The Fair Work Commission (FWC) has announced an increase in the national minimum wage and a 5.75% increase for workers on award wages.
The rates will come into effect in the first pay period after 1 July, 2023.
“The current combination of economic circumstances, namely low unemployment, falling real wages and high inflation, is very unusual and presents a particular challenge in this year’s review,” FWC stated in its announcement.
”A further challenge is the expected sharp slowdown in economic growth over the next year.
“In our consideration, we have placed significant weight on the impact of the current rate of inflation on the ability of modern award-reliant employees, especially the low paid, to meet their basic financial needs.
“Inflation is reducing the real value of these employees’ incomes and causing households financial stress.
“We have also taken into account the recent robustness of the labour market, and the fact that increases to modern award minimum wage rates will provide a disproportionate benefit to female workers and thus may contribute to reducing the aggregate gender pay gap across the workforce.”
The National Retail Association (NRA) and Australian Retail Association (ARA) have opposed the decision.
NRA Legal Director Lindsay Carroll said the award rate increase would be unattainable for most retailers, and predicted many would be forced to cut work hours for employees or lay off staff.
“Frankly, we are disappointed that the Commission could be so out of touch with the realities of most Australian businesses,” Carroll said.
“At every turn business owners are being crunched with additional costs – interest rates, rent, electricity and they were already facing an increase in the superannuation guarantee from July 1.
“Now they are expected to find an additional 5.75 per cent for their wages bill at a time when costs are rising across the board and consumers are tightening their belts.
“This shows a very disappointing lack of understanding on the part of the Commission of the many challenges confronting business owners across the country.”
Carroll claimed the decision was also at odds with attempts by the Reserve Bank to rein in rampant inflation, saying such a large increase without any productivity gains would only serve to push inflation higher.
“It makes no sense that we have the Reserve Bank doing everything in its power to wind in spending, but at the same time having the Fair Work Commission pouring fuel on the fire,” Carroll said.
ARA said today’s decision by the Fair Work Commission to increase modern award rates - in addition to the scheduled 0.5% increase in superannuation guarantee - will place significant pressure on struggling retailers, particularly small businesses.
ARA CEO Paul Zahra said the scale of this increase will be difficult for many Australian retailers to absorb, particularly given there are no productivity improvements gained.
“We’re experiencing a cost-of-living crisis – so it’s important that wages continue to grow; but we’re also continuing to experience a cost-of-doing-business crisis so it’s a very delicate balancing act to keep business operating sustainably,” he said.
“Many retailers are under enormous financial pressure, with rising operating costs across the board. Supply chain costs have increased, utilities have increased, rent has increased, materials have increased and now labour will increase substantially.
“This is before factoring in that discretionary spending is softening – leaving many retailers concerned about operating costs.
“We fear the scale of this increase will tip some businesses over the edge – especially smaller retailers who are on very slim profit margins or in some cases in negative cashflow territory.”
Zahra said whilst inflation remains high, we should also be accounting for future conditions, such as the inevitability that inflation will come back down.
“The Reserve Bank’s message this week included a warning that the moderation of wages over the period ahead is crucial to prevent a wage, price spiral,” he said.
“There will need to be a labour productivity improvement to mitigate against the impact of this very significant rise to avoid job losses in an otherwise challenging year.
“We look forward to expected discussions with the government around review of the General Retail Industry Award to deliver much-needed productivity gains.”
Australian Council Of Trade Unions secretary Jane McManus welcomed the decision to increase wage rates.
“The union movement fought hard for this pay increase. Up against us were the big business lobby – who argued for a real-wage cut.
“All union members should be proud of this pay rise. It’s the largest increase to minimum and Award wages in Australia’s history.
“It’s what unions do – we use our strength in numbers to ensure that working peoples’ pay gets moving again.
“Increasing pay is the most important step to reducing the impact of the cost-of-living crisis.
“That’s why we’re not stopping.
“There are still more than 8.5 million workers who don’t know where their next wage rise is coming from, despite the cost-of-living crisis and big business profits being at record highs.
“Unions are continuing to stand up and take action to improve wages and job security for all workers.”