How did we get to this point?
Too many Australians on low wages don’t get enough money to live on. You shouldn’t be working full-time and not be able to make ends meet, right?
Like many other countries, Australia has a set national minimum wage, which is the lowest pay rate an employee can receive. (Some workers are not even entitled to the minimum – like those on apprentice and trainee, junior or disability pay rates – but that’s another story.)
Australia’s minimum wage is set by the Fair Work Commission, the independent umpire for workplace matters, and is reviewed in June each year. Currently (as of 1st July 2024), the National Minimum Wage is $24.10 per hour or $915.90 per week – and that’s before tax.
“For decades we allowed our minimum wage to become something that is simply not enough to live on.”
Jo Schofield, National President, UWU
In 1907, Australia’s minimum wage was groundbreaking
Australia adopted a minimum wage in 1907, and at that time, it was pretty radical. The President of the Conciliation and Arbitration Court (a precursor to the Fair Work Commission), Henry Bourne Higgins delivered his famous Harvester Judgement, saying wages had to be ‘fair and reasonable‘ for a family of five to live on.
To determine what that would be, he interviewed not only the male workers – but, also their wives. This was the first time a living wage was determined by a person’s needs, not whatever a company wanted to pay.
According to former Assistant Secretary of the Australian Council of Trade Unions Tim Lyons, the judgement reveals the original purpose of the minimum wage.
“(Any person) who is working may not be well off, but they will not be in poverty.” Tim describes how the original system worked by ranking all jobs against each other.
“People will think it’s nuts now, but for some decades, the entire wages system for most people revolved around the rate of pay for a man who has a metal industry trade.”
Back then, an independent umpire based each pay on a percentage of a metalworker’s salary.
“If a metal tradesman gets 100 per cent of the basic wage, a cleaner gets ‘x’ per cent of that base wage, and an electrician gets ‘y’,” Tim explains.
It was a frugal wage, but it rose over time and – for a while – Australians on the minimum wage and other industry awards received a relatively decent standard of pay.
Groundbreaking? Yes, but still far from perfect
Our minimum wage was a big step forward, but the historic decision was not without its faults. In 1912, women were paid just 54 per cent of the male wage. Indigenous Australians were also paid less.
Unions fought over many years to remove pay discrimination. In 1972, it was ruled that women and men who did the same work should be paid the same. The last race-based pay rates were removed in 1966.
However, the battle for equal pay continues – in 2024, for every dollar a man earns, women earn just 78 cents, which adds up to $26,393 per year.
Get involved in our campaign to close the gender pay gap. Join UWU’s Gender Agenda campaign for safety, equality and respect for women.
Fast forward to the 1990s and there was a big shake up
The federal Labor government, with ACTU support, changed how the system worked in the early 1990s with a focus on enterprise bargaining. Tim Lyons explains how.
“Instead of having a system based on what a quarterly tribunal decided, it was based on what you could get out of your own boss”.
For some it worked well, such as people working on the wharves.
“They’re at a choke point in the economy where their labour costs are very little, but the capital costs of what they do is very high”.
“If you need a lot of people to do it, like the service sector, then those kinds of systems have been pretty problematic”.
But for the industries that need more people to get the job done, an EBA is not as effective – particularly, if workers are spread across a lot of smaller workplaces and employers.
These systemic changes happened at the same time as the massive growth in the service sector economy, which includes jobs like cleaning, hospitality, early education and aged care. Many new service sector workers were women and very few had access to enterprise bargaining, partly due to low levels of union membership.
The new rules also gave big business way too much power to hold down minimum rates of pay.
Some workers (mostly men) began to gain through enterprise bargaining, while others (mostly women) were stuck on the award system that was falling behind. The connection between workers with a lot of bargaing power and those with very little had been severed. As a result, the gap between average and minimum wages has been growing wider and wider.
A fundamental change has happened. The minimum wage is no longer about ensuring every worker earns a living wage; instead, it’s now just a safety net – so you don’t hit rock bottom.
How do we know the system’s not working?
National President of the United Workers Union, Jo Schofield, says ever since the 90s, workers on minimum wages have seen their wages fall further and further behind.
“The standard way low pay is understood, is that if you’re paid 60 per cent or less than someone on a middle income, then you’re low paid. Until the late 1990s, our minimum wage stayed above this key threshold. But since then, Australia has been on a downward slide”.
As you can see from the graph below, it’s fallen really quickly.
In 2021, the minimum wage fell to just 51 per cent of the average wage. Jo Schofield explains how this has affected workers.
“What that shows is that if you’re on the minimum wage, you’ve seen your living standards fall further and further behind the rest of the community.
“Unions have fought incredibly hard over the years to keep pushing wages up and we’ve had some wins, but the truth is, the current system has a fundamental flaw – for decades we allowed our minimum wage to become something that is simply not enough to live on.
“That should never be allowed to happen.
“While bigger increases in the minimum wage over the past few years have helped, they have been quickly eaten up by even bigger rises in the cost of living”.
“Simply not enough to live on”
We know from our members what an impact this is having. Lots of you are priced out of rental markets in capital cities. You’ve told us about how you’re struggling to pay for medical expenses, heating bills and even basics like groceries.
“If you work full-time, you shouldn’t make an international definition of low paid,” Tim Lyons says.
And if you’re thinking, ‘but I’m not on a minimum wage, this has nothing to do with me,’ – then think again! The minimum wage underpins all our award wages. This adds up to close to 3 million people. There are over 100 awards, that include industries ranging from aged care to hospitality to cleaning.
If we can increase the minimum wage, that helps everyone else push for better pay.
So, how can we build a better system?
Stay tuned for our next blog in November where we outline a plan for a better minimum wage.
SPOILER ALERT: If we can improve the minimum wage system, we can build a better system for all workers.
Interested in learning more? Join UWU now to get expert advice and support from your union and add your voice to our fight for decent wages for every worker in Australia.
