Business Calls for Subdued Increase to the Minimum Wage
Friday 10 January 2014 @ 9.49 a.m. | Industrial Law | Trade & Commerce
Various news sources are reporting that business groups are mounting a case for a "more subdued increase to the minimum wage" this year in a climate where economic growth remains moderate and superannuation contributions and penalty rates continue to rise.
This comes as little surprise following on a the Federal Government's post-election economic statement which among other things forecasts:
- real GDP to grow at a slower rate of 2.5% in 2014-15 compared to 3% in the pre-election budget statements, resulting mostly from a fall in resources investment
- unemployment (now 5.8% rising to 6.25% in 2014-15 and falling) revised as remaining at 6.25% from 2014-15 to 2016-17.
Business Spectator reports that AiGroup and the Australian Chamber of Commerce and Industry (ACCI) have both urged restraint from Fair Work Australia (FWA) due to the changed economic circumstance likely to be affecting employers this year.
ACCI chief executive Peter Anderson is quoted as saying:
“There is a very strong case for moderation and for some industry sectors a case for a minimum wage increase to be deferred until the employment impact on young people is much clearer, . . .”
FWA is scheduled to make its annual decision on the minimum wage rate in June 2014, a decision which becomes effective at the start of the financial year (1 July 2014). Interestingly, there have been just three years in the past 20 where there has not been a rise in the minimum wage.
Further quoted in a report by SmartCompany, ACCI chief executive Anderson points out that the effect of minimum wage increases is often "oversimplified" indicating that for some employers a minimum wage rise may also mean a number of increased costs in addition to salaries; costs like payroll tax, superannuation payments and workers compensation, to mention a few.
Supporting this is research released in December 2013, commissioned by the FWA conducted by Sydney University’s Workplace Research Centre which found around one in three employers passed on minimum wage rises to workers who were above award rates, a number that was even higher in industries such as the media and telecommunications, mining, public administration and safety.
According to the Australian Bureau of Statistics, the salaries of 1.5 million Australians are determined by award rates and the last increase to minimum wage rates for each classification level of the modern awards ordered by the Fair Work Commission in 1 July 2013 was 2.6%.
The continuation of minimum wage rises on current trend it is argued will have the effect of decreasing employment prospects for the young and in areas like the catering and restaurant industry. Young people will be affected because they are viewed as high risk by employers given the direct wage cost when it is combined with the "costs of providing support and training and the risk they won’t complete their work requirements". In the catering and restaurant industry the affect is because such businesses "react to wage increases by reducing staff or staff hours". In these areas it is argued that consistent minimum wage rises have created lower levels of employment.
No doubt this is a debate that will evolve as the middle of the year comes closer and more is heard from the government on the nation's budget position.
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