Minimum Wage Rise: “Better Than Nothing”

Minimum Wage Rise: “Better Than Nothing”

Minimum Wage Rise

"Better Than Nothing"

Earlier today, the Fair Work Commission announced that the minimum wage from July 1 will be revised to $19.49 an hour or $740.80 a week for full-time workers. Around 2.2 million Australian workers will receive the 3 percent pay rise.

The 3 percent increase in the minimum wage is lower than last year’s 3.5 percent and 2017’s 3.3 per cent. The slowdown of growth can be attributed to the low growth of GDP and inflation in relation to previous years. While wages growth remains historically low, the current status of Australia’s inflation meant that workers may experience a rise in living standards.

The Fair Work Commission is satisfied with the level of increase, which will not lead to any adverse inflationary outcome and negative effect on employment. They believe such increases will improve the living standards of the employees who rely upon minimum wages.

However, The Australian Council of Trade Unions hold the view that the 3 percent increase is not enough to be considered as a “living wage” for the workers, and call for a larger 6 percent increase.

Lain Ross, the president of Fair Work Commission said that the economic conditions justified a lower increase than the 3.5 per cent pay rise awarded last year. Justice Ross admitted that although the living standards for the lowest paid workers have improved, some continue to experience “significant disadvantage”. He further claimed that some low-paid households had disposable incomes which are below 60 percent of median income relative poverty line.

Liam O’Brien, the assistant secretary of the Australian Council of Trade Unions said that there is still a long way to go to ensure that the minimum wage is enough for workers to live on and support their families. He noted that the country should make efforts to realize the Australian worker to work full-time hours and live free from poverty.

Impact on jobs

Some business groups believe that the larger rise in the minimum wage pay will put jobs at risk. Analysts have noted that the increase may have an adverse reaction to the unemployment rate. However, the Fair Work Commission said that the labour market remains strong despite slowing economic growth.  There is no evidence that the previous 3.3 and 3.5 percent increases decisions had brought any adverse effects to the employment.

Small Business Growth

One of the main arguments against raising the minimum wage is that higher wages will cause operating costs for the small business increase, so much that it causes enough failures to outweigh the benefits of raising the minimum wage.

The Australian Chamber of Commerce and Industry (ACCI), argued for an increase of no more than 1.8 per cent, jobs and the viability of some small businesses could be at risk. He said that it will be tough for small business, particularly for the unemployed and underemployed. While the Australian Industry Group was satisfied with the moderate level of increase than the previous two years. The small rise in the minimum wage actually increased small business activity and helped them to grow.

Affects Productivity

Usually, more workers will enter the job market when wages rise, allowing businesses to choose more skilled workers. This gives small-business owners an opportunity to hire more qualified workers while productivity and working efficiency will significantly be improved. Some owners might choose the way of increasing wages level and cut down the number of workers. It is surely a good solution to improve productivity as the higher pay will motivate better-skilled workers, but the overwork will drive more mistakes and poor customer services. The moderate rise in the minimum wage will not bring that situation to happen and the productivity will remain stable growth.

Price Level

In common, small Business will increase the price of the goods and services they sell to offset the higher employee wages. The action of raising price will lead to the sales decline, decreased revenues and lower profits. With the moderate growth rate of wages, the likelihood of that happens decreased. The consumption level and the price of goods and services maintain a stable level due to the balance between demand and supply. The business owners have enough capital in advertising to attract or retain salaried employees.

The prospect of this year’s decision

As the Fair Work Commission claimed, the prevailing economic circumstances provide an opportunity to improve the relative living standards of the low paid, and to enable them to better meet their needs, by awarding a real increase in the modern award minimum wages.

The increase in the minimum wage will directly bring adversely effect on the employment. It will give small business both opportunities and challenges. The productivity and the price will remain at a stable level. Overall, 3 percent of minimum wage growth is not a bad thing and surely brings benefits.

By Chang Liu

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