Minimum wage debate: What do small businesses want?

SmartCompany t, March 14, 2018

Australian unions are pushing for a sharp increase in the minimum wage, but business and retail associations say dramatically lifting wages will place small businesses in jeopardy, especially if they are already on the brink.

Final submissions to the Fair Work Commission’s annual wage review are due Friday, and business groups and unions alike are drawing on research, economic progress and social conditions to back up their arguments for why the national minimum wage should only change by a certain amount.

In light of small businesses operators struggling with higher rent prices and other business costs, what do small businesses want when it comes to the minimum wage?

What is the annual wage review?

The annual wage review is conducted by the Fair Work Commission and is usually carried out within the second half of the financial year. The Commission’s decision affects Australian workers who are either covered by a modern award or transitional instrument, or not covered by an award or other agreement.

The decisions made by the Commission’s expert panel usually come into effect in July of the following financial year. The Commission has not said when it will be releasing this year’s decision, but once submissions have been made, replies to the submissions will be open until April 9. Following the federal budget in May, additional submissions will be accepted by the Commission.

In 2017, the Fair Work Commission decided to increase the minimum wage by 3.3%, citing profit growth in 2016 across all sectors. The current minimum wage is set at $694.90 a week, or just under $36,000 per annum.

What are the unions saying?

The Australian Council of Trade Unions has called for a weekly rise of $50 to the minimum wage, arguing inequality could grow if the minimum wage is not increased. Raising the minimum wage in accordance with the ACTU’s proposal would mean a 7.2% increase.

“If the minimum wage is not raised relative to other wages, higher inequality and more prevalent low pay will prevail, and the growth potential of the economy will not be realised,” the ACTU said in its submission.

What do small businesses and retailers want?

Business groups have a different view: they are calling for a much smaller increase in the minimum wage.

In a statement, chief executive of the Australian Chamber of Commerce and Industry James Pearson argued the ACTU’s proposal is impractical and there needs to be a wage rise that does not put small businesses at risk. The Australian Chamber has proposed a wage rise of 1.9% in its submission.

“Businesses impacted by the minimum wage and award wages decision include small and medium businesses with lower profit margins, many with higher wages and salaries as a proportion of total expenses and lower survival rates,” Pearson said.

“It’s hard to understand why the union movement demands an unrealistic 7.2% increase in minimum wages when they know the tough conditions that small businesses face.”

Executive director of the Australian Retailers Association Russell Zimmerman also disagrees with the ACTU’s proposal. Similar to the ACCI, the ARA has proposed an increase of 1.9% in its submission to the Fair Work Commission.

Zimmerman tells SmartCompany the ACTU’s proposal is “just not viable in the retail industry”. A survey conducted by the ARA found small retailers would support a minimum wage increase that is closer to the consumer price index (CPI) rate of inflation.

“There were a range of responses, some who most clearly said there should be an increase with CPI, others said there should be a more moderate increase. More than fifty percent [of respondents] were in the category of CPI increase,” Zimmerman says.

If the minimum wage was to rise in accordance with the ACTU’s wishes, Zimmerman predicts smaller retailers will struggle to keep up and may consider reducing staff numbers.

“We’ve seen a number of retailers struggle over the past twelve months, we’ve seen some major difficulties we don’t more retailers to go under,” Zimmerman says.

“Let’s have some sensible discussion and a sensible increase, not one that retailers can’t sustain.”

Council of Small Business Australia (COSBOA) chief executive Peter Strong tells SmartCompany it all comes down to whether SMEs can source the additional income that would hypothetically be spent on a larger wage for staff. COSBOA is yet to send a submission to the Fair Work Commission.

“The issue is can we pass the cost on? One of the problem is [SMEs] can’t do enterprise agreement where they’ve negotiated lower than award rates,” he says.

“We’d love to pay our employees but if we can’t pass that on we’ll have to close. The key issue is can whether we can pass it on.”

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