Wage Earners on Low Income Get A Pay Rise but Gap Widens

Wage earners on the minimum award in Australia have been given a pay rise of an additional $15.58 for a 38 hour working week. Despite this increase of 2.6% which is due to start on the 1 July 2013, the gap between low income workers’ weekly pay cheques and the weekly average earnings of Australian’s is widening.

Australian Minimum Award Wage Goes Up

Wage Increases and Job CutsWith less than 4 weeks to implement into payment schedules and budgets, businesses across Australia must adjust payrolls to reflect a minimum award increase from $606.42 to $622 a week. In addition, the superannuation guarantee (similar to Social Security in the USA), will also be increasing from 9% to 9.25%.  This same time last year, the Fair Work Commission announced a pay rise of $17.10 per week for minimum wage owners.

Under the Fair Work Guidelines, the Fair Work Commission in Australia reviews the minimum award wage for working adults in Australia every year. Despite the increase of 2.6 percent, both business industry stakeholders and unions appear to be disappointed with the decision which was handed down by Justice Ross on Monday.

Businesses Struggling to Make Payments

The Australian Chamber of Commerce and Industry and the Australian Retailers Association had proposed a maximum pay increase of only $5.80 per week, requesting special consideration for service industry sectors specifically those in restaurant & catering where small businesses have been feeling the pinch.

Industry lobbyists have warned that some businesses may have to reduce opening and staff hours to reign in increasing operational costs. The latter decision would not just affect the  earning capacity of the business and employees, but also consumers.

Union representatives had requested an increase of $30.00 per week and are reportedly disappointed with the Fair Work Commission’s decision.

Widening Gaps

Since the turn of the century, the widening gap in the disparity of the average weekly wage compared with the low income weekly wage has dropped 6% from 50% to 44% of the weekly average earnings in Australia. This disparity is not just calculated on award wages and industry sectors covered by the Fair Work Commission. Salary packages of top level management and Chief Executive Officers (CEOs) are also included when working out the average weekly wage. While the median salary for a CEO is about $166,953,  in 2011 Australia’s top 10 CEOs , earned a collective $90 million. This includes a range of share options and holdings. (Visit Nine MSN to find out who the top ten CEOs of 2011 were in Australia.)

How Does Australia’s Minimum Wage Compare to the USA?

Wage ForecastingThe increase to the minimum wage in Australia may seem significantly small when compared to the salary of corporate giants, especially those in the mining sector of Australia where GDP has been booming. At $16.37 an hour, the national minimum wage  remains the highest in Western developed countries with American workers at the low end, receiving less than half Australia’s minimum wage at $7.10 an hour.

Workers in restaurant and catering in Australia don’t usually expect to receive tips, unlike workers in the USA whose daily income is dependent upon the generosity of the tables they serve. Casual employees in Australia, those employees who are not guaranteed set working hours each week, will also receive an additional 24% casual loading on top of their minimum wage. This will peak at 25% instead of the original 30% for transitioning companies with the increase of 2.6 percent to be applied to all transitioning awards from the previous Award systems including State based awards which were brought under the federal jurisdiction.  This makes it unnecessary for individual awards to be calculated using the transitioning rates.

Getting Ready to Roll?

Some job losses are expected due to the increase especially for casual employees in small businesses (hiring less than the equivalent of 12 full time employees). However, with the cap on casual loading to now peak at 25% rather than the original 30%, and with the emphasis for employees to seek collective bargaining it appears that the Fair Work Commission is pre-empting a change to the award system and a roll over in government sooner than later.

Employees covered by federal awards and those on the minimum wage but award free, can look forward to an increase in pay with the first payroll run from 1 July 2013.

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