Australian Minimum Wage Increased by 5.75%

[Occams Barber]

The Guardian
2 JUNE 2023

Australia’s lowest-paid workers to get 5.75% increase in minimum wage


Almost 2.75 million Australians will receive a pay rise of 5.75% from July 1 after the Fair Work Commission announced its decision for those on minimum and award wages.

The annual wage review decision, released on Friday, indicates the minimum wage will increase to (Aus)$882.80 per week or (Aus)$23.23 per hour.

For some workers, the rise will be 8.6%.

Workers’ salaries have been falling in real terms in recent years as salary increases have failed to keep up with inflation. For the March quarter of this year, wages rose at an annual rate of 3.7%, well shy of the 7% annual rise in consumer prices.

The increase is about midway between the 3.8% some businesses called for, and the 7% sought by the ACTU (Australian Council of Trade Unions - OB)


SOURCE
Australia’s lowest-paid workers to get 5.75% increase in minimum wage | Industrial relations | The Guardian

(The Australian Fair Work Commission (FWC) reviews the national minimum wage yearly. FWC minimum wage decisions set the mandatory minimum wage for all workers across the country.

Australia does not have a separate minimum wage rate for service employees in restaurants etc. (we don’t normally tip))
- OB

 

[USincognito]

Good for Oz.

 

[Ceallaigh]

As someone who earns close to minimum wage, what I experience when the minimum wage is raised, is the price of things I buy on a regular basis and my bills going up. So it doesn't really help me.

 

[ThatRobGuy]

Is Australia planning on providing any sort of supplement to small business owners or any price fixing measures to accommodate this?

Admittedly, I'm not as familiar with what the balance between "big box stores vs. small business" in Australia, but here in the US, a couple of studies (one from Stanford, I've linked it before, I'll see if I can dig it up) have shown that minimum wage increases can benefit the big box stores in terms of hitting smaller competitors harder. Reason being, big box stores like walmart and target can absorb that kind of increase (due to the vast volume they move) without having to increase their prices all that much to offset it.

 

[Occams Barber]

Is Australia planning on providing any sort of supplement to small business owners or any price fixing measures to accommodate this?

No. I'm not aware that we ever have done anything like that. We also don't subsidise small business for being less able to negotiate stock prices or utility costs or insurance fees etc. etc. These are all areas where big business has a potential advantage. There may be tax advantages to being small, but I doubt it. The minimum wage is reset every year so, if there was a subsidy, it would go forever and in-principle you'd also be subsidising for wage increases negotiated outside of the annual minimum wage setup.

I think the principle is "If you can't afford to pay your staff you probably shouldn't be in business."

OB

 

[Occams Barber]

As someone who earns close to minimum wage, what I experience when the minimum wage is raised, is the price of things I buy on a regular basis and my bills going up. So it doesn't really help me.

A minimum wage increase in Australia isn't expected to add significantly to inflation for a number of reasons:

• The number of people affected by this is relatively small in proportion to the total workforce. Inflation was factored into the FWC's decision.
• Businesses have already been lifting prices without the impetus of a wage rise. In effect a lot of Australia's current inflation is caused by business raising prices to cover non-wage cost increases or because they can.
• Wages are only a proportion of a businesses costs so a 5.75% increase in wages does not equate to a 5.75% increase in running costs.
• How rises effect the individual are more likely to be a matter of a perception which isn't necessarily accurate
• If what you say is true there would be no point inn ever increasing your wage.

OB

 

[ThatRobGuy]

No. I'm not aware that we ever have done anything like that. We also don't subsidise small business for being less able to negotiate stock prices or utility costs or insurance fees etc. etc. These are all areas where big business has a potential advantage. There may be tax advantages to being small, but I doubt it. The minimum wage is reset every year so, if there was a subsidy, it would go forever and in-principle you'd also be subsidising for wage increases negotiated outside of the annual minimum wage setup.

I think the principle is "If you can't afford to pay your staff you probably shouldn't be in business."

OB

That pattern, repeated enough, seems like it could trend toward Monopoly/Duopoly type situations.

Smaller businesses are faced with the reality of having their labors costs making up a bigger slice of the "operating budget pie" than the bigger outlets, as well as not having all of the same levers at their disposal they can pull to offset increased costs.

Big business backs a $15 minimum wage because it will crush Main Street competitors

The story is different for big business. Many large corporations have done comparatively well during the pandemic.

www.usatoday.com

Along with big business lobbying groups, many of these same companies are now actively supporting a minimum wage hike, or at least not opposing it. No wonder: They have the revenues and the scale to absorb a more than 100% increase in the federal wage floor. They also have more options to offset higher costs with layoffs, benefit cuts, and technology.

A lot of big businesses have already raised their minimum wage to $15. Amazon made this move in 2018, while companies like Target and Walmart have followed suit. Not only would a $15 federally mandated minimum wage not hurt them, it would crush some of their small business competitors. The path would be clear for even more market dominance of big businesses and Wall Street, gained at the expense of Main Street.


Although, from what it sounds like, Australia isn't pursuing something as aggressive as what some people are calling for in the US. A 5-6% increase is more easily absorbed than an effort to double the minimum wage like what's being called for in the US.

 

[Ceallaigh]

That pattern, repeated enough, seems like it could trend toward Monopoly/Duopoly type situations.

Smaller businesses are faced with the reality of having their labors costs making up a bigger slice of the "operating budget pie" than the bigger outlets, as well as not having all of the same levers at their disposal they can pull to offset increased costs.

Big business backs a $15 minimum wage because it will crush Main Street competitors

The story is different for big business. Many large corporations have done comparatively well during the pandemic.

www.usatoday.com

Along with big business lobbying groups, many of these same companies are now actively supporting a minimum wage hike, or at least not opposing it. No wonder: They have the revenues and the scale to absorb a more than 100% increase in the federal wage floor. They also have more options to offset higher costs with layoffs, benefit cuts, and technology.

A lot of big businesses have already raised their minimum wage to $15. Amazon made this move in 2018, while companies like Target and Walmart have followed suit. Not only would a $15 federally mandated minimum wage not hurt them, it would crush some of their small business competitors. The path would be clear for even more market dominance of big businesses and Wall Street, gained at the expense of Main Street.


Although, from what it sounds like, Australia isn't pursuing something as aggressive as what some people are calling for in the US. A 5-6% increase is more easily absorbed than an effort to double the minimum wage like what's being called for in the US.

The $15 wage boost had a substantial negative effect on me.

 

[Ceallaigh]

A minimum wage increase in Australia isn't expected to add significantly to inflation for a number of reasons:

• The number of people affected by this is relatively small in proportion to the total workforce. Inflation was factored into the FWC's decision.
• Businesses have already been lifting prices without the impetus of a wage rise. In effect a lot of Australia's current inflation is caused by business raising prices to cover non-wage cost increases or because they can.
• Wages are only a proportion of a businesses costs so a 5.75% increase in wages does not equate to a 5.75% increase in running costs.
• How rises effect the individual are more likely to be a matter of a perception which isn't necessarily accurate
• If what you say is true there would be no point inn ever increasing your wage.

OB

A 5.75% increase isn't too significant. I just hope do gooders don't insist on a more substantial increase in the future. Since it didn't work out so good for us over here.

 

[Occams Barber]

That pattern, repeated enough, seems like it could trend toward Monopoly/Duopoly type situations.

LOL. The annual Minimum Wage case has been going on here since the Sunshine Harvester decision of 1907 which determined that working men should be paid a wage that would allow them to support a family of five. Small businesses seem to have survived for over a century in spite of regular wage increases.. The concept of a "fair wage" is embedded in Australian culture. Apart from the minimum wage, other wages are the subject of staff or union negotiation and are an ongoing part of industrial relations in this country.

Small business employment fluctuates but seems to sit at around 40% of the workforce depending on how you define small.

(I knew those Sociology 101 lectures would come in handy one day)

Although, from what it sounds like, Australia isn't pursuing something as aggressive as what some people are calling for in the US. A 5-6% increase is more easily absorbed than an effort to double the minimum wage like what's being called for in the US.

From memory the US has the lowest minimum wage in the Western World and Australia has the highest. You also have the highest levels of poverty. I have described US industrial conditions as Dickensian in the past and I haven't changed my viewpoint - sick leave, holiday leave, employer paid superannuation, unfair dismissal, maternity/paternity leave, paid public holidays, nationalised medical cover - I could go on.

Try looking at state by state US minimum wages - while California is around $US15 I've seen other states as low as $6-$7 or even no minimum.

State Minimum Wage Laws

www.dol.gov

I am not surprised that there is a push to drastically lift the US minimum wage although I accept that there is a danger of runaway inflation if it were to happen all at once.

OB

 

[hislegacy]

Just for reference sake 23.30 AUD is equivalent to $15.36 and hour US dollars.

23.23 AUD to USD - Australian Dollars to US Dollars Exchange Rate

Get the latest 23.23 Australian Dollar to US Dollar rate for FREE with the original Universal Currency Converter. Set rate alerts for AUD to USD and learn more about Australian Dollars and US Dollars from XE - the Currency Authority.

www.xe.com

 

[Occams Barber]

A 5.75% increase isn't too significant. I just hope do gooders don't insist on a more substantial increase in the future. Since it didn't work out so good for us over here.

Unlike the US, the Australian minimum wage is reviewed every year when Employer and Employee groups sit down with the Fair Work Commissioners to debate the new minimum. While the Federal Government gets to put in a submission it doesn't make the decision - the decision is non-political. Last year's increase was 5.2%.

I'm not sure what you mean by do-gooders but I can tell you that American workers have the lowest minimum wage in the Western world. You also have some of the worst conditions of employment and highest rates of poverty. You definitely need some do-gooders in there fixing things up.

OB

 

[DaisyDay]

As someone who earns close to minimum wage, what I experience when the minimum wage is raised, is the price of things I buy on a regular basis and my bills going up. So it doesn't really help me.

Prices go up whether or not minimum wage is increased. The minimum wage has not kept pace with inflation in the US.

The $15 wage boost had a substantial negative effect on me.

What was it before and when did it change? I know each state has its own rule.

Do you believe that inflation was caused by the rise in minimum wage or might Covid restrictions and economic recovery been the causes? If you hadn't gotten the raise, inflation would still have happened and the effect would have been worse, I think.

 

[Occams Barber]

Just for reference sake 23.30 AUD is equivalent to $15.36 and hour US dollars.

23.23 AUD to USD - Australian Dollars to US Dollars Exchange Rate

Get the latest 23.23 Australian Dollar to US Dollar rate for FREE with the original Universal Currency Converter. Set rate alerts for AUD to USD and learn more about Australian Dollars and US Dollars from XE - the Currency Authority.

www.xe.com

You need to be careful with direct comparisons.
For instance:

• An Australian on the minimum wage makes no direct contribution to the national medical scheme but still gets all the benefits.
• Australian employers also contribute the equivalent of an additional 10.5% of the employee's wage into a retirement investment scheme (aka 'superannuation') This is on top of the wage.
• Tax rates are different but I have no idea who wins or loses.
• Adjusted for purchasing power the 2021 US minimum wage was 17th in the OECD with an adjusted hourly rate of $7.3 USD. Australia was second with an adjusted rate equivalent to $12.8 USD

Ranking of OECD countries by national minimum wage 2021 | Statista

In 2021, Luxembourg had the highest minimum wage at 13.4 U.S.

www.statista.com

OB

 

[Ceallaigh]

Unlike the US, the Australian minimum wage is reviewed every year when Employer and Employee groups sit down with the Fair Work Commissioners to debate the new minimum. While the Federal Government gets to put in a submission it doesn't make the decision - the decision is non-political. Last year's increase was 5.2%.

I'm not sure what you mean by do-gooders but I can tell you that American workers have the lowest minimum wage in the Western world. You also have some of the worst conditions of employment and highest rates of poverty. You definitely need some do-gooders in there fixing things up.

OB

Do-gooder: a well-meaning but unrealistic or interfering philanthropist or reformer.

 

[Ceallaigh]

Prices go up whether or not minimum wage is increased. The minimum wage has not kept pace with inflation in the US.

What was it before and when did it change? I know each state has its own rule.

Do you believe that inflation was caused by the rise in minimum wage or might Covid restrictions and economic recovery been the causes? If you hadn't gotten the raise, inflation would still have happened and the effect would have been worse, I think.

The "fight for $15" was pre-covid. And what it comes down to in basics is, when McDonald's employees pay went from $10 per hour to $15, then $5 hamburgers started costing $8. Now I'm not protesting against wage increases. All I'm saying is when there is an increase, we just end up back where we were. I remember that being said among employees in a burger joint I was working in back in the 80s. It's just one of those sad facts of life. Higher wages gets matched by higher prices and taxes.

 

[DaisyDay]

The "fight for $15" was pre-covid. And what it comes down to in basics is, when McDonald's employees pay went from $10 per hour to $15, then $5 hamburgers started costing $8. Now I'm not protesting against wage increases. All I'm saying is when there is an increase, we just end up back where we were. I remember that being said among employees in a burger joint I was working in back in the 80s. It's just one of those sad facts of life. Higher wages gets matched by higher prices and taxes.

The fight was pre-covid, and is still on-going. The US federal minimum wage is less than half that - $7.25 hr. Link

I don't know what state you live in or what the wage was before as many states have their own labor laws. McDonald prices are up even in states where the minimum wage has stagnated. Grocery prices are also up as are wholesale prices even where wages are not.

 

[Nithavela]

The "fight for $15" was pre-covid. And what it comes down to in basics is, when McDonald's employees pay went from $10 per hour to $15, then $5 hamburgers started costing $8. Now I'm not protesting against wage increases. All I'm saying is when there is an increase, we just end up back where we were. I remember that being said among employees in a burger joint I was working in back in the 80s. It's just one of those sad facts of life. Higher wages gets matched by higher prices and taxes.

You seem to operate under the assumption that the average burger joint employee makes 1.66 burgers per hour.

 

[Ceallaigh]

You seem to operate under the assumption that the average burger joint employee makes 1.66 burgers per hour.

You seem to operate under the assumption that every burger joint employee makes burgers. Also it's likely that burger joints operate based on a bottom line as far as how much is allocated to payroll, no matter how many burgers are sold per hour on average.

 

[Occams Barber]

All I'm saying is when there is an increase, we just end up back where we were. I remember that being said among employees in a burger joint I was working in back in the 80s. It's just one of those sad facts of life. Higher wages gets matched by higher prices and taxes.

It might be better if you take your economics advice from a better-informed source than 'employees in a burger joint'.

The relationship between increased wages and higher prices can be complex and will vary between businesses. Wages are only one cost among many.

OB