Employers across Australia are reeling in the wake of the Fair Work Commission’s decision to increase the national minimum wage by $18.70 a week.
The industrial umpire handed down its decision yesterday, opting to increase the minimum wage by 3% from July 1. The decision is expected to affect around 1.5 million Australian workers on award wages.
The increase will take the weekly minimum wage to $640.90. This will mean $19 extra for workers on the national minimum wage, $22 extra for those on the base trade rate and up to $36 extra a week for professionals.
Business groups across the country have slammed the decision, warning it will lead to retrenchments.
Peter Strong, executive director of the Council of Small Business of Australia, told SmartCompany many businesses will have to close on Sundays and “jobs will definitely be lost”.
Strong says the increase creates a dilemma for small businesses.
“As a small business owner, you don’t want to pay bad wages, as we’re standing next to the people we’re paying those wages too. But at the same time, we need viable businesses to employ these people,” says Strong.
Strong says the decision is also out of sync with Australian economy, which according to national accounts released this week, is seeing strong growth in exports but not in other areas of the domestic economy.
“So wages are going up by 3% but the economy is growing by 0.3%,” says Strong.
The Australian Retailers Association has also criticised the move, which it says will impose “severe economic strain” on retailers across the country.
“This minimum wage increase, together with sluggish retail trade figures and penalty rate rises under Fair Work Commission awards, will only cause further damage to retailers who are struggling to keep their heads above water as it is,” said executive director Russell Zimmerman in a statement.
“With most small and medium retailers being reliant on a minimum wage workforce under the General Retail Award, any move to increase wages within the sector during this time of low consumer confidence and low growth will only further job losses currently underway within the sector—a very distressing truth for retailers,” he said.
Zimmerman said the ARA was lobbying for an increase to the minimum wage of no more than $8.50 or 1.3%, which the association said would have been “realistic and manageable”.
However, the Australian Council of Trade Unions was seeking an increase of $27 a week, arguing that low paid workers need more assistance to cover the extra costs they will face as a result of the recent federal budget.
Master Grocers Australia also slammed the move, with chief executive Jos de Bruin saying in a statement many independent grocers will be reconsidering their staff and employment needs in the new financial year.
Australian Industry Group chief Innes Willox said the increase is too high and will intensify pressure already faced by struggling businesses.
“At a time when the soft labour market is seeing more moderate wages growth in line with the fragility of the domestic economy, employers will find it very hard to understand why the Fair Work Commission has decided to award a particularly generous wage increase this year,” said Willox in a statement.
“This decision will add to the relative costs of employing minimum wage employees. It is likely to make it more difficult for them to find employment while making it less likely that employers will offer part-time minimum wage employees the additional hours of work that many of them are seeking,” he said.