The Australian Council of Trade Unions is leading a renewed push for junior pay rates to be scrapped for adults aged between 18 and 21, in a move that could affect the livelihoods of about 500,000 young Australian workers.
Today younger workers can earn significantly less than their older colleagues, even when they share similar responsibilities. For instance, 18-year-olds in sectors such as retail, fast food and pharmacy may earn as little as 68% of the national minimum wage of $24.10 an hour, with pay rates dwindling further for those younger. This disparity costs young Australians a staggering $3.5bn in unearned wages each year.
The justification for youth wages often centres on the need for employers to provide extensive training to young, unskilled workers. The theory is that employers invest in their development and, in turn, they earn more as they gain experience. But in reality, this justification doesn’t hold up well any more. Many employers today expect workers to be job-ready from day one, with minimal or no training provided. In many cases, young workers invest in their own training before even stepping foot into the job, making youth rates feel misplaced and outdated.
The skills-acquisition argument might have some merit for those just entering the workforce around the minimum working age, but setting the threshold at 21 doesn’t seem reasonable. In Australia, teenagers are entrusted with adult responsibilities – voting and learning to drive – by the age of 18, while they receive no discounts on essential expenses such as rent, bills or groceries. So why should they be penalised with lower pay?
Junior pay rates effectively establish a continuous pool of low-cost labour for businesses looking to capitalise on the skills and enthusiasm of young workers – many of whom are simply striving to get a foothold in the workforce.
In this context, not to mention the added pressure of the soaring cost of living, junior pay rates feel anachronistic and discriminatory.
Opponents argue that abolishing youth wages would drive up youth unemployment. Business leaders warn that employers would hesitate to hire young people at higher rates, potentially locking them out of the workforce altogether. Yet, there’s little to no evidence to support this. New Zealand scrapped its youth wages in 2008, replacing them with a “first job” rate and a training wage set at 80% of the full award rate. Other countries, including Canada, South Korea and Belgium, have also eliminated or restricted in scope sub-minimum wages for young people without triggering significant unemployment.
A 2020 analysis from the McKell Institute made a similar case for Australia, suggesting that abolishing junior rates could lead to a small initial employment decline (up to 2%) or recruitment freezes but would have minimal long-term impact on youth employment. International studies, including a meta-analysis from the International Labour Organization reviewing 328 estimates from 15 countries between 1990 and 2015, have found that raising minimum wages typically has either a small or statistically insignificant effect on youth employment.
So scrapping junior pay rates in Australia would probably not lead to a significant reduction in youth employment, especially if done incrementally. Moreover, it could generate economic activity and create jobs by increasing the purchasing power of young workers.
However, business leaders argue that now is the wrong time for such changes.
The Australian Chamber of Commerce and Industry and the Business Council of Australia caution that the economy is already facing challenges, with record insolvencies and tightened consumer spending. They claim that forcing businesses to absorb the cost of higher wages could lead to job cuts and reduced hours, especially in industries such as retail and hospitality, as raising prices during a cost-of-living crisis isn’t a viable option.
It’s a classic argument: businesses v workers. But this isn’t about pitting the survival of small businesses against wage fairness for young people. Yes, small businesses are struggling in the current economic environment, and their challenges need attention. But conflating their plight with wage fairness for young people creates a false dilemma. You don’t have to harm one to help the other. That’s bad economics, and we should be able to ensure fairness without forcing such trade-offs.
Young workers shouldn’t be forced to bear the burden of intergenerational inequality by losing out on wages in the early part of their working lives. Scrapping junior pay rates isn’t just about fairness – it’s about recognising that young people in Australia are being crushed under the weight of rising living costs, wage discrimination and an uncertain job market. Their economic future is already on shaky ground, and it’s time we gave them the support they need to build a more secure foundation.
Dr Intifar Chowdhury is a youth researcher and a lecturer in government at Flinders University
