Not-So-Big-Mac: What 'Minimum Wage' Actually Means In Australia

Australia's high minimum wage is once again the topic of much discussion online over how it relates to McDonald's. While Australia does have a high minimum wage, and that means we'd have to work fewer minutes to purchase a Big Mac than most other economies, it's not quite as simple as stating a single figure that applies to everyone. It's entirely possible to earn less than the minimum wage in Australia without any laws being broken.

Picture: Getty Images

We visited this topic last month when we looked at how much a McDonald's worker would make in Australia compared to the US. The short version? While working at McDonald's isn't going to make anyone rich, you have a much better chance of scraping a living in Australia than in America.

This week, analysts ConvergEx performed took the topic one step further, as our sibling site Business Insider Australia reported. Firstly, it ranked the minimum wage in countries across the world that enforce the concept. On this measure, Australia came out on top:

Pedant note: as of July 1 2013, the minimum wage in Australia is actually $16.37, not $16.88 — I'm presuming a weird currency conversion error here. It wouldn't change our position in this list though.

Next, ConvergEx combined that data with the well-known Big Mac index to work out how long you would have to work at minimum wage to buy a Big Mac. In Australia, the figure appears to be 18 minutes; in the US, it's 35; in India, it's 347. Yes, that's almost six hours to earn your Big Mac.

If you're of the view that high wage costs are a problem for Australian businesses, you'd be tempted to point to these charts. However, there's a really important proviso to remember: the minimum wage applies if your job isn't covered by an award and you're over 21. The Fair Work Ombudsman spells that out very clearly on its page covering the minimum wage

The national minimum wage is the minimum wage that applies to employees who aren’t covered by an award or agreement.

Given that, are there jobs that pay less than the minimum wage? Absolutely. One well-known example is apprenticeships and junior staff. The Fair Work site lists what you have to pay these roles if an award isn't in place:

Age % of national minimum wage Minimum hourly rate
Under 16 36.8% $6.03
16 47.3% $7.74
17 57.8% $9.46
18 68.3% $11.18
19 82.5% $13.51
20 97.7% $16.00

Apprenticeships are also paid at lower levels, though slightly higher than these. If you're employed as a casual without an award, you are entitled to a 24 per cent loading (to offset lack of holiday pay and other benefits). Even if you score this, under 18s would still be earning less than the adult minimum wage.

On an award, you should generally be earning more than the minimum wage, but how much will vary. In NSW, the hourly rate under the Fast Food Industry Award is $17.98. McDonald's has its own award and pays a slightly lower $17.38.

None of this means that Australia doesn't still have a high minimum wage, but it's always worth recognising that a single figure can be misleading. And if you've ever wondered why so many people in fast-food outlets are under 18, now you know: it's a cost-cutting measure.

THE LUCKY COUNTRY: Index Shows Australians Need To Work Least To Buy A Big Mac [Business Insider]

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Comments

    can someone define award?

    also...cost of living is higher in australia
    big mac is not a sensible standard of measure

      The Big Mac index is pretty well established as being a reasonable measure of purchasing power.

      http://en.wikipedia.org/wiki/Big_Mac_Index

        No longer to be the case. It seems to be a better measure of whether a currency is over-valued or under-valued as opposed to how much work someone need to buy a Bic Mac in a country.

        http://www.economist.com/content/big-mac-index

        In Hong Kong, the average GDP is 1/3 of that of Norway but it would take less work to earn money for a Big Mac in Hong Kong.

        EDIT: needs more grammar checking

        Last edited 20/08/13 4:29 pm

          I wish the had an average rent index for Sydney-siders.........

            I suppose it's not too hard to find out. Salary data is available on ABS and rental averages can be found on the real estate web sites. Would be interesting, I assume.

            Last edited 20/08/13 4:28 pm

      An award is an industry-standard rate of pay, leave, etc. It's normally documented by the government, and I think it is regulated by Fair Work Australia.

      http://www.fairwork.gov.au/awards/a-z-modern-awards-list/pages/default.aspx

      Last edited 20/08/13 10:25 am

      I have to agree somewhat. Would a country that imports all its ingredients make a Big Mac cost more than a country that can produce all the ingredients themselves? I remembered them being not that much cheaper dollar per dollar in Singapore as in here despite cheaper labour costs. Across the border in Malaysia, self-sufficiency and cheap labour costs have made the Big Mac among the cheapest in the world.

        http://www.theguardian.com/world/2009/oct/27/mcdonalds-to-quit-iceland

      It's actually not THAT much higher overall. I know it IS higher though, but I dont' quite think it matches the discrepancy in minimum wage.

      I mean, they still pay a lot for petrol in America, and the price of the stuff we love, games, DVDs, music etc etc, isn't as bad as it once was either. Again, not the discrepancy that almost $10 an hour is.

    The whole minimum wage thing is a bit of a furphy. Yes, on paper, our minimum wage is higher. However, if your under 21 its much lower (this doesn't apply in the US). In effect, the actual minimum wage is much closer to the US than we pretend. If you look at the 'median wage', ignoring exchange rates, the median US wage is only 10% lower than here. However, the buying power of the US dollar in the US is much higher than the buying power of the AUD here.

    Of course, recently this hasn't been the case due to the favorable exchange rate. There's also the fact that we have really low unemployment, which is also awesome.

    Pretty hard to get a casual retail or bar job as a late 20's without retail or bar experience when they can hire under 21 year olds and pay them less. Also unemployment rates in Australia are utter crap. I myself, and a few other people I know can't get centrelink, therefore we're not "unemployed" in the statistics because we're not making govt claims. My partner earns too much, and their parents earn too much.

    Last edited 20/08/13 10:30 am

      The unemployment rate is measured by the Australian Bureau of Statistics and is not restricted to people registered with Centrelink.
      That said, the way it is calculated tends to include as employed many people which the average person would think of as unemployed e.g. if you worked for one hour in the last week you are "employed" (if memory serves).

        I worked FT for half the financial year before going back to uni FT, so that would count me as employed.

          Labour Force data is derived from a survey (a rolling one that never stops), not a census. So to answer your question: Were you surveyed during the year? If you were it would have recorded you as employed if in the first half, and not in the labour forces in the second. Note, Not in the labour force does not mean you are unemployed, it covers retirees, students, home bodies, etc.

            Ah I thought they got it from real numbers not just a survey. Something like Centrelink or the ATO, not that eleventy nine percent are unemployed.

    until recently minimum wage for a disabled person was $1.39 an hour....it took ten years of legal battles for the government to lose and now drag its feet on the compensation and a new disabled wage system.

    Not that one would actually be eating a Bic Mac in India though...

    It's worth pointing out too that the actual Big Mac Index at the moment positions Australia's Big Mac Cost vs per capita income as almost equal with the US, which implies that our currency value is almost dead-on to where it should be. In relation to wages, I think it would also imply (arguably) that average earnings are close to where they should be in terms of international competitiveness, so that essentially we pay relatively less at higher income brackets to support a better wage at the lower end, which frankly - as someone whose income does exceed the average - is something I have no qualms with.

    Not all Big Macs are created equal though, the ones in some Asian countries are smaller and the Indian ones are made from chicken.

    What is the moral or ethical justification for paying younger people less at law? I've never heard anyone explain it.

      There's no law that says you have to pay them less. The law allows you to pay them less, and this can make sense - younger people can come with higher risks (i.e. causing damage to company reputation, they are more likely to leave the business for a variety of reasons).

      There would be very little incentive to hire under-18's if the wage wasn't lower. Why hire somebody with little experience when you could pay the same for an older, more responsible (generally), experienced person.
      However, there is a big case for getting 18+ paid at full adult rates.

      From a moral and ethical standpoint, I imagine the argument would be that there is a greater risk and complexity and set of responsibilities when employing younger workers. If they're under 18, there are things they can't agree to without a parent's or guardian's written consent. As minors, they can also be considered more vulnerable, and an employer is expected to demonstrate far greater care in the management of a group who is inherently more vulnerable. That all costs time - and therefore money - in some way.

      Of course, the justification for those aged 18-20 - beyond that 21 used to be the legal age of adulthood up until the mid-to-late 20th Century when the intrinsic unfairness of being forced to die for you country, but not being allowed to vote or drink was noticed - escapes me.

        The logic is that most 18y olds will be school leavers with no experience or skills needing a job. the 19y old wage is an incentive to keep on the now experienced employee rather than just hire a new crop of school leavers when your current employee suddenly increases in price, and the 20y olds are almost full adult wage, but still slightly more competitive. Whether it actually works that way in practice, I don't know.

    Australia has a high minimum wage, but other wages are also high. 1st year teachers in QLD get $61,000 - and goes past $80,000 after 10 years. Look at the US - In South Dakota the average teacher salary (Not just 1st year, all teachers) is $35,000 and in over 12 states the average salary is less than $47,000

    Last edited 20/08/13 4:34 pm

    "On an award, you should generally be earning more than the minimum wage".

    Generally!? All awards pay above the minimum wage if you're over 21 - that's how awards are designed.

    Also, if you're on an agreement then you MUST receive the same or more than the relevant award or more than the minimum wage, because all agreements must pass the 'better off test' (known as BOOT). If they fail the test, Fair Work will throw them out.

    I wish these figures actually made me feel better off than other countries. As it is, I get $40K p/a and just going with the relative minimum (rent, utilities, food), it's hard to keep afloat.

      ....That's hard for me to understand? I earn $22, 000/year and don't have a lot of disposable income, but I'm definitely not struggling. I live in the inner city, eat out once a week and can buy new shoes when I need them, etc etc.

      I don't have kids though. If you have kids or are supporting someone without an income then I totally understand. Or if you have medical conditions that require management or something. Also I don't have a car, which would definitely add to my costs (though presumably not by twenty grand), and I understand they're absolutely necessary depending on where you live.

    "And if you’ve ever wondered why so many people in fast-food outlets are under 18, now you know: it’s a cost-cutting measure."

    That, and it's a crappy entry level job

    In my experience you get the same demographic working there around the world, regardless of whether min wage is tiered or not

    I work in hospitality and a lot of girls there are under 18. As casual waitresses under the award they ear as little as $7 p/hr with their loading on top. They complain until I (myself being 21) correct them and explain the award to them; considering management don't understand it.

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