Half a million junior workers in sectors such as fast food, retail and pharmacy will receive a boost in their pay, putting them on even footing with their older colleagues.
In a landmark decision on Tuesday, the Fair Work Commission said it would scrap discounted pay rates for employees aged 18 to 20, saying they should receive the full award wage.
Wages for 18-year-olds in those sectors are currently set at 70 per cent of the full award wage, rising to 80 per cent for those aged 19, and 90 per cent when they reach 20.
Minors will still receive junior wages following the latest decision.
The higher wages for young adults will be phased in over a four-year period from December. It will only apply to those who have had at least six months of experience at their current workplace.
The decision took into account factors such as labour market disadvantages for young people, the watchdog added.
The SDA, which is the union representing retail, warehousing and fast food workers, said it welcomed the decision, but would be pushing for the “overdue” change to be applied as quickly as possible.
SDA national secretary Gerard Dwyer said the landmark ruling, which he put “up there with the introduction of equal pay for women in the 1970s”, would mean 18 to 20-year-olds would be treated more equally.
“18-year-olds can vote, drive and put their lives on the line for their country,” he said. “They struggle with the same cost-of-living pressures as every other adult. They do not receive a discount on their rent or the petrol they buy to get to work just because they happen to be 18. Now they will be paid the same as other adults.”
The union noted retail, fast food and pharmacy businesses employed more than 1.5 million Australians, with a disproportionate number of those aged under 21.
The Australian Retail Council, which represents large employers such as Woolworths and Coles, said in a statement that the latest decision would add significant costs for retail businesses.
The council’s chief executive, Chris Rodwell, said junior rates had served Australia well for generations and made it easier for young Australians to land their first job.
“[Junior rates] recognise that younger workers often have little or no workplace experience and help employers, particularly small businesses, give young people their first opportunity,” he said. “Crucially, junior rates for workers aged 17 and under will remain in place. That’s important. Early work experience is critical, and we cannot afford to make it harder for young Australians to get their first job.”
Rodwell said small businesses would be hit hard by rising costs and that if wages rose faster than productivity, it would affect hiring, investment and prices.
AMP deputy chief economist Diana Mousina said by her calculations, the decision would only affect about 3 per cent of workers, but that it would likely worsen inflation and make the Reserve Bank’s job harder as businesses pass on costs to consumers.
“It’s not a great policy because it will lift wage growth across the economy [at a] time where we don’t need it,” she said. “Australian minimum wages are already one of the highest in the world.”
Woolworths, Coles, McDonald’s and Bunnings declined to comment.
with AAP
Millie Muroi is the economics writer at The Sydney Morning Herald and The Age. She was formerly an economics correspondent based in Canberra’s Press Gallery and the banking writer based in Sydney.Connect via X or email.