Coronavirus: Wage rise ‘threatens economic recovery’

The Morrison government has warned increasing the minimum wage this year could be a ‘major constraint to small business recovery’ and cost jobs.

The government urges the Fair Work Commission to take a “cautious approach” to its minimum wage deliberations given the current uncertainties in the domestic and international economic outlook. Picture: istock

The Morrison government has warned increasing the minimum wage this year could be a “major constraint to small business recovery” and cost jobs, sparking fresh conflict with the union movement which is pushing for a $26-a-week pay rise for 2.3 million workers.

While not explicitly backing business calls for a minimum wage freeze, the government urges the Fair Work Commission to take a “cautious approach” to its minimum wage deliberations given the current uncertainties in the domestic and international economic outlook.

The government says while the economy is expected to grow by 4.5 per cent in 2021, “the risk of domestic outbreaks and ongoing disruptions to other major economies mean the economic environment remains uncertain”.

“Although the vaccine rollout is underway, COVID-19 outbreaks that would necessitate further containment measures remain a significant risk and even localised outbreaks could have an impact on consumer and business confidence weighing on consumption and investment,” it says.

The government says the commission should take into account the importance of creating jobs and ensuring the viability of businesses, particularly small businesses.

“While the government has provided significant support to small businesses, given the continuing uncertain global and domestic economic outlook, higher labour costs during this challenging period could present a major constraint to small business recovery and may dampen employment in the sector.”

ACTU assistant secretary Scott Connolly said on Monday that “while the government didn’t have the guts to say it explicitly, it has given the green light to the Fair Work Commission to freeze the minimum wage, relied on by one in five workers”.

“The hypocrisy of the Federal Government is breathtaking – they say it’s fine to get rid of JobKeeper because the economy is recovering, but workers shouldn’t have a pay rise because the economy is faltering. They can’t have it both ways,” he said.

“Profits are soaring over 8 per cent and the Reserve Bank is calling for wage growth above 3 per cent, but the Federal Government still wants the minimum wage to go backwards in real terms.”

In its submission to the annual wage review, the National Farmers Federation calls for a freeze in minimum and award wages until economic conditions improve.

The NFF says the drought, the 2020 bushfires and COVID-19 has created compounding financial pressures that has left many farm businesses highly vulnerable to further disruption.

Workforce costs make up a very significant proportion of total expenditure for agricultural businesses, and, in some cases, it was the single highest recurring expense for a farm.

“This is particularly true for horticultural producers, for whom labour expenses account for up to 70 per cent of total production costs,” the NFF submission says

“The NFF calls for the current minimum wage level to be maintained in order to minimise the financial pressure on agricultural businesses. This will provide affected farms with some time and capacity to recover from recent adversities and protect the productivity and viability of the agricultural sector.”

Business NSW, the state’s peak employer organisation, has also urged the commission to award a zero increase this year, citing the vulnerability of business and significant weakness in the economy.

Unions are urging the commission to back a 3.5 per cent minimum wage increase from July, saying a failure to boost the pay packets of workers “threatens the entire recovery”.

The ACTU bid for a $26.38-a-week increase is double the amount awarded last year when the commission expert panel, led by president Iain Ross, staggered the operative date of a $13-a-week rise due to the economic shock of COVID-19.

In last year’s decision, frontline healthcare, childcare and essential service workers received an increase from July 1 while a second­ group, that included constructio­n and manufacturing em­ploy­ees, got a rise from November.

However, 700,000 workers in industries severe­ly impacted by COVID-19, including fast food, hospitality, restaurants, aviation and live performance, had to wait until February 2021.

The shop assistants union says retail workers experienced a greater stagnation in wage growth than workers in other industries, with wage growth for retail trade at one per cent compared to 1.4 per cent more generally.

The union says retail workers were on the frontline of the pandemic, and faced great uncertainty due to government-imposed lockdowns, reduced trading, cuts to working hours and job losses.

“The unselfishness of these workers, who worked tirelessly during the height of the pandemic should not be ignored but rewarded. With much stronger economic conditions now, Australian workers should not experience any delay in receiving a pay increase,” the union says.