Employers fear ACTU living-wage push ‘could be death of businesses’

The Australian, February 2, 2018

The ACTU proposal for significant minimum-wage rises would increase labour costs by “potentially billions of dollars a year”, ­employers warned last night, as the Coalition accused Labor of “voodoo economics”.

The Australian Chamber of Commerce and Industry said its analysis of the ACTU goal for a living wage set at 60 per cent of the median wage would result in a big increase in the wages bill of ­employers.

“We think it will add potentially billions a year to the already substantial costs to small business, in particular, of each annual wage increase,’’ said the chamber’s director of workplace relations, Scott Barklamb.

The analysis was based on the union claim to the Fair Work Commission last year that argued that phased-in increases totalling $194 a week would be required to meet a 60 per cent target by 2020.

Workplace legal experts agreed that the cost of meeting the ACTU ­living-wage goal, which would potentially flow through to 2.3 million workers, could be in the billions of dollars. University of Adelaide law professor Andrew Stewart said “we are talking about billions of dollars’’, but cautioned that the ultimate impact would depend on the time frame for phasing in increases and any offsets decided by the commission. He said the commission could reduce the impact on employers by awarding smaller increases to workers on higher award rates.

The employer warning came after federal Labor said it would consider changing the law to peg the minimum wage to a certain proportion of the median wage.

Labor has not made a commitment to the 60 per cent target but Minister for Small and Family Business, Workplace and Deregulation Craig Laundy accused the ALP of following ACTU policy and engaging in “voodoo economics”.

Steve Ward, the owner of The World Bar in Sydney’s inner-city Potts Point, said he did not pass on penalty-rate cuts to his 60 staff last year because they were valued employees, but he said he would be concerned by any big increase in the minimum wage. “It would put pressures on business,’’ he said. “It’s actually quite scary. It would send lots of businesses to the wall.”

Gold Coast restaurateur Glen Day said many small businesses were already struggling and a significant increase in the minimum wage would threaten the viability of many businesses.

Mr Day has worked in the restaurant industry for 30 years and now owns a chain of pancake and Mexican restaurants that employs about 70 people, 30 to 40 per cent of whom are permanent staff.

Mr Day said there had not been a decent general wage increase for at least five years and a big shift would be impossible for many businesses. “They’ll have to put people off and go back in the business themselves to make the business viable,” he said.

He said governments should look outside the square for solutions to help low-paid workers. “I know they have their studies and committees and work it all out … (but all the governments say) small business is the backbone of the country,” he said. “I think small business has a sore back from ­carrying the country.”

The chamber’s analysis estimates the cost of applying the ­living-wage claim to the 196,000 workers on the national minimum wage would be $411 million, about double the cost of applying last year’s 3.3 per cent rise to the same number of workers. The estimate of extra billions of dollars is based on employers estimating last year’s 3.3 per cent increase would ultimately cost employers billions when it flows through to all award-covered employees.

Mr Laundy said “many businesses will close” if the minimum wage was set at 60 per cent of the median wage. Asked if he agreed that wages growth was flat, he said wages had recently grown at 2.1 per cent compared with inflation at 1.8 per cent. He said last year’s national minimum wage rise was “flushing through the system” and accused the ALP of engaging in “voodoo economics”, challenged it to produce economic modelling backing its case.

ACTU secretary Sally McMan­us said Mr Laundy was “showing just how out of touch the Turnbull government has become with working people if he thinks that wage growth struggling to keep pace with inflation is something to celebrate”. “Australians need a pay rise, not cuts to penalty rates and a government which stands in the way of increasing wages,’’ she said.

“Far from forcing businesses to close, lifting minimum-wage workers out of poverty and ensuring they have enough money to live on would be a huge boost to the economy.”