In its decision released today, the Fair Work Commission has announced that the national minimum wage will be increased by 3.5 per cent. The decision is said to affect over 2.3 million employees in Australia and has the objective of maintaining a safety net of fair minimum wages, taking into account the relative living standards and needs of the low paid.

This means that the national minimum wage will be $719.20 per week, or $18.93 per hour, which constitutes an increase of $24.30 per week.

Minimum award wages will also be increased by 3.5 per cent, with weekly wages to be rounded to the nearest 10 cents.

The increase is marginally more than last year’s increase of 3.3 per cent but still falls short of the increases being sought by the unions.

The Fair Work Commission President, Justice Iain Ross, stated that:

“The prevailing economic circumstances provide an opportunity to improve the relative living standards of the low paid and to enable them to better meet their needs…. Compared to the position of last year’s Review, the economic indicators now point more unequivocally to a healthy national economy and labour market. The circumstances are such that it is appropriate to provide a real wage increase to those employees who have their wages set by the national minimum wage or a modern award...

The level of increase we have decided upon will not lead to undue inflationary pressure and is highly unlikely to have any measurable negative impact on employment. However, such an increase will mean an improvement in the real wages for those employees who are reliant on the NMW and modern award minimum wages and, absent any negative tax-transfer effects, an improvement in their living standards. We acknowledge that the compounding effect of increases over time may have a cumulative effect which is not apparent in the short term.”

Justice Ross was clear that the increase has not taken into account the recently announced 2018 budget tax cuts for middle and low income earners, which are yet to be passed in the Federal parliament.

The decision follows lively debate between industry groups, unions and the major political parties on the appropriate minimum wage increase.

The Australian Council of Trade Unions (ACTU) called for an increase of 7.2%, and made submissions supporting the adoption of a medium term target for the minimum wage, of 60 per cent of the median wage for full time employees. Relevantly, the Greens earlier this week announced their proposal to introduce legislation echoing the ACTU’s submission that the national minimum wage be set at 60 per cent of the median full time wage.

The Australian Industry Group called for a more modest increase of 1.8%.

The changes will take effect on 1 July 2018 so employers should ensure that they are ready to implement these increases.