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Minimum Wage Case 2004 Minimum Wage Case 2004 Submission of the State and Territory Governments Victoria New South Wales Western Australia South Australia Tasmania Northern Territory Australian Capital Territory Case numbers: 2508, 2845, 2846, 6230, 6231, 6232, 6233, 6318, 6320, 6321, 6348, 6455, 6456, 6457, 6458, 6527, 6563, 6570, 6741 and 6742 of 2003 4 February 2004 TABLE OF CONTENTS Part Page number 1 Overview 3 2 The ACTU claim 4 3 Legislative framework 5 4 Economic context of the claim 7 4.1 Current economic outlook 7 4.2 Risks to the outlook 11 4.3 Summary of state economics 12 4.3.1 Victoria 12 4.3.2 New South Wales 14 4.3.3 South Australia 16 4.3.4 Western Australia 17 4.3.5 Tasmania 18 4.3.6 Northern Territory 20 4.3.7 Australian Capital Territory 22 5 The needs of the low paid 24 5.1 Who are the low paid 24 5.2 Low paid or working poor 27 5.3 Findings concerning the needs of the low paid 29 5.4 The ACTU submission on the needs of the low paid 32 6 Impact of an increase in minimum wages 34 6.1 Impact of national wage increases on employment 34 6.2 Minimum wage increases and productivity 37 6.3 Impact of national wage increases on the incidence of 38 enterprise bargaining 7 The State and Territory Governments’ position 46 Appendix 1 Flow on of Minimum Wage Case decisions to State 50 and Territory jurisdictions Appendix 2 Glossary of terms 58 Attachment 1 The State of Working Victoria report 2 Minimum Wage Case 2004 State and Territory Governments’ Submission Part 1 Overview 1. This submission is made on behalf of the States of Victoria, Western Australia, New South Wales, Tasmania and South Australia, and the Australian Capital Territory and Northern Territory (the State and Territory Governments). On 13 January 2004 the Queensland Government called a State election for 7 February. Consistent with the usual conventions no submission is to be made at this time by the State of Queensland. 2. The State and Territory Governments support an increase in all award rates of pay of $20 per week. The submission details the grounds for supporting a $20 increase, consistent with the legislative requirements of the Australian Industrial Relations Commission (AIRC) pursuant to s113 of the Workplace Relations Act 1996 (the WR Act), the impact of a $20 increase on the Australian economy, including the impact on employment, and examines the needs of low paid employees. 3. The State and Territory Governments also submit that a $20 increase in award rates is consistent with the requirements under the WR Act for a fair safety net to be established and maintained to meet the needs of the low paid. Finally, a $20 increase is sustainable in the current economic climate. 4. The State and Territory Governments submit that an increase of $20 per week in award rates of pay is a sustainable increase, considering the current state of the economy as well as future prospects for the economy. An increase of $20 per week will also balance the needs of Australia’s lowest paid workers with the needs of employers. Please note: for convenience, the current matter will be referred to as the Minimum Wage Case. Previous reviews of the safety net will also be referred to as Minimum Wage Cases. 3 Minimum Wage Case 2004 State and Territory Governments’ Submission Part 2 The ACTU claim 5. The matter involves an application by unions affiliated with the Australian Council of Trade Unions (ACTU) to the AIRC pursuant to s113 of the WR Act to increase all Federal award rates of pay by $26.60 per week with commensurate adjustments to allowances. The grounds on which the ACTU claim are based are, in summary: • to give effect to s3 of the WR Act; • to give effect to s88A of the WR Act; • to ensure a fair safety net of minimum wages and conditions; • to protect low paid workers by increasing minimum rates of pay; • to maintain skills-based career paths; • to provide simple, equitable enforceable rates of pay; and • to facilitate equal remuneration for work of equal value and viable flexible work arrangements. 6. Section 113 of the WR Act provides the AIRC’s power to set aside or vary an award or any term of an award. The legislative requirements in the WR Act are described in more detail in Part 3 below. 7. The ACTU’s claim is $2 (8%) more than that claimed by the ACTU in 2003, when the increment in award wages sought was $24.60 per week and the AIRC awarded $17 for employees earning up to and including $731.80 per week and $15 for employees earning over that amount. 4 Minimum Wage Case 2004 State and Territory Governments’ Submission Part 3 The legislative framework 8. The State and Territory Governments submit that, among other things, the AIRC is required by the WR Act to ensure that there is a fair safety net of wages and conditions for Australian employees. This can only be achieved by the AIRC regularly reviewing minimum award rates of pay. Whilst the WR Act does not specify the frequency of such reviews, the State and Territory Governments support the current practice of holding an annual review. 9. Section 88B of the WR Act provides that the AIRC must perform its functions under this Part in a way that furthers the objects of the WR Act and, in particular, the objects of Part VI. More specifically, section 88B(2) states that: In performing its functions under this Part, the Commission must ensure that a safety net of fair minimum wages and conditions of employment is established and maintained, having regard to the following: (a) the need to provide fair minimum standards for employees in the context of living standards generally prevailing in the Australian community; (b) economic factors, including levels of productivity and inflation, and the desirability of attaining a high level of employment; and (c) when adjusting the safety net, the needs of the low paid. 10. Section 3(d)(ii) of the WR Act also states that a principal object of the Act is to provide a framework for cooperative workplace relations that promote the economic prosperity and welfare of the people of Australia. This is to be achieved, in part, by providing the means to ensure the maintenance of an effective award safety net of fair and enforceable minimum wages and conditions of employment. 11. Part VI of the WR Act provides mechanisms for the prevention and settlement of disputes, in part by awards acting as a safety net of fair minimum wages and conditions of employment. 12. Section 90 of the WR Act requires the AIRC to take into account the public interest, and for that purpose to have regard to: 5 Minimum Wage Case 2004 State and Territory Governments’ Submission • the objects of the Act, and in particular, the objects of Part VI; and • the state of the national economy and the likely effects on the national economy of any award or order that the Commission is considering, or is proposing to make, with special reference to likely effects on the level of employment and on inflation. 13. Any decision by the AIRC to increase Federal award rates of pay will, traditionally, flow through to state awards. Workplaces in the Territories are already under the jurisdiction of the WR Act, and so the decision of the AIRC will apply automatically within those jurisdictions. 14. In those States with their own industrial relations regimes (New South Wales, South Australia, Western Australia and Tasmania) the respective Industrial Relations Commissions will hold separate hearings to determine the issue of flow-on. In New South Wales, the Industrial Commission is required to give consideration to the Federal decision by s50(1) of the Industrial Relations Act 1996 (the NSW IR Act). In Victoria, the flow on of any Minimum Wage Case (MWC) increase to employees not covered by a Federal award (schedule 1A employees) is governed by the provisions of s501(2) of the WR Act. 15. A more detailed description of the flow-on of Minimum Wage Case decisions to the various jurisdictions is at Appendix. 6 Minimum Wage Case 2004 State and Territory Governments’ Submission Part 4 Economic context of the claim 16. In its 2003 decision, the AIRC stated: The immediate economic outlook, reflected in official forecasts, remains positive. Those forecasts suggest the continuation of strong, non-inflationary growth. There are, however, some uncertainties which present risks, most notably any delay in the passing of drought conditions and possible further weakening in the global economy, with uncertainty as to the impact of the Iraq conflict. Whilst we think it inappropriate to assume the worst possible outcome in respect of these uncertainties and risks, we have given weight to those uncertainties amongst other matters in determining the ACTU’s claim. 1 17. It is the submission of the State and Territory Governments that the official forecasts referred to by the Bench have, for the most part come to fruition. The Australian economy continues to perform well, and the outlook is generally positive. The State and Territory Governments further submit that since the 2003 Minimum Wage Case decision: • a number of potential threats to the Australian economy (including the drought, the war in Iraq and the advent of Severe Acute Respiratory Syndrome (SARS)) have now eased; • the Australian economy has continued to improve; and • the world economic outlook has improved. 18. These factors are examined in more detail below.
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