Why millions of Australians are suffering a pay cut despite a big rise in the minimum wage


Why millions of workers on award wages are still suffering a pay cut despite the biggest minimum pay rise in 16 years and unemployment at a 1974 low

  • Minimum wage is going up by 5.2 per cent from July 1 – biggest rise since 2006
  • This Fair Work Commission decision only directly benefits 180,000 workers 
  • Another 2.5 million employees on an award are only getting a 4.6 per cent rise 
  • This is well below the 5.1 per cent inflation pace meaning a cut in real wages 

Millions of low-paid Australian workers on award wages and apprenticeships will suffer a pay cut despite the biggest minimum pay increase in 16 years.

Australia’s unemployment rate in May stayed at 3.9 per cent for the third straight month – holding at the lowest level since August 1974.

But experts fear rising inflation will see unemployment rise later this year as the Reserve Bank of Australia was forced to put up interest rates. 

The Fair Work Commission on Wednesday awarded a 5.2 per cent increase in the minimum wage – the biggest jump since 2006 during the mining boom.

Millions of low-paid Australian workers on award wages and apprenticeships are set to suffer a pay cut despite the biggest minimum wage increase in 16 years (pictured are flight attendants at Sydney airport)

Millions of low-paid Australian workers on award wages and apprenticeships are set to suffer a pay cut despite the biggest minimum wage increase in 16 years (pictured are flight attendants at Sydney airport)

The pay increase was slightly above the 5.1 per cent inflation rate but it only directly benefits 180,000 employees from July 1.

Another 2.5 million workers on award wages are only receiving a 4.6 per cent rise, as are Australia’s 191,000 apprentices.

Their pay increases lag behind inflation, which means they are effectively suffering a cut in real wages.

Like those on the minimum wage, workers on modern awards will get a $40 a week pay boost if they earn more than $869.60 a week.

Commonwealth Bank senior economist Belinda Allen calculated the Fair Work Commission decision, covering 2.7 million minimum wage and award workers, was likely to boost low-paid wages by up to 4.8 per cent – a level below inflation. 

Australia’s 191,000 apprentices are also missing out with their wages going up by 4.6 per cent or $20.69 a week.

Their wages are going up at half the $40 a week pace those on the minimum wage and awards will be getting. 

From July 1, a first-year apprentice electrician will be getting 57.9 per cent of the $42,255 minimum wage, meaning a salary of just $24,466.

Electrical Trades Union acting national secretary Michael Wright said Australia would continue to suffer from a shortage of electricians because of the Fair Work Commission ruling, as just half of apprentices completed their training.

‘Thanks to this decision you earn more working two weekend penalty rate shifts on minimum wage than you do for a full week as an apprentice,’ he said.

‘No wonder our completion rates are a disgrace, young workers are having to quit their trade just to make ends meet. 

The Fair Work Commission on Wednesday awarded a 5.2 per cent increase in the minimum wage - the biggest jump since 2006 during the mining boom. But another 2.5 million workers on award wages are only receiving a 4.6 per cent boost - a level below inflation (pictured is a waitress in Sydney)

The Fair Work Commission on Wednesday awarded a 5.2 per cent increase in the minimum wage – the biggest jump since 2006 during the mining boom. But another 2.5 million workers on award wages are only receiving a 4.6 per cent boost – a level below inflation (pictured is a waitress in Sydney)

Minimum wage rise at a glance

A 5.2 per cent increase from July 1

That equates to $812.60 a week – an increase of $40

The $21.38 an hour rate marks an increase of $1.05

New minimum pay of $42,255 a year for those working full-time – up $2,080 from $40,175

The increase was above the 5.1 per cent inflation rate and was the most generous since 2006 during the mining boom

It was more than double last year’s 2.5 per cent increase

The decision to award a 5.2 per cent minimum wage increase directly affects 180,000 workers

The other low-paid workers on modern awards are getting a 4.6 per cent increase if they earn more than $869.60 a week and will get $40 more a week

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‘This is bad news for them, bad news for the industry and bad news for the nation.’

From July 1, minimum wage workers will receive $812.60 a week, an increase of $40, and $21.38 an hour, up $1.05.

But award wage workers in the tourism, aviation, and hospital sectors will have to wait until October 1. 

Reserve Bank of Australia governor Philip Lowe this week predicted inflation could rise to seven per cent this year for the first time since 1990.

Should this occur, minimum wage workers receiving a 5.2 per cent pay increase would too be suffering from a real wages cut.

Wages growth for low paid workers is still weak despite the underutilisation rate – the level of untapped labour market potential – falling in May from 9.9 per cent to 9.6 per cent, the lowest level since April 1982.

CommSec chief economist Craig James said the minimum wage decision was likely to see broader wages grow in 2023 – leading to higher interest rates as employers struggled to recruit staff.

‘The tight job market and latest minimum wage increase will keep upward pressure on wages, prices and therefore interest rates,’ he said.

In May, 60,600 new positions were created as 7,800 people lost their job.

The participation rate of 66.7 per cent last month was also the highest since the Australian Bureau of Statistics began compiling monthly labour force data in February 1978.

Australia's 191,000 apprentices are also missing out with their wages going up by 4.6 per cent or $20.69 a week (pictured are Electrical Trades Union members)

Australia’s 191,000 apprentices are also missing out with their wages going up by 4.6 per cent or $20.69 a week (pictured are Electrical Trades Union members)

But KPMG chief economist Brendan Rynne said unemployment was likely to rise later this year as high inflation forced the RBA to put up interest rates.

‘The key question now is whether the labour market strength is going to be maintained in this upcoming period of higher interest rates, higher labour costs and higher inflation,’ he said.

‘The combination of all these factors is likely to result in a slowing economy in the near term resulting in a rise in the unemployment rate over the second half of 2022 to return to low four per cent levels by the end of the year.’

The Commonwealth Bank, Australia’s biggest home lender, is expecting the RBA to raise the cash rate in July, August, September and November – taking the cash rate to 2.1 per cent from 0.85 per cent.

CBA economists said a 2.35 per cent cash rate in 2023 was now a risk. Westpac expects a 2.35 per cent cash rate by February next year. 

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