Employers dismiss ACTU wage-jobs link

The peak union body says a $50-a-week wage rise to low-paid workers will create up to 57,000 jobs in a year.

ACTU secretary Sally McManus. Picture: AAP

Granting the union movement’s claim for a $50-a-week increase in the minimum wage would create up to 57,000 jobs in a year because low-paid workers spending the extra money in the local economy would generate more jobs, ACTU modelling predicts.

But the ACTU submission to the Fair Work Commission was contradicted by employer groups, which warned that awarding the “excessive” pay claim would cost jobs and force employers to cut the work hours of employees.

Asserting that a $50-a-week rise would “supercharge” job ­creation, the ACTU provided two methodologies that sought to project the effect of a higher minimum wage on employment.

The first projection found between 50,000 and 57,000 jobs would be created in the first year after such a pay rise was awarded, with 30,000 jobs created in the second year. The second projection found a 40,000-job increase in the first year and 27,000 in the following year.

ACTU secretary Sally McManus said when low-paid workers receive a pay rise “they spend it in the local economy, and that creates more jobs”.

“The Turnbull government and the business lobby are trying to keep wages down by running a scare campaign against higher wages,’’ she said.

“That’s the same discredited, untruthful, damaging trickle-down economics this government loves to roll out. The truth is that pay rises will create jobs.”

But the Australian Chamber of Commerce and Industry and the Australian Industry Group told the commission the ACTU claim was “manifestly excessive”.

The ACCI said the ACTU bid was “an extraordinary claim that would risk business sustainability, hours and jobs if adopted”.

“The businesses impacted by the annual wage-review decision include small and medium businesses with lower profit margins, many with higher wages and salaries as a proportion of total expenses and lower survival rates,’’ the ACCI said.

“Award-reliant sectors such as retail are facing intense competition from the online, global ­market.

“Small, award-reliant businesses that run on lean margins are often unable to pass on wage cost increases to consumers and may need to cut costs by either reducing headcount and hours or substituting capital for labour.

“If the inflated union claim were awarded, it is entirely foreseeable that short-term gains in the earnings of those who remain in employment would come at the expense of those who lose jobs and hours.”

The Ai Group said the effect of higher minimum wage rates on aggregate demand was much more complex than the ACTU suggested and cast doubt on its argument.

“For households with a propensity to spend all of any additional income, the impact on household spending of an increase in wage rates may be severely diluted to the extent that income tax paid by households rises and-or the withdrawal of income transfers reduces payments to households,’’ it said.

“The ACTU submission generalises about the spending ­propensities of low-income ­individuals.”