FWC Annual Wage Review shows you can’t please everyone

Impacted by inflation, equal gender pay goals, and the Middle East crisis, mixed reactions to the wage increase reflect the difficulty in striking the right balance between serving employers, employees, and the economy at large.

Yesterday (2 June), the Fair Work Commission’s Annual Wage Review resulted in a 4.75 per cent increase to the minimum wage; now, unions, employer groups and industry professionals are reflecting on anticipated impacts.

In a joint statement, Treasurer Jim Chalmers and Minister for Employment and Workplace Relations Amanda Rishworth described the rate as “a real wage increase”, noting that today’s decision is the first time the national minimum wage is above $1,000 per week.

Rishworth said: “This is needed cost-of-living help for the minimum wage and award-reliant workers, many of whom are in lower-paid roles, work fewer hours, and have fewer financial buffers to fall back on.”

Chalmers said: “This is the pay rise millions of Australian workers need and deserve.”

However, not every MP was impressed. Senator for South Australia and spokesperson for finance, employment and workplace relations for the Australian Greens, Barbara Pocock, said that the decision will further erode real wages.

She said: “The Fair Work Commission’s decision today amounts to a real wage cut for millions of Australians. Even with this 4.75 per cent increase in the minimum wage, low-paid workers still face an uphill battle as wages have failed to keep up with inflation.”

“When national rents have risen 2.5 times faster than wages over the past five years, working households fall further behind through no fault of their own.”

The Housing Industry of Australia (HIA) noted the likely impact of additional costs on the sector, with managing director Jocelyn Martin highlighting: “Each additional cost impost, whether it’s wages, materials or regulatory burden, chips away at their capacity to keep building.”

“HIA recommended a 3.5 per cent increase to the national minimum wage rate this year, with our submission stating this increased rate represents the outer boundary of what is fiscally sustainable in the current environment.”

She also highlighted that the decision to abolish the C13 classification, “the entry-level rate for some workers, will also add additional pressure on employers”.

This sentiment has been echoed by several employer and business associations, including the Australian Industry Group, with CEO Innes Willox warning the increase “will be very hard to bear for businesses under pressure”.

“Outside of pandemic-affected years, this is the highest increase awarded in the era of the Fair Work Act,” Willox said.

“Employers will clearly struggle to absorb these high wage increases at a time when costs are surging and conditions are deteriorating. This decision will inevitably flow through to more business financial pressure, higher prices and lower employment in the coming months.”

Similarly, the Australian Chamber of Commerce and Industry (ACCI) expressed disappointment at the FWC’s decision, echoing the sentiment that increased costs will be increasingly difficult to absorb, especially by small businesses.

ACCI chief of policy and advocacy David Alexander said: “Today’s decisions further delink wage outcomes from productivity, and economic activity will suffer as a result.”

“The Reserve Bank has cautioned that when productivity is weak and the economy is operating with excess demand, higher labour costs are more likely to flow through to process rather than be absorbed through efficiency gains.”

The Council of Small Business Organisations Australia (COSBOA) similarly expressed concern regarding the anticipated cost pressures today’s decision will impose, with CEO Skye Cappuccio claiming many will need to make difficult decisions.

While noting that small-business owners want to pay their employees fairly, she warned that “a 4.75 per cent wage increase is not just a headline figure. It flows through overtime, penalty rates, allowances, payroll tax, superannuation and other employment costs”.

“Many small businesses will now be forced to look closely at prices, rosters, hours and hiring plans. Others will absorb the cost through owners working longer, unpaid hours. That is not because they do not value their staff, but because they have limited options when costs keep rising faster than their capacity to absorb them,” Cappuccio said.

According to Hays APAC CEO Matthew Dickason, the decision “highlights a growing tension in the labour market”.

“Employers are increasingly focused on their capacity to absorb higher labour costs in a period of still-elevated inflation and uneven demand, while employees face ongoing cost-of-living pressure,” Dickason said.

Dickason noted that employers not able to meet expected salaries will need to prioritise career progression, skills development and further employee benefits to stay competitive in the labour market.

The Australian Council of Trade Unions (ACTU) welcomed the wage increase, highlighting how the decision “broadly keeps up with the cost of living and will provide some financial relief for 3 million working Australians”.

In a statement, the union collective said: “While today’s annual wage review decision falls short of that except for the very lowest paid, it will ease some of the worst price pressures caused by the war’s aftershocks, with a small buffer if the global situation drags on.”

ACTU secretary Sally McManus said: “The lowest paid need to spend almost all of what they earn to survive, and this wage increase will be vital to them while generating income for local businesses that also need a boost.”

In the same vein, the Centre for Indigenous People and Work (CIPW) highlighted the decision’s significance due to Aboriginal and Torres Strait Islander employees being “disproportionately reliant on minimum wage and modern award outcomes”.

“As a result, wage increases determined through the Annual Wage Review are often one of the main mechanisms through which Indigenous workers experience real wage growth,” it said.

The CIPW identified the wage review as “a key equity lever within Australia’s industrial relations system” that extends beyond immediate weekly pay.

“A lifetime of low wages not only constrains workers’ capacity to meet day-to-day living costs; it also materially reduces opportunities for home ownership, capital accumulation, and long-term financial security,” CIPW said.

The statement concluded: “Fair wage-setting is fundamental to building an economy in which Aboriginal and Torres Strait Islander people can thrive, not just today, but across their working lives and into retirement.”

Want to see more stories from trusted news sources?
Make HR Leader a preferred news source on Google.