The Fair Work Commission has abolished junior rates of pay for most over 18s. It’s a positive step
- Written by Kerry Brown, Professor of Employment and Industry, School of Business and Law, Edith Cowan University
On Tuesday, the Fair Work Commission handed down a landmark ruling[1] that will phase out “junior” rates of pay for adults aged 18, 19 and 20 in key sectors.
The commission ruled[2] that if they have six months of experience, all those over the age of 18 working in the fast food, retail and pharmacy industries will need to be paid at the full adult rate. The decision will affect about half a million workers[3] in Australia.
Previously, workers aged under 21 received a percentage of the full adult wage[4], which gradually increased[5] as they got older – 70% for 18-year-olds, 80% for 19-year-olds, and 90% for 20-year-olds.
The changes are expected to be phased in[6] over the next four years, starting in December. Notably, there will be no change to pay rates for those aged under 18, who will still receive a junior rate.
Why the change?
There’s been a push[7] to abolish junior rates of pay for adults for several years. Tuesday’s ruling follows an application[8] made in 2024 by the Shop, Distributive and Allied Employees’ Association. This initiative was supported by the Australian Council of Trade Unions (ACTU).
The decision changes an important concept in setting wages in Australia. That’s because it recognises adult worker status at age 18 rather than 21 years.
The justification for paying young people less centred on two key arguments. The first was that younger workers are relatively inexperienced and there are costs involved in training them.
The second was that it actually benefited young people. Business groups regularly argued it created an incentive[9] for employers to prioritise taking on younger workers, over those receiving the higher adult rate.
The argument here is that by creating an incentive for employers, it makes it easier for young people to get their first foot in the door in the workplace.
The decision still acknowledges the importance of allowing employers to pay a discount rate for less experienced younger workers. Notably, those with less than six months’ worth of work experience can be paid the relevant junior rate.
This aspect of the decision is a crucial caveat and preserves some of the incentives to employ younger workers.
Why is this important?
Recognising adult wage rates should start at 18 rather than 21 corrects an anomaly which has persisted for some time.
The ruling finally aligns workplace pay with modern social standards and norms. By the time they’re 18, young people have earned the legal right to drive a vehicle, vote in elections[11] (since the 1970s), smoke and drink alcohol.
Australia’s wage system was built on the principle that wages should give people enough money to live on. To illustrate, we can look back on a landmark 1907 ruling, the “Harvester Judgement[12]”.
In a case centring on the Sunshine Harvester Company, Justice Henry Higgins ruled[13] a “fair and reasonable” wage should be enough to support a man, his wife and three children in “frugal comfort”.
This ruling led to the establishment of the national minimum wage in Australia (though initially only for white, male workers).
Fast forward to today, the costs of living for someone aged 18 don’t vary significantly from those of someone aged 22. Young adults paid a junior rate are also disadvantaged over their lifetime earnings to save for a house, accumulate superannuation, and so on.
Could it make it harder to get a first job?
Many major business groups have previously opposed the changes[14].
In the wake of today’s decision, the Australian Retail Council said[15] the decision would:
add significant costs to retail businesses, particularly small and medium-sized operators already under pressure from a sustained cost-of-doing-business crisis.
The council said it represented a move away from “long-standing junior wage settings that have supported youth employment for more than half a century”.
So, could it actually make it harder for young people to get a first job? For one, younger workers aged under 18 will still be paid according to junior rates. It could even boost employment prospects for this younger group, making them more competitive for available jobs.
Evidence from New Zealand[16], where the youth minimum wage for 16- to 19-year-olds was removed in stages between 2001 and 2008, suggests paying younger workers the adult rate of pay, does not affect their ability to secure a job.
What doesn’t this address?
The decision to scrap junior rates of pay for adults in these sectors will go some way to improve pay equity. But it will not directly address other equity issues, such as gender pay equity and other workplace issues such as the casualisation of labour.
The ACTU has previously highlighted[17] that Australia’s level of casual employment is one of the highest in the world.
Casual labour can impact young people’s ability to pursue a long-term career and leave them behind or on the edges of the primary jobs market.
References
- ^ landmark ruling (www.fwc.gov.au)
- ^ ruled (www.fwc.gov.au)
- ^ half a million workers (www.theguardian.com)
- ^ percentage of the full adult wage (theconversation.com)
- ^ gradually increased (www.afr.com)
- ^ phased in (www.fwc.gov.au)
- ^ push (theconversation.com)
- ^ application (www.fwc.gov.au)
- ^ created an incentive (www.retail.org.au)
- ^ Bianca De Marchi/AAP (photos.aap.com.au)
- ^ vote in elections (www.aec.gov.au)
- ^ Harvester Judgement (www.nma.gov.au)
- ^ ruled (peo.gov.au)
- ^ previously opposed the changes (www.abc.net.au)
- ^ said (www.retail.org.au)
- ^ from New Zealand (papers.ssrn.com)
- ^ previously highlighted (www.actu.org.au)
