As expected, the chair of the Migration Council and CEO of the Australian Industry Group (AIG), Innes Willox, has blasted yesterday’s minimum wage decision from the Fair Work Commission (FWC), claiming it will cause inflation to soar and hike mortgage rates:
“[The] Annual Wage Review decision of the Fair Work Commission will add fuel to the inflation fire,” Innes Willox, Chief Executive of the national employer association Ai Group, said.
“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…
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“The decision will result in a $40 per week increase to the National Minimum Wage (bringing the NMW to $812.60 per week) and to award rates below the base trade level, and a 4.6% increase to award rates at the base trade level (C10) and higher. The increase is operative from 1 July 2022 for most employees, and from 1 October 2022 for employees covered by certain awards in the aviation, tourism and hospitality industries,” Mr Willox said.
Australian Chamber of Commerce and Industry boss, Andrew McKellar, also said the wage increase was a blow to businesses, costing them $7.9 billion a year on top of the 0.5% increase in superannuation from 1 July. Whereas Australian Retailers Association chief executive Paul Zahra said “we fear the scale of this increase could tip some businesses over the edge”.
Over the past year we’ve witnessed employer groups lobby the federal government for easier access to foreign workers due to purported crippling labour shortages.
However, when it comes to actually paying more to attract Australian workers into their respective industries, employer groups like AIG always refuse.
How can these employer groups simultaneously claim to be having great difficulty finding local workers, necessitating the widespread importation of foreign workers, while at the same time arguing against a real rise in the minimum wage? Their position is contradictory.
Australian real wages have stagnated for a decade despite rising labour productivity:
This has driven down Australia’s real unit labour cost (ULC), which “are an indicator of the average cost of labour per unit of output produced in the economy” and “are a measure of the costs associated with the employment of labour, adjusted for labour productivity”. As illustrated in the next chart, real ULCs collapsed 6.3% below their re-pandemic level in the March quarter and have fallen for the better part of 35 years. This means that labour has become cheaper for Australian businesses over the pandemic.
As a result, wages’ share of national income has fallen to historical lows while company profits have soared to record highs:
If Innes Willox and co are genuinely concerned about inflation, they should look in the mirror at their own member’s price gouging and then order restraint.
Why should Australian workers’ real pay go backwards while businesses continue to enjoy booming profits? How is that fair or good for society?
Thank goodness the FWC ignored the likes of Innes Willox – enemy number one of Australian workers.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also Chief Economist and co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
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