The Fair Work Commission has raised the national minimum wage by 5.2 per cent, which works out to be an extra $40 per week.
It's also increased the minimum award wage by 4.6 per cent or $40 per week — whichever is greater.
Why are wages going up?
The minimum wage is reviewed every year, but this lift is larger than usual.
Why?
Because inflation is going up, fast.
And when inflation is up, things cost more.
And when things cost more, the value of a worker's wage is lower even though the dollar figure is the same.
That's because they're unable to buy as much with those dollars as they used to.
This time last year, it was inflation was at 1.1 per cent.
Now it's at 5.1 per cent.
So the current minimum wage of $772.60 buys workers less than what it could a year ago.
What's the real value of these rises then?
The national minimum wage is 0.1 per cent above the current inflation rate.
That means the value of their pay packet goes up by 0.1 per cent.
But the minimum award wage is 0.5 per cent lower than the inflation rate.
So the real value of that wage is actually going down.
Why didn't the award wage go up as much as the minimum wage?
Fair Work Commission president Iain Ross said it was because inflation was putting too much pressure on people on the national minimum wage, but that raising award rates much higher could "pose a real risk of significant adverse effects to the national economy".
"We are conscious that the low-paid are particularly vulnerable in the context of rising inflation."
Inflation is measured by something called the Consumer Price Index (CPI), which is a general figure calculated off the price of a bunch of goods and services in 11 categories.
And those 11 categories range from non-discretionary, essential things — like the "food and non-alcoholic beverages" and "health" categories — to discretionary things some might consider luxuries — like the "alcohol and tobacco" and "recreation and culture" categories.
Mr Ross pointed out that while the general inflation rate is 5.1 per cent, the rate for some individual categories is higher:
"The non-discretionary components of the CPI, including basic food staples, increased by 6.6 per cent over the year to the March quarter of 2022.
"The increased cost of non-discretionary items will particularly impact low income households and many low-paid workers."
Mr Ross acknowledged the 4.6 rise for those on award wages was a cut to their real value:
"The consideration is to be balanced against the need to provide greater relief to low-paid workers in the context of rising cost of living pressures.
"Given the current strength of the labour market, the adjustments we propose to make will not have a significant adverse effect on the performance and competitiveness of the national economy."
What's the difference between the minimum wage and an award wage?
The national minimum wage is for workers who aren't covered by an award or registered agreement.
It's a basic, general rate.
An award wage takes in the minimum wage but has extra terms and conditions.
It's industry-specific, so it changes from occupation to occupation.
That means the minimum award wage for say, a journalist, will be different from the minimum award wage for a lawyer.
And award wages also go up according to training and experience, so a journalist just starting out will have a different rate from a seasoned newshound.
What is the new national minimum wage?
As of July 1, the new minimum wage will be:
- $21.38 per hour
- $812.60 per week
What was the national minimum wage?
The current national minimum wage is:
- $20.33 per hour
- $772.60 per week
Those rates took effect on July 1, 2021.
What's the new minimum award wage?
Because award wages change from industry to industry, there's no single figure.
The Fair Work Commission says the minimum increase for adult award classifications will be based on a 38-hour week for a full-time worker.
Workers currently earning more than $869.60 a week will receive a 4.6 per cent rise in their pay packet.
Workers currently earning less than $869.60 a week will be adjusted by a flat rate of $40 per week.
That way, no worker is receiving less than a $40 per week increase, but some will be better off.
When will I get my pay rise?
The changes to the national minimum wage and award wages will take effect from July 1.
However, because of "exceptional circumstances" posed by the pandemic, the Fair Work Commission has delayed the increase for workers in the following awards until October 1:
- Aircraft Cabin Crew Award 2020
- Airline Operations – Ground Staff Award 2020
- Air Pilots Award 2020
- Airport Employees Award 2020
- Airservices Australia Enterprise Award 2016
- Alpine Resorts Award 2020
- Hospitality Industry (General) Award 2020
- Marine Tourism and Charter Vessels Award 2020
- Registered and Licensed Clubs Award 2020
- Restaurant Industry Award 2020
Why did this happen now?
It's standard procedure.
The Fair Work Commission reviews the minimum wage rate at the end of each financial year.
How much were people asking for?
The federal government: 5.1 per cent. In early May, during the federal election campaign, Prime Minister Anthony Albanese said he wanted the minimum wage to rise in line with inflation — which was at 5.1 per cent. In its formal submission to the FWC, the new government called for an increase that would "ensure that the real wages of low-paid workers do not go backwards".
The Australian Council of Trade Unions: 5.5 per cent. In April, the ACTU called for a rise of 5 per cent, but increased it to 5.5 per cent, arguing it was needed to meet the rising cost of living.
The Australian Chamber of Commerce and Industry: 3 per cent. In its latest submission to the Commission, the ACCI pointed out the businesses had been slugged with "market increases" in operating costs and had constrained abilities to pay higher wages
And what do they think about the decision?
Mr Albanese:
"I absolutely welcome today's decision
"It makes a difference to people who are struggling with the cost of living.
"If you are on the minimum wage, you are also spending every dollar that you have.
"Every dollar you receive will go back into the economy, into circulation.
"It won't go into savings, it won't go into an overseas holiday, it'll go to food on the table for the kids of people on minimum wages."
ACTU head Sally McManus:
"We think it is going to make a significant difference to the pressures that low-paid workers are under with cost of living rising.
"It is disappointing that they have said they are going to delay the increases for parts of the work force, that mainly being in the area of hospitality and airlines.
"Aviation at the moment is very busy and has recovered, and we believe that is not a reasonable thing to withhold those increases for that period of time."
ACCI head Andrew McKellar:
"This adds very significant costs to the Australian economy and to business.
"By our calculation, this will add $7.9 billion in costs to the effected businesses over the year ahead, so that will be a very considerable burden that those businesses will either have to take to the bottom line, or pass on to their customers.
"It comes at a time when inflation is emerging as one of the most urgent challenges facing the Australian economy and if we are to address that, if we are to remain competitive, then, clearly, this is not a decision that will help in those circumstances."
