Junior wages to get the chop?

Any rise in junior pay rates could devastate SMEs in the retail and hospitality sectors, business groups say. The future of junior wages has been thrown into question by Australia’s top pay decision maker launching an inquiry yesterday.

Fair Pay Commissioner Professor Ian Harper released an issues paper and called for submissions on the role of junior wage rates for business and the Australian economy more generally.

Junior wages – discounted pay rates for workers below the age of 21 – are particularly important to the retail and hospitality sectors, which combined employ the majority of junior workers in Australia.

The AFPC estimates about 530,000 Australians are employed on junior rates, constituting about 58% of all employees aged 15–20.

The review into junior wage rates will feed into a more general review into federal pay scales. While there is a possibility the inquiry could recommend that junior wage rates could be extended across more industries, the prospect business groups fear most is that junior rates will be lifted or abolished.

The chief executive of the National Retail Association, Patrick McKendry, says arguments that junior wages should be abolished because they discriminate against young people ignores the role they play in the viability of retail businesses and in generating jobs for young people.

“When commentators speak about junior wages being discriminatory, I’d suggest those same people have in all likelihood never operated a small business or franchise, never employed people and are approaching the issue from an academic or theoretical point of view that poorly serves small business in Australia,” McKendry says.

Any lift in junior wage rates would quickly result in a shift in employment to older and more experienced people and drop in the number of businesses prepared to put time and energy into training young staff, McKendry says.

The smallest businesses and least skilled young employees would be the hardest hit by any change to junior wage rates according to John Hart, the chief executive of peak hospitality industry group Restaurant and Catering Australia.

“The real area of sensitivity is down at that bottom end and that’s where junior rates of pay compensate for the lower productivity of those employees,” Hart says. “We need these employees, they want to be there and are happy with the money they get, so I’m not sure there’s much justification for a lot of movement.”

Given the current skills shortage, Hart says, many businesses would be forced to change their staffing arrangements if junior wage rates increased.

“The bottom line is that if there is any increase in the amount that people get paid by our businesses, they will compensate by employing people for less hours or try other combinations to keep net wage rate the same,” Hart says.

Submissions can be made to The AFPC inquiry into junior wage rates until February 29, 2008.