11/05/2016 - 15:02

CCI cautions on award wage rises

11/05/2016 - 15:02

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The gap between the state’s minimum wage and the national floor should be reduced to prevent putting low-paid workers at risk of job losses, according to the Chamber of Commerce and Industry of WA’s submission to the upcoming state wage case.

Debate rages about the impact of minimum wage rises on low paid workers.

The gap between the state’s minimum wage and the national floor should be reduced to prevent putting low-paid workers at risk of job losses, according to the Chamber of Commerce and Industry of WA’s submission to the upcoming state wage case.

Western Australia is the only state that maintains a state minimum wage, which exceeds the national minimum by more than $20 per week, at $679.90 for a full-time 38-hour week.

The national minimum is $656.90.

But as the mining boom has ended, there have been calls to reduce that gap, with the argument that it makes the industries that hire a large number of low-paid workers less competitive.

Business News reported in November last year that Small Business Minister Joe Francis had considered moving industrial relations powers that currently reside with the WA Registrar Industrial Relations Commission to the national Fair Work Commission in order to ensure a level playing field.

The chamber’s submission to the state wage case, which is determined by the WAIRC, argues that governments should focus on using the tax and welfare systems to improve living standards for low-income households, which can be better targeted than wage rulings.

An additional problem was that research by the national Fair Work Commission suggested businesses reliant on award wage workers in industries such as hospitality and retail would take action to manage or reduce wages bills when they come under pressure.

That was the case in more than 85 per cent of hospitality businesses and 72.7 per cent of retailers.

That could be through reducing hours for casuals, reducing employee numbers or reducing shift availability.

“Faced with higher wages for lower skilled workers, businesses have an incentive to reduce employment of such workers, and/or to invest in labour displacing capital, hire (or make more intensive use of existing) higher skilled workers, and seek to pass on costs,” the CCI’s submission said.

“It is clear that the majority of these strategies negatively impact on the employment prospects of low-paid workers, and whilst some will argue that passing on the increased costs to consumers should be the preferred option for businesses, the Productivity Commission warns that ‘price rises prompt a shift in demand away from domestically produced labour intensive goods and services’, further impacting upon employment.”

A further submission, on behalf of Commerce Minister Michael Mischin called for an increase in line with inflation, around 1.5 per cent.

That would preserve the real value of the minimum wage, the submission argues.

Unions WA had a request at the opposite end of the spectrum, however, with a rise of $30 per week, about 4.4 per cent, proposed, touting the Productivity Commission’s recent workplace relations review.

“The Productivity Commission’s review of the literature on minimum wages and its own empirical analysis finds little or no evidence of negative employment effects from raising the minimum wage,” the submission said.

“It indicates that no prescription can be inferred as to the desired rates of increase of the minimum wage from the empirical analyses.”

The Productivity Commission was equivocal in that report, however.

“Based on its examination of the available evidence, together with its understanding of the Australian economy, the Productivity Commission has concluded that large increases in the minimum wage bite (or indeed, steep rises in the minimum wage compared with product prices) would make lower-skilled, less experienced employees less attractive to employers and reduce employment on both an hours and headcount basis, particularly over the longer term,” that report said.

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