$3.6 billion wages hike to hurt small businesses most

The Fair Work Commission’s decision to hike up award wages by 2.5 per cent disproportionately affects industries which have been hurt the most by COVID-19 restrictions and will cost Australian businesses $3.6 billion a year. This, combined with the 0.5 per cent increase in the Superannuation Guarantee, represents a huge burden on business.

Nearly a third of all people who will be receiving an increase work in retail, food and accommodation services – sectors routinely forced to stop trading or reduce the number of patrons in their stores over the course of the COVID-19 pandemic.

“This is a bitter pill to swallow for the approximately 230,000 small and family-owned businesses which dominate these particular sectors. Australians who have managed to battle on through, keep their business afloat and keep people in work now face a highly risky hike in wages – always their biggest cost,” acting CEO Jenny Lambert said.

“While our national economy has recovered well in the last few months, this bird’s-eye view does not represent what’s happening on the ground in some sectors and states.

“We face a multi-speed economy. Not only are some industries doing better than others, some businesses in the same sector are recovering better than others.  But yet again, this minimum wage decision imposes a one-size-fits-all outcome for the 625,000 businesses that are award reliant.

“It’s the small, local cafe or bookstore in Melbourne, the family-run tour operator off Cairns, that we ignore when we look at our macroeconomic performance and assume all is well in Australia.”

There will again be some delay in wage increases coming into effect in some industries, which is some acknowledgement of the ongoing risks to small businesses and jobs. However, the staggered dates are very limited, and with just six months between increases in the retail and nine in the hospitality industries, some employers and jobs are going to be placed at unnecessary risk in what remains a highly uncertain environment.

“We also know that most state leaders will not promise to stop locking down parts of the economy and closing borders until the majority of Australians are fully vaccinated.  We have seen with the Victorian lockdown how unpredictable the situation still is.  In addition, our international borders are still closed which is economically damaging to many sectors including tourism, agriculture and higher education, most of which have small business providers involved. That’s why a 2.5 per cent increase to award wages now is premature and irresponsible,” Ms Lambert said.

“Employers and employees have worked hard over the last 12 months to keep our economy moving. ACCI supported a 1.1 per cent increase which would have maintained the real value of wages and been fairer, less risky and more reasonable for everyone.”