Building industry groups in Australia have slammed a decision by the Fair Work Commission to hike first and second year pay rates for apprentices in construction trades by an average of 20 per cent.

Opponents of the wage hike say the move will impose undue costs on builders and discourage builders and other employers from taking on apprentices at a time of concern regarding a looming shortage of skilled tradespeople toward the middle of the decade.

Unions, however, have welcomed the move, referring to the decision as a “win for skills and the economy.”

In its latest decision, Fair Work Australia granted significant wage increases to first and second year apprentices across a range of industries throughout Australia, with rates of pay now set to vary according to whether or not apprentices have completed Year 12.

Under the new arrangements, minimum rates of pay for first year apprentices who have completed Year 12 will increase to 55 per cent of the qualified tradespersons Award rate (up from typically around 42 per cent now); those for second year apprentices, meanwhile, will rise from 55 per cent to 65 per cent of the rate.

In addition, adult apprenticeship rates (applicable to apprentices over 21) will be introduced into a number of awards which currently do not contain them, while adult apprenticeship rates will be hiked to 80 per cent of the Award rate.

The new rates will apply to those who commence their apprenticeships from next year onward.

According to Master Builders Australia, the decision will see average increases of first and second year wages of around 20 per cent.

In some trades, the effective rise could be even more. First year apprenticeship rates for an electrician will jump from $289.68 to $398.31, according to the Australian Council of Trade Unions, while first year carpenters will receive increases of $72.42.

In the explanation accompanying its decision, the Commission noted that existing wage structures were set when the majority of apprentices were aged 16 or under upon commencement, whereas the reality nowadays is that a large number of apprentices have completed Year 12 and some hold vocational qualifications.

The Commission also claims a higher rate will improve completion rates – currently now as low as around half of all apprenticeships commenced.

Building industry employer groups, however, have blasted the decision, saying it will discourage employers from taking on apprentices and add costs for builders.

“Disappointingly, the Commission has appeared to overlook expert evidence that pointed to large job losses in the residential construction sector if wage rates were to increase,” Housing Industry Association industrial relations spokesman David Humphrey says, referring to a study the HIA released in conjunction with Master Builders late last year.

That study said 12,000 apprenticeship positions would be under threat if claims for a significant hike in apprentice wages went through – albeit with that figure being based on the full amount of the union’s claim, which would have taken first year apprentice rates to 60 per cent of the qualified tradesperson’s Award rate, being granted.

 “Current wages for apprentices reflect the training nature of the employment relationship and the fact that in their early years apprentices need high levels of supervision and are less productive than a fully trained worker,” Humphrey says.

Master Builders Australia chief executive officer Wilhelm Harnisch agrees, saying the decision will lock thousands of young Australians out of rewarding careers in an industry ‘crying out’ for more skilled workers over the next decade.

“It must be remembered that apprentices are being paid to attain a qualification,” he says. “The Commission’s decision will simply price many apprentices out of what is already a tight job market and at a time when the building and construction is struggling and less able to afford to take them on.”