Business bodies call for restraint on minimum wage

Business bodies have urged Fair Work Australia to exercise restraint in its minimum-wage deliberations, which begin today with a series of hearings, arguing a large increase will compound pressures on Australia’s small- to medium-sized businesses.

Business bodies and unions have wildly different views on the appropriate increase in the minimum wage, with business calling for the Fair Work Australia Minimum Wage Panel to increase employee pay by $9.50 a week, while unions have called for almost triple that figure.

The Council of Small Business Organisations of Australia says minimum wage increases are increasingly coming out of the pockets of small business rather than consumers, because SMEs are less likely than big business to compensate for the increased costs by hiking up prices.

COSBOA executive director Peter Strong has thrown his support behind the Australian Chamber of Commerce and Industry’s calls for a $9.50-per-week increase in the minimum wage.

Strong says while the body understands that workers need a pay rise to deal with the rising cost of living, hefty minimum-wage increases can have a big impact on an SME’s viability.

He says that $9.50 a week would be “about right”.

“If you’re a small business around a mine, $9.50 would be nothing. But if you’re a retailer and feeling the pinch, it might come out of your pocket,” Strong told SmartCompany this morning.

The ACCI this weekend said a sizeable increase “would weaken the already struggling small business sector, and fly in the face of budget warnings of a patchwork economy and last week’s softer than expected jobs data.”

ACCI – which represents large and small businesses – said a $9.50 weekly rise with carve-outs for disaster-affected regions and underperforming industries is the “fairest result”.

An increase of that size would lift the minimum wage by 6.5% over two years, it said, which is 1% more than rises in the cost of living.

The business body argues that last year’s record rise of $26 a week – following a freeze during the global financial crisis – is still working its way through the system.

It added that unfunded wage-rises fuel inflation, thereby increasingly the likelihood the central bank will hike rates. “An interest rate rise that eats up a wage rise is of no benefit to anyone,” ACCI says.

But unions are calling for a “modest” $28-per-week increase in the national minimum wage and in other award minimum wages up to the benchmark tradesperson’s rate, and a 4.2% increase for other award workers.

The Australia Council of Trade Unions says this would lift weekly wages from $569.90 to $597.90, a 74-cent-per-hour increase from $15 an hour.

“This is a modest claim to ensure the one in six workers who are dependent on awards are not left behind by Australia’s economic prosperity,” ACTU Secretary Jeff Lawrence says.

Lawrence has said that today’s minimum wage now equates to 44.7% of the average income, down from 50.5% a decade ago.

“The reality is 1.3 million people survive each week on minimum wages – that’s almost 2.5 times the population of Tasmania,” Lawrence said.

“Our economy is growing, profits are at record levels, and unemployment is low. But living costs are rising sharply for the low-paid.”