Australian Businesses Lambast Record Minimum Wage Increases

Staff at Village Cinema serve customers in Geelong, Australia, on June 22, 2020. Quinn Rooney/Getty Images

The Australian business community has criticised the Fair Work Commission for the latest wave of minimum wage rises, saying it would add more pressure to struggling businesses nationwide.

On June 2, the commission announced that it would lift the national minimum wage by a total of 8.6 percent from July 1, effectively raising the pay rate for lowest-paid workers from $21.38 (US$14.14) to $23.23 per hour.

The national minimum wage applies to all workers who are not covered by an award or registered agreement.

At the same time, workers who are employed via contracts or agreements will have their minimum wage increased by 5.75 percent.

The commission estimated that only 0.7 percent of Australian workers were paid the national minimum wage, while 20.5 percent were paid the minimum rates covered by modern awards.

Businesses Community Laments Over Record Minimum Wage Increase

Following the announcement, the Australian Chamber of Commerce and Industry (ACCI) said the Fair Work Commission’s decision would hit small and family businesses with a $12.6 billion wages bill on top of the 0.5 percent increase in superannuation payments for workers this July.

“Today’s decision will come as a hammer blow for the 260,000 small and family-owned businesses who pay minimum and award wages,” ACCI chief executive Andrew McKellar said.

“The Fair Work Commission has made a dangerous choice to chase after the supply-side inflation shock that we are experiencing. An arbitrary increase of this magnitude consigns Australia to high inflation, mounting interest rates and fewer jobs.”

Staff work in a busy Lygon Street cafe in Melbourne, Australia, on Oct. 22, 2021. William West/AFP via Getty Images

The CEO warned that many small and family enterprises in the accommodation, food, construction, manufacturing, and retail sectors had experienced falling profits over the past two years and thus could not afford the wage rises without lifting their prices.

“A 5.75 percent increase will make the job of the Reserve Bank more difficult to control ongoing inflationary pressures, inflicting pain on families and small business when they are already down to the wire,” McKellar said.

Echoing the sentiment, National Retail Association (NRA) said the new minimum wage was a detachment from commercial reality for most Australian businesses.

NRA Legal Director Lindsay Carroll said most businesses could not afford the increase and expected many of them to cut workers’ hours or lay off staff.

“This shows a very disappointing lack of understanding on the part of the Commission of the many challenges confronting business owners across the country,” Carroll said.

The legal director also stated that the wage rises would counter the Reserve Bank’s effort to contain inflation.

“It makes no sense that we have the Reserve Bank doing everything in its power to wind in spending, but at the same time having the Fair Work Commission pouring fuel on the fire,” Carroll said.

Fair Work Commission Explains Its Decision

Fair Work Commission President Adam Hatcher said the decision was made under “very unusual” challenges, including falling real wages and high inflation.

“A further challenge is an expected sharp slowdown in economic growth over the next year,” he added.

The president noted that the commission had considered the effect of high inflation on low-paid workers’ ability to meet their basic financial needs.

Staff members assist shoppers at Costco Perth in Perth, Australia, on March 19, 2020. Paul Kane/Getty Images

In addition, he said it took into account the upcoming 0.5 percent increase in the super guarantee and the impact of a softening jobs market on workers and different industries.

“We have also had regard to the need to avoid entrenching high inflation expectations by taking a perceived wage indexation approach and the recent weak performance in productivity growth,” Hatcher said.

The commission president then assured the public that the latest wage increase would not create a wage-price spiral nor any material macroeconomic effects.

Government and Unions Support High Wage Increases

The Labor government has expressed support for a wage rise in line with the current inflation rate of seven percent.

Federal Education Minister Jason Clare believed higher wages would lead to people spending more at small businesses.

“It helps the economy,” he told reporters.

“The reason we’ve got a challenge with inflation is not because people on the lowest incomes in Australia have been paid too much. It’s just an outright lie.”

Meanwhile, the Australian Council of Trade Unions (ACTU) welcomed the Fair Work Commision’s ruling, saying it would move wages in the right direction amid high inflation.

“Today’s 5.75 percent increase for award workers means they can just keep up with the cost of living. It is a matter of survival,” ACTU Secretary Sally McManus said.

“Along with the Annual Wage Review, our workplace laws must keep up with the times. We need strong workplace protections to ensure secure jobs, stamp out wage theft and close labour-hire loopholes so wages and conditions are not driven down while big business posts soaring profits.”