Food industry demands minimum wage freeze, migrant slaves

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By Leith van Onselen

The restaurant and catering industry association has backed the National Retail Association’s (NRA) call for the minimum wage to be left unchanged in 2018, claiming in its submission to the Fair Work Commission (FWC) that an increase in the minimum wage cannot be justified given the current economic conditions. From The Australian:

Restaurant and Catering Industrial, representing 45,000 restaurant, cafe and catering businesses across the country, said a significant minimum-wage rise would jeopardise employment growth.

The call for a wage freeze mirrors the push by the National ­Retail Association and, if granted, would represent a pay cut for minimum-wage employees, given the inflation rate…

“RCI ­argues that the prevailing economic conditions do not warrant any increase in the minimum wage,’’ it said…

ACTU secretary Sally McManus said the “retail bosses union” was demanding no one gets a pay rise. “Have they worked out who buys their stuff?’’ she said. “Workers can’t spend money they don’t have.”

I noted yesterday that demanding a freeze to the minimum wage is unreasonable, given this would equate to a real pay cut of 1.9% (i.e. the current inflation rate).

More broadly, growth in Australian employee compensation remains stuck in the gutter, falling in real terms by 4.2% since March 2012, despite solid rises in labour productivity:

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Thus, the FWC needs to strike a fair balance that provides a decent, but not excessive, real lift in the minimum wage.

What makes the restaurant and catering industry’s zero wage rise claim more galling is that it has also demanded easier access to migrant workers because of alleged skills shortages. Below are extracts from Restaurant and Catering Australia’s pre-Budget Submission:

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In the current climate, the biggest challenge facing businesses in the café, restaurant and catering sector is chronic and acute skills shortages, particularly amongst key occupations of cooks, chefs and café and restaurant managers. The increasing demand for skilled labour among hospitality businesses over the coming years will only exacerbate the severity of this problem. As such, R&CA strongly urges the Commonwealth Government to address the chronic skills shortages affecting the tourism and hospitality industries as a priority in the 2018-19 Budget. Anecdotal evidence received from R&CA members indicates that access to skilled workers, both from domestic and international sources, is by and large the most significant issue faced across the industry…

VISA APPLICATION CHARGES

The hospitality sector is heavily reliant on the skilled migration system to source the skilled labour required to operate businesses successfully. R&CA believes that the structure of Australia’s skilled migration system should be designed in such a way that supports those industries expected to contribute the most to future employment outcomes. In order to achieve this, any proposed changes to Australia’s skilled migration system should incorporate a meaningful reduction in costs across a wide number of working visa categories.

The implementation of the Commonwealth’s Government’s Temporary Skills Shortage (TSS) visa as of March 2018 will result in an increase to visa application charges from the current $1,060 per primary 457-visa to $1,150 per primary visa for the short-term stream and $2,400 per primary visa for the medium-term stream. R&CA argues that the cost of the TSS visa to small businesses is prohibitive and will ultimately negatively affect the ability of cafés and restaurants to source the skilled labour they need to maintain the viability of their businesses, in the absence of sufficient numbers of skilled and willing domestic employees. Therefore, R&CA would urge the Commonwealth Government to commit to a 50 per cent reduction in the cost of the TSS visa in the 2017-19 Budget…

WORKING HOLIDAY MAKER VISA

R&CA argues that a meaningful reduction in the cost of obtaining a visa is required to support Australia’s position as an attractive and competitive destination for temporary and long-term visitors… The cost of the WHM fee has more than doubled over the span of a decade, increasing from $180 in 2005-06 to $440 in 2016-17. These significant fee increases have corresponded to a decline in the number of applications received for the WHM visa (subclass 417)…

SKILLING AUSTRALIANS FUND

R&CA has expressed significant concerns regarding the Commonwealth Government’s $1.2 billion Skilling Australians Fund, originally announced in the 2017-18 Budget. The scheme is funded by the Government’s reforms to the skilled migration program which requires employers who nominate foreign workers under the new TSS visa and certain permanent visas to pay a Skilling Australians Fund (SAF) contribution from March 2018. R&CA believes that the Commonwealth Government’s training levy will exacerbate the impact of acute skills shortages and act as a handbrake on the economic growth and development of the tourism and hospitality sectors…

R&CA argues that it is unreasonable to expect businesses of any size to absorb the heavy financial burden of this training levy, let alone small businesses operating on very low margins and will lead to the closure of businesses.

Australia’s overall labour underutilisation rate is running near 14%, with youth labour underutilisation at 30%:

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How can the restaurant and catering industry credibly howl skills shortages when there is such a large pool of potential employees that could do what is essentially unskilled or semi-skilled work with just a little bit of training?

Instead of reaching for the easy option of cheap migrant labour, how about performing some training? And if you are having difficulty attracting workers because of alleged “skills shortages”, try raising wages.

Only in recent years have wage rises that accompany the normal functioning of the labour market been conveniently rebranded as “skills shortages”.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.