Junior Rates Inquiry Issues Paper

Junior Rates Inquiry Issues Paper
AIRC per Munro J, Duncan DP, Raffaelli C
[Print Q9610] 22 December 1998

ACTU response

D No. 911999

1.Should the Commission refrain from "foreclosing" on non-discriminatory alternatives?

This was the ACTU submission dated 6 November to this Inquiry. It remains our submission for all the reasons given. The Commission's report should be as comprehensive as is achievable, and be based on wide-ranging consultation. [Any balanced 'exposure of the available evidence about the consequences for youth employment of abolishing junior rates and the utility of junior rates' in the Commission's Reports will also necessarily expose critiques of that evidence and identify the disutility of junior rates.]

2.Should the terms of reference be read as subject to s.88B of the Act?

In this Inquiry under s.120B the Full Bench is not discharging its dispute prevention and settlement functions in the context of particular claims being before the Commission as constituted. When claims seeking the establishment and maintenance of the safety net of fair minimum wages and conditions are before the Commission as variously constituted, Section 88B imports the objects of the Act [s.3] and of Part VI of the Act [s.88A]. It is not clear that s.120B -which particularly empowers this Full Bench Inquiry-should be read as being subject to s.88B; the Full Bench is not making or varying awards. That said, we do not consider that much turns on this point.

3.Should the reference to "junior rates" in s.120B be taken to refer to certified agreements, apprentice rates and similar related provisions?

The principal concern must be to age-based rates of pay in the Commission's awards. These are the rates which set minimum entitlements. Provisions in certified agreements are principally the concern of the parties to them; ultimately any age-based rates of pay set down in such agreements will be renegotiated having regard to developments which may have occurred in the award provisions which set the base and define the tests for disadvantage. In our view, apprentice rates of pay, and indeed all award rates applying in conjunction with formal training arrangements, are not embraced by the term 'junior rates' as such, though some degree of affinity arguably exists between them. In this respect, apprentice and other contract of training rates are not the central concern of this Inquiry, but it would not necessarily be inappropriate for some adjunct reference to be made to them by the Commission in its Report.

4.Is any issue of substance pressed about the Inquiry's procedure adopted or foreshadowed?

Not by the ACTU at this time.

5.Do a relatively weak set of policy considerations dictate the prohibition on age based discrimination against young employees? What policy objectives are to be served by the prohibition on agebased discrimination?

In our view the provisions against age-based discrimination derive from the general 'award reform' precepts which originated with award restructuring and the Structural Efficiency Principle in the mid to late eighties and subsequently were given statutory force in the then s.1 50A of the Industrial Relations Act. The essential injunction is against arbitrariness and for fairness and contemporary relevance in award provisions. These are strong policy considerations warranting concerted attempts at their achievement. Discriminatory provisions should be corrected or removed. In contrast, in our view, an extremely weak set of policy considerations has been articulated to support preservation (indeed, extension) of age-based discrimination against young employees, and this for highly dubious policy objectives.

6.Is the policy objective essentially one of avoiding or reducing unjustifiable failure to ensure equal remuneration for work of equal value?

See 5 above. This sparing characterisation of the essential goal is not inaccurate, in our view.

7.Is the remediable deficiency of age-based rates comprehended by the following points:

• equity and work value - yes, this criticism is fundamental
• equal pay and work value-yes, this criticism is fundamental
• inherent unfairness at age 18 and above-yes, absolutely
• systemic exploitation of young people - yes, in part
• needs and living costs comparisons -yes, this has great force
• perverse incentives for youth employment-this is true in important sectors
• perverse incentives for adult employment-this is true in important sectors
• diminished self-esteem -this reflection is inescapable for individuals who are otherwise adult before the law
• junior rates as business welfare subsidy -this is the practical effect of existing provisions
• proxies for costs of training -this is certainly true in most instances, such as for example the employment of 18, 19 and 20 year old shop assistants who have multiple years experience on the job in the retail sector.

In our view, the present array of provisions is an "accident of history" in need of thorough overhaul to be effective and relevant to contemporary and emerging workplace and social requirements.

8.Can it be established that in particular instances, if not in general, the same work is being done, with the same results, by a junior as by an adult worker? How? Can differential minimum rates then be justified?

Yes, it can readily be established through witness evidence. Differential minimum rates cannot be justified in this light.

9.Should the Inquiry's assessment be limited to current junior rates provisions, or should it allow for changes to current provisions including greater reliance on experience and competency in pay progression schedules in awards?

Any assessment strictly limited to assessment of the status quo of award junior rates provisions would be artificially and unnecessarily limited, and be subject to high probability of being rendered outdated and redundant soon after the Inquiry's Report is released. Award restructuring has yet to be applied to junior rates in the Commission's awards; that this situation exists at all is only because of the great caution and reserve exercised by the union movement on the question of junior rates and its commitment to achieving fair and enduring reform rather than simply an early result. Current award provisions governing junior rates of pay and related matters reflect a state of `suspended animation' which cannot reasonably be expected to persist indefinitely. It would be entirely reasonable for the Inquiry to give consideration to the prospect of junior pay rate progression schedules being moderated in various ways, for example by the application of SEP precepts generally and the inclusion of experience and competency criteria in particular.

10.Is it discriminatory to have differing base rates for junior and adult apprentices?

Yes. The extent of this discrimination would drastically be reduced by recognition and reflection in awards that persons are adults at age 18, especially with the increasing trend for apprenticeships to be taken up by young people on completion of year 12 rather than (as was historically the case) upon turning 15 years of age.

11.What inference can be drawn about the industrial parties' capacity to develop non-discriminatory alternatives to age based progression frameworks?

At peak council level, it is our judgement that there is no longer any prospect of reaching agreement regarding non-discriminatory alternatives to existing age-based progression framework. [We held the contrary view in the early nineties, and indeed the National Training Wage provisions bear witness to the more propitious circumstances which then existed in this respect.] Since the introduction of the Workplace Relations Act and its requirement that this Inquiry be conducted, the union movement has continued to exercise great reserve in the interests of achieving a fair and enduring resolution of the junior rates issue. It would be premature and unfounded to infer from this that there is no prospect of developing by collective negotiation any significant non-discriminatory alternative to existing junior rates provisions; however profound obstacles to such development exist in important sectors.

12.Can greater consistency in junior rates provisions and principle be achieved across awards generally? How?

We believe so, through proper application of award restructuring consistent with Structural Efficiency tests and procedures. Not only can such an outcome be achieved, our view is that it must be achieved in the interests of ensuring fairness and redressing arbitrariness in the safety net defined by the Commission's awards.

13.Are there significant options for non-discriminatory alternatives (to age-based junior rates) capable of being developed to be a feasible alternative?

The ACTU believes the answer to this question is in the affirmative. We are presently in the process of developing a specific claim for testing under Structural Efficiency Principle criteria, which is neither simplistic abolition of junior rates nor rigid retention of the status quo, but is a measured package of reforms consistent with skill, competency and experience related criteria and designed to meet all non-discriminatory requirements under the Act. The claim under consideration has a number of logically discrete elements; one element under consideration has a degree of affinity with the National Training Wage progression framework.

14.Is the assertion - that competency based classification models make no allowance for maturity and life experience and are too administratively complex - corroborated or countered by the NTW model?

The ACTU will seek to have its claim to apply award restructuring to junior rates tested on its merits. Allowance for maturity and life experience and for administrative simplicity and tractability are considerations central to framing the specific claim to be made.

Regarding the NTW model and related examples of alternative progression frameworks, we say firstly that the 'quest for perfection is illusory'; and secondly that it is a proven success with a vastly greater number of (junior and adult) trainees passing through under its provisions than under any other comparable scheme ever.

15.Concerning practical difficulties said to be inherent in competency based progression arrangements.

Competency based arrangements are in principle the fairest and most appropriate basis for specifying and defining minimum wage entitlements in a progression framework. Great advances have been achieved over the past decade in many award areas and callings in devising and implementing competency based progression arrangements; this work however remains far from complete and the union movement for its part remains committed to the continuation of those efforts. Nothing in the claim contemplated (to apply SEP to junior rates) is hostile to full competency based arrangements nor to their continuing development and certainly not to those arrangements applying in connection with longer term contracts of training such as apprenticeships.

16.Should the junior rates debate proceed without clear articulation of concrete alternatives?

This Inquiry is a statutory requirement and must proceed in accordance with the Act as it stands. The ACTU did not seek for s.120B to be inserted into the Act. Nevertheless, we consider this Inquiry and its Report can assist to inform debate on these important issues by raising the factual basis on which that debate proceeds and by disposing of shibboleths and misunderstandings.

The Inquiry is required to Report to the Minister by the due date; some concrete alternative proposals have been put to the Inquiry, although it is not required to have any claim before it in order to proceed. Indeed it is unclear to us how the Inquiry might proceed were any such claim before this Full Bench. In such circumstance, ought the Full Bench refrain from determining any such claim until its Report had been received by the Minister? Until the Minister had laid the Report before both Houses of parliament? Until the parliament had reached a resolution in light of the Report? Should the Commission in such circumstance make a contingent determination and withhold giving effect to it until Ministerial or parliamentary approval had issued? What implications might each of these courses carry for the statutory independence of the Commission and perceptions of its independence and impartiality? Alternatively, should the Full Bench in such a contingency rather first determine such claims as were before it, and subsequently advise the Minister in its Report accordingly? What then would such Report to the Minister achieve?

In our considered view, this Full Bench may well have been placed in an invidious position by having before it for determination a specific claim with respect to junior rates of pay.

It is decidedly the case that the Minister in this instance has predetermined his response to the Report of this Inquiry, having announced the intention of the government to legislate requiring the preservation and extension of junior rates without any simultaneous announcement of intention to repeal s.120B in a timely way. The purpose and intent of the Minister's pre-emptive and premature announcement invites speculation, but we decline to offer any.

In all the circumstances, we believe this Full Bench in its Inquiry and Report can assist to achieve informed debate on the critically important issue of junior rates of pay. For all the reasons put, we say it would be inappropriate for the Full Bench to attempt to determine the way forward in the absence of any specific claim to vary being brought in the normal way. We have advised the Commission of our intention to make such a claim. For reasons of propriety we have chosen to await the final Report of this Inquiry before bringing any specific claim to the Commission.

17. Concerning the coverage of junior rates provisions and its impact on the cost of abolishing junior rates and (ii) the ‘degree to which age related progression in junior rate classifications denies equal remuneration for work of equal value’.

The Issues Paper at this juncture correctly identifies a range of considerations relevant to assessment of the effective coverage of award junior rates of pay in the employment of young workers. That coverage certainly varies by award, by industry sector, and industrial context.

Without dedicated and expensive special survey information, it is our understanding that existing available data is inadequate to the task of providing authoritative economy-wide estimates of employment coverage under award minimum rates of pay for young workers. Nevertheless, it would be possible to provide ranges of cost estimates for the abolition of junior rates of pay using available data and expert knowledge of coverage in the various industry sectors.

The issue of age based discrimination applies with respect to the awards of this Commission, quite independently of the extent to which that discrimination is reflected in practice into the field resulting in denial of equal remuneration for work of equal value.

18. Should the Inquiry accept that there is no substantive basis on which the Commonwealth government analysis about youth employment should be disputed?

Yes, the Inquiry should definitely do other than accept the Commonwealth government submission. While we do not take substantive issue with its broad description of the changing contours of teenage employment in Australia over the past 15 years, its attempts (in the final paragraph of section 3.7 of that submission) to draw a causative linkage with corresponding changes in teenage average earnings and thus youth wages is highly contentious.

That attempted linkage is tendentious and must be rejected. It is beset with reasonable doubt as to its accuracy and validity. On the balance of probabilities the analysis should be rejected; the weight of evidence from Australia and overseas is against the simplistic and convenient (to them) conclusion that a powerful and immutable inverse relationship exists between teenage employment and teenage earnings.

It is true that full-time teenage employment has declined over the past 15 years, and that there has been a corresponding rise in real hourly earnings of full-time teenage employees. However, as demonstrated in the ACTU November submission to this Inquiry at Table 1, the latter may be and is likely to be due to a change in the age-employment profile within the full-time employed teenage cohort with no change whatever in teenage hourly rates of pay. All else equal, fewer 15, 16 and 17 year olds employed full-time will generate both effects rejected on by the average earnings. Such compositional effects derive from a range of factors including increased school retention rates to year 12 and technologies change, and confound any inference sought to be drawn from average earnings data regarding the causative effects of youth minimum wage rates

In any event, the converse picture emerges with respect to part-time employment, where teenage part-time employment has grown substantially in conjunction with significant increases in teenage part-time average hourly earnings. This aspect of any fair analysis of youth employment in Australia over the past 15 years is suppressed in the Commonwealth submission to the Inquiry.

Other substantive bases on which the analysis set out in the Commonwealth government submission should be disputed are identified at section 3 of the ACTU November 1998 submission to this Inquiry, and in the Junankar, Waite and Belchamber paper forwarded to this Inquiry under separate cover.