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Submission to AIRC Inquiry into Junior RatesPosted: 06 November 1998Author: Michael Gadiel Position: Industrial Officer Organisation: Unions NSW
SummaryThe Labor Council's Submission to the Inquiry into Junior Rates by the Austrialian Industrial Relations Commission.
Unions NSW
Submission to
AIRC
Inquiry into Junior Rates of Pay
C No. 33985 of 1998
Introduction The Labor Council submits that junior rates are discriminatory. They were first established on the basis that the needs of a junior were less than those of an adult male. In recent times, the needs principle has been significantly overturned by the principle of 'equal pay for work of equal value'. Notwithstanding the existence of an historical basis for the development of junior wages, there has been a societal shift in our views regarding the setting of the level of remuneration for work. This has left junior rates as a surviving vestige of an industrial relations system from a previous era. Labor Council proposes that junior rates should be replaced with a non-discriminatory alternative. Furthermore that the Commission is the appropriate body in which the arguments should be put regarding their replacement and that this should be done industry by industry, award by award. There is an overwhelming case for the immediate compression of junior rates to provide for the full adult rate at the age of eighteen. The Labor Council does not, by way of this argument, concede that lower rates should apply to employees below the age of eighteen, nor limit our ability to argue for the removal and replacement of junior rates in other age brackets. In reviewing junior rates award by award and seeking non-discriminatory alternatives we propose the following range of outcomes:
The Labor Council does not accept that a one size fits all approach, as proposed by the Coalition members of the House of Representatives Standing Committee on Employment Education and Training, is desirable or appropriate. Nor do we accept that the status quo can remain, as advocated by the Minister. We submit that there is a vital role for the Commission in overseeing and driving the replacement of junior rates with other non-discriminatory alternatives. This process must occur industry by industry, award by award and may extend over some time, with a range of interim steps, particularly for industries that have not established a competency based classification framework. The above process would limit any supposed negative effects upon youth unemployment arising from a sudden increase in wages. Background The 'Harvester Judgement' handed down by Justice Higgins in 1915 established the needs principle in setting the basic wage at a level such that the requirements of an average family could be reasonably met. The principle justified the payment of a higher wage to men then women on the basis that a man would have a family to provide for. This principle was the original pretext for the setting of a junior wage below the adult male level. In his analysis of the principles used in the historical development of junior wages David Pitman notes that 'all decisions seem to relate back to the ideas of Dethridge C. J. in the commercial Printing Case of 1934'. In this decision, Dethridge observes: "The court has never attempted to lay down any general principles governing rates for juniors. Frequently they have been arrived at by agreement or by adoption of current practice, In many cases rates have been prescribed, no reasons being given. Rates for juniors should be high enough to maintain them, but not high enough for extravagance; ...The rates must have some relation to the probable cost of living, and therefore to the amount of the basic wage... The most advanced junior has not as a rule any family responsibilities, and his rates should be materially less than the basic wage." This case reaffirmed the practice of paying juniors a percentage of the full adult rate, according to a sliding scale by age, up to the full adult rate at 21. In many cases this is still the practice today. The table below shows the pay scale for shop assistants in the NSW Shop Employees (State) Award.
On the issue of work value Pitman notes that 'Commonwealth and State tribunals have generally assumed that juniors have a considerably lower work value than adults, whether unskilled or journeymen, because of lower maturity and experience'. Thus, the needs principle fits conveniently with a loose application of the work value principal in the justification of lower wages to juniors, on a sliding percentage scale. The equal pay cases of 1969 and 1972 overturned the needs principle. This was replaced with the principle of 'equal pay for work of equal value'. Although the operation of this new principle resulted in equal pay for women it has not applied in the treatment in juniors. The 'equal pay for work of equal value' principle stands as the strongest justification for a shift away from the current system of junior rates and for their replacement with a non-discriminatory alternative. Since this time junior rates have remained a feature of our industrial system. Wage tribunal decisions maintaining them have relied less upon the 'needs' principle and more upon 'work value' and the 'allocative' principle. The 'allocative' principle, as used by Pitman, captures arguments associated with the labour market effects of changes to youth wages. The cases for the continuation of junior rates relying on the 'work value' principle suggest that younger persons wages require some discount 'to account for their relative lack of experience and maturity'. The assumption is made that there are a set of life skills including teamwork, organisation, planning, responsibility, punctuality, customer awareness, communication, initiative, self-confidence and a healthy work ethic which are difficult to measure. Significant employers of young people, such as McDonalds Australia Ltd have submitted that: "These skills and attributes are not easily measured objectively but, as young people are generally less proficient in them that older workers, age based wage rates represent a simple, rational and intelligible proxy for competency based rates." Arguments associated with the 'allocative' principle rely upon the presentation of evidence show that an increase in youth wages arising from a shift away from junior rates will negatively affect youth employment. Advocates of this position urge caution in changing the time honored junior rates system for risk of generating higher levels of unemployment. Junior rates developed in Australia because of the application of a range of principles in an ad hoc fashion. The 'needs' principle which was central to the original determinations for junior wages is no longer relevant. The current situation has arisen because junior wages have often been set by agreement between the parties, principles set have not been reviewed and processes such as the Structural Efficiency Principle were not applied to junior rates. There has never been a major test case establishing principles in this area. Labor Council Position Over the last twenty-five years since the equal pay cases of 1969 and 1972, there have been significant advances in our perception of what is, and is not discriminatory. As our understanding advances, junior rates increasingly appear to fall into the category of what is discriminatory. At the present time, junior rates rely upon special exemptions from anti-discriminatory provisions at both the State and Federal level to remain legal. This legislative tension has arisen as a result of significant changes in society's values and requires amelioration. The Labor Council submits that the Industrial Relations Commission is the appropriate forum to provide a mechanism for the alleviation of this tension. Age of Adulthood The Labor Council recognises that we are entering a transitional period with respect to junior rates and it will take some time to fully do away with them. There is however an interim step which may be implemented almost immediately. This involves acknowledgment that 18 rather than 21 is now the accepted age of adulthood. Currently society recognises 18 year olds as full adults almost universally. An eighteen-year-old is:
Industrial relations is one of the last remaining areas to recognise the societal shift toward the recognition of 18 as the age of adulthood. Today, the obligations of adulthood are imposed upon young people at the age of 18 rather than 21. But, there are still a few areas that do not accord 18 year olds the full benefits of maturity, this includes our industrial relations system. The Labor Council submits that existing junior rates in awards should be varied to provide for the full adult rate of pay for 18 year olds. This is an easily justifiable first step in any transformation towards non-discriminatory alternatives to junior wages. In putting forward this argument, the Labor Council does not concede that junior wages should be maintained for juniors younger than 18. We contend that there is overwhelming case for the abolition of junior rates for eighteen year olds because the set of arguments above apply in addition to the remainder of our submission. Junior Wages and Employment There is a range of conflicting economic evidence regarding the relationship between youth wages and employment in general. The recent Productivity Commission report 'Youth Wages and Employment' concludes that 'a 1 per cent increase in youth wages would lead to a decrease in youth employment of between 2 and 5 per cent in industries that employ a relatively high proportion of youth'. Caution should be exorcised when looking at the general relationship between youth wages and employment. Youth employment is concentrated in particular sectors; what we really need to know is the effect in a particular industry, of this very little work has been done. Factors influencing the employment of juniors and particular industries extend well beyond wage levels. This thesis is backed-up by conclusions reached in the BLMR paper by Mackay, who writes. "There is evidence of persisting occupational segregation of youth employment, and this suggests that these are indeed identifiable 'youth jobs' and/or 'adult jobs'. The precise extent of this occupational segregation can not be determined, but it appears to be substantial." The Productivity Commission paper, 'Youth Wages and Employment' goes further in explaining some of these market rigidities. It observes that because of variable demands in the retail and personal service industries, which are met by younger workers willing to work outside normal hours. 'In these industries, employers are likely to favour part-time and casual employment outside normal hours and in meeting peak demands, while maintaining full-time employment in standard hours of work'. From 1984 to 1997 part-time hours worked by teenagers in the retail trade and in the hospitality industry went up by 130% and 210% respectively. This lead the Productivity Commission report to conclude that 'in several service industries where the majority of youth workers are employed, teenage part-time employment has increased, despite rising wage costs'. This would seem to counter the proposition that youth employment levels are linked directly to wage levels. Clearly the youth labour market displays a range of complexities across sectors, types of employment (part-time, casual etc) and age groups. Each sector has a range of institutional, technological, regulational, and other factors operating that would affect teenage employment levels. These variables need to be properly taken into account in assessing the effect that a change in junior rates would have on employment. There is a range of views regarding the effect that the 25% increase in female wages resulting from the equal pay cases had upon women's employment. However, ABS figures show that the female employment / population ratio grew steadily from 39.1% in 1972 to 42% of the female civilian population in 1984 and has reached even higher levels today. In their econometric analysis of the effect of the equal pay cases on the labour market Gregory and Duncan conclude: "Substitution responses to relative wage changes appear to be very small...The level of measured female unemployment also appears to be largely unaffected by the change in relative wages." Gregory and Duncan calculate that the 25% change in relative wages reduced the growth in female employment by only 1.5% per annum. ''The consensus seems to be that women's employment growth (after trying to eliminate structural, cyclical and supply influences) has been slightly reduced, if by much less than might have been expected'. Arguments against the removal of junior rates associated with the employment effects arising from a projected increase in youth wages may be applied in a discriminatory fashion to any particular group. In previous cases relating to equal pay for women and aborigines this type of argument was not accepted. In the case of juniors it is equally inapplicable. Advocates of equal pay for women were not demanding across the board pay rises for women. They were seeking equal pay for work of equal value or recognition that wage levels should be determined according to value of the work itself not by virtue of the person employed to do the work. The same reasoning applies in the case of junior rates. Arguments associated with labour market effects of increased wages need to be tempered by consideration of the fact that proposals for non-discriminatory alternatives to junior wages will not necessarily result in wage increases. Rather the importance of the exercise is establishing a non-discriminatory framework for setting wage levels for juniors based on their work value or competency level, not on some arbitrary scale which has remained essentially unchanged for over fifty years. Federal Government Proposals In the recent report by the House of Representatives Standing Committee on Employment, Education and Training the coalition members of the Committee recommend the following in relation to junior wages. "Members of the Coalition parties on the committee recommend that the Government legislate to over-ride existing federal industrial awards to establish a National Youth Wage which:
The Labor Council submits that a one-size fits all National Youth Wage is an inappropriate mechanism for the advancement of youth employment. Aside from its obvious discriminatory aspects such a blunt approach is likely to upset many successful provisions put in place in particular industries that may include training and other special arrangements particular to the needs of that industry. The Federal Minister for Workplace Relations, Mr Peter Reith in his paper, 'Protecting Job Opportunities for Young People', claims: "It has not proven possible to establish skill-based criteria which properly reflect all relevant skill differences, and because age has proven to be an indispensable proxy for maturation factors" Mr Reith uses this as the basis for the Federal Governments preemptive policy announcement supporting the amendment of the Workplace Relations Act to allow for 'the permanent retention of junior wage rates'. The Labor Council rejects the Governments position as it would entrench a fundamentally discriminatory policy. In the last thirty years there has been steady progress in removing the discriminatory features of our industrial relations system. This retrograde policy, announced by the Minister has no place in a society built around the ethos of 'a fair go'. Non-Discriminatory Alternatives to Junior Wages The Labor Council's primary assertion is that, the most practical and desirable means for replacing junior wages with a non-discriminatory alternative is to complete the process of developing of a set of competency based classifications in each industry. With such a set of skill based classifications a young person may progress upwards as skills, knowledge and maturity advance. Under such a framework, both the 'work value' and 'equal pay for work of equal value' principles may be satisfied. A young persons worth to an employer may be appropriately classified and remunerated according to measurable skills and life experience. This would represent application of the Structural Efficiency Principle to junior rates by establishing a set of consistent, skill based rates of pay. This approach has utility because many of the skills aligning closely to maturity and life experience have been identified as Key Competencies (See Appendix A for more detail). The seven Key Competencies are:
The need for 'employment related key competencies' was first recognised in the Finn Report in 1991. In 1992, the Mayer Committee produced recommendations for the key competencies, which are now recognised, and part of the National Training Framework. These competencies are measurable and align with maturity; they determine work performance and the ability to acquire other competencies. In his paper on the role of Key Competencies in the training reform agenda Colin Ducker writes: Key competencies will provide a thread which is anchored in secondary schooling, runs through vocation education and training and ties into both work and adult life. And key competencies will be incorporation into national industry competency standards which, in turn, are forming a significant relationship with the development of vocational education and training curriculum. Key competencies are designed to assist in the school to work transition and may be incorporated into industry training packages enabling them to capture the characteristics for which age has traditionally been used as a proxy. Frequently a basis for the payment of junior wages is to compensate for unproductive time spent in informal on-the-job training. This accounts for the increase in human capital, and increase in future earning potential, acquired by the youth. The Labor Council proposes that the Commission should oversee a process whereby informal training arrangements are made formal and brought into the National Training Framework of measurable competencies linked to classifications. This will ensure the portability and future recognition of competencies acquired. A different situation would apply to industries where it could be shown that the levels of youth employment would not be significantly affected if junior rates were removed entirely. This may be a reasonable and justifiable course of action for low or semi-skilled positions requiring a limited bundle of easily acquired competencies. Such might also be the case for an industry that preferred the employment of juniors over adults for reasons other than discounted wages. There would undoubtedly be areas where juniors are sought for their positive characteristics such as ability to take-up new ideas and willingness to work flexible hours. In such cases as described above the work value of a junior would be equal to, or greater than that of an adult. Industries that are not yet near to having a competency based classification implemented need to be put on notice. The Commission should review any junior wage scale according to set principles and make adjustments to reflect the true work value of juniors in that industry. Furthermore, the Commission would advise employers in the industry that it would have to find a non-discriminatory alternative to junior rates, within a reasonable time. Conclusion Junior rates are a dinosaur; a hangover from the past. They are an unwelcome and embarrassing reminder of a wage fixation system that set women's wages below men's. With the benefit of our modern, more enlightened approach we now know better than to perpetuate a system that discriminates against a person on grounds of their age. There are range of workable alternatives to junior wages, the best of which is the development of a set of competency based classifications, incorporating key competencies. This would provide a system based on performance, productivity and work value, not on age alone. As we approach the turn of the century we need a fairer, non-discriminatory mechanism for the payment of juniors, appropriately recognising and developing their skills, suited to the twenty-first century - not back to the future. |
