Quarterly indexation 1922

Updated time

Last updated

20 December 2016

In 1922–1923 the Court established a system of quarterly indexation, in which the basic wage was increased in line with a Commonwealth measure of inflation each quarter[1]. This was a measure to maintain the real value of the minimum wage, and to protect in real terms the standard of living of workers. Clauses providing for automatic increases to take place in accordance with measures of inflation were included in awards.  This system was maintained until 1953, interrupted by the Great Depression (1931), a ‘fresh start’ in 1934, and World War II (1939–1945).  

In theory such a system would lead to the maintenance of the award wage at the 1921–22 level in real terms. This was not however the result. The award rate in fact appears to have risen and fallen in real terms.  No-one has yet been able to explain why.

The Full Court noted that employers and unions did not oppose quarterly indexation. However, employers opposed the ‘Powers three shillings’, designed to compensate employees for the time lag in obtaining an adjustment to compensate for prices which had already increased:

‘The figures submitted were so convincing that neither the employers’ representative nor the workers’ representatives contended that the Court should go back to the figures for the preceding calendar year, or to the figures for the twelve months preceding the award, or to abandon the practice of basing the rates on the last quarter’s figures, or to abandon the quarterly adjustments. The real objection by the employer’s representatives was to the Court adding 3s. a week to the quarterly figures, which they contended would add 3s. a week to the Harvester judgement standard, and that additional burden ought not to be added to the burdens the industries have to bear in times of depression.

For instance, if the Court had in April last based its awards on the preceding quarter’s figures without adding 3s. a week thereto, the workers would have received on an average for the whole quarter up to 31st July, 3s. a week less than the costing of living during that quarter, and that would have been unjust to the workers.’[2]

Eventually there were 34 separate federal basic wages based on different costs of living estimates: separate basic wages for the six capital cities, for 26 country towns and for two localities. There were also basic wages which varied in each of the six State systems.

The first measure of price changes used to adjust the basic wage was the ‘A Series Retail Price Index’. It was replaced with the ‘D Series Price Index’ in 1933, the ‘C Series Price Index’ in 1934, and the special Court series in 1937, amended in 1947 and 1950[3].

Footnotes

[1] Gas Employees Case (1922) 16 CAR 4 at 36, Powers J; Wool and Basil Workers Case (1922) 16 CAR 768, Webb DP; (1923) CAR 17 CAR 680 at 690

[2] (1922) 16 CAR 829 at 831–832

[3] David Plowman, Protecting the Low Income Earner, The Economics and Labour Relations Review, Dec, 1995 Source Volume: 6 Source Issue: 2, pp. 272 and 257