Submission 167 Australian Council of Trade Unions Workplace Relations Framework Public inquiry

Juniors

The ACTU does not believe there is any justification for the retention of discounted wages for workers between the ages of 18 and 21 within the industrial relations system. Adults should be paid as adults, meaning that workers aged 18 and over should be entitled to the relevant adult rate for the work they are performing, unless they are in a formal and genuine apprenticeship or traineeship arrangement that combines work with on-the-job and off-the-job accredited training.

At present, minimum wages for junior employees not covered by formal training arrangements are generally expressed as a percentage of the minimum rate for the relevant classification in modern awards. This means that any minimum wage increases awarded as part of annual wage reviews flow on to junior wages in modern awards. The ACTU supports a continuation of this process for adjusting junior rates of pay, where they exist.

The larger question is whether it is appropriate for existing junior pay scales to continue to be a feature of modern awards, leaving young workers dealing with adult costs of living to remain on lower, discounted wages right up until they turn 21 under many modern awards. It is important to note that junior rates are not a feature of all awards at present. In the building and construction industry for example, modern awards have no junior rate provisions and unapprenticed young workers have traditionally been paid as adults.

The ACTU and affiliated unions have long held the view that the provision of junior rates for workers over the age of 18 years is unjustifiable and discriminatory, and fundamentally inconsistent with the principle of equal remuneration for work of equal or comparable value.

In our submission, wages should be based on skills, abilities and work value and not on the age of the worker.

Australian society recognises the age of 18 years as the start of adulthood for all other purposes. Under the common law, an adult is a person who has attained the age of 18. A person who reaches the age of 18 years in Australia can be expected to be treated as an adult in virtually all contexts – except in terms of the wages they are entitled to receive in the workplace.

Consistent with the position outlined above, unions will continue reject and oppose any argument to insert junior rates into those awards that historically have had no such provisions. In those awards that do have existing provisions for junior rates, unions will continue to advocate for the removal of junior rates for workers aged 18 and over, with the exact approach to be determined on an industry by industry basis.

For example, as a moderate, preliminary step towards that longer-term goal in the retail industry, unions have supported the removal of junior rates for workers aged 20 years. Extensive submissions and evidence in support of this position were presented in the 2013 retail industry junior rates case before the FW Commission, as described further below.²²²
We further note that Australia’s continuing use of junior rates is an issue that has been commented upon by the ILO’s Committee of Experts on the Application of Conventions and Recommendations in the context of Australia’s compliance with the ILO’s Minimum Wage Fixing Convention, 1970 (No. 131). The Committee has conveyed its expectation that the Australian Government will ‘continue to review from time to time the rationale and advisability of fixing differentiated wage rates on grounds such as age or disability’. ²²³

We recognise that the payment of discounted wages to junior workers is explicitly permitted under Australian law. However, in our submission these facts do not render the payment of junior wages to young workers necessary or desirable.

Discounted wage rates for junior workers are often justified on the basis that they reflect a reasonable discount for inexperience and so encourage employers to provide employment opportunities to young people. The ACTU submits that this argument is far from tenable, particularly in the case of 20 year old workers. By this age, many workers have previous skills or experience. Indeed, many have been working for several years by the time they reach the age of 18. They bring skills, qualifications and experience to the job, and are entitled to have their work valued accordingly.

The argument that is generally presented by employers any time a wage increase is sought is that it cannot be afforded and that it will lead to fewer people being employed. This is also the argument often put forward for retaining discriminatory wages for young workers. On that point, we refer to the experience and evidence presented in other sections of this submission about the impact of annual minimum award wage increase and the lack of any demonstrable impact on employment growth or employment prospects of the low paid. There is no evidence of adverse employment affects in those industries, such as building and construction, that have long had no provision for junior rates.

The ACTU also notes studies conducted internationally that suggest the elimination of discounted wage rates for young workers will not have adverse employment effects. Studies on the effect of reforms in New Zealand which included lowering the eligibility age for the adult minimum wage from 20 to 18 and increasing the youth minimum wage found no robust evidence to suggest that increases to the minimum wages paid to young workers had negative effects on youth employment rates or hours worked. Indeed, the authors found stronger evidence of positive employment responses to the changes in terms of increased hours worked and increased earnings for young workers.²²⁴

The fact that many employers in the retail industry, for example, have already been paying adult rates to workers of 20 years of age for some time under enterprise agreements also suggests that this measure does not impact negatively on business productivity or competitiveness.

The ACTU therefore welcomed the decision last year by a Full Bench of the FW Commission to vary the General Retail Industry Award 2010 to ensure that 20 year old retail employees receive the full adult rate of pay provided that they have worked for the employer for more than six months.²²⁵ The decision, in response to an application by the Shop Distributive and Allied Employees’ Association (SDA) and supported by the ACTU, recognises that the discounted rate for 20 year old adult retail employees did not provide a fair and relevant minimum safety net.

In reaching its conclusion, the Full Bench made a number of important findings, including:²²⁶

We agree with the SDA’s submission that a high proportion of employees in the retail industry are low paid….  It is also accurate to describe 20 year olds, who do not receive the adult rate of pay, as being amongst the lowest paid.²²⁷

The evidence presented by both the SDA and the employers generally supports a conclusion that most junior retail employees achieve a satisfactory level of proficiency in their roles after about six months in employment. Further much of the evidence suggests that there is little difference in the duties and responsibilities assigned to 20 and 21 year old retail employees or in the level of supervision required in relation to those employees.²²⁸

There was little evidence to suggest a 20 year old, with some experience, required any supervision; certainly not close supervision such that may suggest an additional cost would be incurred by employers to engage persons to provide such supervision. In fact, as we have earlier noted, there was evidence that employees at 20 years of age or younger had supervised other employees.²²⁹

Having considered all of the evidence and submissions we are not persuaded the variation will be likely to have a negative impact on workforce participation. In those businesses with a collective or other employment arrangement whereby 20 year olds are already being paid the adult rate, it is unlikely to have any impact on the continuing workforce participation of these workers. … In the case of businesses where the award rate only is paid, we accept employers may consider whether to hire either a younger employee or an adult instead of a 20 year old. The evidence did not suggest it is a strong possibility they will decide to do so. Their current practice was not to prefer these other employees to an employee about to turn 21 years of age. That is understandable as they would be unlikely to do so particularly in the case of an employee with experience who understands the business and its customers.²³⁰

We assess the likely cost impact of the claim to be moderate. Further, that impact will be reduced as a consequence of the period of service requirement we have decided to introduce. We are not persuaded that the provision of adult rates to 20 year old retail employees will have a significant negative impact on business costs, nor on the viability of retail businesses. We are not persuaded it will have a discernible impact on employment growth.²³¹
In varying the Award to give effect to the decision, we are mindful of the cost implications for some employers and the transitional arrangements that are still applicable under the Award. We have therefore decided that the Award should be varied so that the new rates for 20 year old employees in retail classifications will be phased in as follows: 95% of the adult rate to apply from the first pay period commencing on or after 1 July 2014; and 100% of the adult rate to apply from the first pay period commencing on or after 1 July 2015.²³²