Workers throughout Australia earning an Award wage will be at various levels of happiness as the Fair Work Commission’s minimum wage rise of three per cent starts hitting hip pockets. Some will be thankful for any increase, others will want more.
For a worker on the minimum wage of $719.20, it will be an extra $21.60 a week. For someone on the median Award earning $1,100 a week, it’s $33 more. It doesn’t sound like much, but the three per cent flows through to all 122 Awards, from cooks and baristas to pharmacists and pilots. However, to a small business owner struggling to make ends meet, it could mean a lot. Keep in mind any increase in wages also means an increase in Return to Work levies, Superannuation contributions and possibly Payroll Tax.
For a business owner baking bread, cutting hair, or repairing cars, $33 per employee per week will come out of the same bucket they’re using to pay that increased utility bill, or a rent hike. For an exporter, it makes them just that little bit less competitive on the global stage.
A three per cent increase to the minimum wage sounds insignificant but it all adds up. Some businesses will be able to absorb the increase, other business owners will put in even more hours in an effort to control their costs. For some struggling small businesses, it could even be the proverbial straw.
Close to 60 per cent of small business owners take home less than $50,000 per year – not much above the average barista wage – and usually with their house on the line. These owners will have to increase staff pay and absorb those costs or pass them on. Given they wouldn’t pay themselves an Award wage, we know their own take-home pay certainly will not increase.
The three per cent wage rise equates to $200 million in extra wages for South Australian workers. While much of that will be spent in our state, it’s $200m that thousands of business owners will collectively have to find.
The South Australian Business Chamber, along with the Australian Chamber of Commerce and Industry, supported a wage rise limited to 1.8 per cent, reflecting economic conditions and still higher than current national CPI of 1.3 per cent. The minimum wage has increased by 30 per cent over the past decade while inflation has only increased by approximately 20 per cent.
The Fair Work Commission last year increased the minimum wage by 3.5 per cent, and 3.3 per cent the year prior – well above CPI. At least they were more moderate this time around and far off the living wage increase of 11.5 per cent, which the unions had been calling for over the past two years.
This living wage could well have been the dying wage for some small businesses.
This article was originally published in the South Australian Business Journal on Tuesday 4 June 2019.
Anthony Penney is executive director, industry and government engagement at South Australian Business Chamber.
