COSBOA warns minimum wage increase to hurt small business

The Council of Small Business of Australia has warned an upcoming increase in the minimum wage will hurt small businesses, saying it will cut into family income during an already fragile time.

In an eagerly awaited decision, Fair Work Australia on Friday lifted the minimum wage from $569.90 to $589.30 a week. The $19.40 per week increase is about midway between union calls for a $28 per week rise, and the $10 sought by business bodies, including COSBOA.

COSBOA executive director Peter Strong told SmartCompany this morning that while employees are getting a pay increase, the ruling is a pay decrease for small businesses.

“People need more money and we understand that, but small businesses don’t get a lot of money,” he says.

“At the moment, small business is a lot of hard work. We’re just here to make a living and it impacts on small business owners’ family income.”

Strong also says the current “inadequate” tax breaks will make it difficult for small businesses to cope.

“You can’t give more money to small businesses but the Government can give more tax breaks. The Government can also remove red tape. The amount small business pay for GST and superannuation is something they should have a look at.”

The Fair Work ruling, effective from July, will flow to 1.4 million workers. It amounts to a 3.4% rise above inflation, and follows a $28 per week increase last year, after a freeze during the global financial crisis.

The Australian Chamber and Commerce and Industry said the ruling was “excessive”, after initially lobbying for an increase of $9.50 a week.

ACCI chief executive, Peter Anderson, claims the increase will add nearly $3 billion over the next year to the wages bill of Australia’s already vulnerable small and medium business sector.

Australia Industry Group chief Heather Ridout says the ruling carries the risk of unemployment.

“We understand the pressures on the cost for living for the low paid, but this decision is on the high side and it exposes lower-skilled people to a greater risk of unemployment or underemployment,” she said.

“While not wanting to overstate the risks, it has to be said that in the current circumstances faced by non-mining, trade-exposed sectors such as manufacturing and tourism, the decision is sure to further erode margins and will weigh against decisions over retentions and new hiring.”

But the news has been welcomed by the Australia Council of Trade Unions, which had lobbied for a $28 per week rise.

“Today’s decisions will help meet the needs of award wage earners and we are pleased it is above inflation, but the reality is it will not be enough to bridge the gap between the low paid and the rest of the workforce,” ACTU secretary Jeff Lawrence says.