Minimum wage workers will pocket a little extra money each week, thanks to the Fair Work Commission, but economists warn the increase won’t raise living standards.
The Fair Work Commission opted to raise the minimum wage by 35 cents an hour on Friday, representing a boost of 1.75 per cent.
The move brings the minimum wage up from $740.80 a week ($19.49 an hour) to $753.80 ($19.84 an hour).
It’s a small increase, which the Fair Work Commission itself noted was “substantially lower” than the 3 per cent increase provided in 2019.
But the latest increase is roughly enough to keep in line with inflation while also reflecting the changed economic circumstances Australia faces in a post-coronavirus world, the commission said.
“The increases we have awarded are likely to maintain the real value of the wages of national minimum wage and award-reliant employees,” the commission said.
‘Resounding rejection’ of government policy
Sally McManus, secretary of the Australian Council of Trade Unions, said the increase was not enough.
“We would have liked to see a larger increase and are disappointed some workers won’t see pay rises until November or February,” she said.
The decision to increase minimum wages also shows cutting costs is not the only way to drive the economy through a recession, Ms McManus said.
“Today’s announcement of a pay increase for Australia’s lowest-paid workers is a resounding rejection of the argument that we can cut our way to economic recovery,” she said.
“Putting more money in workers’ pockets is the key to rebuilding our economy, this is how the hospitality and retail sectors will grow, when workers have money to spend.
“This is why the Government must extend and expand JobKeeper past September, maintain the rate of JobSeeker, and lift investment in job creation programs. Infrastructure, buying”
Balancing wages with jobs
Independent economist Saul Eslake welcomed the increase, telling The New Daily it balances the need to support workers without over-burdening employers.
“I think it’s a good outcome,” he said.
Prior to the Fair Work Commission’s announcement, Mr Eslake advocated for changes to the minimum wage to be delayed until the uncertainty created by the pandemic began to clear.
But he noted that if the changes do go ahead an increase should at least match the rate of inflation so ‘real wages’ did not go backwards.
‘Real wages’ refers to the purchasing power of the money a worker receives, rather than the total in dollars.
If wages increase by less than the rate of inflation, the money a worker earns will not be able to buy as many goods and services as it previously could – meaning a worker’s ‘real wages’ have shrunk.
“[This increase] will ensure people on the minimum wage are able to maintain– roughly speaking – their standard of living,” Mr Eslake said.
“Not everyone’s living costs go up by the same amount as the CPI, some do more and some do less so it’s not perfect, but it maintains the real value of the minimum wage.”
And while many advocacy groups will argue a larger increase is necessary, Mr Eslake said too large an increase would add undue burden on business’ hiring costs.
The outlook for employment is “a bit precarious” right now, Mr Eslake said, and even though Australian workers will face less competition from migrant workers, “it’s still going to be fairly tough” to for many looking for work.
“In those circumstances a significant increase in the cost of hiring people who almost by definition don’t have a lot of skills – otherwise they wouldn’t be on the minimum wage – well, this is probably not the right time to be doing that.”