Published: Tue, June 06, 2017
Money | By Armando Alvarado

Fair Work Commission trashes economic myth on minimum wage

Fair Work Commission trashes economic myth on minimum wage

A commission full bench led by president Iain Ross said the minimum wage must be lifted by 3.3 percent from $17.70 to $18.29 per hour.

Ross noted that higher labour productivity, subdued inflation, and strong profit growth provided an opportunity to improve the living standards of Australians directly reliant on minimum rates of pay. The pay rise will take effect from July 1.

The 2.3 million Australians on the minimum wage will get a $22.20 a week pay rise from next month.

"It will, however, mean an improvement in the real wages for those employees who are reliant on the national minimum wage and modern award minimum wages and an improvement in their relative living standards".

He said global research had "fortified our view that modest and regular wage increases do not result in disemployment effects". The new national minimum wage will soon be $694.90 per week.

The union peak body's proposed increase was 50 per cent more than its claim a year ago and nearly three times the 2.4 per cent increase granted by the commission in 2016.

"With the inherent weakness in today's economic climate, along with tax increases about to hit consumers, this upsetting increase will strongly impede on employment growth within the industry".

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While giving reasons for the increase, higher than last year's $15.80 a week increase but still less than unions' calls for a $45 raise, Ross said that the commission "may have been overly cautious" in previous years' decisions.

In a statement released by Russell Zimmerman, Australian Retailers Association (ARA) executive director, said "Australian retailers are already facing a complex operating environment" and that "this increase will be extremely harmful to the growth and stability of the Australian retail industry".

While some industry groups had lobbied for the increase to be as low as 1.2% this year, Ross said when reviewing research about wage increases out of the United Kingdom, it raised the possibility that the Commission had been too cautious in the past when making decisions on minimum entitlements. He also believes the decision would not result to inflationary pressure.

"If our current rules can't deliver a decent pay rise, then they need to change", she said.

But employer groups insisted the increase would be "devastating" to businesses struggling in a sluggish retail market.

The rise should come as some relief, and it needed to, with the price rises of 2.1 per cent for everyday goods and services for the year ending March, according to Australian Bureau of Statistics figures.

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