Employer group calls for raise much lower than unions' proposal of five per cent
National employer organisation Ai Group is proposing a 2.8% minimum wage increase, citing various "economic challenges" affecting organisations.
Innes Willox, chief executive of Ai Group, called on the Fair Work Commission (FWC) to consider the "deteriorating state" of the economy in setting the minimum wages this year.
"The commission should also be mindful of the cumulative impact of the unprecedently high increases over the past two years, as well as the business impact of a further 0.5 percentage points increase to superannuation obligations that will commence from July," Willox said.
Early signs of weakness in the labour market should also be noted, as there are areas seeing reduced employment levels, according to the chief executive.
"Having regard to these economic challenges, any increase in the National Minimum Wage should not exceed a figure of 2.8%," Willox said. "A moderate increase of this size would lower the likelihood of negative impacts on employment and raise the likelihood of an earlier reduction in interest rates by lowering inflationary pressures."
Lower than unions' pay hike request
The Ai Group's submission to the FWC is much lower than the five per cent minimum wage hike requested by the Australian Council of Trade Unions (ACTU).
According to ACTU, their requested wage hike would most especially benefit women and part-time employees.
"The lowest-paid workers are the ones who are the hardest hit by inflation, they need a five per cent pay increase to start to get ahead again and make up for the real wage losses over the last few years," said ACTU secretary Sally McManus in a statement.
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But the Ai Group disputed the unions' claims.
"The ACTU continues to erroneously and mischievously claim the minimum wage decision affects only a small and narrow cohort of workers and their employers. This is wrong," Willox said.
"Approximately 2.9 million workers are directly impacted by the decision through the award system. The minimum wage decision also influences wage negotiations through the enterprise bargaining system, and broader wage setting in the labour market."
According to Willox, there are other ways to support Australians amid the cost-of-living pressures aside from giving them a minimum wage increase.
"Other forms of government income support – such as recently announced tax changes, and further measures expected in the May budget – must be used in tandem with minimum wages to help protect the real income levels of households," the chief executive said.
Wage-price spiral debunked
In 2023, the Fair Work Commission awarded employees with an 8.6% wage increase - despite previous concerns that a high wage hike will keep inflation levels high.
New research from the Centre for Future Work at the Australia Institute, however, debunked this claim after analysing the correlation between minimum wage increases and inflation since 1997.
It found that there was "no significant correlation between rises in the minimum wage" since 1997.
"The historical data prove that concerns about inflation are not a credible excuse to deny low-paid workers a much-needed pay rise," said Greg Jericho, Australia Institute and Centre for Future Work Chief Economist, in a statement.
"Even if businesses respond to minimum wage rises by charging consumers more, it will have a minuscule effect on inflation because it would be subsumed by much larger factors including chain disruptions, energy shocks, and corporate profits."
According to the institute, raising wages by five to 10% this year would even offset recent inflation and restore pre-pandemic trend in real wages for employees.
"There is a moral imperative to restore quality of life for these Australians and this analysis shows that there is no credible economic reason to deny them," Jericho said.