‘Can’t afford that’: Cafe owner breaks down over minimum wage hike

A Sydney cafe owner has broken down over yesterday’s minimum wage increase, claiming his small business may not survive it.

An emotional cafe owner has claimed his business might be forced to close as a direct result of yesterday’s bombshell minimum wage increase.

On Wednesday morning, the Fair Work Commission announced the national minimum wage would rise by 5.2 per cent to $21.38 per hour or $812.60 per week, representing an increase of $40 per week.

Modern award minimum rates will also go up 4.6 per cent “subject to a minimum increase of $40 per week”, and both increases will come into effect from July 1 for most workers.

The ruling took many by surprise, given it was even more generous than the 5.1 per cent hike backed by the Albanese government, and far above the 2.5 per cent to 3.2 per cent boost employer groups had campaigned for.

However, it was less than the 5.5 per cent increase the Australian Council of Trade Unions (ACTU) had been pushing for.

But industry insiders and business owners have slammed the decision, which will impact the more than 2.7 million Australians on the national minimum or award minimum wages, claiming they cannot afford to pass on the rise and warning that prices could jump as a result.

One of the countless small business owners impacted by the decision is Sydney cafe owner Phillip Salhab, who owns the Appetite Cafe in Five Dock.

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Phillip Salhab, owner of Sydney's Appetite Cafe in Five Dock, said his business will not survive on top of the already inflated grocery and power prices. Picture: Sky News Australia

He told Sky News there was a real chance he would now have to close his cafe’s doors as a result of the minimum wage increase on top of other cost pressures such as skyrocketing power bills and grocery prices.

“While we accept the increase in the minimum wage obviously for our team and others to keep up with cost of living pressures, we as a business cannot afford it,” he told host Peter Stefanovic.

“We’re offering already 20 per cent more than the minimum wage but we’re being asked to pay at least $42 an hour depending on what the role is.

“That’s the going rate at the moment but we can’t afford that.”

Mr Salhab was moved to tears as he said it would be “easier” to simply close.

“At the end of the day, it’s a business. We’re here to make money. Our profit margin every day gets smaller and smaller and I really question why? At the end of the day, if there’s nothing to take home ourselves, then why?” he said.

Consumers ‘will pay the bill’

Meanwhile, a number of employers and industry groups have threatened to raise prices in response to the wage rise.

According to Australian Chamber of Commerce and Industry CEO Andrew McKellar, the rise would cost businesses billions, warning that companies had a choice of plummeting profits, passing costs on the customers, or closing down.

“By our calculation, this will add $7.9 billion in costs to the affected businesses over the year ahead, so that will be a very considerable burden that those businesses will either have to take to the bottom line or pass onto their customers,” he said.

“It comes at a time when inflation is emerging as one of the most urgent challenges facing the Australian economy and if we are to address that, if we are to remain competitive, then, clearly, this is not a decision that will help in those circumstances.”

Bosses have threatened to raise prices. Picture: iStock

Australian Retailers Association chief executive Paul Zahra agreed, claiming the boost “could send some businesses to the brink”.

“Whilst the ARA supported a fair and balanced increase to the minimum wage, we fear the scale of this increase could tip some businesses over the edge,” he said, according to The Australian.

And Australian Industry Group chief executive Innes Willox also lashed the ruling, claiming the move “will add fuel to the inflation fire”.

“[Businesses] have to make decisions around passing these costs on, so in the end it ends up with consumers who will pay the bill,” he said, as per the ABC.

“The concern is this will add fuel to the inflation fire we’re seeing running through the economy at the moment.”

‘Morally indefensible’

But ACTU secretary Sally McManus said working people needed a significant pay rise now.

“It’s is morally indefensible for employers to argue for pay freezes when profits are up 20 per cent and on every measure businesses have recovered well from the pandemic. The biggest risk to business is actually consumer spending which ironically they are seeking to damage through their proposed wage cuts,” she said.

“Arguing for a pay freezes and cuts for working people when all the economic indicators support a significant pay increase makes it crystal clear that some of these employer groups will never support pay rises for workers.”