Split Annual Wage Review Decision highlights risks and uncertainties

“The Majority’s decision in this year’s Annual Wage Review is risky given that the economy is in recession, many businesses are struggling to survive, and unemployment and underemployment have increased sharply. The official unemployment rate is at its highest level in almost two decades and the underemployment rates recorded in the past two months are well above any levels previously recorded,” Innes Willox, Chief Executive of the national employer association Ai Group, said today.

“Australia already has the world’s highest minimum wage and in the current environment priority needs to be on preserving as many jobs as possible, and avoiding imposing any barrier to employers keeping and taking on employees and increasing hours of work. In the Australian Industry Group’s view, the Minority decision of Professor Mark Wooden is the correct one – a wage increase at the current time is not appropriate. The fact that the Expert Panel issued a split decision for the first time in almost three decades highlights the risks and uncertainties.

“The Minority decision of Professor Wooden highlights the seriousness of the current situation:

[547] Australia has almost certainly entered its most severe economic recession since the 1930s. The scale of the contraction is likely to be far worse than the recession of the early 1980s and early 1990s. This can already be seen in measured labour underutilisation rates jumping to levels not previously observed, and this is before accounting for the many persons (~623 600) that dropped out of the labour force entirely. Indeed, my best estimate is that in April 2020, 23.8 per cent of all workers and potential workers in Australia were either without any job or working part-time in a job providing fewer hours than preferred.

[548] The employment impacts are likely to be most acutely felt by workers in lower paid jobs (and hence more likely to be award reliant) and / or by new entrants to the labour market.

[549] For those most affected, the impacts can be serious, with permanent reductions in future employment prospects and future earnings.

[550] During a recession, and especially one as severe as the current one, what is most critical for the incomes of workers and their families is securing a paid job that provides adequate hours. In my opinion, the requirement to provide an adequate safety net for workers means the FWC should, in the current environment, be prioritizing jobs and hours over a wage increase.

“The Majority’s decision is of concern in the current environment and will impact adversely both on hiring and firing decisions and on the opportunities faced by many seeking work or looking to increase their hours. It is particularly concerning for young people who have been so heavily impacted by the downturn in the labour market.

“Nevertheless, it is important that the Majority roundly rejected the ACTU’s proposed 4% increase. The staggered wage increase of 1.75% is also substantially less than the minimum wage increases awarded in recent years, and operative dates has been delayed for the industries hardest hit by the COVID-19 Pandemic.

“ABS data has shown that three quarters of Australian businesses are under stress and the real risk is that the economy will be in a worse position by the end of the year than it is now,” Mr Willox said.

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