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Minimum wage increases by 3.5%

Posted on : Monday, 4 June 2018

On Friday 1 June 2018, the Expert Panel of the Fair Work Commission (FWC) issued its Annual Wage Review decision (2017-18) by increasing the Modern Award minimum wage rate by 3.5% and to apply from the first pay period to commence on or after 1 July 2018. This increase follows the 3.3% increase in 2017.


Using the Manufacturing and Associate Industries and Occupations Award as an example for the base trade rate, this rate (C10) will move from $809.10 per week to $837.42 per week (or $22.04 per hour).


The national minimum wage (NMW) rate will move from $694.90 per week to $719.20 per week (or $18.93 per hour).


In referring to the application of its decision, the Panel stated that the "number of employees who have their pay set by an award is estimated to be 2.3 million or 22.7% of all employees. The proportion of employees that are paid at the adult NMW rate is estimated to be 1.9%. Further, a significant number of employees are paid at junior or apprentice/trainee rates based on the NMW rate. The Panel's decision will also affect employees paid close to the NMW rate and modern award rates and whose pay is set by a collective agreement which is linked to the outcome of the Review."


The Panel took into account a number of factors as required by the Fair Work Act 2009 (Cth) and commenced with the conclusion that:


"Fairness is central to both the modern awards objective and the minimum wages objective. Section 134 (1) refers to a 'fair…minimum safety net' and s.284 (1) refers to 'a safety net of fair minimum wages'. The Panel confirmed the view expressed in the 2016-17 Review decision."


The Panel also accepted that minimum rates of pay impact upon an employee's capacity to engage in community life and the extent of their social participation. The matter of gender equality had a specific reference in the Decision. For example: "The modern awards objective and the minimum wages objective both provide that in a Review, the Panel must take into account 'the principle of equal remuneration for work of equal or comparable value' (s.134(1)(e) and s.284(1)(d))."


The extent to which women workers are award reliant, the Panel said that "this affects the impact of minimum wage increases on the gender pay gap. Women are disproportionately represented among those on the NMW and those who are reliant on modern award minimum wages. It follows that an increase in the NMW and modern award minimum wages (particularly an increase above the level of bargained wage increases) will assist in reducing the gender pay gap."


From an economic point of view, the Panel made the following remarks:

  • Full-time employment grew by 3.1%, significantly greater than the 1.0% growth over the previous year;
  • Hours worked increased by 3.3% over the year to April 2018 compared with 1.8% a year earlier;
  • Business conditions are generally robust;
  • Inflation and wages growth remain low;
  • The real value of the NMW has increased by 5.8% over the last decade, and by 4.3% in the past five years. However, the Panel noted that this has not resulted in improvements to the actual or relative living standards for many categories of NMW and award-reliant households, due to changes in the tax-transfer system.