Fair Work Commission under pressure to raise minimum wage amid pressure on cost of living

“We are the working poor … there is no work-life balance as I can’t afford a living.”

Comments like this from a full-time retail assistant are brought to the industry judge who is considering how Australia’s low earners can get a big boost in their pay packets.

While high inflation and rising interest rates make this a crucial decision as families face hip pocket pain, it’s not an easy decision.

Looking for a new job or job candidate? Post jobs and search for local talent on 7NEWS Jobs >>

The Fair Work Commission will issue its annual pay review decision before mid-year.

Employers’ organizations argue that companies can only afford a 3.5 percent increase for 2.6 million minimum-wage and bonus-wage workers.

The Australian Chamber of Commerce and Industry, Master Grocers and others say that’s a reasonable figure given the pressure on a number of sectors.

ACCI, the country’s largest business association, says its bill represents a 4 percent wage increase because it also includes a 0.5 percent increase in retirement benefits.

It would raise the minimum wage to $841.04 a week.

“The economy supports a salary increase. But it has to be sensible and responsible,” says ACCI CEO Andrew McKellar.

The Australian Retail Association has called for a 3.8 percent increase.

The cost of living is falling but remains high.

Inflation was 7.4 per cent for the year to December 2022, based on the Australian Bureau of Statistics quarterly consumer price index.

According to the Bureau’s monthly indicator, it was 6.8 percent for the year ended February 2023 and is declining.

Given the latest inflation figures, unions argue that ACCI and the grocers are calling for a $1,500 annual real wage cut for a full-time minimum-wage worker.

Retailers are offering a cut of about $1350.

ACTU has called for a 7 percent increase — an increase of about $57 a week, or $3,000 a year for a full-time minimum-wage worker.

The top union argues that this would cover current living expenses.

Last year, employers’ groups attacked the Commission’s decision to grant a 5.2 percent increase for workers on minimum wage and 4.6 percent for workers on bonuses.

They said it would endanger jobs and fuel inflation.

Similar arguments are being made this year.

The labor movement argues, with some merit, that inflation is being driven by corporate profits, as companies benefit from tight supply chains largely due to the war in Ukraine.

ACTU Secretary Sally McManus said companies would not suffer.

“The business has performed well during the COVID recovery and inflationary period. Corporate profits rose 18.9 percent in 2022. Bankruptcies are at record lows. The business can afford that raise.”

Mr McKellar said a pay break would put pressure on small and family businesses at a time when they can least afford it.

“Price-sensitive sectors such as lodging, hospitality, retail, government, arts and recreation have all seen falling profits over the past two years,” he said.

The Reserve Bank of Australia said in its latest statement this week that wage growth is “consistent with the inflation target provided productivity picks up”.

She expects wage growth to pick up in response to tight labor markets and higher inflation.

However, given the limited spare capacity in the economy and the historically low unemployment rate, the central bank is aware of the risk of a price-wage spiral.

Ms McManus says there was no wage-price spiral after last year’s decision.

“The five percent increase last year had almost no impact on overall wage growth. Employers should not be allowed to use the same discredited arguments to justify further real wage cuts,” she said.

While the Labor government bill did not include a percentage, it did set out a preferred path: “The Australian Government recommends that the Fair Work Commission ensure that the real wages of Australia’s low-wage workers do not decline.”

Labor Secretary Tony Burke – a former union advocate for retail workers – described what happens to the low paid as “like you try to chase a bus and the bus goes faster than you can walk”.

“And when bills come in, people’s wages just don’t keep up, and we want to make sure these low-paid workers are able to catch up and effectively get them back on the bus.”