WorkChoices and pay equity – what will it mean?

An article by Rae-Anne Medforth Director, WorkSight Pty Ltd and Editor, Public Services International Pay Equity NOW.

International Women’s Day 2006 is the eve of radical changes to the industrial relations system as we know it. Consequently it is a useful time for us to consider the impact on women’s wages.

The pay gap between women’s and men’s wages in Australia has traditionally been smaller than in many other industrialised countries. This has largely been attributed to the 1972 Equal Pay Case and the centralised industrial system of awards which cover most employees. (OECD, OECD Employment Outlook Paris 2002, p 95. Belgium leads the way in pay equity with a six per cent wage gap, followed by Australia. The average wage gap for OECD countries was 16 per cent: pp 95-97)

Australian women who work full-time receive 85.1% of earnings of men. However when we compare the full-time total earnings which includes over time, allowances and bonuses, women only receive 80.9% of men’s earnings leading to a gap of 19.1%. (May 2005 trend estimates: Australian Bureau of Statistics Cat No. 6302.0 Average Weekly Earnings August 2005. The ABS considers that trend estimates provide a more reliable guide to the underlying direction of the original estimates and are more suitable than either the seasonally adjusted or original estimates for most business decisions and policy advice.)

Such a wage gap is not acceptable in Australian society today. In my opinion I do not consider that the introduction of a more competitive market model will improve the wage gap between men and women.

The gap between women’s and men’s wages increases as we move away from the centralised award provisions. For those women whose pay and conditions are determined by collective agreements the wage gap is greater than those covered by awards. (HREOC Submission to Award review taskforce www.hreoc.gov.au). In general women are less likely to be involved in the enterprise bargaining process. Almost one third of women in the private sector rely on awards to establish their wages and conditions as opposed to 17% for men. (Victorian Pay Equity Working Party Advancing Pay Equity: Their Future Depends On It Report to the Minister for Industrial Relations, February 2005) As a result women have been more reliant on the comprehensive award system that has been available to Australian workers.

When we consider the outcomes for women if they enter into Australia Workplace Agreements (AWAs) the pay gap grows again. Evidence suggests that women are already faring worse in individual versus collective bargaining. A comparison of non managerial employees' average hourly rates of pay in 2004 found a gap of:

zero per cent between women and men on award only wages ($16.40);
7.73 per cent between men and women on unregistered collective agreements ($22 compared to $20.30);
10.36 per cent between men and women on registered collective agreements ($25.10 compared to $22.50);
11.3 per cent between men and women on unregistered individual agreements ($23.90 compared to $21.20); and
20.32 per cent between men and women on registered individual agreements ($25.10 compared to $20.00)
(ABS Employee Earnings and Hours Cat No 6306.0 May 2004. See also Marian Baird and Patricia Todd Government Policy, Women and the New Workplace Regime paper presented to the workshop Federal Government's Proposed Industrial Relations Policy University of Sydney June 20-21 2005.)

What impact will the new WorkChoices system have on women’s wages - Does fair pay mean equal pay?

The new AFPCS – the Australian Fair Pay and Conditions Standard –establishes the minimum employment conditions that will apply to all workers on federal awards, preserved state awards and agreements (either collective or individual) made under the WorkChoices legislation. These are:

4 weeks paid annual leave for full time employees
52 weeks unpaid parental leave
10 days paid personal/carer's leave
2 days paid compassionate leave
2 days unpaid carer's leave
20% casual loading
38 hour maximum working week for full time employees
Minimum wage – currently $12.75 an hour

AFPC – Australian Fair Pay Commission – this is a new organisation that will determine the minimum rates of pay and any increases to these minimum rates for all workers in the federal system. It will also establish the Australian Pay and Classification Scales that will take over the role of establishing the pay rates and classification structures from awards.

The Australian workplace is highly gender segregated and women remain clustered in the low wage sectors of the workforce. Many pay equity issues are exacerbated by this occupational segregation. Vigilance will be required to ensure that the minimum rates established for particular classifications do not increase the pay gap between women’s and men’s jobs. It is important that a range of processes be established to ensure that there is a comprehensive application of the equal pay principle Section 90ZR of the WorkChoices Act provides for the principles embodied in anti-discrimination legislation to be taken into account by the AFPC. However the Act does not provide for:

anti-discrimination considerations in the wage setting parameters; and
section 90ZR does not specify how the AFPC is to take these matters into consideration, raising the potential for complex issues such as indirect discrimination to go unaddressed. (HREOC Submission to Award review taskforce www.hreoc.gov.au )

The potential exists for indirect discrimination to impact on the setting of minimum wages if, for example, the parameters contain unstated bias about the value of certain skills or attributes which has been a significant problem in the past. The prevention of discrimination can only occur if there is a proper assessment of the value of work performed, particularly in female dominated industries.

The AFPC will have to be cognisant of the impact of any reconfiguration of classification structures and the subsequent impact on pay equity. Any move to compress current classification structures will, without doubt lead to greater pay inequality and discrimination – a situation that must be avoided. (ACTU Submission to Award review Task Force http://www.awardreviewtaskforce.gov.au )

The AFPC will have done a great disservice if, as a result of their work, greater discrimination and pay inequality arise caused by the ‘rationalisation’ of award wage and classification structures. In order to remove discrimination and hence minimise pay equity problems there is a need to clearly and precisely identify and specify many skills involved in the various female dominated occupations and industries. A non-gendered evaluation of skills and classification structures is an important issue in resolving pay equity. (ACTU Submission to Award review Task Force http://www.awardreviewtaskforce.gov.au)

Of real concern for workers’ wages and importantly pay equity is the removal of the no disadvantage test. Part VIE of the Workplace Relations Act. Section 170XA of the Workplace Relations Act (the current act) states that:

"an agreement disadvantages employees in relation to their terms and conditions of employment only if its approval or certification would result, on balance, in a reduction in the overall terms and conditions of employment of those employees …"

The new system provides that the total package of wages and conditions offered to an employee is benchmarked only against the Australian Fair Pay and Conditions Standard (the Standard) contained in the proposed section 89(2), which provides a basic minimum standard of employment pay and conditions. Not the relevant award which is currently the case. In addition the Fair Pay Commission does not seem to have the powers to take on special cases, an option which is currently available to the AIRC. For example the AIRC was able to realign the classifications based on a reassessment of work value in the child care equal pay case. The recently appointed chair of the Fair Pay Commission Professor Ian Harper emphasised in a speech to a conference in Melbourne 16 February that the AFPC was obliged to set the minimum wage at a level that prevented the unemployed being "priced out of the labour market", and that it would take into account forms of income apart from wages. (HREOC Submission to Award review taskforce www.hreoc.gov.au )

He said the body would have to "carefully balance" on the one hand not putting impediments in the way of the unemployed gaining jobs or inducing employers to shed the low-paid, while on the other providing a safety net.

"The careful balancing of these two aspects of minimum wages requires detailed knowledge of the circumstances and incentives facing people in low-paid jobs, their employers and those currently without paid work of any sort".

"As to circumstances, these may include whether an individual is single or in a relationship, has dependants or not, speak English as a first language or have some form of disability.

"As to incentives, these include primarily pay and conditions but the Commission must also consider interactions between minimum wages and the tax and social security systems. (“Ensuring Fair Pay: The First Steps” Speech by Professor Ian Harper Chairman, Australian Fair Pay Commission Thursday 16 February 2006.)

Some of these comments are disturbing. When the chair is discussing “whether an individual is single or in a relationship” one may imagine that he is considering the good old days of women receiving less pay because they were not the breadwinner. The WorkChoices provisions in my opinion do not support closing the gap between women’s and men’s wages. It provides a system for those in the stronger market position to receive increased benefits in the form of conditions and wages. The minimum standard will be set by the Australian Fair Pay Commission and each award will be stripped back to the bare minimum of wages and conditions. Potentially millions of Australian workers will be worse off if this happens and consequently the gap between women’s and men’s wages will increase. This includes workers who are directly employed under an award as well as those who are employed under an agreement that is based on a particular award.

The question we asked: - does fair pay mean equal pay…..clearly the answer is no.