Jobs ‘at risk’ with $26 wage boost for low-paid

By Ewin Hannan

Employers have warned that Fair Work Australia’s decision to award a $26-a-week pay rise, the second-highest increase in 25 years, to the nation’s 1.45 million low-paid workers will threaten the pace of jobs growth and penalise small businesses struggling to recover from the global financial downturn.

Business groups said the decision represented a “double whammy” for employers, as the rise in the minimum wage to $569.90 a week from July 1 coincided with increased wage rates, penalties and loadings associated with the introduction of Labor’s modern awards.

The Australian Chamber of Commerce and Industry said the pay rises — $1 less than what unions wanted but double what employers had sought — would add $2.5 billion to the annual wages bill of small businesses.

The increase would translate into at least $31.20 extra per week once it flowed through to leave loadings, superannuation, payroll tax and workers’ compensation payments.

The National Retailers Association said yesterday’s rise, coupled with the extra modern award costs, would add between 6 and 9 per cent to annual wage bills.

Workplace Relations Minister Julia Gillard and the ACTU welcomed the ruling, which virtually upheld the union movement’s claim for a $27-a-week pay rise.

It was the first minimum wage decision under Labor’s Fair Work Act and followed last year’s minimum pay freeze imposed by the Howard government’s Fair Pay Commission.

Ms Gillard said the government, which had argued for an above-inflation rise, believed the decision was “economically responsible and fair”.

She said the increase represented a rise of about $6 a week over inflation and would ease the pressure on the family budgets of the nation’s lowest-paid workers.

ACTU secretary Jeff Lawrence said the pay rise was a “dividend for the end of Work Choices” and broke the drought after a 21-month wage freeze under the former government’s wage tribunal.

“Last year’s wage freeze was the last gasp of Work Choices and was an insult to the contribution working Australians make to our economy, which sent the living standards of the lowest-paid workers even further backwards,” Mr Lawrence said. “This decision will restore some equity and fairness into our economy.”

In its decision, the minimum wages panel, headed by tribunal president Geoff Giudice, said the economic data showed there had been a “significant decline” in the real value of minimum wages between March 2008 and March this year.

“Our review of economic conditions indicates that since March 2008, the Australian economy has performed much better than expected,” the panel said.

“During that time, productivity, prices and real earnings have grown but minimum wages have not. There is a strong case for a rise in minimum wages to provide a fair and relevant safety net, protect the relative living standards of award-reliant employees and assist the low paid to meet their needs. The forecasts for 2010-11 give strong grounds to conclude that such an increase could be awarded without threatening business viability, employment growth or adding to inflation.”

Opposition workplace relations spokesman Eric Abetz said the Coalition welcomed the fact Australian workers had received a pay rise. “We note that the increase is at the higher end of expectations and trust that this won’t have a negative effect on jobs,” Senator Abetz said.

Australian Industry Group chief executive Heather Ridout said the decision was “out of sync with an economy that has seen the balance of risk and sentiment shift downwards in recent times”.

“It appears the tribunal has awarded a catch-up increase but this approach is risky,” Ms Ridout said. “Timing is everything, and there is a risk that this increase will slow the pace of job creation and that for many households, the benefits of higher wage rates will be offset by a reduction in employment opportunities.”

Yesterday’s increase was the second-largest in 25 years. The highest was $27.36 a week awarded in 2006 following an 18-month hiatus caused by the transition to the Fair Pay Commission.

Article from The Australian, June 4, 2010.