Labor’s ‘living wage’ policy risks job growth: employers

National employers have urged Bill Shorten to rethink the “living wage’’ policy, with a warning for the future of businesses.

Federal Opposition Leader Bill Shorten. Picture: AAP

National employers have urged Bill Shorten to take Labor’s living wage policy “back to the drawing board” warning the proposal risked future jobs growth and the viability of businesses operating on low margins.

Australian Industry Group chief executive Innes Willox said the policy would have “perverse impacts” on the labour market and overlooked the above-inflation increases to the national minimum wage in recent years.

CEO of the Australian Industry Group Innes Willox. Picture: AAP

Mr Willox said the ALP, in support of the policy, was presenting an excessively negative view of how the economy had performed for households, neglecting to mention businesses had been creating jobs at record rates in recent years.

He said there was no point having an independent tribunal to determine wages and employment conditions if parliament was going to impose unbalanced criteria that would require the Fair Work Commission to give inadequate weight to the impact of their decisions on businesses and the broader economy.

“The policy should be taken back to the drawing board,’’ he said.

“Most critically, the announcement puts at risk future growth in employment opportunities.

“The people most exposed to these risks are low-skilled people, part-time employees and young people. It also puts at risk a considerable swathe of Australian businesses that operate on low margins and provide jobs for low-skilled Australians.”

He said if the national minimum wage was moved up to a level equivalent to 60 per cent of median earnings, an unskilled labourer would be paid close to the rate of an electrician or fitter, and much higher than existing apprentice wage rates.

“This would have at least three disturbing impacts: it would further reduce the incentive for people to undertake apprenticeships or other forms of new training, it would most likely lead to many people leaving the trades, and it would reduce employment opportunities for low-skilled people — such as new workforce entrants.

“The problems created by the approach proposed would not be limited to just the lower wage levels in an award, there would be distortions in the relativities between wage levels right up to the top levels in the classification structure.”

‘Fantastic step’ in wage fix

ACTU secretary Sally McManus has hailed Labor’s ‘living wage’ policy as a “fantastic first step” to fixing the wages system, insisting it will benefit business and ensure no full-time worker lives in poverty.

Bill Shorten has unveiled the policy which will see significant pay rises start flowing to 1.2 million low-paid workers from July next year.

Mr Shorten said a Labor Government would legislate to require the Fair Work Commission to prioritise lifting workers out of poverty above business viability and jobs growth.

Employers have expressed alarm about the financial impact of the policy but the ACTU insisted it would benefit business.

“Business in Australia is driven by domestic consumption and this in turn is driven by wages,” Ms McManus said today.

“An end to low wage growth would benefit small and medium businesses.”

She said the return to a living wage — “an idea which was first implemented in Australia more than 110 years ago, would be a significant step forward in the fight against low wage growth and poverty in this country”.

ACTU Secretary Sally McManus, centre. Picture: AAP

“The living wage is an Australian idea, it’s time it was bought back. It is the essence of a fair go — workers should not be working full-time hours and earn poverty wages,’ she said.

“Unfortunately, the living wage has been eroded over time, and now the Fair Work Commission points out that the minimum wage does not lift all workers who rely on it out of poverty and the current rules prevent them from fixing it.

“The re-establishment of a living wage would ensure that full time work means a comfortable life and enough money to live on, not simply to avoid starvation.

“This is an essential and fantastic first step to fixing our broken wages rules and stands in contrast to years of inaction from the Morrison Government, who now admit that low wage growth is not a side-effect but a design feature of their economic policies.”

Under the policy, a Labor government would direct the commission next year to identify a living wage target and phase in minimum wage increases for the nation’s low-paid workforce.

In a bid to blunt employer criticism, Mr Shorten said a new ­living wage, identified as 60 per cent of median earnings, would not “automatically flow” through to an estimated 2.3 million award-reliant workers and “will only apply to those receiving the ­national minimum wage”.

Labor released figures last night estimating about one in 10 workers, or 1.2 million, would be affected, including 180,200 on the adult national minimum wage, about 600,000 who are not paid exactly at the award rate, and those on junior, apprentice and disability rates of pay.

“It’s a bit rich”: Chamber chief

Australian Chamber of Commerce and Industry chief executive James Pearson said the policy, if implemented, would force many businesses to choose between cutting the hours of employees or laying people off.

“Even if businesses could charge customers more, to recover the cost of increased wages, that would simply add to the cost of living that the policy is supposed to address,’’ Mr Pearson said.

“It’s a bit rich for big unions to say that their living wage proposal is good for small business, when small and family business owners around the country, who work long hours, have taken great financial risks, and have put their homes on the line to employ people, know the reality.

“This policy would see them cutting the hours they give their staff, laying people off, working longer hours themselves to make up the difference and, for some, having to close their doors.

“In forcing the Fair Work Commission to prioritise a living wage over all other factors, the Opposition is sidelining the needs of not only small business owners but those looking for work or trying to enter the workforce for the first time, including students and young people.”

Jobs and Industrial Relations Minister Kelly O’Dwyer said Labor had no credibility when it came to increasing the minimum wage, and the rules Mr Shorten wanted changed were introduced by the former ALP government.

“The Productivity Commission has said that the most important element to combat poverty and inequality in our country is for people to be able to have a job and the Coalition has a proud and strong record,’’ she said.

“You contrast that to Bill Shorten and a Labor government that saw one in every eight manufacturing jobs lost. You saw three out of six years where the minimum wage in fact went down — not up — and did not stay ahead of inflation.”