Apprentice wages too low for comfort

A new national study, prepared by the Centre of Applied Research in Social Science at the University of New England, has highlighted the financial difficulty facing apprentices, with wage levels for many first-year apprentices below the poverty line and barely above the level of unemployment benefits.

The report, Living Standards of Apprentices, released in November 2007 by Group Training Australia (GTA), compares the earnings of apprentices across a range of industries with a variety of community benchmarks.

These benchmarks include the 'Henderson Poverty Line' and the federal government's 'Indicative Budget Standards for Australia', which is calculated at two levels - a modest-but-adequate standard and a low-cost standard.

Jim Barron, CEO of GTA states: "At a time of national skills shortages and with a need for more young people to take up a trade, it is disturbing that many apprentice wages, particularly in the first and second year, remain below a standard generally acceptable to the community."

The report finds:

• A sample of six representative occupations shows that in all cases, awards for minimum pay for first-year apprentices are below the Henderson Poverty Line.
• Based on the Indicative Budget Standards, the modest but adequate living standard is unattainable for first-year apprentices unless they receive large allowances as part of their award.
• Allowances can substantially augment income in some industries. For example, in the Melbourne construction industry, allowances can boost income by up to 50%. However, these allowances tend to be confined to the construction industry and for the remainder of apprentices they barely cover outlays on tools and special travel.
• Even when mandatory allowances are taken into account, 40 of the 42 award categories of first-year apprentices studied in the report have disposable income below the poverty line.
• School leavers who engage directly in paid work are paid a junior wage, typically $40-$70 a week higher than a first-year apprentice.
• A comparison with the unemployment benefit (Newstart) shows that when the value of its cash and non-cash components is taken into account, a first-year apprentice's standard of living is barely above that of the unemployed.
• Second-year apprentices are not that much better off; they universally earn above the poverty line though their standard of living is austere.
• Above-award payments add little to apprentice earnings. The typical above-award payment is 9% and varies by occupation.

The report's lead author, Prof Michael Bittman, said that most apprentices only survive the early years through a mixture of handouts from parents, working overtime wherever possible, working in the cash economy or taking a second job.

A first-year apprentice in the metal trades industry in Sydney receives an award wage of $13,622 gross a year. That translates into an after tax income of approximately $231 a week - almost $46 below the poverty line and just $20 more than the 'dole'.

Barron said the level of earnings explains, in part, the extraordinary drop-out rate among apprentices, which is as high as 40%: "This is a poor return on the national investment in skills formation and reflects the low value that is often placed on trade training. This is likely to lead to apprenticeships being seen as unattractive to many school leavers."

"If Australia is serious about creating a future generation of skilled tradespeople, it must ensure that wages paid to apprentices, particularly those in the first and second years, provide adequate financial encouragement and support."

The financial plight of apprentices in the early years has been acknowledged by both sides of politics. In this year's Budget, the Coalition announced the payment of a $1000 tax-free bonus to first- and second-year traditional trade apprentices as well as a $500 payment to help offset the cost of off-the-job training. GTA led the advocacy campaign for the $1000 tax-free bonus and applauds the government for these initiatives. The Labor Opposition has also committed in the past to the payment of second- and fourth-year $1000 completion bonuses as well as an $800 TAFE fee account. Such commitments are very welcome. GTA urges both sides of politics to continue to give this issue high policy priority.

GTA will use the report to help inform its national consultations and preparation of its submission to the Australian Fair Pay Commission for its upcoming review into junior and training wages.

Living Standards of Apprentices can be downloaded at: www.grouptraining.com.au/projects/apprentices_living_standards.html.

GTA is the national peak body representing the network of over 150 group training organisations employing over 40,000 apprentices and trainees throughout Australia.

The patron is His Excellency Major General Michael Jeffery AC CVO MC (Retd) Governor-General of Australia.