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The new minimum wage: Everything you need to know

A photo of a man sorting through $50 bills.
The national minimum wage has risen by 3 per cent. (Photo: Getty)

If you haven’t already heard, Australia’s lowest-paid workers are set to get a modest pay rise.

There are a lot of numbers and figures flying around, so here’s the low-down on the bare facts you need to know, and then some: what the raise is, who’ll get it, when you’ll get it, and some extra background to put it in context.

How much is the raise?

The Fair Work Commission have decided to lift the national minimum wage by 3 per cent.

That brings the current minimum wage of $18.93 an hour to $19.49 an hour.

The weekly full-time minimum wage will go from $719.20 to $740.80, an increase of $21.60 a week, or $1,092 a year.

When does it come into effect?

If you’re on the minimum wage, you won’t start getting paid more immediately. But you won’t have to wait long, either: the changes come into effect on 1 July this year, so your employer should be paying you the new rates from that date.

Who and how many people does this impact?

The decision to lift the minimum wage will have a direct impact to 2.2 million people, or roughly one in five of all employees.

It’ll mean a direct pay rise for 180,2000 employees on the minimum wage, as well as those whose pay is set on the modern award minimum wage.

Those working in industries like retail, hospitality, cleaners, factory workers, restaurant workers and security guards are the most affected.

How often is the minimum wage reviewed?

The Fair Work Commission’s Expert Panel reviews the national minimum wage once a year and typically announces their decision around May, with the change to come into effect on 1 July each year.

Around this time every year rise a crescendo of calls for a significant hike to the minimum wage: the Australian Council of Trade Unions (ACTU) campaigned for a 6 per cent rise (or $43 a week), arguing that the current minimum wage keeps too many low-paid workers at or below the poverty line.

Works should be paid a ‘living wage’, not a ‘minimum wage’. Here’s exactly what a ‘living wage’ is and isn’t.

How does our minimum wage compare to other countries?

In real dollar terms, Australia now has the highest minimum wage in the world.

Australia is now higher than Luxembourg (11.97 euros, or US $13.34), with whom we were previously on par.

In saying that, however, when looked at from a different perspective, our minimum wage isn’t high at all. That’s because measuring purely by dollar terms doesn’t take into account things like the costs of living.

To account for this, the OECD has another measure: a ratio of minimum wages relative to the median wages of full-time workers – with the poverty line set at 60 per cent or less of the national median income.

Australia’s minimum wage was 55 per cent of median in 2017, according to the Australian Institute’s Centre for Future Work director and economist Jim Stanford.

Seen in this light, Australia doesn’t even make the top 10 countries for the best minimum wage: we rank 11th on the OECD’s list, behind countries like Chile, Columbia, Portugal, Slovenia, and Romania.

“[Thursday’s] increase of 3 per cent will not change that ratio very much, nor the international ranking,” Stanford told Yahoo Finance.

What do people think of the FWC’s decision?

The reception has been… mixed.

The ACTU is appeased, though wants more to lift Australia’s lowest-paid workers and their families out of poverty.

“This is a welcome pay rise for millions of low paid workers, especially in the face of further penalty rate cuts in a few weeks,” said ACTU assistant secretary Liam O’Brien.

“We have a long way to go to ensure that the minimum wage is enough for workers to live on and support their families.”

James Pearson, the CEO Australian Chamber of Commerce and Industry, was less pleased.

“It will have serious implications for many small businesses,” he warned.

“This is the third increase in a row that is well in excess of inflation, with no link to productivity increases.”

But the Fair Work Commission’s president Iain Ross said there wouldn’t be any unwanted consequences to the economy.

“We are satisfied the level of increase we have decided upon will not lead to any adverse inflationary outcome and nor will it have any measurable negative impact on employment,” he said.

– with AAP

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