While business owners are, for the most part, reluctant to scrap the minimum wage, recent debate highlights scope for reforms to make it fairer, including an exemption for microbusinesses.
A recent opinion piece in My Business elicited many strong opinions on the idea of scrapping the minimum wage in favour of an overhauled version.
Some business owners eagerly defended the current legislative minimum standard, saying that it serves to prevent even more workers from being exploited than are already slipping through the cracks.
“Small business has enough trouble competing with employers paying cash in hand or underpaying workers to get an unfair advantage over other small business owners who are in business for long term and believe in paying their employees a sustainable wage,” said one reader.
“I’m shocked a credible organisation would even entertain the idea of publishing this article. I accept responsibility for performance of both my businesses. The fact one of them is thriving wh[ile] one is struggling does not mean my dedicated hard workers should receive peanuts compared to my other workforce,” commented another.
There was also a suggestion that the minimum wage encourages growth among industries that can afford it, and effectively shuts down others that can’t instead of letting them drag on unsuccessfully.
“The minimum wage legislation prevents economic resources being diverted into industries that do not provide people with a wage that they can survive on. The result is the "working poor" who then require greater government support, i.e. your taxes to support them. You can clearly see this effect in the USA and other economies around the world that do not have a decent minimum wage,” one reader argued.
The case was also put that instead of looking solely at wages, the benefits of having people in work rather than claiming unemployment benefits is a win-win for all, and as such the government should do more to help SMEs cope with the short-term cash flow struggles to meet the minimum wage requirements.
“One of the worst traps for a very small business is where after employing someone if they happen to have a period of poor sales, they happen to use the only cash which is generally available, which is often the money that should go to pay the GST, the small business is of course still liable for the GST and if unable to pay it receive fines, have to put of[f] the employee and ultimately the business may even go under,” said another reader.
“If they have taken the risk of employing and training a staff member and that is one extra Australian off of unemployment benefits, some kind of allowance should be made by the government for that very small business.”
Others see it as a necessity that actually supports SMEs, by providing funds to low-paid workers that they can then spend at local businesses.
“The poorest in our society tend to spend every cent they earn, and they tend to spend it in their local community thereby benefiting the local SMEs and helping them to build up local employment. Raise the minimum wage and ensure that all employers pay at least the minimum then the whole economy will feel the benefit from the bottom-up stimulus,” commented one reader.
Yet this cut to the original argument – that under the present system, not all employers pay at least minimum wage, therefore limiting its stimulatory effect on the wider economy.
It was largely for this reason that others supported the idea of scrapping the current system in favour of a majorly overhauled one: one that would be more fairly applied and therefore more sustainable, particularly small businesses.
“I completely agree with your general thoughts in your article and have been saying there [are] problems with the minimum wages for a long time when it comes to their application to small businesses,” William Pintainho of Aware Financial Services said in an emailed letter to My Business.
“I think the greatest obstacle is the perception the average person has to the owners of small businesses (i.e. they have little sympathy), because employees and customers seem to be envious of them, think these owners are living the high life when the reality is often completely different. I know this as an accountant and adviser plus being self-employed myself. What many, if not most, self-employed / owners do is ‘fake it until you make it’ because they are told that from training tapes etc.”
Mr Pintainho pointed to high-profile wage underpayment scandals, such as those at 7-Eleven, as evidence that the minimum wage system isn’t working as well as it could.
“As recent news about franchisees confirms … many of them are struggling and going bankrupt but the franchisor stands to benefit the most because they ‘pick up’ the failed business for nothing despite selling it for say $200,000 one or two years before.”
He suggested that microbusinesses should be exempt from minimum wage provisions, allowing the business financial scope to grow while employees have the choice not to work with such a business or negotiate on the terms of the remuneration.
Opinion: Why do so many claim to represent small businesses?
By Adam Zuchetti
Opinion: House prices not all doom and gloom
By Adam Zuchetti
Analysis: How can SMEs realistically stay competitive?
By Adam Zuchetti