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27 March 2019

Proposed wage increase could stifle small business employment

Labor’s proposal to move from a minimum wage to a living wage could negatively impact many small businesses that are already operating on very low margins and put at risk their ability to employ or even survive, the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell said today.

“Small business is the biggest employer of labour in Australia and therefore changes to the Fair Work Commission Annual Wage Review processes need to be very carefully thought through to avoid unintended consequences," Ms Carnell said.

“ATO data from 2017 shows that more than 43% of small business owners had taxable incomes below the minimum wage - they are paying their staff and their bills, with little left over to pay themselves.

“There are 2.2 million small businesses in Australia – 40% of which employ staff.

“That is over 850,000 businesses that would have either have to absorb or pass on the increased costs of employing staff to their customers. If they can’t do this, employment will suffer.

“Hardest hit by this proposal would be smaller retailers, those in the hospitality industry, cafes and fast food outlets.

“Many of these small businesses simply won’t be able to compete with larger businesses.

“The Fair Work Commission currently conducts annual wage reviews through an independent process that takes into account a range of economic factors.

“This has delivered an increase to the minimum wage of 3.5% last year and 3.3% the year before – increases significantly ahead of CPI.

“We welcome the opportunity for further consultation and submissions with appropriate focus on the capacity of small businesses to pay and the potential impact on employment.”