The Fair Work Commission (FWC) has raised the minimum wage by 3.75 per cent in a measured bid to bring low income earners up to par with inflation.
FWC President Adam Hatcher announced the decision on Monday morning and outlined the reasoning for the move which has been praised as “sensible” by economists.
“Our decision today is to increase the national minimum wage and all modern award minimum wage rates by 3.75 per cent, effective from July 1, 2024,” Mr Hatcher said.
“In determining this level of increase, a primary consideration has been the cost of living pressures that modern award reliant employees, particularly those who live in low income households, continue to experience.
“This is not withstanding that inflation is considerably lower than it was at the time of last year’s review.”
Mr Hatcher said modern award minimum wages remained lower than they were five years ago, not withstanding last year’s increase of 5.75 per cent.
He said it was “not appropriate” to significantly increase the wages above the rate of inflation because labour productivity was “no higher” than it was four years ago while productivity growth has “only recently” returned to positive.
Mr Hatcher said the first function of the increase was to increase the minimum rate of pay for employees who are not covered by a modern award or enterprise agreement, of which only a “very small number” of Australians will be affected by the decision.
Secondly, and the “most important” aspect of the FWC Review, was to increase the wages of about 20.7 per cent of the Australian workforce by making the decision applicable to the 121 modern awards which various industries and occupations operate under.
“The characteristics of employees who rely on modern award minimum wage rates and are therefore directly affected by our decision are significantly different to the workforce as a whole. They mostly work part-time hours, are predominantly women, and almost half are casual employees. They are also much more likely to be low paid,” Mr Hatcher said.
“We have also taken into account that modern award reliant employees will shortly receive the benefit of the stage-three tax cuts and the budget cost of living measures which are projected to increase household disposable incomes over the next 12 months.
“We have treated the forthcoming increase to the superannuation guaranteed contribution amount as a moderating factor.”
Mr Hatcher said the “modest contribution” to the total amount of wages growth would be consistent with the forecast return of the inflation rate to below 3 per cent in 2025.
Business Now host Ross Greenwood said the announcement would be a “benchmark” for future wage growth decisions.
“Effectively, 3.75 per cent translates to around $24.10 per hour, this is for minimum wage people and those people on those modern awards, which works out broadly to about $47,000 a year,” he said.
Outlining the approximate $1,400 per year increase to minimum wage, plus the $870 stage-three tax cut boost, as well as superannuation increases and power bill relief, Greenwood said there was “quite a lot of extra money coming into families’ pockets”.
Judo Bank economic advisor Warren Hogan praised the FWC for making a “sensible” decision, although it only brought lower income earners back to “where they were five years ago”.
“I think this was an excellent decision from the Fair Work Commission and it highlights the good work they’ve been doing for the past few years,” Mr Hogan said.
“It was sensible, 3.75 was actually lower than I thought they would be and it is about in-line with inflation… it’s a good outcome.”
Employment and Workplace Relations Minister Tony Burke spoke to Sky News and said the FWC’s move to increase the minimum wage was an “absolutely welcome decision”.
“What’s happening now, is that wages are deliberately growing,” Mr Burke said.
“I know this is not the decision Jane Hume wanted, Jane Hume was calling for a real wage cut, as though, somehow, low wage earners should be personally blamed for inflation, this says to people, ‘the system is continually trying to make sure your wages stay in front of what’s happening to prices.
“For 2.6 million Australians, this decision is a really good one and a good day for them.”
Mr Burke said it was a “core value” for Australians to be “paid properly”, chiding the Liberal Party’s “answer” to productivity by paying people less.
“You want people to be getting ahead year after year, and certainly the people who have the least capacity to ever deal with rising prices are people on the lowest incomes, and you got 2.6 million of them who had a pay rise guaranteed today,” he said.