The wages of Australia's 1.5 million lowest paid workers will increase by an extra $18.70 per week from July in response to a decline in their living standards.
Fair Work Commission president Justice Iain Ross delivered the decision on Wednesday to increase the minimum wage by 3 per cent to $640.90 per week or $16.87 per hour.
Justice Ross said the distribution of earnings had become more unequal in recent decades and the annual wage review had a role to play in ''ameliorating inequality''.
''While real earnings have generally increased over the past decade, earnings inequality is increasing,'' he said.
''This has reduced the relative living standards of award-reliant workers and reduced the capacity of the low paid to meet their needs.''
The Fair Work Commission last month ruled to limit Sunday penalty rates for some restaurant and cafe staff from July, expected to save businesses up to $112 million a year.
Trade unions had called for a $27 (3.9 per cent) increase in the minimum wage from $622.20.
ACTU Secretary Dave Oliver said the Fair Work Commission's decision was unfair in the context of Wednesday's National Accounts figures which showed the economy was strong, but wages were lagging behind.
''Today's decision means that low paid workers including cleaners, retail and hospitality staff, child care workers, farm labourers, and factory workers will fall even further behind the rest of the workforce,'' Mr Oliver said.
David O'Byrne, Acting National Secretary of United Voice said the increase would only cover the 2.9 per cent inflation of the past year. ''It condemns the one-and-a-half million workers and their family who rely on the minimum wage for their pay increases to continuing hardship,'' he said.
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