In order to combat the challenges of rising inflation and cost of living, Australia’s 2.7 million minimum wage and low-paid workers on awards will receive a pay increase of up to 5.2% on Friday.
This is the most substantial increase in 16 years.
From July 1, there will be a weekly rise of $40 in the National Minimum Wage, which applies to employees who are not covered by an award or a registered individual contract.
The new legal minimum is $812.60 per week, or $21.38 per hour, reflecting a 5.2% rise.
While low-paid retail employees will start seeing pay raises on July 1, those employed in the tourist and hospitality industries will need to wait until October 1.
For individuals employed full-time, the new minimum pay amounts to $42,255 annually, an increase of $2,080 from the previous minimum salary of $40,175.
The rise was the most generous since the mining boom of 2006 and was above the inflation rate of 5.1%.
However, despite that hefty boost, Philip Lowe, governor of the Reserve Bank of Australia, predicts that inflation will reach 7% for the first time in 32 years in 2022, which would result in a real pay fall for the lowest paid.
Likewise, Australia’s 191,000 apprentices are only earning a 4.6% raise, along with another 2.5 million award recipients.
Their pay increases are not keeping up with inflation, therefore given the current rate of inflation, they are really seeing a reduction in real wages.
Workers on modern awards will receive a $40 pay increase per week if their weekly earnings exceed $869.60, much as those on the minimum wage.
Beginning on July 1, a first-year apprentice electrician will be paid just $24,466 or 57.9% of the minimum wage of $42,255.
According to a press release from Treasurer Jim Chalmers and Employment Minister Tony Burke, 59.1% of women, or 1,571,100 women, will benefit from the hike in the minimum wage.
1,088,300 men, or 40.9%, will see their pay increase.
With 62.6%, over two-thirds of Australians who receive wage increases are part-time workers. In comparison, 37.7% of full-time employees have this status.
The industries with the greatest number of employees who will gain from the increase in the minimum wage are those in the health care and social assistance, lodging and food services, and retail trade sectors.
The Treasurer stated in a statement that “this week’s minimum wage hike is a success for the many hardworking Australians who’ve kept our communities and our economies moving amid the worst of the pandemic.”
“This wage increase acknowledges those sacrifices and the particular difficulties in our economy,”
According to Professor John Buchanan, a specialist on the labor market at the University of Sydney, the hike in the minimum wage will have knock-on consequences by raising community expectations of a salary increase.
“The power of workers relative to their bosses and ideas of a community norm and what’s acceptable to go for shape wages.” So, he explained “that (the increase) will shape that norm.”
“It will have a significant impact on those who rely on awards.”
“For the large portion of people paid over the award rate, the flow-on effects are muted, but there is no question that it will have an effect,” he continued.
The national minimum wage increased by 3.1% on average between 2010 and 2019 in Australia, although pay growth has been slow for years.
According to data from the Australian Bureau of Statistics, over one in four workers, or 23%, are protected by an industry award, 35.1% have a collective agreement with their employers, and 37.8% are covered by individual agreements.