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Business says minimum wage rise too high

Justin Grey
06 June 2011 3 minute readShare
My Business

Fair Work Australia’s decision to raise the minimum wage by around $20 a week has been condemned by My Business readers, by industry and welcomed only weekly by unions.

Nobody, it seems, is happy with Fair Work Australia’s decision to increase the minimum wage by $19.40 a week.

The Australian Council of Trade Unions (ACTU) was reserved in its praise, saying the decision “…will help meet the needs of award wage earners and we are pleased it is above inflation, but the reality is it will not be enough to bridge the gap between the low paid and the rest of the workforce,” according to ACTU Secretary Jeff Lawrence.

Employer groups didn’t hold back, with the Australian Retailers Association warning it will cost jobs.

“Retailers will feel the biggest impact of the wage increase with the shop assistant rate increasing by over $21 per week,” said ARA Executive Director Zimmerman. “Small to medium businesses will be hit the hardest … the smaller players are facing the same struggles as Australian workers with interest rate increases, more taxes, increased utility bills and a higher cost of living. Many will simply have to close their doors.

“This decision is disastrous for retailers and it’s unreasonable to expect them to pay increased wage bills while the sector struggles to post any significant growth and when retailers are already facing wage increases as of 1 July with the second transition to the Modern Award.”

“The double increase will give retailers no choice but to shed staff, especially since retail trade figures have shown little growth and any year -on-year boost in sales is still well below the rate of inflation.”

COSBOA’s Peter Strong was more guarded.

“People on low wages do need to keep up and this rise reflects that,” he told My Business. “But many small businesses are also on low incomes so we need to make sure we do not rob Peter to pay Paul and then Peter cannot put food on his table or even employ anyone. So so we need to look at better tax breaks for low income employers - particularly those in retail.”

My Business readers were also less-than-impressed by the new wage.

David Jackman, managing director of Pronto Software, said “Unfortunately there is a consequence in well intentioned actions like this to the exact folk it is trying to help.”

The smaller business, especially those that are in hospitality, where many younger and low paid staff get their base experience to improve their skills (so they can negotiate higher rates) are hit by both the GST they have to pay (as usually low GST in purchased raw ingredients) which has nothing to do with the business’s profitability and now an incremental cost that is almost impossible to pass on in higher prices for their coffee and other basic foods.”

“This cost increase and continual GST impost just forces these small businesses to reduce staff to an absolute bare minimum and that means the folk these increases are trying to help are actually priced out of the market. This is exactly the same as well intentioned trade unions pricing their members out of the workforce with now so many jobs exported overseas – it happens whilst we watch and nobody actually acts to stop it,” Packman said.

“Unfortunately our ‘feel good politicians’ simply do not understand the consequence of their decisions. I suppose this isn’t surprising as the vast majority of them haven’t ever tried to run a small business and be responsible for actually doing something.”

Debra Templar from retail consultancy The Templar Group wrote “Everything is going up in price: rent, outgoings, utilities, technology, petrol etc. Yet retail prices are being sorely tested by online and deep discounting by the major chains. Where exactly are small retailers supposed to find the extra money?”

“Their answer will be to work seven days a week, purely as a means of survival. This way they will be able to keep their existing staff, at roughly the same pay, but have them work less hours. Retailers don't want to lose their staff but if the only way to stay solvent is to reduce hours then that is what is going to happen. And their staff will probably start looking for second jobs.”

Eric Bigalk of marketing consultancy Smart Solutions said he can “see the necessity for the rise and also see how in times like these, even the smallest of rises to wages can put one or the other job into jeopardy. My eldest daughter is starting out in the working world and gets paid way less than the wage minimum. Like many employers, they pay her cash to avoid paying minimum wages and to reduce paperwork and other obligations. For her it is upsetting and asking for more money means losing her job.”

“From my clients I hear enough complaints already about how tough it is to stay afloat and make headway in business (I guess that is why they see me...), but as every cent counts these days, the minimum wage rise could literally cost jobs or the government taxes as more cash transactions will arise along with it.”

Business says minimum wage rise too high
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Justin Grey

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