Women’s wages and the 2019-20 Annual Wage Review

Women’s wages and the 2019-20 Annual Wage Review

Introduction

International Women’s Day (IWD) is now just a week away. A few days later, March 13th, is the deadline day for submissions to the Annual Wage Review (AWR) run by the Fair Work Commission (FWC).

So, in this blog I review what is happening with wage suppression in Australia and focus on what the AWR means for women in paid work.

The current context

First, recently we had another explosion of revelations of wage theft by large companies, and the first serious signs of defence on behalf of those corporations by them, their employer organisations, and their primary employer organisations.

One of the defences means a lot, negatively, for all women: it aims to excuse and justify employers systematically underpaying workers because of Australia’s award system. An award is an industrial agreement that applies to employers and workers in defined industries and occupations. There are 122 awards, and each one sets legal minimum standards on wages and conditions of employment for each industry and / or group of occupations. For example, there is an award for manufacturing workers and employers, another for retail workers and their employers, another for construction workers, and so on.

The employer arguments and the reporting of them are nonsense. Employers do not have to know about every award or the whole system in order to pay correctly for the award, or maybe 2 awards, that cover them and the workers they employ. Learning is not difficult. Years ago, when the system was more complex, workplace delegates (shop stewards) learnt their award as a matter of course, often by reading and discussing its contents with each other and their workmates, or by attending meetings and short courses run by their union or the old Trade Union Training Authority (TUTA). The company personnel officers did the same.

To support these hyper-exploiting employers, the Australian Financial Review (AFR) says the award system should be scrapped. As we shall see below, this is a big new problem for all workers, and especially so for women in paid work.

The AFR is also promoting the defence that the employers’ confected “award complexity” also leads to over payment of workers. There is no sign of real evidence to support that, as there is with wage theft.

Second, recently the Australian Bureau of Statistics (ABS) released its newest data on wages. These showed a 2.2% increase over the past 12 months and thus confirmed that wage stagnation, or wage suppression, is still in force.

The government’s conservative Workplace Gender Equality Agency (WGEA) pointed out this showed just the tiniest reduction in the gender pay gap and increasing complacency among employers towards reducing that gap.

A number of news reporters have provided strong descriptions of what’s happening with wages, although their analysis remains poor. (For example see here, and here.)

Michael Pascoe, reporting and commenting for the online news agency, The New Daily, said:

“… the 2.2 per cent annual pay rise is no rise at all. After tax and inflation, it’s a big fat 0 per cent….

“And it’s actually worse than zero growth for many people. The interaction with our transfer system – family tax benefits, tax rates and such – means many households went backwards. Their real take-home pay shrank….

“What’s more, the present policy mix means that while wages slaves go nowhere or backwards, those who already have substantial assets are enjoying the fruits of asset price inflation brought on by loose monetary policy.”

The Reserve Bank (RBA) governor has given up on his “strategy” against wage suppression – asking employers to say “yes” if their workers ask for a rise – using the bushfires, drought and the corona virus as excuses to do so. So much for the brief and pathetic effort of the Governor to be a workers’ champion. Anyone who fell for that really did come down with the last shower of rain.

Third. Of course, the employers are building new defences to protect wages suppression. The most significant is the new argument that superannuation increases is to blame for keeping wages down. Again, this assault on the superannuation system and wage setting is very serious for working women. Space limits means we must return to this in another post.

Fourth. At the same time, we have the government’s Ensuring Integrity Bill and its review of the Fair Work Act 2009 (FWA09) as it currently stands. This is intended to protect and strengthen wages suppression. The slow drift to an economic recession or downturn continues. Also, the past month has seen the 6 monthly reporting season of company financials and, associated with that, a “stunning” increase in share values on the stock exchange, now under downward pressure allegedly from Covid19.

Meanwhile the Australian Council of Social Services (ACOSS) reports new data that shows an increase in Australians living below the poverty line:

“That included 774,000 children, an increase from the previous study.”

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For all of these reasons, and maybe others, the AWR is a big deal for women in paid work, whether it be full time work or part time work, and as we shall see, has flow in effects – good or bad – to all other workers and their children.

Women and the Annual Wage Review

The Fair Work Act 2009 (FWA09) requires that the FWC conduct an annual review of minimum wages and empowers it to award or not award an increase in those minimum wages. An AWR “panel” does this work, chaired by the President of the FWC. The process is described in relatively plain language at the FWC web site and, among other things, enables interested organisations and individuals to make submissions to it. It denies the rights of low paid workers and their unions to collectively bargain over minimum wages. Bargaining is replaced by “polite submissions” that the FWC considers. The statutory requirements for annual minimum wage setting imposed on the FWC can be found at Part 2-6 section 285 onwards of the FWA09.

All of the decisions from previous years are available at the FWC web site, along with the submissions from organisations and individuals for each year.

The FWC’s decision – increase or not – can be, and usually is, applied to minimum rates in awards, as well as the national minimum wage. Each of the 122 industrial awards sets minimum rates for workers covered depending on the level of the skill and knowledge and sometimes other factors. These are known as the award minimum rates.

Last year, the FWC awarded a 3% increase (close to and sympathetic to the employers’ claims – see below for a bit more), applied to both the NMW and minimum award rates. The NMW became $740 per week or $19.49, an increase of $21.60 per week or 56 cents per hour.

For low paid women, including those on the minimum rate in the award that applies to their work, the following applies:

“[18] The modern awards objective and the minimum wages objective both provide that in a Review we must take into account ‘the principle of equal remuneration for work of equal or comparable value’ (s.134(1)(e) and s.284(1)(d)).

Therefore when its decision is handed down and published the FWC must explain how it has taken women’s wages into account, and by how much.

Women in last year’s decision

Last year the FWC reminded everyone:

“[71] Women are disproportionately represented among the low paid and award reliant, hence, an increase in minimum wages is likely to promote gender pay equity.”

The FWC explains “low paid” thus:

“[199] A threshold of two-thirds of median (adult) full-time ordinary earnings is the benchmark we use to identify who is ‘low paid’ within the meaning of ss 134(1)(a) and 284(1)(c).

“[200] The assessment of the needs of the low paid requires an examination of the extent to which low-paid workers are able to purchase the essentials for a decent standard of living and to engage in community life, assessed in the context of contemporary norms. The risk of poverty is also relevant in addressing the needs of the low paid.”

Median earnings are currently $1380 per week, maybe very slightly higher. Therefore two thirds of that is $920 week and anything there or less than that is the bench mark for being low paid … in the eyes of the FWC.   

But the current National Minimum Wage (NMW) is $740.80 per week..

That means the NMW is $189.20 less than what is accepted as a living wage.

The ACTU’s aim is to win increases that bring the NMW up to the accepted living wage.

What does “award reliant” mean?

The FWC defines an “award reliant” worker as one who is paid at the rate required for the work they do as defined in their relevant award. They exclude a worker who is paid a little bit more than that but who is, in all other respects, reliant for their conditions of work on their award.

So for example, a woman working for wages, may be paid at $26 per hour which is 50 cents above the minimum rate for her type of work. The FWC does not define them as “award reliant” even though, for all practical purposes, they are. Thus, the FWC under-estimates the number of workers, especially women, who are “award reliant”.

The Commission can potentially take any of several different forms, including per cent increases, flat dollar increases or a combination of these.

In recent years the increase has been in the form of uniform percent increases for all.

One factor in the uniform percent approach was this:

“A uniform percentage increase will particularly benefit women workers, because at the higher award classification levels women are substantially more likely than men to be paid the minimum award rate rather a bargained rate.”

The FWC’s decision runs to over 100 pages, and includes more extensive explanation of its thinking about women’s wages, especially equal remuneration and the gender pay gap.

I won’t canvas all of that here, except that it covers the various submissions put to it, especially by the ACTU and the employer organisations, and also its own review of Australian and overseas research. It includes this:

“[390] Most measures of the gender pay gap have fallen over the last couple of years, including the AWOTE, where the gap has reduced from 16.0 per cent in November 2016429 to 14.1 per cent in November 2018.”

Just a couple of weeks ago the government’s own gender equality agency expressed its concern that the slow fall in the gender pay gap has almost come to a halt.

The FWC summed up the situation, as follows:

“[399] Increases in minimum wages, particularly adjustments that might exceed increases evident through bargaining, are likely to have a beneficial impact on gender pay equity. This is so firstly, because of the dispersion of women within award classification structures and the greater propensity for women to be paid award rates and, secondly, because women are disproportionately represented among the low paid.”

We can say with certainty: the bigger the uniform per cent increase, the more likely a bigger decrease in the gender pay gap.

Finally, its worth a quick look at 2 major submissions in last year’s review to compare them with each other and with the FWC’s decision. For women, the most important is the ACTU submission, because it takes the situation of women in waged work most seriously.

The ACTU Submission for 2018-19 (last year)

The ACTU’s aim is to lift the minimum wage to a living wage, and last year it sought a 6% increase applied to the NMW and all modern award minimum wages, as a step towards this aim. This would have been a $43.15 per week increase to the NMW. It’s submission included this:

In 2018 the Fair Work Commission granted an increase to the minimum wage of 3.5% or $24.32 per week, a step in the right direction but one which left many full-time workers struggling.

“The restoration of a living wage – one of the proudest achievements of the early Australian union movement – remains the goal of our ongoing campaign.

“The minimum wage should not leave people in poverty, it should provide a comfortable life for low-paid workers and underpin our labour market.”

For working women and women union activists the ACTU submission is a very important document. One reason for this is its critique of the thinking of the FWC and the employers on a number of issues, but particularly women’s wages, equal remuneration and the gender pay gap.

What is more, the material content in the ACTU Submission is way more comprehensive and gives a clearer picture of the situation than even the FWC decision. For example, it points out:

“Gender pay gap data based on AWOTE (Average Equal Ordinary Time Earnings) are the most commonly used metrics in Australia to measure progress towards gender pay equity, which is when women and men receive equal pay for work of equal or comparable value. However, this measure of the pay gap compares the ordinary time weekly earnings of men and women in full-time jobs only. It hides the gendered access to wage and benefit top-ups on ordinary time weekly earnings reflected in total full-time earnings. In 2018, Figure 6.1 shows that the total gender pay gap in women’s and men’s total full-time average weekly earnings (FTAWE) was 18%. The full-time data also shed little light on the gender pay gap for almost half of Australia’s working women, who work part-time and are not included in this metric. When we include average weekly earnings (AWE) for all workers, both full-time and part-time, the gender pay gap in 2017 rises to 32.4%. This high figure underscores women’s significantly lower earnings relative to men’s in Australia, which have ramifications for lifetime earnings, superannuation earnings and security in retirement.”

Further on equal remuneration, the ACTU says:

“In our submissions to the previous Review, we suggested that the principle of “equal remuneration for work of equal or comparable value”, as defined in the FW Act and applied by the Commission, was ill-suited to examining and addressing gender-based undervaluation in the course of an Annual Wage Review. We also indicated that the apparent rigidity of the equal remuneration principal was a serious flaw in the wage fixation framework.”

It’s also worth comparing the ACTU submission with the employers, for example the Australian Industry Group (AIG).

Australian Industry Group Submission

The AIG submission on wages and equal remuneration is brief and cursory and is, in essence, designed to keep the general FWC decision really low.

They sought an increase of 2%; that is up $14.40 on the NMW and $16.75 for a base level trades person or equivalent. The result was much closer to what they wanted than the ACTU claim.

On equal remuneration, the AIG confined itself to this:

“AIG supports the principle of equal remuneration for work of equal value and the importance of improving gender equality in the workplace. We have been advocates for realistic, practical and targeted measures to eliminate the causes of gender inequality in the workplace.”

In conclusion

The AWR is a big deal for all women but, of course, directly so for women in waged work. It is a big deal for workers who get their pay increases out of enterprise bargaining. The ACTU claim and its supporting arguments are essential elements in the struggle to ensure a better deal for all women because there are flow on effects from full time wages to part time, from those in more secure jobs (falling) to those in precarious work (especially women) and those who depend on the award rate rather than a collective agreement.

Right now, we do not know the ACTU claim but surely we can expect to do so at around IWD or shortly after. We can be sure that ACTU and key union staffers are working on it behind the scenes.

Will there be a fair dinkum campaign and not just polite submissions? What will be the content of such a campaign? Right now, there is no sign of one; no sign even of any systematic union education about the AWR and the award rates, even though relative to enterprise bargaining the AWR is more relevant to more workers than ever before. Is that the business of rank and file workers in our unions, or should they leave it to the wisdom of their elected leaders? That is up to them but, we do know in our history rank and file workers have initiated struggles to lift minimum rates of pay to higher levels.

There is nothing in the genetic make-up of workers in the 2020’s that says they cannot learn to do the same.

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