There’s a renewed push to scrap junior rates of pay for young adults. Do we need to rethink what’s fair?

Should young people be paid less than their older counterparts, even if they’re working the same job? Whether you think it’s fair or not, it’s been standard practice in many industries for a long time.

The argument is that young people are not fully “work-ready” and require more intensive employer support to develop the right skills for their job.

But change could be on the horizon. Major unions^[1] and some politicians^[2] are pushing for reform^[3] – arguing “youth wages” should be scrapped entirely for adults.

Why? They say the need to be fairly paid for equal work effort, as well as economic considerations such as the high cost of living and ongoing housing crisis, mean paying young adults less based on their age is out of step with modern Australia.

So is there a problem with our current system, and if so, how might we go about fixing it?

What are youth wages?

In Australia, a youth wage or junior pay rate^[4] is paid as an increasing percentage of an award’s corresponding full adult wage until an employee reaches the age of 21.

This isn’t the case in every industry – some awards^[5] require all adults to be paid the same minimum rates.

But for those not covered by a specific award, as well as those working in industries including those covered by^[6] the General Retail Industry Award, Fast Food Industry Award and Pharmacy Industry Award, employees younger than 21 are not paid the full rate.

Why pay less?

Conventionally, junior rates have been thought of as a “training wage”. Younger people are typically less experienced, so as they gain more skills on the job over time, they are paid a higher hourly rate.

But there are a few key problems with this approach, which may not be relevant given many employers’ expectations for their workers to start “job-ready” and a lack of consistency in the training they provide.

Training up and developing skills is an important part of building any career. But it isn’t always provided by their employers.

Many young workers train themselves in job-related technical education and short courses, often at their own expense^[8] and prior to starting work.

Employers reap the benefit of this pre-employment training and so a “wage discount” for younger workers may be irrelevant in this instance.

None of this is to say employers aren’t offering something important when they take on young employees.

Younger workers coming into employment relatively early have access to more than just a paid job, but also become part of a team, with responsibilities and job requirements that support “bigger-picture” life skills.

Those who employ them may be contributing to their broader social and cultural engagement, something that could be considered part of a more inclusive training package. Whether that justifies a significant wage discount is less clear.

Read more: Why real wages in Australia have fallen while they've risen in most other OECD countries^[9]

Calls for a rethink

There are growing calls for a rethink on the way we compensate young people for their efforts.

An application^[10] by the Shop Distributive and Allied Employees’ Association – the union for retail, fast food and warehousing workers – seeks to remove junior rates for adult employees on three key awards. This action will be heard by the Fair Work Commission next year.

Sally McManus, Secretary of the Australian Council of Trade Unions, said^[11] the peak union body will lobby the government to legislate such changes if this application fails. The Greens have added their support^[12].

That doesn’t have to mean abolishing youth wages altogether. But 21 years of age is a high threshold, especially given we get the right to major adult responsibilities such as voting and driving by 18.

A transition strategy could consider gradually lowering this threshold, or increasing the wage percentages over time.

Lessons from New Zealand

We wouldn’t be the first to make such a bold change if we did.

Our geographically and culturally close neighbour, New Zealand, has already removed the “youth wage” – replacing it with a “first job” rate and a training wage set at 80% of the full award rate in 2008.

A common argument^[14] against abolishing youth wages – and increasing the minimum wage in general – is that it will stop businesses hiring young people and thus increase unemployment.

But a 2021 study^[15] that examined the effects of New Zealand’s experience with increasing minimum wages – including this change – found little discernible difference in employment outcomes for young workers.

The authors did note, however, that New Zealand’s economic downturn post-2008 had a marked effect on the employment of young workers more generally.

What’s fair?

It’s easy to see how we arrived at the case for paying younger adults less. But younger workers should not bear the burden of intergenerational inequity by “losing out” on wages in the early part of their working life.

The debate we see now echoes the discussions about equal pay for equal work value run in the 1960s and ‘70s in relation to women’s unequal pay.

We were warned that paying women the same as men would cause huge economic dislocation. Such a catastrophe simply did not come to pass.

References

1. ^{^} Major unions (www.fwc.gov.au)
2. ^{^} some politicians (www.afr.com)
3. ^{^} pushing for reform (www.theaustralian.com.au)
4. ^{^} junior pay rate (www.fairwork.gov.au)
5. ^{^} some awards (www.fwc.gov.au)
6. ^{^} covered by (www.news.com.au)
7. ^{^} Best smile studio/Shutterstock (www.shutterstock.com)
8. ^{^} at their own expense (www.aihw.gov.au)
9. ^{^} Why real wages in Australia have fallen while they've risen in most other OECD countries (theconversation.com)
10. ^{^} application (www.fwc.gov.au)
11. ^{^} said (www.theaustralian.com.au)
12. ^{^} support (www.afr.com)
13. ^{^} Lukas Coch/AAP (photos.aap.com.au)
14. ^{^} common argument (www.theaustralian.com.au)
15. ^{^} 2021 study (papers.ssrn.com)
16. ^{^} Stephan Roeger/Shutterstock (www.shutterstock.com)