1 Fair Work Commission Fair Work Act 2009 Annual Wage Review 2016-17 Living Wage claim and ...

319 Pages·2017·3.11 MB·English

by  Brian Lawrence

Fair Work Commission

Fair Work Act 2009

Annual Wage Review 2016-17

Living Wage claim and Submission by the
Australian Catholic Council for Employment Relations
29 March 2017

Table of Contents
Paragraph
A. INTRODUCTION 1
B. 20 YEARS OF THE AUSTRALIAN MINIMUM WAGE 12
C. WAGE SETTING UNDER THE FAIR WORK ACT 2009 24
D. INCREASING POVERTY AND INEQUALITY 40
E. THE FWC'S WAGES RELATIVITIES POLICY 50
F. THE SOCIAL SAFETY NET UNDER ATTACK 84
G. SUPPORTING SOLE PARENT WORKING FAMILIES 94

The Attachment to this submission is the manuscript for an ebook Working Australia, 2017:
wages, families and poverty . The chapters and sections of that ebook which are relied upon in
support of the submission are indicated in the text and at the conclusion of the submission.
The Attachment commences at page 33.
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A. INTRODUCTION
Living Wage and award wages claim
1. The Australian Catholic Council for Employment Relations (ACCER) seeks the
following orders by the Fair Work Commission (FWC):
 The National Minimum Wage (NMW) be set at $710.00 per week and $18.70 per
hour.
 Award rates of pay be increased by $30.70 per week.
 No award rate shall be less than the NMW.
2. The claims are made having regard to the following objectives.
(a) A money increase, rather than a percentage increase, is claimed in respect of
award rates of pay so as to provide relatively more to those most in need,
including the hundreds of thousands of workers and their families who are living
in poverty as a result of low wage rates and/or as a result of irregular and
insecure work. At the same time the amount claimed will maintain the real
wages of those workers on higher paid work classifications; for example if the
latest published annual increase in the Consumer Price Index prior to the annual
wage review decision is 2.0%, an increase of $30.70 per week will maintain the
real value of award rates up to about $80,000 per year. There are few award
classifications above that level and the ones that are above that level have had
the benefit of annual percentage increases since 2011.
(b) The claim in respect of the NMW is for an increase of $37.30 per week. The
NMW is not a living wage: it is not one that provides a standard of living in
excess of poverty and one that is sufficient to achieve a decent standard of living
in contemporary Australia. Using a similar term, the NMW does not provide a
basic acceptable standard of living. ACCER seeks this further increase in the
NMW of $6.60 per week as the first step in a process that will adjust the NMW
to a level where it can be reasonably called a Living Wage.
(c) The annual wage review has two distinct functions: to set the NMW by the
making of a national minimum wage order and to vary award wages. The NMW
applies to workers who are not covered by an award. The proposed increase will
have an immediate benefit for those workers who are award free and who are
paid by reference to the NMW. The claimed increase will have no significant
impact on award classification structures because award rates that are aligned to
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the NMW (of which there are very few) are generally transitional rates covering
the first three months of employment and the next highest award rate is typically
$19.40 per week more than the NMW. That rate is generally known as the C13
rate and is designated as such in the Manufacturing and Associated Industries
and Occupations Award 2010. ACCER intends to apply for further increases in
the NMW in future wage cases which would raise the NMW above the C13
level. ACCER will seek the adjustment of the NMW to not less than the base
wage rate set for cleaners under the Cleaning Services Award 2010, which is
currently $45.70 per week more than the NMW. In the next annual wage review
it will address the award classification issues arising from these proposed
increases in the NMW and asks that the FWC invite submissions from interested
parties on the issues and options regarding the adjustment of the NMW to a level
where has an impact on lower paid award classifications. The same issues
would arise in the current wage review if the FWC decides, in a decision which
is currently reserved, to set a medium target for the NMW, as requested by
United Voice and supported by the Australian Council of Trade Unions
(ACTU).
3. The claims are made in a proceeding which requires that the FWC maintain a safety net
of fair minimum wages that takes into account, among other matters, relative living
standards and the needs of the low paid. The claims take into account:
 the needs and relative living standards of workers who depend, either directly or
indirectly, on the safety net rates set by the NMW and awards;
 the insufficiency of the NMW and low paid award rates to provide workers and
their families with an income that is sufficient to achieve a standard of living that
exceeds poverty levels;
 the fact that many low paid workers and their families are dependent upon wages
that are insufficient to enable them to purchase the essentials for a decent standard
of living and to engage in community life, assessed in the context of contemporary
norms;
 the social and economic impacts of the claimed increase;
 the substantial loss of the relative value in the NMW since it was first set, as the
Federal Minimum Wage, in 1997;
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 the fact that the Schoolkids Bonus was withdrawn from Australian working
families at the end of and the need for minimum wage rates to start to take into
account that loss; and
 increases in cost of living, productivity and community-wide wages since the
handing down of the decision in the Annual Wage Review 2015-16 in May 2016.
4. ACCER submits that the claims are economically prudent. However, if the FWC finds
that there are reasons not to grant the claims as sought, ACCER seeks that priority
should be given to increasing the lowest wage rates, i.e. to supporting those most in need.
This priority is consistent with the FWC's statutory obligations to set a NMW as a safety
net upon which higher wage rates may be set by awards and/or by collective bargaining
agreements and to take into account relative living standards and the needs of low paid
workers across the range of wage classifications. This means that priority should be
given to adjusting the NMW. The NMW should be a Living Wage, but it is not.
5. At the time of writing this submission legislation is currently before Parliament to freeze
Family Tax Benefit payments for two years, commencing 1 July 2017. The impact of
this change has not been included in the grounds upon which the wage claims are based.
ACCER will address these matters following the expected passing of the legislation.
Given the size of the cuts compensation for the loss of the Schoolkids Bonus and the
freezing of family payments cannot be fully achieved in the current wage review.
Other matters for determination
Sole parents
6. In section G we refer to issues concerning childcare expenses and the working hours of
sole parents. These matters were raised in the Annual Wage Review 2015-16 and held
over to the current review: see Annual Wage Review 2015-16, Decision (May 2016
decision) [2016] FWCFB 3500, paragraphs 659.
Budget Standards research
7. In the Annual Wage Review 2015-16 ACCER sought the establishment of a process
under section 290 of the Fair Work Act to obtain evidence about the needs and relative
living standards of the low paid. The request was refused. In refusing the request the
FWC referred to research being conducted by the Social Policy Research Centre at the
University of New South Wales to update 1996 research on budget standards for low
paid and unemployed workers and to advice given to it that this research will be used to
"inform debate and guide decisions about the levels of minimum wages and income
support payments required to support healthy living consistent with individual needs
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and community expectations". It said that "it seems to us that the results of this
research will be relevant to the issue raised by ACCER. In the event that ACCER
wishes to pursue its proposal for a s.290 inquiry it should submit a proposal to the
President"; see May 2016 decision, paragraphs 657-8. The research has not been
published. ACCER believes that the budget standards research will be the best starting
point for an inquiry into the needs of the low paid and that a section 290 investigation or
some similar process should be established soon after the release of that research. This
could be done upon the FWC's own motion or upon application to the President by an
interested party. While we see the budget standards research as being central to the
inquiry, we do not see it as being limited to that research. We would expect that any
application to the President would be accompanied by an outline of the way in which
the inquiry might proceed.
The scope of the operational objective
8. In section C we refer to statements made by the FWC in the last four annual wage
reviews that "those in full-time employment can reasonably expect a standard of living
that exceeds poverty levels" and "The assessment of the needs of the low paid requires
an examination of the extent to which low-paid workers are able to purchase the
essentials for a ―decent standard of living‖ and to engage in community life, assessed in
the context of contemporary norms". These are described in this submission as the
operational objective of the minimum wages system. The proper scope of the protection
and benefit intended by the operational objective is discussed in section C. ACCER
seeks the FWC's opinion on the scope and ambit of the protection and benefit of each of
the two descriptions used by it.
Pensions
9. In section D we refer to the relevance of the pensions safety net to the setting of the
wages safety net and the FWC's conclusion on this matter in the May 2016 decision.
We ask for the reconsideration of the conclusion.
Wages relativities policy
10. In section E we refer to the FWC's wages relativities policy which has been applied in
the six annual wage review decisions from 2011. It is submitted that the application of
this policy is contrary to law.
ACCER
11. ACCER is an agency of the Australian Catholic Bishops Conference. ACCER‘s
advocacy is informed by the Catholic Church‘s experience as a major employer in
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Australia, with about 225,000 employees in health, aged care, education, welfare and
administration; but it essentially arises from the belief, based on Catholic social
teaching, that workers have the right to wages that will support themselves and their
families at a decent standard of living. It is a standard that has wide community support
and, for reasons explained in the submission, is consistent with and required by the
practical application of the protection in the Fair Work Act and relevant human rights
instruments.
B. 20 YEARS OF THE AUSTRALIAN MINIMUM WAGE
12. This year's wage review will mark the 20th anniversary of Australia's modern national
minimum wage. It was first set in April 1997 by the Australian Industrial Relations
Commission (AIRC) and was then known as the Federal Minimum Wage (FMW). In
2010 the FMW became the NMW when the Fair Work Act 2009 came into operation.
However, the antecedents of Australia's national wage are found in the Harvester case
of 1907. The 20th and 110th anniversary of these important dates can prompt a serious
discussion about the nature and purpose of the minimum wage in a globalised economy
so different to 110 years ago and in a more unequal society than it was only 20 years
ago.
13. The legislation under which the AIRC operated in 1997 had no requirement for the
setting of a federal minimum wage, but it was agreed that one should be set so as to
ensure that no award rate fell below it. The FMW was set at the C14 wage rate in the
Metal Industry Award 1984-Part 1, which only applied in the first three months of
employment, after which the worker covered that award would move to the C13 rate.
The C14 rate, like all other award wage rates at the time, had not been the subject of any
assessment regarding its adequacy and the standard of living that it would support. The
FMW was not a general individual entitlement, but it was great importance to award-
covered workers.
14. The AIRC was divided, however, on the meaning of legalisation introduced in 1996
which required it to "have regard to ... when adjusting the safety net, the needs of the
low paid"; Workplace Relations Act 1996, section 88B(2). The majority of the AIRC
found that the legislation did not relate to an assessment of the material needs of the low
paid. The majority held that the legislation‘s reference to "the needs of the low
paid‖ was not a reference to the living costs of low paid workers. They took the
view that ―needs‖ should be ―construed simply as an adjunct to ‗low paid‘ without
any further attempt to specify or quantify them‖ (Safety Net Review-Wages-April 1997,
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(1997) 70 IR 1, at pages 51-3). This meant, in effect, that the legislation‘s reference to
the needs of the low paid was regarded as the need to protect the relative position of
low paid workers in the new wages system. This view was abandoned in the Safety Net
Review Case, 1998. The only member of the bench who made a decision on the basis of
a different view of the legislation was Vice President Ross (as he then was). His view
was that the needs of the low paid included their living costs, the view which was
accepted a year later.
15. Because of the Vice President's analysis of the legislation, he gave close consideration
to the needs of the low paid and, in particular, the extent of poverty among wage-
dependent workers. The inadequacy of the C14 and other award wage rates is evident
from the Vice President's analysis of the evidence and his conclusions from that
evidence, which included:
 ―... I agree with the submission by ACOSS [Australian Council of Social
Services] that as the proportion of wage earning families with children that is
actually living in poverty has increased in recent a years there is a role for the
HPL [Henderson Poverty Line] or similar poverty benchmark in checking whether
minimum wages, together with income support payments, are at least sufficient to
prevent poverty in these households.‖ (Page 128)
 ―Low income can lead to a substantial reduction in equality of opportunity for
large numbers of people. There is strong evidence that both health status and
educational attainment is influenced by socio-economic status, with children in
low income families more likely to have lower educational outcomes, and with
people on lower incomes more likely to experience serious health problems.
Given the importance of both health status and educational attainment in
influencing a person‘s economic future, the impact of growing up in a low income
family can be a substantial compounding of disadvantage in the longer term.‖
(Pages 140-1)
 ―I agree [with Bishop Challen of the Brotherhood of St Laurence] that wage
fixation in Australia has reached a ‗fork in the road‘. We can allow the living
standards of low paid workers and their families to drift further below community
standards, or we can set clear objectives for maintaining and improving them.‖
(Page 187)
 ―If we are to begin to address the problems confronting low paid employees and
the widening gap between award and market wages we must do more than simply
maintain the real wages of the low paid. Such a response simply preserves the
status quo. A status quo in which income inequality is increasing and many low
paid workers and their families have to go without food or clothing, is neither fair
nor acceptable.‖ (Page 188)
16. Unfortunately for the low paid, the Vice President's fears have been realised and the
position has worsened over the 20 years since the FMW was introduced:
 living standards have drifted below community standards;
 there are no clear objectives concerning poverty in recent wage decisions;
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 inequality has increased; and
 childhood poverty, with all its damage to personal development and future
prospects, has increased.
17. The Australian Council of Social Services (ACOSS), which had played a prominent role
in the 1997 wage review, sought to re-agitate the question of the adequacy in the Safety
Net Review Case of 1998. The barrier it met was that it was an intervener in a series of
industrial disputes that would be arbitrated in the AIRC by an adjustment to award wage
rates which were then viewed as a package of agreed relativities between a wide range
of wage rates. Because the parties to the disputes did not support an investigation that
might lift the floor in the award system, ACOSS's proposal failed. The AIRC said:
"In deciding in this case to continue to relate the level of the federal minimum
wage to that of the C14 classification rate, the Commission is not precluded from
taking into account different considerations, unrelated to the C14 rate, in deciding
the level of the federal minimum wage in the future." (Safety Net Review April
1998 (1998) IR 37, 76)
18. Despite this comment, the FWM and the NMW have been tied to the C14 award rate
ever since; and requests to successive tribunals to inquire into the adequacy of the wage
have filed. In 2003 ACCER was represented by Frank Costigan QC in its attempt to
have the needs of the low paid investigated, but again the proposal failed. Since then,
including 2006 to 2009 under the Work Choices legislation, it has remained tied to the
C14 rate set in the award system.
19. The linkage between the NMW and the C14 continued under transitional legislation
regarding the introduction of the Fair Work Act 2009, which set the NMW at the start of
2010 at the same rate as the FMW at the end of 2009. The award classification structure
on which the FMW was set in 1997 (the Metal Industry Award 1984-Part 1) is now
found in the Manufacturing and Associated Industries and Occupations Award 2010.
20. In each year since the first annual wage review in 2010 ACOSS and ACCER have
proposed an inquiry into the needs of the low paid, but have failed. The arguments
advanced for breaking the nexus between the NMW and award rates generally have
been based on increasing levels of poverty and the failure of the NMW to provide a
contemporary national minimum wage of general application independent of award
classifications.
21. The failure of the NMW to maintain contemporary relevance is evident in a number of
ways. In Table 33 of the Attachment hereto we compare the increases in the
FMW/NMW with changes in average household disposable income (HDI) as calculated
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by the Melbourne Institute of Applied Economic and Social Research. Over the period
January 1998 to January 2017 the after-tax FMW/NMW increased by 98.3%, whereas
HDI increased by 126.7%. The margin was even greater in the case of a trade-qualified
worker on the C10 award rate, whose after-tax increase was only 85.5%.
22. In the current wage review United Voice, supported by the ACTU, has made an
application for a medium term target to be set for the NMW at 60% of median wages.
In support of the application are statistics which show that in 1997 the FMW was about
3.0% above 60% of median wages and that the NMW was about 11.0% below 60% of
median wages in 2016; see ACTU submission, 10 October 2016, Figure 9. The same
trends appear in a comparison of FMW/NMW increases with changes in average
weekly earnings. The NMW and award rates have become disconnected from the
greater increases in community-wide income levels. The NMW has lost contemporary
relevance.
23. It is inevitable that lower relative wage rates will impact on relative living standards and
push more into poverty, including workers with family responsibilities and single
workers who rely on irregular and/or part employment. This has affected all low paid
workers, whether they are only paid the award rate or some inadequate amount above
the legal minimum.
C. WAGE SETTING UNDER THE FAIR WORK ACT
The NMW is a personal right set by legislation
24. Although the origins and the quantum of the NMW are to be found in the FMW and in
the award system, the nature and function of the NMW under the Fair Work Act and
quite different to the nature and function of the FMW under the Workplace Relations Act
1996. The NMW is a general legal right conferred on Australian workers independent
of, and not ancillary to, the award system. The right applies to workers who are not
covered by an award, albeit that the vast majority of workers are covered by an award.
The NMW is a safety net entitlement upon which awards and/or collective bargains may
be based. As a general safety net entitlement the NMW should not set by reference to
wage relativities that may be set by awards and/or collective bargains.
25. The FWC is required by section 285(1) to conduct an annual wage review each financial
year in which it must review modern award minimum wages and the national minimum
wage order. Each function is performed by reference to different, but similar, statutory
factors. Included in the matters that may be covered by awards are "skilled-based
classifications and career structures"; section 139 (1). Section 285(2) provides that in
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exercising its powers to vary modern award minimum wages, the FWC must take into
account the rate of the national minimum wage that it proposes to set in the review.
26. It would be inconsistent with the scheme of the legislation for considerations arising in
regard to award relativities to be taken into account when setting the NMW, which
operates as a general entitlement independent of any award entitlements. The separate
wage setting functions were first raised by ACCER in its March 2014 submission, which
included, at paragraph 2(a), a request for "A ruling that the Fair Work Act 2009 requires
that the NMW be set without being constrained by the rates of pay prescribed by awards
made under the legislation. The reasons in support of this application are in Chapter 2B".
Chapter 2B in the 2014 submission was in similar form to Chapter 2C of the Attachment
hereto. The purpose of the submission was to break what ACCER called a Gordian
Knot that had tied the NMW to award rates:
"This new scheme in which centrality is given to the setting of the NMW is very
relevant to a point raised in the previous chapter about the fact that in some
awards there are classifications and wage rates sitting close to the NMW, and if
the NMW is to be increased, changes will be have to be made to them. The award
classification system has operated to constrain the adjustment of the NMW. Since
1997 the NMW and the C14 award rate appear to have been tied together by a
Gordian Knot. The provisions of the legislation, properly applied, cut that knot."
(ACCER submission, paragraph 258)

27. There was no response by the FWC to this matter. The submission was repeated in
2015 with the FWC accepting the distinction, but, despite doing so, in both 2015 and
2016 it still awarded a uniform percentage increase to the NMW and award wage rates.
In Chapter 2F of the Attachment we review the May 2016 decision in order to identify
how the separate but similar factors and considerations relevant to each process could
have led to the same conclusion. We find that the factors and considerations were
conflated and that there was no relevant distinction made between the factors and
circumstances of each process, with a uniform increase being the outcome. So, despite
ACCER's efforts to use the terms of the Fair Work Act to break the award-based
restriction on the NMW dating back to 1997, the position did not change. Workers in
Australia are blessed by having a unique wages system based on the notion of a fair
basic wage and, where appropriate, margins for acquisition of skills, yet we have seen a
particular view about relativities in the award system compromise the setting of the
NMW.
Basic operational objective.
28. In each its last four decisions the FWC has said :
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