Are you better off than you were in …?

The Annual Wage Review 2024-5, living standards struggles, and the next election

The question in the title draws from what Trump effectively used in the closing weeks of the recent US elections. Liberal-National Party (LNP) leader Peter Dutton is exploring a similar approach to defeating the Albanese Labor government in the approaching Australian election. Dutton was a major figure in the right-wing LNP government in 2020 and has been the opposition leader since 2022. Employer groups are preparing to help him. Will Labor government messaging on the economy be adequate for the Australian working class?

The Annual Wage Review (AWR) is a statutory requirement of the Fair Work Act 2009 (FWA09) to be conducted by the Fair Work Commission (FWC). The Review decides on annual pay increases for Australia’s lowest-paid workers, both the National Minimum Wage (NMW) and the minimum rates in the “modern” Award system. It is one of 2 major annual events that shape the standard of living directly for about 2.9 million low-wage workers and extends indirectly to many others. (The other is the Commonwealth Budget.)

This year’s AWR (starting in December) coincides with the next election and, is a unique opportunity to defeat Dutton’s attempt to attract workers on median wages or thereabouts and less.

We will probably not know the specific minimum wage claims from the ACTU, employers, or governments until early to mid-March.

The gender pay gap (GPG) and “junior rates” in many awards will be 2 specific issues pursued in the union submissions.

We do know that employers usually propose a very low increase or none, which is commonly accepted or supported by the LNP. We can expect the Reserve Bank (RBA) to argue against a significant increase, although not directly to the Review. The ALP government has twice advocated that the AWR not let workers fall behind the CPI.

In December, the FWC will announce the timetable for the Review through to next July, thus coinciding with the Commonwealth election. (Go to the end of this article for a brief plain language summary of the Annual Wage Review process.)

Let’s explore why workers have earned a catch-up increase on minimum rates with a focus on the 2.9 million workers directly affected.

The current National Minimum Wage (NMW) and award rates

Last year’s decision awarded a 3.75% increase and set the NMW at $915.90 per week of 38 ordinary time hours, or $24.10 per hour, starting from July 1, 2024. That is below the ACOSS (Australian Council of Social Services) poverty lines, despite recent improvement.

That 3.75% increase also applied to the minimum rates in all awards, including other minimum rates for various types of workers, like workers with a disability and “junior” workers. “Modern” industrial awards set out minimum pay scales and conditions of work for all workers in the Australian economy.

The ACTU (Australian Council of Trade Unions) Submission proposed a 5% increase to the NMW and all minimum award rates.

Each award’s pay scales show the minimum rate to be paid for each type of job in every applicable industry.

For example, in the manufacturing industry, the minimum rate for a base-level tradesperson is now $27.17 per hour at a 38-hour week. In the oil refining industry, the lowest rate for a trainee is $25.47. In the retail industry, the second lowest rate for a retail employee is $26.24.

The ACTU said that the average award wage in May 2021, just after the start of the pandemic, was worth about $5,200 more than mid-2024 because of inflation.

The Gender Pay Gap

Ongoing activism over decades, led by union women, has highlighted a significant gap in wages paid to women doing the same or similar work as men, reproduced in minimum rates in awards and enterprise bargaining.

The Labor government changed aspects of the FWA09 to provide stronger and clearer powers for the FWC to close this gap in making AWR decisions.

This issue will be pressed by the ACTU and, probably, some specific unions during the coming Review. 

Junior rates – youth wages

Most awards contain minimum wages for “junior” workers, apprenticeships, disabled workers, and trainees.

The ACTU is now building support to get rid of “junior” and other youth rates because these young workers are doing “adult” work no matter their age.

For example, the minimum wage for café and restaurant workers depends on the age of the worker, not the nature of the work they do. A full-time 38-hour week 16-year-old doing the same work as a 19-year-old is paid $11.73 per hour, $8.21 less than a 19-year-old. The difference for a casual worker is $10.27 per hour.

National Minimum Wage Decisions

The graph shows AWR decisions for the NMW from 2011 to the current year relative to the tax bite and inflation. The green bar shows the FWC’s minimum wage decision, the purple bar shows its value after tax, and the blue shows its value taking inflation into account.

This does not show the cumulative effect of what is lost or gained from one year to the next.

Last year the ACTU established that the average award wage had lost about $5,200 in real spending power since May 2021.

The 2023 and 2024 outcomes are noteworthy because they followed recommendations from the Labor government to the FWC that minimum rates should keep up with inflation, and for 2024-5, the Labor government’s changes to the tax scales that had been laid down by the previous LNP government.

The AWR “increases” to the NMW can be assessed relative to several other incomes, including executive salaries. (Forthcoming.)

The next graph shows the NMW relative to ACOSS’ poverty line (60% median wage), starting in 2020, the last full year of government before the pandemic, when Dutton was in the cabinet. “1.0” on the right-hand axis is the poverty line. The real NMW is below the poverty line.

We see 2 things: first, the start of a catch-up in real wages lost in the last couple of years, and second, the NMW remains below the poverty line, just as it has since the election of the LNP in late 2013. For workers on the minimum wage “Family Assistance Scheme” can improve their situation if they have children.

This year is a good time to compare the commitment of all political parties and their leaders to lifting minimum wage workers out of poverty in real terms. 

Livings standards interactions

The AWR decision interacts with other elements in the struggle to maintain and improve living standards.

First, wages and profits are mutually dependent. How much profit is taken relative to the wages paid to get them is called the rate of exploitation. The most recent data shows the rate of exploitation is still at a historically high level, despite a recent dip.

The system of enterprise bargaining, and individual wage bargaining, under the Fair Work FWA09, the tax and spending detail of the Commonwealth Budget and, the Reserve Bank’s (RBA) monthly monitoring and adjustment of interest rates all interact with the AWR to form the standard of living for the majority.

More than ever climate change and associated degradation of nature damage the standard of living.

Industrial action by workers to pursue their demands is the crucial but most neglected dimension of the living standards struggle. In general modern union leaders are not serious about this when it comes to minimum wage strategy.

For further action: focus and strategy

Future discussion will assess the AWRs minimum rates relative to executive salaries, average wages, and median wages, incorporating the GWG. Prices and productivity will also be thrown into the mix. The median wage is quite important because it provides a target for getting wage rates and government payments above the poverty line.

Probably there will be details on that in the AWR submissions and research, especially from the ACTU.

Last year’s decision, with the recent Labor tax cuts, starts the process of catching up on wages that have been lost during the ten years of LNP governments.

Dutton’s right-wing attempt to be a popular champion for middle and low-income workers may ask something like: “Are you better off than 2021?”, that is directly after Morrison’s covid Budget hikes.

The forthcoming Review is a potential focal point to lift the standard of living for millions of Australians and challenge the sincerity of Dutton’s claim to be their new champion.

The ACTU’s usual approach is to submit a claim and then politely argue its case without public education and industrial organizing to scale. Historically, this is right-wing unionism.

That won’t lift low-wage workers above the poverty line and thus make a crucial difference in their minds who, if anyone, is on their side.

The possibility that Dutton can win with his living standards question, requires a different strategy that also attracts young workers into union membership and activism.

The intent should be to develop a mass public campaign in support of the ACTU’s claim in which low- and middle-income workers learn of their common interest and their potential power in winning improvements to living standards.

A different strategy like this can also attract young workers into union membership and activism. They become their own champions instead of waiting for a “strong man”.

That would require a deliberate effort to create a new level of defiance and determination, a strategy that laborism does not wish to entertain.

The real left must learn the lesson from low-income working-class voices: “It’s the stupid economy, everyone!” The struggle we develop there will shape everything else we stand for.

Addendum:

The AWR process

The purpose of the AWR is to determine whether an increase in the NMW and associated minimum rates in all “modern awards” should be granted, and if so, how much, and the relevant starting dates. The FWA09 requires that the decision be applied from July 1st each year.

The AWR is conducted by a Special Panel of the Fair Work Commission (FWC), as required by specific parts of the FWA09, from about early December through to the final steps in the first week or so in July of the following year.

In December the FWC announces a timetable for the Review and “interested parties” are invited to make “initial submissions” by a deadline date, probably in March 2025.  The “interested parties” include unions, employers, the Commonwealth and state governments. For workers, the ACTU makes the most important “submission” that proposes the increase that the FWC should award to low-paid workers on the NMW and award rates.

All relevant information is posted to a special page at the FWC website. Last year’s web page can be seen here.

Economic research is compiled and published. After the March submissions, further “consultation” occurs through to the final decision announced in early to mid-June.

In early to mid-July all workers affected should receive their pay increase, if awarded, backdated to July 1st. Sometimes, the starting date may be delayed for some awards. This is permitted under the FWA09.

In this process under the FWA09, low- and middle-income workers on the NMW or award rates are entirely dependent on what the ACTU and any individual union proposes for them, and the force of the argument brought forward by the ACTU and union specialists in written and oral submissions, as required by the FWC Expert Panel.

There is no statutory requirement that workers directly affected be involved in making decisions about their pay claims.

Commonly, the annual NWR increase is extended to private arrangements between employers and individual workers, and to negotiated enterprise agreements. This is called a flow-on effect. It is not a statutory requirement that this occurs unless there is a specific clause in an enterprise agreement that requires it.

Modern awards and their pay scales

“Modern” awards set out the minimum standards for pay, working hours, other conditions, and rights for just about every industry and occupation in Australia. Much content is derived originally from the previous award system under the Conciliation and Arbitration Act.  However, the process for “maintaining” modern awards enables regular attacks on the quality of those standards from the employers and they are not as strong as they used to be, nor do workers have the same “rights” to form the content of awards and enforce them.

Modern awards do retain a pay structure that provides minimum pay relativities for different grades of workers. Often these are based on the different skills and knowledge that workers bring to the daily labour process.  

The AWR uses the pay structure of the Manufacturing and Associated Industries Award as its reference point for the dollar effect of its decisions. This enables a simple way of working out the dollar effect for the minimum rates for other awards. This is bread and butter industrial advocacy work for Australian unions.  

Union members and workers generally are quite capable of learning the content of their awards and the pay relativities contained within them.

That is the basis for working out whether an employer is engaging in wage and superannuation theft, among other things.