Industry groups warn FWC over wage rise flow-on effects

Business groups and industry leaders critical of recent wage ruling, cite inflationary pressures

Industry groups warn FWC over wage rise flow-on effects

The Fair Work Commission (FWC)’s generous and historic minimum wage rises (of 5.2 percent) announced on Wednesday, 15 June 2022 which were awarded to Australia’s lowest paid workers were not unanimously welcomed by all members of the business community.

The Australian Chamber of Commerce and Industry was one of the first industry groups to warn that these minimum wage rises for Australia’s unskilled workers could put many small business owners under additional financial stress in an already fragile and jittery economy. They also said that yesterday’s FWC wage ruling will cost Australian businesses an additional $7.9 billion a year.

The Chamber of Commerce also noted that employers will also have to pay an additional 0.5 percent in their superannuation from 1 July on top of these pay rises – on the very the same date that these wage rises take effect.

The Australian Retailers Association (ARA) is one of the largest industry bodies directly affected by yesterday’s wage decision. The ARA covers a $360 billion market employing 1.3 million Australians and it’s one of the biggest private sector employers in Australia. They warned that these sizeable wage rises for retail workers could potentially “tip some businesses over the edge”. This could be particularly the case for smaller operators (and shopfronts) who lack the economy of scale to absorb the additional labour costs.

Other prominent business leaders warned that these minimum wage rises will end up flowing to all workers across the board, fuelling rising inflation and potentially causing rising unemployment as business are forced to lay-off their more expensive staff.

Head of the Australian Industry Group, Innes Willox, warns that these rises will create a standard expectation of wage rises in employee negotiations across the board. He explained: “There is a major risk that the 5.2% per cent increase that has been awarded to the National Minimum Wage, with increases of between 4.6% and 5.2% to award rates, will fuel inflation and lead to even higher interest rates; even more hardship for people with mortgages, personal loans or credit card debts; and add substantially to the risk of unemployment and underemployment – particularly for unskilled employees.

“The cost increase will be difficult to absorb for businesses that are already struggling to cope with big increases in material and energy costs, interest rate rises, supply chain disruptions and labour shortages.”

Not all employers or businesses will be in position to comfortably meet these demands - potentially forcing them to either cut their existing workforces or move their operations offshore. Such a situation could create a perfect storm of rising inflation mixed with rising unemployment – or stagflation – a risk already flagged by the World Bank only last week.

Even though Australia’s jobs market appears strong: with unemployment currently measured at only 3.9 percent (which is a 14-year low). This employment data accords with a trend currently facing HR executives and hiring companies, many of whom often struggle find the right people to fill their positions.

Even the trade union movement, who were appeased by the 5.2 percent wage rise, commented on this trend and how it translates for hiring professionals. Australian Council of Trade Union’s president Sally McManus said that many employers have been forced to offer higher wages to entice staff into their organisations. In response to yesterday’s FWC wage rule, she said that there will be employers who won’t “be affected by this – it just raises the floor.”

With inflation in Australia forecast to reach 7 percent by December, yesterday’s wage rises may still not be enough for many Australians in unskilled professions struggling to make ends meet. Reserve Bank Governor Philip Low believes that if inflation reaches 7 percent by Christmas, this “5.2 per cent increase in the minimum wage on July 1 won't be enough to stop low-paid wages from deteriorating in real terms again.”

The Fair Work Commission’s next lot of wage increases for modern awards across other industry sectors such as aviation, tourism and hospitality sectors will be announced on 1 October covering the following categories:

  • Aircraft Cabin Crew Award 2020
  • Airline Operations-Ground Staff Award 2020
  • Air Pilots Award 2020
  • Airport Employees Award 2020
  • Airservices Australia Enterprise Award 2016
  • Alpine Resorts Award 2020
  • Hospitality Industry (General) Award 2020
  • Marine Tourism and Charter Vessels Award 2020
  • Registered and Licensed Clubs Award 2020
  • Restaurant Industry Award 2020

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