Australian Companies Fear Financial Strain from Minimum Wage Increase
Many Australian companies are afraid that they will not be able to bear the financial burden of a 5.75 percent minimum wage increase starting next month. This increase will provide relief for millions of minimum wage workers but is causing concern for small business owners, such as café owner Jenn Ramos.
Ramos stated that she finds the upcoming pay rise to be “very stressful” and is considering cutting staff to pay for salaries. Even though an extra $40 a week doesn’t sound like a lot, she explained that multiplying this by seven or eight employees creates a lot of pressure for small business owners.
The Fair Work Commission’s decision to increase wages is justified, according to financial expert Scott Phillips. However, he pointed out that raising the minimum wage will inevitably lead to higher inflation for businesses and consumers. Without a rise in production and sales, small business owners like Ramos may struggle to keep up with these price increases.
Challenges Facing Small Business Owners
Small business owners have always faced financial challenges when it comes to managing their companies. As inflation rates continue to rise, it becomes increasingly difficult to cut costs without impacting business operations. The minimum wage increase further adds a financial strain on small businesses.
Many small business owners are looking for ways to adapt and adjust to the new financial landscape. Ramos, for instance, is increasing in-house baking while considering cutting costs by introducing QR codes for customer orders.
Phillips believes that small business owners will need to come up with creative ways of keeping customers coming through the door to stay afloat. However, as inflation drives up prices and wages, the trickle-down effect of other workers demanding wage increases becomes a concern.
The Potential Effects of Wage Increases
Although wage increases offer financial relief to minimum wage workers, it may also lead to higher inflation rates that can hurt businesses and consumers alike. Phillips explained that adding more money into the economy through wage increases without raising costs and prices will lead to spending from workers. This, in turn, will lead to additional costs for businesses and further pressure on prices.
Phillips agrees that helping those on the lowest wage makes sense, but wage increases can have a negative impact on the economy over time. The trickle-down effect of raising everything else, combined with other workers demanding wage increases, could lead to an endemic financial strain. “That is where the real pain will be felt if it becomes endemic and other workers ask for the same type of raises,” he said.
Summary:
Australian companies are afraid they will not be able to bear the financial burden of a 5.75 percent minimum wage increase from next month. It offers relief to millions of minimum wage workers but puts a financial strain on small business owners such as café owner Jenn Ramos. Although the Fair Work Commission’s decision to increase wages is justified, the rise in inflation rates exacerbates the challenges already faced by small businesses. Small business owners will need to come up with creative solutions to keep customers coming through their doors, but the long-term effects of wage increases on the economy remain uncertain.
Additional Piece:
The debate around minimum wage increases is not a new one, and while it’s important to provide minimum wage workers with a livable income, the financial strain placed on small business owners cannot be overlooked.
One solution that businesses can consider is finding ways to remedy the decrease in profitability caused by minimum wage increases. Cutting unnecessary costs, renegotiating expenses with suppliers, and adopting a more efficient business model are all possible solutions.
Another key strategy to combat inflation rates is to prioritize customer retention and acquisition. By providing excellent customer service, offering competitive pricing, and investing in marketing, small businesses can ensure they remain profitable.
Adopting technology such as automated ordering and payment systems, online ordering, and self-service kiosks can also help small businesses reduce costs and improve the customer experience.
The key to weathering financial challenges is to stay agile and adapt to change. Small businesses need to be proactive in identifying opportunities that will help them cope with rising inflation rates. By prioritizing customer retention, adopting technology, and cutting unnecessary costs, small businesses can continue to thrive despite the challenges of a constantly evolving economic landscape.
In conclusion, while wage increases are a welcome relief for minimum wage workers, the financial strain on small business owners cannot be ignored. However, by finding ways to cut costs and remain profitable through excellent customer service, competitive pricing, and investing in technology, small businesses can continue to grow and remain profitable.
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Australian companies fear they will not be able to bear the cost of a 5.75 percent wage increase that will offer relief to millions of minimum wage workers from next month.
The cafe’s owner, Jenn Ramos, said the upcoming pay rise “is very stressful” and forced her to start thinking about cutting staff to be able to pay salaries.
“Although an extra $40 a week doesn’t sound like a lot, you have to multiply that by seven or eight people at a time, so making small changes like that puts a lot of pressure on us,” Ramos said. a current affair hostess Deborah Knight.
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The cafe’s owner of three years said she understands that workers need a pay rise too, as she’s been on her end before, but noted that as a small business, she’s already struggling.
“People are not spending as much, (there is an increase) in interest rates, there is an increase in costs; we are also feeling the pressures from other avenues, not just salaries,” Ramos said.
She said one way they’re trying to keep costs down is by doing a lot more in-house baking to try to pay for the extra wages that are coming.
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Ramos said he is also considering introducing QR codes for customers to order their food to cut costs.
“It may be something that we have to implement as a last resort just to help reduce some salaries but still keep our staff,” he said.
“We can’t afford to lose our staff as well.”
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The cafe owner said she loves what she does, so she doesn’t want to have to close due to rising costs, which is why she is trying to adjust to the changes.
Finance expert Scott Phillips believes things will only get tougher for small business owners like Ramos, because the economy is expected to get tougher in the next six to nine months.
“We know the economists have been talking about it, the RBA (Reserve Bank of Australia) is trying to slow things down,” Phillips said.
But he said small business owners like Ramos will need to try to find a way to keep customers coming in the door to stay afloat and so everyone has less money to spend because of inflation.
He said the Fair Work Commission is justified in its decision to increase wages, “because they want to keep their award wages in real terms.”
“In other words, after inflation,” Phillips said.
But he explained that the problem is that someone has to pay the bill.
“It’s going to hurt businesses, consumers or both,” he said.
Phillips agreed that wage increases could drive inflation higher.
“You can’t put more money into the economy through wage increases… without a) raising costs and prices for those businesses, or b) spending the money coming into the economy for those workers,” Phillips explained.
He said the additional costs for businesses are likely to put pressure on prices.
Phillips said that while it makes sense to help those on the lowest wage, he said the trickle-down effect of everything else going up and other workers not making minimum wage and then asking for wage increases is also what can hurt the economy. .
“That is where the real pain will be felt if it becomes endemic and other workers ask for the same type of raises,” he said.
https://amp.nine.com.au/article/7bb8e208-e1b9-4533-b8ef-dfe1d67d293f
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