 

NSW

VIC

QLD

SA

WA

TAS

NT

ACT

AUS
(a)

Final consumption expenditure

 

 

 

 

 

 

 

 

 

  General government

-1.5

-0.8

0.0

-0.1

0.6

0.7

1.7

-0.1

-0.5

  Households

1.0

3.2

-0.3

0.5

0.3

1.9

-0.9

0.6

1.2

Gross fixed capital formation

 

 

 

 

 

 

 

 

 

  Business investment

5.6

0.2

-3.3

3.4

11.5

2.2

-17.8

-5.6

4.0

  Dwelling investment

9.6

1.7

10.8

6.9

7.3

2.5

1.7

7.8

6.4

  Government investment

0.2

5.8

3.4

8.4

4.5

0.5

-3.8

-1.9

2.9

State final demand

1.5

2.3

0.4

1.4

3.0

1.6

-1.9

0.5

1.6

(a) Australia estimates relate to Domestic final demand.

124   We conclude that overall, the Western Australian economy has weathered the pandemic well and is returning to positive growth. Consumer and business sentiment has rebounded.  However, as the Anzac Day long weekend lockdown in Perth and the most recent lockdown in Melbourne demonstrate, further outbreaks represent a risk to the ongoing recovery.  It must be recognised that such outbreaks have an impact on industry sectors such as accommodation and food services in particular.  Additionally, a further risk to the outlook as noted by Treasury, is the impact of the winding back of stimulus measures such as the Commonwealth JobKeeper scheme. Whilst early indications are that the overall economic recovery will ameliorate any adverse impact of the withdrawal of stimulus measures, and the most recent ABS labour force data tend to support the view that there has not been any clear aggregate impact, some level of volatility in the State economy is likely.

The state of the national economy

125   Section 50A(3)(c) of the Act requires the Commission to take into consideration, to the extent that it is relevant, the state of the national economy.

126   Whilst the national economy suffered its largest contraction on record for the June quarter 2020 of minus 7%, it has rebounded strongly and much faster than expected. As set out in the Economic Conditions and Outlook, since the MidYear Economic and Fiscal Outlook 2020-21 was published, the national economy has grown even further, from the projected Gross Domestic Product (GDP) growth of 0.75% to 1.25% for 2020-21 and an upward revision of 4.25% for 2021-22. Unemployment has fallen rapidly to 5.6% in the March quarter 2021, compared to the forecast rate of 7.25%.  The 2020-21 unemployment rate for the full year is projected to be 5.5%, falling to 5% in 2021-22.

127   Inflation is projected to pick up to 3.5% for 2020-21, compared to minus 0.3% for 2019-20, before settling back to 1.5% for 2021-22.  As with the Western Australian labour market, wages growth is forecast to remain subdued, with WPI to be 1.25% for 2020-21, rising to 1.5% in 2021-22 and 2.25% in 2022-23.  Household consumption and housing investment has been strong. Both UnionsWA and the Minister in their respective submissions in reply, noted that the Commonwealth Budget projections of 11 May 2021, suggested the overall national outlook is positive, with strong growth forecast in the labour market.  Whilst this strength of the recovery in the national economy is noted, the RBA has sounded some caution, that growth is projected to be uneven, reflecting the impact of the pandemic in a range of areas.

128   The National Accounts show a continued strengthening in the national economy.  Gross Domestic Product rose by 1.8% in the March quarter 2021. Private investment grew by 5.3% and household spending has increased by 1.2%, with spending on services being up by 2.4%.  Overall, economic activity is above the prepandemic levels. The Minister noted the main driver of growth in the national economy being private investment (business driven), in terms of machinery and equipment purchases, and household consumption, in terms of housing investment. UnionsWA submitted that the data demonstrates the States and Territories, except the ACT, show continued economic improvement.  Variability in industry performance was also noted by the Chamber, in the context of the ABS observations on productivity in the National Accounts.  Those industry sectors most exposed to the pandemic, including accommodation, food services and the arts and recreation, whilst they are rebounding following restrictions easing, are still operating at lower than pre-pandemic levels.

Western Australian award framework that represents a system of fair wages and conditions of employment

129   Section s 50A(3)(e) requires the need for the Commission to ensure that the Western Australian award framework represents a system of fair wages and conditions of employment. There was no suggestion on this occasion that any increase in the SMW should not flow into State awards.  We have done so in all  prior State Wage Orders, as part of maintaining minimum award rates of pay and a fair system of award wages and conditions of employment.

     Relevant decisions of other industrial courts and tribunals

Fair Work Commission decision

130   On 16 June 2021, the Fair Work Commission handed down its Annual Wage Review 2020-21: [2021] FWCFB 3500.  In doing so, the Fair Work Commission noted the very different circumstances applying to its deliberations this year, compared to those in the Annual Wage Review 2019-20.  It was accepted in the main by those participating in the proceedings that the current performance of the economy has exceeded expectations and the Fair Work Commission observed that “The Australian economy has recovered to a greater extent and more quickly than anticipated": at [24].

131   The Fair Work Commission also acknowledged that there were risks to the outlook, especially COVID19 outbreaks requiring containment measures. In considering the requirements of s 284 of the FW Act, the Fair Work Commission concluded that an increase in the FMW was warranted on this occasion, higher than that granted in last year's Annual Wage Review.  The FMW and minimum award rates have been increased by 2.5%, increasing the FMW to $772.60 per week.

132   As to the timing of the wage adjustments, the Fair Work Commission has adopted a similar but varied approach to the "industry clusters" considered in the Annual Wage Review 2019-20. Informed by research conducted by Professor Borland of the University of Melbourne, industry groupings of "fully recovered", "almost recovered" and "lagging recovery", have been adopted.  Within these broad groupings, the Fair Work Commission noted that there exists some variation in subsectors of industries at the individual modern award level.

133   Relevantly for present purposes, some modern awards in the accommodation and food services, the arts and recreation sectors, and some sub-sectors relating to the retail industry, remain in the "lagging recovery" category, and will have the wage increase deferred to 1 November 2021. Others, including in the general retail sector, notably small businesses impacted most by COVID19 lockdowns and restrictions, have had the wage increase deferred to 1 September 2021.

134   The parties were given an opportunity to make submissions on the Fair Work Commission decision.  The Minister contended that the Fair Work Commission decision was equitable and considered.  It was submitted that as with the rejection of the ACTU claim of a 3.5% increase, the Minister reiterated that the UnionsWA claim in these proceedings should also be refused.  The Minister maintained that his contention of a $19.20 per week increase was fair and reasonable.  In terms of timing, the Minister submitted there should be no delay in the implementation of the increase to the SMW in this jurisdiction.  He contended the capacity of the Fair Work Commission to stagger increases by modern award groups under the FW Act, is not available to the Commission in the same manner.  In any event, to do so would be inequitable to those employees employed in a business not subject to the negative impact of future lockdowns.

135   The Chamber submitted, consistent with its earlier submissions that the Commission should not increase the SMW as the Fair Work Commission has done.  As to the Minister’s submissions regarding the staggering of any increase by award, the Chamber agreed that given the terms of the Act in this jurisdiction, only one effective date should be determined. For reasons it has previously identified in its written and oral submissions, and those referred to by the Fair Work Commission applying to the accommodation and food services sectors especially, the Chamber submitted that any increase in the SMW should be deferred to 1 November 2021. 

136   UnionsWA contended that its claim should be granted in full and from 1 July 2021, despite the Fair Work Commission decision.   It was contended by Unions WA that last year’s decision, with the delay in implementation, effectively led to no increase in the SMW for six months.  Given that the most recent National Accounts figures showed Western Australia had the strongest State economy, there could be no justification to delay any increase in the SMW in this jurisdiction, as the Fair Work Commission has done.       

Conclusions

137   On balance, to accede to the Chamber’s submission that there be no increase in the SMW on this occasion, would involve failing to apply the statutory requirements in ss 50A(3)(a)(iii) and (iv) of the Act, and would not be taking into consideration meeting the needs of the low paid, under s 50A(3)(a)(ii).  It would mean, given increases in the cost of living, that minimum wage employees would have an effective wage reduction. 

138   We have in most recent years, as noted above, granted increases in the SMW in excess of the cost of living such that employees covered by the State Wage Order have had real wage increases.  Economic considerations are important, and we have had regard to our obligation under s 50A(3)(b) of the Act to consider the state of the Western Australian economy and to grant real increases in the SMW, when the economy supports this.

139   Necessarily, given the unique circumstances of last year's State Wage Case and the case this year, the economic consequences of the pandemic have been a most important consideration.  This is both in terms of the damaging impact of the outbreak of the pandemic and the subsequent recovery in this State and nationally.  The Western Australian economy overall has recovered much more strongly that was anticipated in last year’s State Wage Case.  The most recent data before us, points to ongoing recovery and growth.  

140   In last year's decision, in considering the uncertainty, we awarded an increase in the SMW at the same level as that awarded by the Fair Work Commission in its Annual Wage Review. We also delayed its introduction. Given the economic recovery underway in Western Australia, which is one of the strongest of all the States and Territories, and is somewhat stronger than the national economy, we consider that a real increase in the SMW can be justified on this occasion.  This conclusion must involve our obligation to consider the needs of the low paid, prevailing living standards and an improvement in living standards, where it can be economically sustained.  In doing so, we are also very conscious of the need for us to consider the capacity of employers to bear the costs of any increase in the SMW.  The considerations we are required to weigh in the balance under s 50A(3) of the Act are, as we have previously observed, both competing and almost irreconcilable: State Wage Case 2012 at [103].   

141   We accept that until such time as the impacts of the pandemic are completely past us, and in particular, high levels of vaccination are achieved throughout the State, there is the ongoing risk of disruption, in particular industry sectors covered by the State Wage Order, such as accommodation, food services, retail and the arts and recreation sectors.  However, we consider that it is likely as time goes on that any further outbreaks are more contained, with impacts on affected businesses minimized.  

142   We also note that the overall Western Australian economic recovery from the pandemic and the recovery of the national economy are similar. Both economies are showing increasing strength, particularly in jobs growth overall.  At the same time, we also recognise the contentions advanced by UnionsWA, and as observed by Mr Christmas in his evidence, that the strength in jobs growth has not translated into growth in wages, as represented by measures such as the WPI.  This is despite the emergence of some tightening in the Western Australian labour market and skills shortages in some industry sectors.

143   Balancing of all the factors we must consider under s 50A(3) of the Act, we have decided to increase the SMW by 2.5 %.  The SMW will increase to $779.00 per week.  Award rates of pay will also be adjusted by 2.5%.

144   As to whether there should be a delay in the implementation of the increase as submitted by the Chamber, the Fair Work Commission in the Annual Wage Review 2020-21 deferred the implementation of the adjustment for those employees subject to the General Retail Industry Award 2020 to 1 September 2021.  For those employees subject to 22 different modern awards within various industries including aviation, tourism, theatre and performance, sports, restaurants and licenced clubs, the deferral was to 1 November 2021.  This was on the basis of the impact COVID-19 response measures have had in different industries and sub-industries. It is not possible to replicate this outcome in the statutory framework applicable to the State Wage Order. State awards do not mirror the coverage of the national modern awards, and the implication of the State wage adjustment into State awards, would result in logistical impracticalities in applying a deferment to some groups or categories of employees.

145   We also note that many economic indicators and data are reported on an Australia wide basis and are not disaggregated for the States.  Therefore, in determining an operative date, we are not able to disaggregate the economic indicators nor the impact on businesses and employees within industries or sub-industries in the State system.

146   A determination must be made by the Commission that applies to all industries, businesses and employees.  The application of a deferred adjustment will result in some employees receiving a wage increase months after their national system counterparts. Similarly, a determination not to defer an increase, will result in wage increases being applied some months before the national modern award adjustments are made. 

147   In 2020 we deferred the increase in the SMW by six months, noting that a deferral would allow time for the effects of the lifting of restrictions to develop and stabilise.  The Commission also noted that it assisted in balancing the various considerations that the Commission was required to consider.  This decision was made in the context of a situation that was unprecedented and was compared unfavourably with previous economic crises. The only other occasion this Commission has deferred an increase was in 2009, in a situation described as the worst economic downturn in the global economy since the Second World War.  In 2020, we noted that expectations were for a situation much worse than that experienced in 2009.  Thus, on the two occasions the Commission has deferred the operative date of an increase in the SMW, the circumstances have been exceptional, and the situation at the time and the forecasts, were dire.

148   The situation presented to the Commission in this year’s submissions note that the forecasted economic downturn was not as significant as that predicted at the time of last year’s State Wage Decision.  The forecast economic indicators presented this year are considerably more positive than those for 2009 and 2020. Whilst acknowledging that there remains some risk of outbreaks and associated measures applied in response that may limit economic activity, we are not convinced the situation is exceptional.  There is a broad consensus that the State’s economic recovery is well underway, that there has been significant improvement, and economic indicators have exceeded expectations.

149   In balancing the various factors that we are required to consider we have determined that the operative date of the increase in the SMW will be 1 July 2021.

Two-year apprenticeships

150   The Minister has drawn to our attention a present gap in the State Wage Order, to the effect that award free apprentices undertaking a two-year apprenticeship are not covered by the order.

151   Whilst an amendment was made to the Building Trades (Construction) Award to provide for two-year apprenticeships, an apprenticeship in concreting was not covered.  As this apprenticeship falls outside the scope of the award, the Minister sought an amendment to the State Wage Order to provide for this, in terms of s 50B(3) of the Act. Given that the Commission has linked award free apprenticeship rates to the Metal Trades (General) Award for a four-year apprenticeship, the Minister suggests that the same apply for the two-year apprenticeship, at the rate of pay for the second and third years, respectively.

152   The Chamber agrees with this course, as does UnionsWA, although UnionsWA contended that the rates of pay should reflect its claim for an increase in the SMW and award rates.

153   We agree with the Minster's proposal that the State Wage Order be varied to include a new provision for award free apprentices undertaking a two-year apprenticeship. The rates of pay should reflect the second- and third-year rates of a four-year apprenticeship. We thank the Minister for bringing this matter to our attention and also for providing to us an updated industry skill list for 2021, as Attachment C to the Minister's submissions.

Statement of principles

154   The State Wage Order made each year is required, by s 50A(1)(d) of the Act, to  be accompanied by a statement of principles to be applied and followed in relation to the exercise of jurisdiction under the Act in setting wages, salaries, allowances or other remuneration of employees or the prices to be paid in respect of their employment.

155   No party has sought any changes to the existing Statement of Principles issued in the 2020 State Wage Case and nor do we propose any be made.

Minutes of proposed General Order

156   A minute of proposed general order, giving effect to our reasons for decision, is now published.  Should any party wish to speak to the minutes of the proposed general order, the Commission should be informed and they should set out the issues they wish to raise in writing, by 12 noon Monday, 28 June 2021.