Business groups slam minimum wage increase

Business and retail groups have angrily labelled Fair Work Australia’s (FWA) minimum wage increase as irresponsible, out of sync with the Australia’s financial position and potentially damaging to the economy.

Fair Work Australia announced yesterday that the minimum wage will be increased by $26 a week as of July 1, bringing it up to $569.90 a week.

The unions had been pushing for a $27 a week rise after the global financial crisis halted increases last year, but business groups wanted the increase limited to $12.50.

The Australian Commerce of Chamber and Industry (ACCI) says while there was a case for a modest increase the decision goes far beyond what was responsible or justified.

ACCI Chief Executive Peter Anderson says the decision is a stark reminder that our centralised wage system fails to cater for employers that can afford large wage rises and those that can’t.

“It was so swift and harsh that many businesses will be left reeling,” he says. “It will be a dangerous setback to economic recovery in the small business sector.”

Australian Industry Group Chief executive Heather Ridout agrees.

“Fair Work Australia’s large minimum wage increase is out of sync with an economy that has seen the balance of risk and sentiment shift downwards in recent times.”

Ridout says it will slow the pace of job creation and that for many households the benefits will be offset by a decrease in employment opportunities.

ACCI estimates it will add $2.5 billion to the annual wages bill of Australian small business and that in reality it’s at least a $31.20 weekly increase when add-ons such as payroll tax, superannuation, leave loadings and workers compensation are considered.

Small businesses, in award-reliant industries will also struggle with the reorganisation of the awards scheme which means higher penalty rates and increased labour costs as of July 1.

Russell Zimmerman, Director of the Australian Retailers Association says the impact on Australia’s $292 billion retail sector which employs over 1.5 million people will be significant, particularly because retailers are already struggling.

“Things are far from good,” he says.

“Retailers have been doing it very, very tough out there. Whether it’s large or small retailers, everyone has a sales signs up. This will definitely have an impact on their bottom line.”

Zimmerman says the pay increase combined with the awards changes will particularly hurt small traders who hire staff on the weekends. “Weekend retailers will be seriously affected. We think that it may cause some members to review or reduce staff hours or they may even have to put staff off,” he says.

“Let’s not forget small and medium employers who will have to pay this unreasonable minimum wage rise are dealing with the same struggles as Australian workers, including six interest rate rises since October, a lack of access to finance and dampened consumer confidence.

“We’ve already been told by a number of retailers that they’re rethinking how they are going to manage their staff going forward. They are very concerned about it because it’s going to be a huge cost to their business.