22 June 2022

Those on the ground not sold on minimum wage increase - here’s why

| James Coleman
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Man with plate of food

Matthew Wilson is the chef at Magoo’s in Kingston. Photo: Michelle Kroll.

When Matthew Wilson first started in the hospitality industry at the age of 16, he was paid “stuff all”.

“Now, people doing the same job I was doing are only earning a bit less than what I’m on,” he says.

Matthew is the chef at Magoo’s Café and Bar in Kingston and has mixed feelings about the announcement that the minimum wage is to be increased by 5.2 per cent.

“It’s good that everyone is moving up as the price of everything else is going up,” he says.

“However, as far as small business is concerned, they’re really playing with fire in terms of affordability. The money has to come from somewhere.”

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Australia’s minimum wage is now $21.30 per hour after the Fair Work Commission (FWC) handed down its annual assessment on Wednesday, 15 June.

There will also be a 4.6 per cent increase to wages governed by the awards, which includes the health care, community services and hospitality sectors.

Magoo's Cafe & Bar

The bar at Magoo’s. Photo: Michelle Taylor.

In the last weeks of the federal election campaign, the now-Prime Minister Anthony Albanese said he would back a move to lift the minimum wage so it kept pace with inflation. Right now, that’s 5.1 per cent.

FWC president Iain Ross said inflation is expected to peak at around 6 per cent by the end of the year, impacting businesses and workers.

“The most significant changes since last year’s review decision have been a sharp increase in the cost of living and the strengthening of the labour market,” he said, handing down the decision online.

“The lowest-paid are particularly vulnerable in the context of rising inflation. Inflation … erodes the real value of workers’ wages and reduces their living standards.”

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According to recently released data from the ABS, around 60 per cent of businesses are enduring surging costs in 2022.

The ACT might have the highest average weekly earnings in Australia, but a number of living costs have increased over the past five years.

Electricity is up by more than 28 per cent, gas by 24 per cent, and health services by 21 per cent, to name just a few. The ACT also remains the most expensive place to rent in Australia.

Matthew himself has noticed the cost of supplies skyrocket just in the past six weeks.

“The oil I use for the deep fryer has gone from $50 for 20 litres to $89.50, and we use six of those a week,” he says.

The Canberra Business Chamber oversees more than 3000 local businesses across 40 industries. CEO Graham Catt agrees with Matthew.

“As the whole community faces cost of living issues, local Canberra businesses are struggling to manage rapidly rising costs,” he says.

READ ALSO Five minutes with Matthew Wilson, Magoo’s Cafe and Bar

Graham says businesses have done what they can to avoid passing these on to consumers, but with thin margins, the wage increase will leave many with no choice.

“The biggest issue facing local businesses right now is shortages of local workers,” he says.

“The announcement does nothing to address the biggest problem for employers, which is that they simply haven’t got the workers and can’t find the workers.”

Graham Catt

CEO of the Canberra Business Chamber said the eased requirements are a relief for many businesses. Photo: Supplied.

The ACT Council of Social Services (ACTCOSS) argues that increasing the income of those on the lowest wages is always good for business.

“We know that when people on the lowest wages get additional money, they don’t save it,” CEO Emma Campbell says.

“They spend it immediately on the things they need and by so doing, put it into the hands of local business.”

Canberra’s business community is largely made up of small, family-owned businesses. In fact, of the 31,000 active businesses here, only 40 employ more than 200 people.

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For Matthew at Magoo’s, he sees the extra money being spent, but chances are, not in these small businesses.

“People will take their money where it buys the most, and that’s the bigger businesses,” he says.

“From a hospitality point of view, people will buy their meals from the bigger clubs. They supplement their costs with income from the pokies so you can get a sirloin steak for $16. It costs me $9 for that steak. There’s no way I can offer it for $16.”

Matthew says businesses will have to get “savvy” to survive.

For community services organisations such as ACTCOSS, Emma has written to the ACT Government and Federal Government to ask for more funding to help cover the cost of wage increases within their own organisations.

The minimum wage changes come into effect from 1 July, unless there are exceptional circumstances. Federal politicians, judges and senior public servants were also granted a pay rise of 2.75 per cent from 1 July.

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HiddenDragon7:05 pm 23 Jun 22

If there’s one election commitment that the Albanese government should look seriously at bending, if (maybe) not quite breaking, it’s the timetable for the Liberals’ middle/high income tax cuts. Savings from deferral of those cuts could be used to cover the cost of an extended and enhanced lower income tax offset.

Those offsets are opposed by econocrats as “distortionary” (i.e. they earn too much to get the offset, so therefore it’s a bad idea) but they are a neat way of targeting assistance to the working poor.

I wonder how many commenting on this article actually run their own businesses? All it does is point to the fact someone’s gotta pay. The simplistic “it’s only a $1 an hr” argument os false. For a FT employee, it’s $40 a week plus super on top. Only additional productivity can help meet this cost. The taxpayer doesn’t unlike our public servants who will apparently receive a 2.75’% taxpayer funded increase (plus super) on 1 July.

higgo, and James Philemon below, you could always try paying it out of the historically high profit share to capital compared with labour share of income. I refer to the RBA for the relevant data.
Radical, eh?

James Philemon1:47 pm 24 Jun 22

Of course, Fido, that ratio must apply equally across all industries, and it couldn’t be that some industries with higher profits mask the ratio in those with lower profits, right? Averages appear to be a radical concept too, eh?

James Philemon, where did I purport uniformity of profit share? Yours is a useless straw man. Will you argue that a particular case or few in business should over-ride broader beneficial change?
While Robert Prentice’s comment (to which you first replied below) does not survive a reductio argument, his point is a fair one. Nobody will ever guarantee business survival in our economy.

Most hospitality jobs have to pay above the minimum wage to get employees now anyway.

The price of lockdowns and money printing is starting to be felt. It’s not going to get better any time soon.

I thought that the floods in Qld caused produce to rot, resulting in the $12 lettuce?

I thought that fuel prices that have crippled anyone who drives a car or uses a truck in their business were caused by the Russians invasion of the Ukraine?

I thought that the shortage of new cars and the increase in their price, and the flow-on effect to used cars, was due to components shortages, caused by a worldwide pandemic?
I could go on, but thank you for clarifying that it all could have been avoided had there been no lockdowns.
(I guess a lot more Australians would have died and our hospital system would have collapsed in the process, but at least lettuce would be cheaper).

Then you thought wrong. Even the Federal government thought they’d cost $3.2 billion a week. The IMF warned in June 2021 that lockdowns would lead to global famines in the coming years.

If you think shutting down everything for two years would have no consequences downstream, I don’t know what two tell you.

The Silver, you may have a point around global economic conditions in coming years but the specific topic of this article and the causes of current inflation in Australia are almost wholly unrelated to government pandemic spending or lockdowns.

It’s the soup we swim in now. My bug bear is that anyone pointing out there would be serious economic, social and political downstream consequences from lockdowns, restrictions and money printing in 2020 were dismissed as cranks who didn’t care about people’s lives. When the eventual economic, social and political problems arrive, I can’t help but say “I told you so”.

Or to put in more direct terms: The Arab Spring starting around 2011 was a direct result of the pressure put on food prices caused by the financial crisis of 2008. Why would you expect to have seen the worst of the economic hardship caused by lockdowns and money printing by now? We’ve barely begun to pay for the damage governments did, the current inflation is just the start of it.

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