Should businesses be concerned about a living wage?

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Small and medium-sized businesses are concerned after Opposition leader Bill Shorten confirmed he will boost the minimum wage to a “living wage”, should Labor win the Federal Election.

In a speech delivered to business leaders on Wednesday, Mr Shorten declared that the coming federal election would be “a referendum on wages” and that the current $18.93 minimum hourly pay was based on an outdated understanding of the cost of living.

“It came in as a principle before we had mobile phones, before we charged for water, the internet hadn’t been invented,” Mr Shorten said.

“The minimum wage is nowhere near adequate as a living wage.”

While the comments have been welcomed by the Australian Council of Trade Unions – which has been lobbying for a “living wage” to ensure that “nobody should work full-time and live in poverty” – employer groups say the move would backfire.

“To put it simply, forcing higher wages on employers with no return would only serve to push people out of work and lessen the opportunities for young Australians to enter the workforce,” Australian Industry Group chief executive Innes Willox said.

Mr Willox said any policy levers aimed at boosting wages – which all sides of the debate agreed was needed – should also support the creation of new jobs and lift the pace of productivity growth.

The numbers

  • The commission increased the minimum wage by 3.5 per cent last year, ahead of the then inflation rate of 2.1 per cent
  • The ACTU has lobbied for a living wage to be set at 60 per of the median wage, a change that would have seen the then-minimum wage of $695 a week jump to $852.
  • In practice, a “living wage” pegged at 60% of median wages (the ACTU model and what is commonly understood as the ‘living wage’ unions are seeking) would see an increase of at least $72.80 per week / 10.1% at just the National Minimum Wage level, with no consideration of jobs, productivity or capacity to pay.
  • The proposal could cost the Australian economy more than $8.7 billion per year, would threaten the viability of small businesses, and negatively impact jobs and hours.

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