Politics

Bill Shorten’s minimum wage increase plan will put small operators “out of business”: Kate Carnell

Emma Koehn /

Australian Federal Opposition Leader Bill Shorten delivers the 2016-17 Federal Budget Reply speech in the House of Representatives at Parliament House in Canberra, Thursday, May 5, 2016. (AAP Image/Sam Mooy) NO ARCHIVING

The nation’s small business ombudsman has hit out at Opposition Leader Bill Shorten’s proposal for Australia to consider increasing the minimum wage to a “living wage”, saying it will “put a lot of people out of business”.

Shorten took to the lectern at the National Press Club on Tuesday, outlining several elements of Labor’s economic plan, including a commitment to restore cuts to penalty rates if the Labor Party was to secure government at the next election.

He also took aim at the nation’s definition of a “minimum wage”, saying the current levels of weekly pay enshrined in Australian employment awards do not reflect the needs of people in the face of the “contemporary cost of living”.

“Our goal should be a real, living wage, effectively raising the living wage for all Australians,” he said.

The current minimum wage is $640.90 a week, after increasing by 3.3% last year, when the Fair Work Commission (FWC) decided to set a new standard that was close to double CPI.

But the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell is critical of Shorten’s speech, and says the idea of increasing the minimum wage when the FWC already has the power to set wages “just looks a little bit popularist”.

The reality is that a living wage, in a perfect world, is absolutely wonderful. But if you said to small businesses that you are going to have to pay in excess of $100 more for all of your employees, what it would mean is that small businesses actually wouldn’t be able to employ people,” Carnell tells SmartCompany

“If Bill’s policy is that small businesses should be paying people $100 more a week, then that would put a lot of small businesses out of business.”

The Australian Council of Trade Unions has advocated for establishing a national minimum wage at 60% of the country’s median wage, which could amount to an increase in the minimum wage to $852 a week, reports Fairfax. 

While Shorten has not outlined exactly how Labor would determine or enshrine a living wage, Carnell says his speech yesterday indicates a Labor government would seek to overrule the Fair Work Commission on wage decisions by setting a level.

“The minimum wage is not set by politicians, nor should it be … but that is sort of what he [Shorten] said. There’s no way to get that outcome [of an increase in the minimum wage] without it being political,” she says.

The challenge for smaller operators when it comes to wages talk is that while bigger corporates have their own enterprise bargaining agreements (EBAs), most SMEs employ staff based of minimum wages contained in awards, says Carnell.

A significant increase here could remove their ability to employ more staff, Carnell says. She believes policies on wages should start with how to boost productivity, rather than salaries

You could get big pay increases if you could trade them off against productivity, but if you go wages first, you mess up profitability,” she says.  

In his speech, Shorten also reiterated his long-held objection to the Coalition’s corporate tax cut plan. He wants to limit a cut to the corporate tax rate only to businesses with annual turnover of $2 million or less.

However, the exact details of Labor’s tax plan, including whether existing tax cuts will be reversed, will only be revealed after the May budget, Shorten said yesterday.

Finance Minister Mathias Cormann had demanded Shorten reveal whether he plans to reverse the cuts to the company tax rate for companies with turnovers of up to $50 million, which were passed last April.

However, Shorten said yesterday the policy position would be finalised after the budget.

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Emma Koehn

Emma Koehn is a former senior journalist at SmartCompany.

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