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Unions call for increased minimum wage but SMEs remain wary

The Australian Council of Trade Unions has argued for an increase in the minimum wage in the Annual Wage Review.

In an announcement last week, it said it would argue for a 5 per cent increase in its submission, lifting the minimum hourly rate to $21.35 and the minimum annual rate by a little over $2,000.

“If this Government is serious about addressing cost of living pressures, it starts with wage growth,” said ACTU Secretary Sally McManus.

“There are practical things this Government can do to lift wages, but so far they have sat on their hands or pretended it’s someone else’s job. The biggest, and most immediate action the Prime Minister can take is backing this increase and arguing alongside us in the Fair Work Commission that this increase is what workers need and deserve.”

According to the ACTU, one in four Australian workers rely on the Annual Wage Review for their pay rise. Submissions closed on 1 April and are now under review by an expert panel.

In the Federal Budget last week, it was announced that welfare recipients and pensioners would receive a one-time $250 payment while the low and middle-income tax offset (LMITO) would increase by $420. A short-term cut to the fuel excise was also announced.

However, the ACTU argues that wage growth continues to lag behind projected inflation and that these measures “will do nothing to generate the long-term, sustainable wage growth that workers need or stop the nation’s workforce suffering another year of real wage cuts.”

While the government forecasts wage growth to increase to 3.25 per cent, unions say it lags behind projected inflation.

“The Budget’s measures did not adequately address the current cost of living crisis in Australia for average Australian workers,” stated Greg Bamber, Professor & Director, International Consortium for Research in Employment & Work (iCrew) at Monash Business School*.

“The Budget seemed to focus on the short-term political agenda, trying to get the coalition re-elected, rather than longer-term priorities that should include improving health and education as well as addressing the high degree of inequality in Australia, giving all the people more of a fair go!”

He called the ACTU’s claim “understandable”, noting many workers experienced unemployment during the pandemic.

“This situation most severely impacted low-paid sectors and those that employ more women than men, such as health care, social assistance, accommodation, food services, and retail. So, increasing minimum wages would also address the gender pay gap,” Mr. Bamber said.

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“Although employers seem to oppose pay increases, an increase in minimum wages would help employers to deal with labour shortages that many are experiencing. Business interests tend to assume that increasing minimum wages will cause increases in unemployment. However, international evidence refutes that assumption.”

Still, business associations and employee relations specialists remain wary of how this move can affect small and medium Australian businesses that are only just recovering from lockdowns, travel restrictions, and rocky consumer confidence.

“The same costs of living pressures that the ACTU has identified also apply to business owners,” Emma Dawson, Employsure Face2Face Business Partner, pointed out. “It’s simply more expensive to keep the doors open. Forcing a minimum wage increase could create a domino effect with increased costs being passed onto consumers in the form of higher prices and services – compounding the problem further.”

“The real winners of a 5 per cent minimum wage hike will be large organisations with massive profits that can absorb the associated costs. SMEs simply will not be able to compete, and some may just give up and close their doors for good.”

Similarly, Andrew McKellar, chief executive of the Australian Chamber of Commerce and Industry, urged the Fair Work Commission to show caution in reaching its decision.

“Small businesses are on a knife-edge – the risk of further COVID-19 outbreaks, the impact of flooding in NSW and Queensland, and the ongoing conflict in Ukraine continue to dampen the prospects of recovery,” Mr. McKellar said.

“While some sectors have remained resilient through the pandemic, other sectors, particularly accommodation and food services, arts, recreation, and retail sectors, as well as tourism-related businesses, have been smashed by lockdowns and restrictions.  It will still take some time for many of these businesses to pay back debt accrued through the pandemic and return to profitability.

“In the upcoming annual wage review, any push for unsustainable wages growth would likely risk the viability of businesses and the jobs they sustain and create.”

Any decisions and orders from the Annual Wage Review are usually implemented in July of the following financial year.

*Greg Bamber is a Professor, Monash Business School, Monash University and co-editor of International & Comparative Employment Relations: Global Crises & Institutional Responses.

READ ALSO: Federal Budget 2022: Hits and Misses

Rhea Laxmi Nath

Rhea Laxmi Nath

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