Debate Heats Up Over Minimum Wage Increase in 2021

The Morrison government has cautioned against increasing minimum wage this year. (Justin Sullivan/Getty Images)

The Morrison government has cautioned that increasing Australia’s minimum wage this year could constrain small business recovery and employment.

“Higher labour costs during this challenging period could present a major constraint to small business recovery and may dampen employment in the sector,” the government noted in a submission (pdf) to the Fair Work Commission’s annual review, urging the Commission to consider the job creation and business viability during the post-pandemic economic recovery.

“The risk of domestic outbreaks and ongoing disruptions to other major economies mean the economic environment remains uncertain,” the government stated.

“Although the vaccine rollout is underway, COVID-19 outbreaks that would necessitate further containment measures remain a significant risk.”

In response to the call, the Australian Council of Trade Unions (ACTU) is arguing for an increase of 3.5 percent, or $26.38 per week, for a full-time minimum wage worker.

The ACTU argued that one-fifth of Australian workers receive the minimum wage and rely on the Commission’s annual review for pay increases.

The increase of 1.75 percent last year, which was delayed three months for 75 percent of recipients, meant Australia was falling behind other countries, such as the UK and New Zealand in “establishing a living wage at 60 percent of median income.”

“If wages don’t increase, it threatens the entire recovery,” Sally McManus, the ACTU Secretary, said in a statement. “Money in the hands of working people is what will create sustainable economic growth, not bigger profits for big business.”

Secretary of the ACTU Sally McManus during a doorstop in the media gallery at Parliament House on March 18, 2021, in Canberra, Australia. (Sam Mooy/Getty Images)

The ACTU cited the Reserve Bank’s statements that wage growth is too low and argued that the labour share of GDP has fallen to a historic low.

“Everyone suffers if wage growth doesn’t bounce back. If minimum wage workers do not have money to spend, local businesses feel it the most.”

Joining the ACTU, the Queensland (pdf) and Victorian (pdf) state governments in their submissions called for a wage rise.

Simultaneously, the South Australian and New South Wales (NSW) governments echoed the federal governments warnings in their submissions.

The National Farmer Federation (NFF) and Business NSW, one of the state’s top employer organisations, called for a freeze in minimum wage increases this year.

“The NFF calls for the current minimum wage level to be maintained in order to minimise the financial pressure on agricultural businesses,” the Federation said in its submission to the annual wage review.

The NFF argued that the drought, the bushfires last year, and the pandemic have hit hard on many farm businesses. At the same time, labour costs make up a big proportion of total cost in agriculture, especially for horticultural producers.

“This will provide affected farms with some time and capacity to recover from recent adversities and protect the productivity and viability of the agricultural sector,” the Federation said.