$7.9 billion wage hike will hurt small business

The Fair Work Commission’s decision to increase minimum wages by 5.2 per cent and award wages by 4.6 per cent will hit those industries which have been hurt the most by COVID-19 restrictions and will cost Australian businesses $7.9 billion a year. Coupled with the 0.5 per cent increase in the superannuation guarantee from July 1, this is a significant impost for small business.

“The wage increase awarded by the Fair Work Commission today is too much amid current economic pressures and uncertainty,” Australian Chamber of Commerce and Industry chief executive Andrew McKellar said.

“While some businesses have rebounded strongly in recent months, the reality is we are experiencing a multi-speed economy.

“Many award reliant business were severely disrupted by the COVID-19 pandemic and are only just beginning to recover.  Imposing unaffordable wage increases on these small businesses will put jobs at risk, not create them.

“Throughout the annual wage review, ACCI urged the panel to consider the ability of businesses to afford any substantial increase in wages. The reality is many small businesses do not have the resources to absorb extra costs.

“An arbitrary increase in wages risks triggering greater inflation, raising costs for consumers, and making it harder for businesses to retain workers.

“Having only just begun to recover from the pandemic, small businesses are now facing surging energy prices, continued supply chain disruptions, the second worst workforce shortages in the OECD, and the prospect that inflation could reach 7 per cent.

“This annual wage decision imposes an unnecessarily complex outcome on businesses who are already facing a difficult and disparate set of economic circumstances.  It’s not what we need in a modern, flexible and international competitive economy where increased focus on higher productivity is needed.

“Again, there will be some delay in wage increases coming into effect in some industries, acknowledging the ongoing challenges many small businesses are experiencing. However, with just a three-month delay for increases in the aviation, tourism and hospitality industries, businesses and jobs are going to be placed at unnecessary risk in what remains a highly uncertain environment.

“Since the introduction of the Fair Work Act, the panel has increased the minimum wage rate above inflation 11 out of 12 times.  Wages have not gone backwards over the last decade.  On a purchasing power parity basis, Australia has the highest minimum award wage in the world.

“ACCI proposed a balanced and responsible increase of three per cent in this year’s annual wage review, reflecting the mounting costs faced by business and the risks of higher inflation.