IKEA and union agree on adult wages for all

IKEA will do away with lower rates of pay for younger employees under a new three-year enterprise agreement with the retail unions – the SDA.                                                                               

Staff have endorsed a new union collective agreement for employees at IKEA overwhelmingly after negotiations between the company and the union.                                                                           

The scrapping of youth wages means that there is now just one pay rate for each job level at IKEA. This replaces the junior rates of pay that meant young workers got as little as half of the adult rate.

The abolition of junior rates of pay will deliver an immediate pay rise to 15% of IKEA employees who are under the age of 21; they will now receive adult rates of pay.

The company, hailed as "extremely progressive" by SDA national secretary Joe de Bruyn, will also offer employees 26 weeks maternity leave on full pay.

IKEA Australia East currently employs approximately 1200 people, around half of whom are female, and plans to grow its employee base to 3000 by 2015. 

Why do some young people get paid less than the ‘minimum wage’?

Junior rates are part of many Australian industrial awards. They pay rates, based on a proportion of the adult wage, which rise with each year of age. Typically, 16 year olds are paid 50% of the adult rate, 17 year olds get 60%, at 18, 70%, at 19, 80% and at 20 the rate payable is 90% of the adult rate.

Age based rates originated with the 1907 Harvester judgement, which introduced lower rates for juniors on the basis that their ‘needs’ were less than those of adults. As the concept of employee ‘needs’ in setting wages was replaced by productivity and work value, age based wage rates were retained to discount the wages of young people to account for their relative lack of experience and maturity.

The lower minimum rates for young people have proved very popular in some industries, especially retail, hospitality and fast food.

But some young people say age based wages can be unfair. For example, a young person might have started work in a supermarket at age 16, and by age 20 had four years experience. Yet that person would get paid less working alongside an adult (aged 21+) with no experience.

Other young people are concerned that some employers fired staff as they got older (and qualified for higher pay) even if they were doing a good job.

On the other hand, supporters of junior rates say they help create jobs for young people by making them more affordable for employers. They say that junior rates are fair because new workers tend to be less productive (than older workers) and require more training.

Some employer groups have gone ever further and said that eliminating youth wages would ‘kill jobs’ for young people. If they are right, the effect could be quite dramatic. Indeed, the Retail Council of Australia estimated that if junior wages were removed about 200,000 of the current 280,000 junior employees would be replaced by adults.

Other supporters of youth wages fear that paying adult wages to 16 year olds will make work more attractive than school – making it hard to retain young people in education.

Got something to say about youth wages? Go to the student blog and express yourself!