The Fair Work Commission has ordered a $13 a week increase in the national minimum wage, or 1.75%.
The new minimum wage will be $753.80 a week or $19.84 an hour.
The decision, released on Friday, will result in pay rises for more than 2.2 million Australians who are paid the minimum or who have their pay set by awards that rise in line with the decision.
But the FWC decided to stagger the increase, with essential service workers benefiting immediately and industries hardest-hit by Covid-19 waiting until 1 February.
Frontline healthcare, social assistance, teachers and childcare workers will receive the increase from 1 July; construction, manufacturing and other industries from 1 September; accommodation, food services, arts, recreation, aviation, retail and tourism from 1 February.
The commission’s president, Justice Iain Ross, said the minimum wage panel had to weigh “sharply polarised” demands.
Unions had asked for a 4% rise, or $30 a week more, while peak employer bodies – including the Australian Chamber of Commerce and Industry and Australian Industry Group – wanted a freeze or to delay the pay rise until 1 January, and the federal government had stressed the need to protect jobs and consider business viability.
The decision, in the midst of the Covid-19 contraction, breaks a line of above-inflation pay rises, including a 3% rise last year. Inflation was 2.2% in the March quarter.
Ross said the FWC understood the economy was in a “significant downturn” and the shock to the labour market had been “unprecedented”, citing the substantial increase in unemployment and underemployment.
The FWC had taken a “cautious approach” to both the timing and size of the minimum wage rise due to the economic environment and tax and transfer changes – such as jobkeeper and jobseeker schemes – which benefit low-income households.
There were “some indications the economy is beginning to recover” but there were “significant downside risks” including that of a second wave of infections and “the future of domestic support” such as the jobkeeper wage subsidy.
Ross said the shock to the labour market meant the panel gave greater weight to the potential that minimum wages could inhibit hiring and re-employment.
The union request for a 4% rise would create the risk of “disemployment”, particularly for young workers.
But he said low-income households would be “less able to meet their needs” and would be at greater risk of poverty without a pay rise.
The FWC had taken a more “nuanced approach” on the timing of pay rises than employer calls to delay all rises until 2021.
The staggering of pay rises was based on restrictions to contain Covid-19, and data about those sectors experiencing the biggest job losses and pay declines.
Ross said about 25% of award-reliant workers would benefit in the first tranche from 1 July, with 40% of workers in the second tranche and more than one-third in the final tranche.
Ross said Prof Mark Wooden, appointed to the FWC panel in March by the attorney general, Christian Porter, had dissented from the majority view and recommended “no increase”.
That was because Wooden believed “risks are weighed in one direction” and growth in jobs and hours should be prioritised over a wage increase, he said.
The secretary of the Australian Council of Trade Unions, Sally McManus, said the increase was “very modest” and “it is disappointing that several awards will not see any increase until November or February”.
“However, it is clear in the decision that this panel of experts recognise that cutting wages in the middle of this crisis would be a disaster for working people and the economy and they have rejected the arguments put by some employers to effectively cut wages by freezing the minimum wage,” she said.
The AiGroup chief executive, Innes Willox, said the majority’s decision was “risky given that the economy is in recession, many businesses are struggling to survive, and unemployment and underemployment have increased sharply”.
Willox said the decision will harm “impact adversely both on hiring and firing decisions” which was “particularly concerning for young people who have been so heavily impacted by the downturn in the labour market”.
