An Approach to Minimum Wage Determination - Assignment Example

1. Introduction The success of any organization depends on the performance of its employees, which is directly proportionate to their motivation and satisfaction level. Please note that compensation or wages play a very important role in this regard. Therefore, it is almost mandatory for an organization to have their salary structure and wage mechanism designed in a way that is beneficial for both parties. To be more specific, though companies these days come up with fancy CTC’s, the break-up actually determines if the compensation is really meaningful for the employee. Whether an employee is fairly compensated is determined by the minimum wage structure of a company. The economy can progress only if companies look forward to revise their minimum wages policies from time to time, with the constantly changing times. This will also ensure dedicated employees, who are instrumental in any organization’s growth. The paper thereby looks into the the submissions of the Australian Council of Trade Unions (ACTU) and Australian Chamber of Commerce and Industry (ACCI) and reveal about their approach to minimum wage determination. The paper also looks to present the extent to which these views were reflected in the Minimum Wage Review decision of Fair Work Australia. 2. What do the submissions of the Australian Council of Trade Unions (ACTU) and Australian Chamber of Commerce and Industry (ACCI) reveal about their approach to minimum wage determination? The organization which upholds the responsibility of ensuring whether employees are getting fairly compensated is the Australian Council of Trade Unions (ACTU) & Australian Chamber of Commerce & Industry (ACCI). The Minimum Wage Panel (the Panel) established under the Fair Work Act 2009 (FWA) is required to conduct and complete an annual wage review in each financial year. This panel through the Act sets out some important procedural fairness requirements for the review. It includes the provision of a reasonable opportunity for all persons and bodies to make written submissions, publication of the written submissions and a reasonable opportunity for submissions to be made in reply. Interested organizations and bodies like ACCI and ACTU, referred to collectively as parties, participated in this review by written submission and some of them participated in public consultations. However, there is fundamental difference between the lines of thought which is being adopted by these two organisations while submitting their recommendations to the panel. The ACTU examines the wage rate by comparing the changes in the recent trends in the living standards, which has come about and the various dimensions related to it; with the revisions made into the wage-structure. “The ACTU is entrusted with the responsibility of ensuring the Fair Work Australia Minimum Wage Panel and the National Minimum Wages that needs to be paid to the employees so that they are satisfied.” (ACTU, 2011) Fundamentally, it’s quite evident that ACTU is in favour of a safety net through a strong framework for minimum wages. The ACTU supports the institutional intervention of FWA in ensuring a strong system of minimum wages. After examining the minimum wage rate, the Australian Council of Trade Unions (ACTU) suggested a layered or structured approach. It recommended a weekly increase of $26.00 to the national minimum wages as the flat dollar increase policy. This is also applicable to the modern award wages and includes the C10 level. Now, this means that the raise is equivalent to 3.8 per cent raise at the C10 level, which according to the ACTU recommendation, is also applicable to all modern wages higher that the C10 level (ACTU, 2012). On the contrary, ACCI advocated for more organizational autonomy and supports relatively limited framework for minimum wages. Their approach is relatively tilted towards adopting a neoclassical approach where in it eemphasises more on enterprise bargaining. The Australian Chamber of Commerce & Industry (ACCI), through their findings hinted towards examining the way in which the work environment has progressed; so that even the meagre change in the salary structure, helps the employees to cope up with the evolving changes in the living standard (ACCI, 2012). 3. To what extent were these views reflected in the 2011-2012 Minimum Wage Review decision of Fair Work Australia? Recommendations that made part of submission from ACCI and ACTU, being fundamentally competing in their approach has found a balanced adoption by the panel which has tried to steer across these two recommendations. Highlighting that both getting a job and the pay and conditions attaching to that job are relevant when considering social inclusion, was considered by the panel in its report. Panel also put forward that there was no dispute that employment is an important component of social inclusion. It also accepted that the pay and conditions of work are relevant because they impact upon an employee’s capacity to engage in community life and the extent of their social participation. Economic conditions over the past year have been reasonably strong, driven by the resources and related sectors, with some softening in labour market conditions in the second half of 2011 and a moderation in inflation. Economic growth was lower than anticipated at the time of the 2010–11 annual wage review. Annual inflation has been volatile, falling from 3.1 per cent in the year to the December quarter 2011 to 1.6 per cent over the year to the March quarter 2012. The continuing high levels of unemployment among young people, the reasonably elevated underemployment rate and some decline in both the participation rate and the employment to population ratio for men are signals of some fragility in the labour market (Annual Wage Review, 2012). In summary, the outlook for growth is uneven. This uncertainty and the diversity of experience in the economy should be significant factors in the determination of the level of increase in minimum wages (Watt, 2012). In its submission, ACTU also recommended that the Panel should consider bringing equity in adjusting minimum wages. This was also important to bridge the gap due to ongoing difference in gender pay inequality. This recommendation was considered by the panel so as to bring pay equity over period of medium to long term. 4. In your view how well do the decision of Fair Work Australia and the approaches of  the ACTU and ACCI respond to the requirements of contemporary reward management? The Minimum Wage as stated by the Annual Wage Review, specifies the fault in the calculation of the Australian Council of Trade Unions (ACTU) & Australian Chamber of Commerce &Industry (ACCI), as the increase in the annual wage rate is inconsequential as it somehow is oblivious to the inflation rate, which has a direct effect on the purchasing power (Annual Wage Review, 2012).  The manner in which Australian Council of Trade Unions (ACTU) & Australian Chamber of Commerce & Industry (ACCI) looks towards evaluating the increase in wage rate is flawed as the rapid rise in the consumer price index hasn’t been considered which has affected the actual increase in the minimum wage rate. The effect of this has been such that the increase in wage rate has been negotiated by the growth in the consumer price index has negotiated the advantage associated with a rise in minimum wage. The review of the panel regarding the increase in the minimum wage rate is thereby moderate but needs to look into the factors like employment and inflation before arriving at a final decision regarding the increase in wage rate. This makes it important that the minimum wage rate is decided in a manner which helps equity to prevail in the economy. Every employee compares their ratios with those of their peers and if they are dissatisfied it affects their work. But if the ratios are equal “equity remains prevalent and fair justice prevails”. Employees like neither to be under paid nor over paid. They want the pay to be equitable so that the satisfaction level is high among managers (Gardner & Charles, 1998). This makes it important that Australian Council of Trade Unions (ACTU) & Australian Chamber of Commerce & Industry (ACCI) looks towards determining the minimum wage rate after looking into various factors which will ensure that the wage rate matches the actual work effort put by the employees. This brings to the fact that the mechanism adopted by Australian Council of Trade Unions (ACTU) & Australian Chamber of Commerce & Industry (ACCI) in calculating the minimum wage is not correct and needs to dwell on some other aspect like inflation and employment so that they are able to determine the minimum wage increase with more accuracy and this will help to reflect the actual scenario which needs to be considered. Australian Council of Trade Unions (ACTU) & Australian Chamber of Commerce & Industry (ACCI) decision to have an increase in wage and increase for most award workers is highly justified because it is consistent with the statutory criteria of the law which makes it important that the panel reviews their decision based on certain parameters and come up with a final decision on that basis so that it reflects the manner the work culture has evolved. Australian Council of Trade Unions (ACTU) & Australian Chamber of Commerce & Industry (ACCI) also looks towards matching the requirements of the contemporary reward management as the panel looks to identify the fact the employees also need to be rewarded for their good work and need to ensure that they are provided complete justice and accuracy in the minimum wage that needs to be paid. The Annual Wage Review also brings forward the notion that the minimum wage rate which is determined has to follow certain conditions and parameters laid down by the statutory and by abiding to those a minimum wage review needs to be conducted every year (Annual Wage Review, 2012). Australian Council of Trade Unions (ACTU) & Australian Chamber of Commerce & Industry (ACCI) followed a similar strategy and looked ensuring that the information provided by them looked into the different norms and research techniques so that the minimum wage increase matched the actual ground scenario. 5. Conclusion The way Australian Council of Trade Unions (ACTU) & Australian Chamber of Commerce & Industry (ACCI) has determined the wage increase is independently justified. However, due to their fundamentally competing approach for recommendations, the panel has to steer a balance in its overall approach. As such, prima facie, the recommended increase in minimum wages would help the workforce in general, to improve its living standards and would also help to empower them with a greater purchasing power by in turn equipping them to deal with the ongoing socio economical changes. But in order to make it happen, it is needed that Australian Council of Trade Unions (ACTU) & Australian Chamber of Commerce & Industry (ACCI) must develop more suitable framework which will look towards bringing the required changes in the manner the employees are rewarded so that there is consistency and a defined structure followed by the economy. 6. References ACCI, 2012, Fair Work Australia: 2011 Annual Wage Review, Australian Chamber of Commerce & Industry. Australia ACTU, 2012, Submission to the Annual Wage Review 2011-2012. Australian Council of Trade Unions, Australia Annual Wage Review, 2012, Annual Wage Review 2011 – 2012. Fair Works Act 2009, Australia Gardner, Y & Charles, E. 1998, Equity theory: perception is reality, High Beam Research, the Gale Group Inc Waring, P & Burgess, J 2011, "Continuity and change in the Australian minimum wage setting system: the legacy of the commission", Journal of Industrial Relations, vol. 53, no. 5, pp. 681-691. Watts M (2010), How should minimum wages be set in Australia? Journal of Industrial Relations 52(2): 131–149. Read More