Minimum wage hike puts pressure on businesses

The potential rise of the minimum wage will place a costly burden on businesses during a period of uncertainty.

7 June 2022 

Australian Chamber of Commerce and Industry (ACCI) chief executive Andrew McKellar has warned against “unaffordable wage increases” for small businesses, which could inflict further pain on small businesses, and the millions of jobs they sustain and create.

“Overall, employees aren’t falling behind when the full compensation they are receiving from employers is accounted for,” Mr McKellar said.

“Imposing unaffordable wage increases on small businesses will put jobs at risk, not create them. The fact is in nine out of the last 10 years, the panel has increased the minimum wage rate above inflation. Wages have not gone backwards over the last decade.”

The Albanese government had recently lodged a formal submission with the Fair Work Commission (FWC) recommending it lift the minimum and ‘modest’ award wages by 5.1%.

The government submitted to the FWC that high and rising inflation and weak wages growth were reducing real wages across the economy and creating cost-of-living pressures for Australia’s low-paid workers. 

Speaking to Sky News, Mr McKellar urged caution not to “bake in stronger expectations around inflation”. The Reserve Bank’s (RBA) target for inflation was still between 2% to 3%. 

“That’s where we’ve got to get back to. Business has really been facing a lot of pressures over the past two or three years,” he said.

“They’ve got through the pandemic. Many of them have struggled to survive through that period. They’re now facing real challenges in terms of labour availability, supply chain disruption, and we're seeing soaring energy prices. 

“This is the last thing that we need to do is to start to bake in more cost pressures for those sorts of businesses.”

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Mr Mckellar said it was important to consider how the current conditions affected different types of businesses when it came to wage growth in the broader marketplace.

“Clearly, for those businesses that are doing well, then obviously, this is the time when we will see some increased pressure on wage outcomes and that should happen in the marketplace, and it is happening,” he said.

“If we look at things like the wage price index, which is showing growth of 2.4%, I don’t think that’s necessarily representative of what’s happening in the broader marketplace. 

“We had National Accounts data last week. It showed that total compensation for labour, if you are including bonuses and other factors, all the payments that people are getting, that’s gone up 5.5%. That’s much closer to what we’re seeing in terms of the inflation outcome.”

There was also a disconnect when it came to what was happening across small business in particular and medium-sized business, in comparison to the big end of town, according to Mr McKellar.

“There are many small businesses that have really been struggling and now they’re trying to get back on their feet,” he said.

“They’ve done everything they can to maintain jobs and employment over the past two years. And we start the recovery process now with unemployment at 3.9%.”

In its recent submission, the ACCI has stressed the need for genuine caution and moderation in awarding any increase in the minimum and award minimum wages.

The ACCI has backed a 3% increase in the minimum wage to find the right balance, taking into account the full range of risks and uncertainties facing the Australian economy, workers and businesses.

The FWC is set to make a decision this month on a wage rise for the nation's lowest-paid workers.

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