Raising the minimum wage and super hike will hamper SMEs: R&CA

The federal government has maintained its call for the national minimum wage to move in line with inflation, signaling the possibility of significant back to back increases that flow through to small business employers already facing a planned pension increase.

The Fair Work Commission is weeks away from releasing its minimum wage decision for the 2023-2024 financial year, outlining the basic income for an estimated 2.7 million Australian workers covered by the minimum employment standards.

In its post-budget submission, the federal government said on Friday that increases to the minimum wage, currently set at $21.38 an hour, should not lag behind inflation.

In the twelve months to March quarter 2023, the cost price index, Australia’s ‘headline’ rate of inflation, rose to 7% through increases in the price of most goods and services.

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If passed in full, a 7% increase would raise the minimum hourly wage to $22.87 and raise weekly earnings by $56.46 from $812.60 to $869.06.

But instead of advocating for a 7% increase to the minimum wage, as the Australian Council of Trade Unions (ACTU) has done, the federal government has left the exact figure up to the Fair Work Commission.

“We recommend that the Fair Work Commission ensure that real wages for Australia’s low-wage workers do not go backwards,” said the statement, signed by Treasurer Jim Chalmers, Minister for Employment and Workplace Relations Tony Burke and Finance Minister Katy Gallagher.

The latest Budget’s assessment of inflation suggests that inflation will ease in the coming year “as global price shocks and supply constraints ease.”

“While still high, inflation is expected to fall to 3¼ per cent in 2023-24 and return to the target band [2%-3%] in 2024-25,” it said.

Business representatives, trade unions are still divided about support

While the federal government and the union movement favor a significant increase, small business representatives argue that tight economic conditions will make it difficult to pass another major minimum wage increase.

The Council of Small Business Associations of Australia is “more comfortable” with a 4% increase, according to chairman and director Matthew Addison.

While the federal government has previously dismissed fears that higher minimum wages will contribute to a wage-price spiral and exacerbate inflation, Addison argued it remains a live concern.

“We are concerned that individuals in small businesses and mums and dads who own their own businesses are having a hard time and that minimum wage increases for workers are not easily passed on to the owners themselves,” he added.

Ben Kearney, chief executive of the Australian Lotteries and Newsagents Association, said a 4% increase would help support news agency workers, many of whom are classified under the General Retail Industry Award, without putting extra pressure on business owners.

“We are very sympathetic to employees having to keep up with the rising cost of living,” Kearney said.

“But at the same time, small business owners are often no different than employees, and they also have to be able to try to keep up with that.”

“I think it’s important that we just try to get that balance right,” he continued.

“Because small businesses are, to some extent, victims of a lot of headwinds that play into the pricing of a lot of electricity, fuel, etc.”

The Restaurant and Catering Association argued in its submission on 2 May that the minimum wage must not increase by more than 3%.

Imposing even higher fines will push traders to the brink, it said.

“Small businesses that cannot afford any excessive increases in modern award rates and the subsequent application of penalty rates for weekends or public holidays will discourage trade and reduce the number of available shifts for employees, resulting in further underemployment and unemployment.” post read.

Even with inflation set to moderate, the trade association maintained that current economic pressures will continue.

The separate 0.5% repeal of the pension guarantee rate to 11% on July 1 will make it even harder for traders, it said.

“An unsustainable wage increase will jeopardize the recovery and viability of small businesses, which are already feeling the pressure from rising operating costs and reduced consumer spending,” it said.

The latest proposal from the Australian Retailers Association calls for the FWC to raise the rate by 3.5%, down from the 3.8% rise it proposed in March.

“This recommendation equates to a 4.0% increase in labor costs for employers, including the impact of the next increase in the retirement age that will come into effect at the same time as the next increase in the minimum wage,” it claimed.

The National Retailers Association is seeking a maximum increase of 3.25%.

Conversely, the ACTU says 7% is appropriate given the cost of living squeeze these low-wage workers face.

“Worker households’ living costs have grown more than those of self-funded pensioners, pensioners or welfare recipients over the year, likely due to increased exposure to debt,” it said.

Conditions for small businesses, while hardly rosy, will generally be boosted by measures contained in the new federal budget, the ACTU continued.

“The overall impression is one of generally reduced cost pressures for business, allowing sufficient room for business investment, incentive payments to workers, keeping prices high while consumers are happy to pay them, and a reluctance to be the first mover in price cuts,” it said . .