Federal election 2019: Wesfarmers boss says Labor policy set to hit small business

The West Australian, 13 April 2019

Scott Morrison and Bill Shorten will go head-to-head in Perth.

Wesfarmers chairman Michael Chaney has warned that Labor’s living wage policy could “throw people” out of work, as new analysis shows small businesses will be hit hardest by the policy.

Analysis of data from the the Household, Income and Labour Dynamics in Australia survey shows that low-paid employees are most likely to work for small businesses.

According to the survey, 38 per cent of low-paid people work in firms with fewer than 20 employees, compared with 35.2 per cent who work for firms with more than 500 workers.

Low-paid employees are classified as those in the lowest 20 per cent of hourly earnings.

Perth cafe owner Merrellyn O’Callaghan said she had a sharp intake of breath at the thought of her wages bill rising even higher if a Shorten government introduced its “living wage” policy.

Her cafe is described as a “beautiful garden oasis”, but it is also a place of hard work and tough financial decisions.

Wages account for 40 per cent of her expenses at the popular Garden Cafe in Maylands.

“It’s been tough. Wages is the biggest cost. At level one, the lowest you can pay is $29 a hour at the weekend,” she said.

“I employ 10 or 11 casuals and at the weekends there are seven of us on.”

She had been forced to take on more juniors, who can be paid a lower wage.

“I’m working less than I used to. I was doing 80 to 90 hours a week last year because I couldn’t afford the wages but you can’t sustain it,” she said.

Ms O’Callaghan said if Labor increased the minimum wage she would have to work more hours herself, giving staff fewer hours and even closing on quieter days.

HILDA director Mark Wooden said while the union movement had created the impression low-paid workers were employed by companies with huge profits, they were more likely to work for small businesses. “For small business your margins are close to nothing … so when your margins are close to nothing and you adjust if your cost go up where does the money come from?” Professor Wooden said.

Under its “living wage policy”, Labor leader Bill Shorten has promised to raise the wages of 1.2 million low-paid workers, but has not said by how much.

Mr Chaney said mandating a living wage “is a very blunt economic instrument”.

“No one would argue with the simple proposition that in a decent society, people should be able to earn a wage that enables them to have an acceptable standard of living,” he said. “The problem is that, as with most economic issues, the living wage issue is not a simple one.

“The last thing a government wants to do is to mandate higher wages and find that people are thrown out of work as a result. This is a very real possibility at the present time, when many businesses in Australia, especially small ones, are struggling to remain viable because of the downturn in the domestic economy.

“Raising labour costs would tip many over the edge and throw people out of work. Secondly, if you look at the statistics, a significant proportion of people earning the current minimum wage come from higher income households where there is more than one income earner.

“Given any government’s income is limited, they need to more sharply target their spending. In this case, it would be much better to adopt policies which encourage economic growth, corporate tax cuts and investment allowances, for example, and use the resulting increase in government receipts to provide assistance to the actual low-income households,” Mr Chaney said.

A Labor spokeswoman defended the policy.

“Every-thing is going up except people’s wages,” she said. “In the last five years, out-of-pocket costs to see a GP are up 26 per cent, private health insurance premiums are up 30 per cent, electricity prices are up 15 per cent, and long day childcare costs are up 24 per cent.”