The 'needs' principle and 'capacity to pay'

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Last updated

01 July 2015

Industrial tribunals had to resolve complex questions about the economic and social effects of minimum wages they proposed to set.  During the 1900s a debate took place between those seeking protection for workers and their family ‘needs’, and those seeking to protect industry.  The level of the minimum wage reflected that debate, with a lower level of minimum wage for unskilled labourers initially set by tribunals because of a different method of assessment of needs in for example NSW (6 shillings a day or less), and then a relatively higher level of minimum wage set in Harvester (7 shillings a day), which was subsequently gradually adopted across Australia. 

However, concerns about the capacity of industry to pay led to the rejection of attempts to raise the level of the minimum wage for unskilled labourers again to the level of ‘needs’ estimated by the Royal Commission into the Basic Wage of 1920 (the Gas Employees Case 1921).  Capacity to pay was again given priority when award wages were cut by 10 per cent as a result of the Great Depression of 1931, when industry capacity to pay was substantially reduced.