Millions of Australian workers just got a 3.5% pay rise

More than two million Australian workers on minimum wages will receive a $24.30 pay rise to $719.20 per week after the Fair Work Commission (FWC) increased wages for the country’s lowest paid by 3.5%.

The increase means that from July 1, the country’s minimum hourly rate of pay will be $18.93.

All modern award minimum wage rates will also increase by 3.5%. For someone on the C10 Tradespersons award, that translates as an extra $28.30 a week.

The decision splits the difference between the amounts unions and employees were seeking.

The ACTU wanted a $50 weekly increase, while the Australian Industry Group was seeking a $12.50 rise arguing that any higher rate would cost jobs.

Commission president Iain Ross said the FWC did not believe the increase would cause “undue inflationary pressure” or have a “measurable negative impact” on employment.

“We remain of the view that modest and regular minimum wage increases do not result in disemployment effects or inhibit workforce participation,” he said.

It’s the largest increase ever handed down by the FWC and also goes some way to addressing the Turnbull government’s budget forecast of a 3.25% increase in wages in 2019-20 – well above the current rate of 2.1%. CPI currently sits at 1.9%.

The Budget forecast is for wages to increase by 2.25% this year, rising to 2.75% in 2018–19.

Justice Ross said the real value of the minimum wage has now risen by 5.8% in a decade, with the majority 4.3% coming in the last five years amid an economy and labour market both considered healthy.

But those increases had not delivered an improvement to “actual or relative living standards for many categories of national minimum wage and award-reliant households” he said because of changes to the taxation system.

Today’s 3.5% rise “will mean an improvement in the real wages of those employees reliant on the national minimum wage and modern award minimum wages and will, absent any negative tax transfer effect, result in an improvement in their living standards.”

“Compared to the position at the time of last year’s review, the economic indicators now point more unequivocally towards a healthy national economy and labour market. The circumstances are such that it is appropriate to provide a real wage increase to those employees who have their wages set by the national minimum wage or by a modern award,” Ross said.

The Commission Panel noted that full-time employment had grown 3.1%, which was significantly greater than the 1% growth over the previous year and that hours worked increased by 3.3% over the year to April 2018 compared with 1.8% a year earlier.

The age-adjusted participation rate is at a record high, at 66.7% in April 2018, and 0.8 percentage points higher than last year.

Business profits grew by 4.3% in 2017 and by 5.8% in the non-mining sector.

The Panel noted that women are disproportionately represented among those on the national minimum wage and any increase would assist in reducing the gender pay gap.

The FWC estimates that number of employees who have their pay set by an award is 2.3 million or 22.7% of all employees and the proportion of paid at the adult NMW rate is 1.9%.

You can watch Justice Ross reading the FWC decision here.

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