• Rikki Lambert

Minimum wage increase threatens small business jobs


The ACTU is arguing for a $26-a-week rise in the minimum wage in the case currently before the Fair Work Commission, but employers and the government argue that an increase of this size will put small business jobs at risk, as these businesses struggle to recover from the pandemic induced recession.


The unions argue that a wage increase of $26, when the decision is handed down this July, will be good for workers and good for the economy because it will boost consumer confidence.


The proposition is that minimal wage earners spend all of their wages, so that a wage increase will boost demand within the community and provide additional business activity for small business.


In its submission, the Morrison Government called for a “cautious approach” to raising the minimum wage, given “uncertainties in the domestic and international economic outlook”.


In their response to the ACTU submission, employers have pointed out that workers who are on minimum wages are unlikely to spend their money in businesses that are suffering most from the recession, like tourism, travel and hospitality.


The ACTU counters that these industries should continue to receive Jobkeeper while workers in other industries should get the wage rise.


Around 2.3 million workers, who are on awards, are likely to get wage increases if there is an increase in the minimum wage. Of these 180,000 earn the minimum wage. It is currently set at $19.84 an hour or $753.80 per week which is around 52.7 per cent of the national median wage.


The government submission argues:

“The risk of domestic outbreaks and ongoing disruptions to other major economies mean the economic environment remains uncertain.
“Although the vaccine rollout is underway, Covid-19 outbreaks that would necessitate further containment measures remain a significant risk and even localised outbreaks could have an impact on consumer and business confidence weighing on consumption and investment.”

The government also noted that the Superannuation Guarantee is scheduled to increase by 0.5 percentage points in July.


The Morrison government’s submission does not nominate a rate for the minimum wage but argues that the Fair Work Commission should take account of the economic circumstances that currently exist.


From this perspective, the Reserve Bank has forecast that wages are unlikely to rise until the unemployment rate is in the 3.5 per cent to 4 per cent range.


However, there are currently labour shortages in some sectors which are likely to lead to over-award wages being paid to many workers earlier than predicted by the RBA.


Businesses have taken a mixed view to the minimum wage case this year, with some joining the government in suggesting caution and others such as Master Grocers Australia going further by explicitly suggesting no wage rise should be granted.


It is likely that the FWC will take their usual position which will be a compromise between the competing positions presented.


It is also likely that any wage rise will lead to greater pressure on some small businesses and manufacturing firms.


Whether the economic recovery will be strong enough to allow them to sustain their recovery despite the hit, is now more uncertain because of the disruptions to the vaccine roll-out.