According to the latest data from the Employment Hero SME Index, which analyses information from over 140,000 small and medium-sized businesses (SMEs) and 1.4 million employees, there are concerning indicators for Australian workers regarding employment conditions.
With the new National Minimum Wage increases taking effect from July 1, 2023, it is expected that the employment situation will worsen.
The most recent analysis from the Index shows a decline of -6.4 percent in median hours worked in April compared to the previous month. This drop is observed across all states and territories, business sizes, industries (except Manufacturing, Transport, and Logistics), and age groups except those under 18. Moreover, in industries such as Construction and Trade services, Healthcare and Community Services, and Retail, Hospitality, and Tourism, median hours worked have fallen both year-on-year and month-on-month, affecting all age groups. Interestingly, despite working fewer hours, the median hourly wages have increased by 7.1 percent compared to the previous year.
These findings from the SME Index contradict the wage rise decision by the Fair Work Commission, suggesting that the impending wage increases may exacerbate the negative employment trends in the latter half of 2023. The decrease in hours worked, as inferred by the Index, aligns with the decline in discretionary spending in the Retail, Hospitality, and Tourism sectors, as well as the underemployment statistics reported by the Australian Bureau of Statistics. These factors together indicate that Australia is facing a consumer recession. In May 2023, the median hourly wage for Australian SME employees was $35.87.
Notably, the Retail, Hospitality, and Tourism sectors experienced declines in average employment growth (-0.1 percent), median hourly wages (-1.3 percent), and median hours worked (-4.7 percent) on a month-on-month basis. Moreover, the median hours worked in these sectors also decreased compared to the previous year (-1.2 percent), indicating that this decline is not just a seasonal fluctuation.
The Healthcare and Community Services sector is also showing signs of distress. Although the average employment growth for SMEs in these industries is still positive, there have been declines in median hourly wages (-1.3 percent) and hours worked (-6.2 percent) on a monthly basis. In the case of hours worked, the decline is even observed year-on-year (-2.2 percent). This decrease is likely attributed to a decrease in demand for these services, possibly due to the ongoing cost of living crisis.
Australia’s minimum wage and award rates are set to increase in a decision made by the Fair Work Commission (FWC). The minimum wage will see a significant 8.6 per cent boost, while award workers will receive a 5.75 per cent pay increase. These changes will affect around a quarter of the country’s workforce.
The new minimum wage, aligned with a slightly higher classification wage rate in modern awards, will be $23.23 per hour or $882.80 per week based on a 38-hour workweek. However, it’s worth noting that the FWC has emphasized that these pay raises will only make a modest contribution to overall wages growth in the upcoming 2023-24 period. They are confident that the increase will not lead to a wage-price spiral or have a substantial impact.
Although the FWC acknowledges that the new rates will not fully maintain the real value of modern award minimum wages or reverse the decline experienced in recent years, they are confident in the limited effect of the increase. The wage adjustments will go into effect in the first complete pay period on or after July 1.
Ben Thompson, Co-founder and CEO of Employment Hero, said: “Employment Hero supports wage rises and the prosperity of both employees and employers. We know that thriving, robust economies create great opportunities for businesses and employees alike.
“Businesses are facing economic headwinds and the pressures of inflation; further wage rises that ultimately cause a wage-price spiral or unemployment benefit no one, especially not employees.
“Our data shows wages are already outpacing inflation, and we are deeply concerned the FWC’s wage rise decision will exacerbate the current decline in employment growth reported in the SME Index. For example, some employers will have no choice but to reduce their employee numbers or drop hours. We are conscious of short-term gains that may produce long-term pain for Australian workers, especially as consumer spending appears to wane.”
Mr. Thompson continued: “We are fully supportive of better outcomes for employees and employers. Employees earning more is a great thing and we know the positive impact this has on society. However, the challenge Australian workers will likely face coming into the second half of the year is securing ample hours of work, which relies heavily on the stability and growth of our SME sector.”
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