Labor’s $3.6b pre-election pay boost for childcare workers
Phillip CooreyPolitical editorAug 7, 2024 – 10.30pmListen to this article5 minThe Albanese government will fund a 15 per cent, $3.6 billion pay rise for childcare workers over the next two years on the proviso their employers agree to limit fee increases until after the election, and accept longer-term, union-negotiated pay deals for their workers.
The move seeks to dampen cost-of-living concerns ahead of the next election as well as build a sizeable workforce in the sector, which is essential if Labor is to achieve its stated aspiration of delivering universal childcare.
Prime Minister Anthony Albanese and NSW Labor leader Chris Minns. The government argues subsiding childcare wages has an indirect productivity benefit. AAP
Prime Minister Anthony Albanese, who outlined that aspiration before the 2022 election, said the 15 per cent pay rise for early childhood education and care workers would be delivered as a 10 per cent pay increase starting in December, and another 5 per cent from December 2025.
To be eligible for the government-funded pay increase, childcare operators must agree to limit fee increases to no more than 4.4 per cent over the next 12 months, starting on Thursday.
With the election due by May next year, this guards against larger increases in childcare costs between now and polling day, and is in addition to the $5.4 billion boost in government-funded childcare subsidies that began last year.
Advertisement“This is an important condition that will keep downward pressure on fees for families. Funding must be passed on in full to employees through increased wages,” Mr Albanese said.
The pay boost, which the government describes as an “interim retention payment”, coincides with a multi-employer bargaining claim before the Fair Work Commission.
Contingency reserve
The United Workers Union, which lodged the claim that covers 64 employers, wants to match the 25 per cent pay rise awarded to aged care workers last year.
The 15 per cent pay increase will be incorporated into the Fair Work determination.
“The government-funded wage increase will be available to employers to pass on to their workers through a new union-approved, sector-wide agreement,” the union said.
Alternatively, a government spokesman said an employer could incorporate it into a separately negotiated Enterprise Bargaining Agreement.
“The centre doesn’t need to sign the EBA, but they need to have an equivalent compliant workplace instrument in place,” he said.
The $3.6 billion cost of the 15 per cent pay rise was hidden in the budget’s contingency reserve, which set aside $61 billion over three years, a significant proportion of which was for care sector pay increases.
“We have a big commitment to make sure that workers in the care sector, predominantly women, are paid fairly for what they do,” Treasurer Jim Chalmers said at the time.
The pay rise will be worth an extra $103 per week to the average childcare worker from this December, increasing to at least $155 a week from December 2025.
Mr Albanese came to government vowing to serve at least two terms and leave a legacy of reform. Top of his list was affordable, universal childcare, and he charged the Productivity Commission with exploring how to make this happen. The commission was tasked with modelling the economic, fiscal and societal effects of a 90 per cent subsidy for all households.
The government is sitting on the final report, which it plans to release in September, but the interim report, released in November last year, said an essential foundation was a strong workforce.
Delivering a fully universal system “will require careful implementation and sequencing”, it said, and solutions to workforce issues were described as “considerable and persistent”.
This was made more challenging by childcare workers being lured to higher paying jobs in aged care, following the 25 per cent pay rise, and the profligate National Disability Insurance Scheme.
Inflation warning
“Since coming to government, the number of [childcare] workers has grown by more than 30,000, but we need more,” Mr Albanese said.
“This commitment will help retain our existing early childhood educators, who are predominantly women, and attract new employees.”
The government argues subsiding childcare wages has an indirect productivity benefit because it means more parents, especially women, can work more.
The announcement comes a day after Reserve Bank of Australia governor Michele Bullock warned wages were still increasing faster than productivity, which can be inflationary.
“Wages growth appears to have peaked but is still above the level that can be sustained given trend productivity growth,” the RBA said.
Ms Bullock warned that even modest wage rises might not be consistent with low inflation if productivity growth did not increase.
“We do expect [productivity growth] to get back towards trend levels in the next year or so. But it’s possible that … if productivity doesn’t improve, then even wage rises around 3.5 per cent might not be enough to keep unit labour costs contained,” she said.
The RBA also warned in its updated economic outlook on Tuesday that continued increases in government spending were one of the factors pushing up economic growth and prolonging high inflation.
Productivity Commission boss Danielle Wood last month said it would be almost impossible to eke out productivity gains from the rapidly expanding care sector, since there was little scope for technological improvements.
The commission’s interim report said universal childcare could push an extra 20,700 people, mostly women, into the workforce, but at a cost to taxpayers of $120,000 per job.
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