The minimum wage decision will be announced today. Will Prime Minister Albanese get his wish?
The Fair Work Commission will announce its minimum wage decision today.
It’s one of the most-anticipated wage decisions in years.
In the last weeks of the federal election campaign, the now-Prime Minister Anthony Albanese said he would back a move to lift the minimum wage so it kept pace with inflation.
Right now, that’s 5.1 per cent.
However, last week, the World Bank warned the global economy may now be facing years of stagnating growth and above-average inflation, and it would take a collective effort to avoid “stagflation” and a global food crisis.
What should Australia do with its minimum wage in these uncertain times?
It will be an independent decision, with a history
The way Australia sets its minimum wage is unique.
The institution that makes the decision — the Fair Work Commission — is an important pillar of Australian capitalism.
It’s an independent tribunal that is responsible for maintaining a safety net of minimum wages and employment conditions in the economy.
It reviews and sets minimum wages for employees in the national system every year, with the review taking place from March to June before the new financial year.
And it’s not a new body.
The commission traces its origins to the 1890s, to the decade of great strikes: the 1890 maritime strike, 1891 shearers’ strike, 1894 shearers’ strike and the 1892 Broken Hill strike.
Historians say we came very close to a civil war in that decade.
For politicians at the time — who were trying to get Australia’s six colonies to federate and become a nation — it was imperative to try to steer the country away from bloody class warfare and achieve industrial peace.
Their solution?
In 1904, a few years after federation, Australia’s new federal parliament passed legislation creating the Conciliation and Arbitration Court.
That court would be an umpire of Australia’s labour markets.
If employers and employees couldn’t agree on wages and conditions, the court would make a decision for them and all parties would have to accept it.
The court wouldn’t play favourites either. It would be guided by what was right and fair.
And, in 1907, it made a landmark decision about wages being paid to workers at the Sunshine Harvester Works in Melbourne’s west.
After careful reasoning, Justice Henry Higgins ruled that a “fair and reasonable” wage for an unskilled male worker at the factory ought to be enough to allow “a human being in a civilised community” to support a wife and three children.
He calculated the “cost of living” of a working family and declared that a basic wage needed to pay enough to cover it.
It wasn’t a new idea.
In the 1880s, the president of the New South Wales Court of Arbitration had said something similar.
But Higgins’s “Harvester Decision” eventually led to the creation of a national minimum wage for all Australian workers, as state wages boards adopted the Harvester calculation over time.
In 2011, the Fair Work Commission published a fascinating history of the events, which you can access here.
It also produced a short documentary, which is below.
The documentary tells the story of how the lyrics to Waltzing Matilda — Australia’s unofficial anthem, which was written by Banjo Paterson in 1895 — were likely based on a violent dispute between shearers and their employer at Dagworth Station in central western Queensland in 1894, during a period of great strikes.
According to the story, a few weeks after the Dagworth dispute, a union shearer called Samuel “Frenchy” Hoffmeister — who had been suspected of burning down the Dagworth woolshed during the melee — was found dead in a nearby billabong.
He’d been shot.
And his ghost may be heard as you pass by that billabong:
“You’ll come a-waltzing Matilda, with me.”
One of Australia’s most well-loved national songs is based on a violent industrial dispute about a wage cut during an economic downturn.
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Annual minimum wage decision
So that’s the history.
Fast forward to 2022, and Australia’s national industrial relations umpire is now called the Fair Work Commission.
And, every year, it decides what the minimum wage should be for the coming financial year, after weighing up economic conditions, inflation and what employers and workers have to say about their circumstances.
In nine of the last 10 years, it has increased the minimum wage by more than the prevailing rate of inflation.
The one year it didn’t do so was in 2020, in the first year of the COVID-19 pandemic.
See the graphic below, where the numbers are in percentages.
What are different groups calling for?
The current national minimum wage is $20.33 per hour, or $772.60 per week.
The Albanese government made a formal submission to the Fair Work Commission at the start of this month.
It recommended that the commission ensure that the real wages of Australia’s low-paid workers don’t go backwards in the next 12 months.
“Maintaining the relative standard of living [for] low-paid workers is not expected to have a material impact on employment,” it said.
“Australia’s low-paid workers — many of whom are young, female and in casual employment — are far more likely than higher-paid workers to find themselves experiencing financial hardship.”
What do other groups suggest should happen to the minimum wage?
Ai Group: an increase of 2.5 per cent.
Australian Chamber of Commerce and Industry: an increase of up to 3 per cent.
Australian Council of Trade Unions: an increase of 5.5 per cent.
The National Farmers’ Federation: says the commission should take a “measured approach” and “consider farmers and other small businesses operating on narrow margins in already challenging times”.
However, other groups are pushing for the commission to overhaul the way it sets wages for Australia’s lowest-paid workers.
The Australian Manufacturing Workers’ Union says the national minimum wage should be set at 60 per cent of median full-time weekly earnings (MWE).
Why?
Because, in 1995, the national minimum wage used to be worth 64 per cent of median full-time weekly earnings, but it slipped to 55 per cent in 2008, and now it’s slipped to below 50 per cent.
“This is a disgrace,” it says.
It says the minimum wage should, therefore, be lifted by $180 a week, to get it back to where it used to be, although it should be phased in gradually.
See the graph below.
The Australian Council of Social Service (ACOSS) agrees that a “reasonable benchmark” for the adequacy of minimum wages would be 60 per cent of the full-time median wage.
And Adam Bandt, leader of the Australian Greens, says the commission should set the minimum wage to at least 60 per cent of full-time median weekly earnings, so minimum wage workers aren’t trapped in “working poverty”.
His submission cites a 2017 paper from the ACTU that argued for a return to the older spirit of wage adequacy.
The name of the paper?
It was called “Living up to the promise of Harvester: Time for a Living Wage.”
The Fair Work Commission will broadcast the handing down of the Annual Wage Review 2021-22 decision on its website at 10am AEST on Wednesday, 15 June 2022.
