Australian workers face conundrum: longer hours, lower wages, and stagnant growth, reveals SME index.
Although Australia’s workforce saw a 1% increase in median work hours last month and a 2.3% annual uptick, Employment Hero’s SME Index reveals a concerning trend: wages have declined by -1.3%. This discrepancy hints at potential underemployment among SME employees, with median hours worked dropping by 2.8% in the past month and declining by 8.2% quarterly, while employee growth remains stagnant at 0.3% monthly and 5.1% annually. Additionally, the index highlights challenges faced by Australia’s aging workforce. Employees aged 65 and older experienced a notable month-on-month increase of 10.4% in work hours, possibly driven by financial strain. Despite these hurdles, Australia’s overall employee growth remains resilient, averaging a monthly increase of 0.4% and an annual growth of 6.7%, aligning with ABS’s latest unemployment figures.
However, the median hourly wage paints a less optimistic picture, dropping to $38.08 in February, despite an impressive annual growth rate of 7.5%. Particularly noteworthy is the Science, Information, and Technology sector, which saw a significant month-on-month drop in hourly rates by -4.8% to $57.12, indicating broader economic shifts affecting various industries.
Small businesses showing signs of struggle
The strain is most acute among small businesses (between 1 and 19 employees), with the Index data indicating this cohort is not only seeing slowed employee growth of 0.3 per cent MoM and 5.6 per cent annually, (compared to medium businesses at 1 per cent and 15.3 per cent, then large businesses at 0.9 per cent and 18.4 per cent respectively), but also suggests small businesses are coping with economic pressure by reducing employee work hours. This data, supports figures from ASIC earlier last week highlighting that monthly business insolvencies are at a nine year high. Slowing employee growth among smaller businesses signals a potential crisis among a group of employers that form the backbone of the Australian economy.
Wages down across the country, especially for tech sector
February’s wage trends further underscore a drop in wages across the country, with all Australian states experiencing a downturn in wages (most severely felt in NT at -2.4 per cent while WA fared best at -1.0 per cent), despite moderate YoY wage growth for all states (lowest growth in NT at +4.5 per cent, while ACT and QLD employees topped the Index at to +8.7 per cent).
The technology sector, once booming, now shows signs of cooling, marked by the Index’s lowest employee growth and a significant month-on-month median hourly wage drop of -4.8 per cent to $57.12, as well as an annual decrease of -0.2 per cent, compared to all other sectors that saw annual wage growth.
Retirement delayed as Boomers pick up more hours than Gen Z
The report also highlights an intriguing generational divide in the workforce. While most age groups saw a decrease in median hours worked, those aged 65+ bucked the trend, possibly indicating a necessity-driven increase (+10.4 per cent MoM) in working hours amidst economic uncertainties. Annually, individuals under 18 saw a -5.1 per cent decrease in hours worked while other age groups saw an increase between +1.1 per cent (25-64 year olds) and +2.9 per cent (65+ year olds).
Ben Thompson, CEO and Co-Founder of Employment Hero “The latest Index findings point out the dichotomy between overall employee growth and the challenges faced by small businesses. Just as our data has revealed, many businesses are experiencing overall employee growth, in line with February’s ABS unemployment rate which dropped 0.4 per cent from 4.1 to 3.7 per cent. However, glaring issues remain for small businesses that are not only experiencing stagnant growth, but are at risk of insolvency and being forced to make hard decisions.
“As such, small business owners are looking to cut down on expenses and reduce workers’ hours, while their employees are having to navigate job instability, underemployment and consequential financial strain; making them likely to seek another job to make ends meet.Small and medium businesses are the heartbeat of our economy, accounting for almost 70 per cent of employment in Australia. While larger businesses show signs of resilience and recovery, this report’s stark revelation shows small businesses are at a very real risk of going under. This demands immediate attention to safeguard these crucial contributors to our economy.”
Eddie Kolwalski, Senior Insights Manager at Employment Hero, added, “The dramatic shifts in working hours, especially among the eldest and youngest in the workforce, reflect broader economic pressures and the uneven impact on different demographic groups.
“The trend among the younger demographic can be attributed to the higher likelihood of underemployment, with many in this age group often finding themselves in hospitality or retail positions. On the other hand, the increase in hours for those aged 65 and above suggests a necessity-driven choice. While we have seen recently that Australia’s unemployment rate has dropped, this data represents the very real concern of underemployment.
“There’s not much to celebrate when people are in jobs but not making enough to live off it.” As Australia navigates this challenging economic landscape, Employment Hero’s SME Index serves as a crucial barometer for understanding the evolving dynamics of work, wages, and the wellbeing of SMEs.
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