Labor’s plan to legislate for the Fair Work Commission to lift the minimum wage to a “living wage” has drawn fire, with many SME owners themselves living below the poverty line.
On Tuesday (26 March), the federal opposition expanded on its initial idea to explore the introduction of a minimum wage, stating that it would legislate for the Fair Work Commission to investigate what a living wage in Australia would look like, and to then implement it.
Labor said the policy would only cover the minimum wage and would not be extended to industry awards.
‘Politicians must be clearer on where they stand’
Employment lawyer McDonald Murholme, managing director of Alan McDonald, called on both parties to end the uncertainty for businesses around wages and clearly spell out their proposals going into the federal election.
“Australia has a diverse and evolving workforce, demanding a modern and compassionate approach to safety nets such as the national minimum wage,” Mr Murholme told My Business sister title Lawyers Weekly.
“In light of this, it is important that the government treads lightly on changes to the FWC regulations and allows the commission to uphold Australia’s high standard for protecting employees.”
Mr Murholme noted that business groups have “argued that a substantial raise to this standard would cost employers billions and lead to job losses”, and suggested that a more measured approach is needed for the whole economy to benefit.
“Modest, incremental increases to the minimum wage have been shown to boost the economy and have no significant impact on job loss statistics,” he said.
“That would simply add to the cost of living that the policy is supposed to address.”
Unsustainable cost imposition on small business: Business groups
Reaction from the business community to Labor’s proposal has been swift and harsh.
The Australian Chamber of Commerce and Industry (ACCI) launched its federal election campaign on Wednesday, under the name “Small business is a big deal”, with workplace relations one of the three core issues it is lobbying for, alongside energy and skills.
Its CEO, James Pearson, claimed that the policy would, if implemented, ultimately hurt the very people it was intended to help.
“Labor’s living wage plan will push up the cost of wages for many small businesses, without any regard for the capacity of these businesses to pay the increased wages or pass on the increased costs to customers,” he said.
“With cost of living pressures already putting many small businesses under the pump, this policy would force many businesses to choose between cutting the hours of their employees or laying people off. Even if they could charge customers more, to recover the cost of increased wages, that would simply add to the cost of living that the policy is supposed to address.”
Mr Pearson added: “In forcing the Fair Work Commission to prioritise a living wage over all other factors, the opposition is sidelining the needs of not only small business owners but those looking for work or trying to enter the workforce for the first time, including students and young people.”
The government-funded Australian Small Business and Family Enterprise Ombudsman (ASBFEO), designed to be a politically neutral supporter and advocate for small businesses and family operators, also expressed concerns at Labor’s proposal.
“Small business is the biggest employer of labour in Australia, and therefore, changes to the Fair Work Commission Annual Wage Review processes need to be very carefully thought through to avoid unintended consequences,” Ombudsman Kate Carnell said.
“Hardest hit by this proposal would be smaller retailers, those in the hospitality industry, cafes and fast food outlets.
“Many of these small businesses simply won’t be able to compete with larger businesses.”
Ms Carnell also noted that the current independent process for determining the minimum wage has already delivered a 3.5 per cent hike last year and a 3.3 per cent rise in 2017 — both well above the rate of inflation.
“More than 54 per cent of small business owners had taxable incomes below the poverty line.”
‘We already earn less than our employees’
A number of My Business readers suggested that substantial wage rises for their employees, if such a measure were implemented, would prove unsustainable and would force them to shut down.
Many also said that they already take home less themselves than they pay their workers, making the suggestion of a living wage a personal slap in the face, too.
This was corroborated by Ombudsman Ms Carnell, who said that “ATO data from 2017 shows that more than 54 per cent of small business owners had taxable incomes below the poverty line”.
“They are paying their staff and their bills, with little left over to pay themselves,” she said.
Here is what some My Business readers had to say on the living wage proposal:
- “We have already stopped employing staff, and my husband and I work well above 70 hours a week each to keep our business running. Our take-home pay is less than our employees as they have always come first. We are often separated for work and have not had a holiday for eight years.”
- “People can’t spend money at their local small business if the business can’t afford to operate and pay staff, so they close down. Labour costs in Australia are ridiculously expensive.”
- “If the so-called ‘living wage’ is lifted to 60 per cent of the average wage, which I understand they are saying, then that equates to a 34 per cent increase in wages for the lowest paid and no doubt similar increases for those above the minimum wage.”
- “Shorten loves to use the word ‘corporations’. It makes it sound like all small businesses are rich businesses that can afford much more in wages and penalty rate increases.”
- “I know for a fact that my business cannot survive any more cost now that we are fighting the China manufacturing imports. I’m sorry to say that to me... it will be my time to call it quits and fold up the business. By the way, I employ seven people.”
- “Why is it OK for employees to have a decent standard of living but not employers because, if you were reading what people from small business are saying, they do not receive the same benefits as their employees and no one is looking to help them.”
At least one My Business reader, however, expressed a degree of support for the proposal:
“What part of ‘living wage’ do people have trouble with here? From the comments on small business people (of which I am one) or retirees, it’s all about having a decent standard of living — why cannot this apply to the people businesses employ?”
‘Opposition has listened to employer concerns’
Not everyone was fully opposed to the idea, however.
Business Council of Australia chief executive Jennifer Westacott took a different view, noting that Labor planned to retain the Fair Work Commission as an independent umpire, and that any wage increases it mandated would be staggered rather than delivered in a single hit.
“The Business Council has long supported the Productivity Commission’s recommendation that the Fair Work Commission broaden its framework for determining minimum wage increases, while also considering the impact that any increase may have on the labour market and the economy more broadly,” she said.
“Full-time workers deserve a wage that allows them to support themselves. They also need the jobs that only thriving businesses can create. An independent umpire is the best way to balance these demands.
“An independent commission with broader terms of reference alongside a thorough review to determine a living wage are sensible steps. Employers also welcome Labor’s commitment to considering the tax and transfer system in any future determinations.”
Ms Westacott added that “the opposition has listened to employers’ concerns, ensuring that any increase in the minimum wage is phased in over time”.
But she agreed that more clarity is needed around how its approach could work in practice, and how it would be delivered.
“Clearly, it is Labor’s intention to target the lowest paid workers by announcing that changes would not flow through to workers on awards or enterprise bargaining agreements. It will be important to see exactly how this mechanism works,” Ms Westacott said.
“A minimum wage increase is not a panacea for disadvantaged Australians. Political leaders should act to tackle entrenched disadvantage through a Productivity Commission inquiry to better target resources to those who need them and by increasing the inadequate Newstart allowance for single people.”
- 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