Impact of Abolishing Junior Pay Rates on Youth Employment

Junior Wages Abolish Australian

Unions Want to Scrap Junior Pay Rates? Concerning.

Unions have launched a landmark bid to abolish the junior pay rates for half a million young workers. At the ACTU Congress in Adelaide on Thursday, unions endorsed a policy to tackle junior rates, which apply in 75 awards, and to abolish low junior rates for apprentices and 18 to 20-year-olds.

ACTU Secretary Sally McManus: “This is going to be a very important test case to move our country forward and not have discrimination against young people.”

Clayton Cook (MD TP Human Capital) Response: “The ACTU would literally cause increased discrimination of young people. Even the Fair Work Commission has long recognized that the productivity of young workers is less than that of adult workers and that they come with additional costs due to training and supervision needs.”

“I’ve been recruiting for over 25 years across a wide range of industries, from small businesses to large corporations, government sectors, and mining. I know firsthand how challenging it is for companies to consider hiring young people, even with junior rates of pay as an incentive. This is evidenced by the consistently high youth unemployment rate. If anything, there should be more incentives for organizations to hire young people.”

“The unions’ stance is a clear case of living in some utopian fairyland, completely disconnected from economic realities, and will create significant problems for both employers and employees.”

What Are Junior Rates of Pay? These are only minimum rates of pay. TP Human Capital currently has a 16-year-old labor-hire employee working for a client (wholesaler) who has elected to pay him the adult award rate “because he’s doing the same work as the adults.”

Benefits of Junior Rates:

  1. Encourages Youth Employment:
    • Junior rates make it more affordable for businesses to hire young workers, providing them with valuable entry-level opportunities and work experience. Abolishing these rates could lead to higher youth unemployment as employers might prefer hiring more experienced workers at the same cost.
  2. Reflects Experience and Productivity:
    • Junior workers typically have less experience and may require more supervision and training. Lower pay rates reflect their lower productivity levels compared to more experienced workers, ensuring a fair compensation structure based on skills and output.
  3. Economic Sustainability for Businesses:
    • Many small and medium-sized businesses rely on junior rates to manage their labor costs effectively. Removing these rates could strain their finances, potentially leading to reduced hiring, cutbacks, or even closures, negatively impacting the overall economy.

International Context: It’s not like we are on our own in Australia, doing something strange. Here is a list of the top 20 Western countries offering junior rates of pay:

  1. United States
  2. United Kingdom
  3. Canada
  4. New Zealand
  5. Ireland
  6. Germany
  7. France
  8. Netherlands
  9. Belgium
  10. Switzerland
  11. Austria
  12. Denmark
  13. Norway
  14. Sweden
  15. Finland
  16. Italy
  17. Spain
  18. Portugal
  19. Greece
  20. Luxembourg

These countries have implemented junior rates of pay to support youth employment, skill development, and economic sustainability, recognizing the unique position of young workers in the labor market.

Closing Comments: The unions most probably took this opportunity to leverage the McKell Institute report published in February 2020, claiming that “many of these claims lack tested empirical evidence and are heavily reliant on anecdotes from the business community.” All they needed to do was speak to a bunch of agency recruiters, TAFE, trade school, Job Active providers, university representatives, etc., for all the evidence needed to prove this is a bad idea.

Unions are membership organizations and therefore need media exposure to effectively communicate their role as representatives and advocates for their members, to build membership and retain existing ones. We believe this is one of those attention-seeking moves rather than a well-thought-out policy change.

Our Message:

Our message is that abolishing junior pay rates is misguided and will harm both young workers and businesses. As experts in recruitment and training, we see firsthand the challenges of hiring young people even with current incentives. The unions' approach is disconnected from economic realities and will increase youth unemployment, reduce skill development opportunities, and strain small businesses. We advocate for maintaining and even enhancing incentives to hire young workers to support their entry into the job market and foster their professional growth.

 

 

Links for more information:

ACTU Official Website:

The Australian Council of Trade Unions (ACTU) outlines their campaigns and advocacy efforts, including their stance on junior pay rates and other labor issues. ACTU

National Retail Association:

Fair Work Ombudsman:

  • Comprehensive resource on junior pay rates, minimum wages, and rights of young workers in Australia. Fair Work Ombudsman

SDA Union:

  • Discusses the union's proposals and agreements affecting junior pay rates and employment conditions in the retail sector. SDA Union

McCell Institute

 

MEDIA: