“Most of retail is in negative growth. All you’ve got growing currently is food retailing, and that’s because of inflation,” Mr Zahra told the Financial Review.
Retail trade volumes declined by 0.6 per cent in the first three months of the year, according to data from the ABS, driven by falls in household goods and fashion retailing.
A 7 per cent award wage rise would ultimately lead to higher prices, Mr Zahra said.
“In a cafe with an owner-operator and a handful of staff on thin margins, at the end of the day, any wage increase is passed on – it goes straight through to the customer,” he said.
Hospitality sector employers warn they will need to pass the higher costs through to prices, since the industry’s acute labour shortage renders it unable to adjust worker hours.
Wage figures to be released this week are tipped to show that salaries grew by 0.9 per cent in the March quarter. The annual rate of growth is expected to accelerate to a decade-high of 3.6 per cent from 3.3 per cent, according to a survey by Reuters.
Advertisement
The RBA expects wages growth to hit 4 per cent by the end of the year, before slowing to 3.8 per cent in 2024 as the economy cools on the back of higher interest rates.
The RBA has pointed to accelerating inflation in the labour-intensive services sector as one of the key reasons it unexpectedly lifted interest rates to 3.85 per cent earlier in the month. Wages make up 40 to 50 per cent of the price of services such as hairdressing and restaurant meals, where a relatively high share of workers are paid award rates.
The combination of rising wages growth and weak productivity growth means that unit labour costs for business were rising “briskly”, the RBA said after its latest board meeting.
Financial markets imply an 11 per cent chance the Reserve Bank will lift the cash rate to 4.1 per cent by August and expect rate cuts next year.
Workplace Relations Minister Tony Burke, Treasurer Jim Chalmers and Minster for Finance Katy Gallagher wrote to the FWC on Friday in a joint letter saying their inflation-matching claim for minimum award workers from last year was unchanged, implying government support for a 7 per cent lift in pay for the lowest-paid.
Advertisement
Such an outcome would represent the largest minimum wage increase in decades, coming just one year after the FWC lifted award wages by between 4.6 per cent and 5.2 per cent in response to accelerating inflation.
That decision boosted the wages of the lowest-paid workers to $21.38 per hour, equating to an annual salary of $42,255.
‘No option’ but to raise prices
Unions are pushing for an across-the-board 7 per cent increase in award wages on July 1, while business groups are calling for a more modest lift in the range of 3.5 per cent to 4 per cent.
Council of Small Business Organisations Australia chairman Matthew Addison said he was concerned at the prospect of a 7 per cent award wage rise, which he said would drive inflation higher.
“Small business have no margin at the moment, they are really doing it tough in terms of the cost of business increases across the board,” Mr Addison told The Australian Financial Review.
Advertisement
Combined with the looming 0.5 percentage point increase in the superannuation guarantee to 11 per cent on July 1, Mr Addison said another inflation-matching minimum wage rise would leave businesses with “no option but to put their prices up”.
“They’re already doing it tough trying to hire labour, and labour costs are going up anyway because of the lack of people available to work for them.
“We are concerned at [7 per cent], you are going to feed the wage-price-inflation spiral,” Mr Addison said.
Restaurant & Catering Australia chief executive Suresh Manickam said any increase above his organisation’s proposed 3 per cent level would add to inflation.
Mr Manickam said his members would be more likely to pass through the cost of higher wages to consumer prices than to cut hours, since the hospitality sector is already grappling with crippling worker shortages.
“At the moment, the issue that we’ve got is that we’re already at our limit. There’s not much room to move. It’s that simple.”
Advertisement
Australian Hotels Association chief executive Stephen Ferguson said the accommodation and food services sector was facing a shortfall of about 50,000 workers.
He said the sector’s fixed costs were increasing due to a combination of higher insurance premiums, soaring energy prices, and cost of goods.
“The cost of wages at a hospitality business makes up about 25 to 30 per cent [of costs], so every little cost that goes in contributes,” Mr Ferguson said.
“We believe in the circumstances that 4 per cent is balanced is reasonable.” This figure includes the 0.5 percentage point increase in the superannuation guarantee.
Though he described the union movement’s call for an inflation-linked claim as “modest”, Melbourne Institute’s Professor Wooden said firms employing minimum-wage workers would probably respond by reducing workers’ hours and raising prices.
While a large minimum wage rise would be inflationary, Professor Wooden said the bigger driver of inflation was what was happening with wages elsewhere in the economy.
Advertisement
Workers who received a pay rise in the final three months of last year received an average wage increase of 4 per cent, while employers have been making increasing use of one-off incentives like bonuses, according to the ABS.
Australian Chamber of Commerce and Industry chief executive Andrew McKellar urged the FWC to consider the ongoing constraints faced by businesses including soaring input costs, sluggish productivity, and weak levels of profitability across many sectors of the economy.
He said ACCI’s call for a 3.5 per cent increase was consistent with the RBA’s objective to get inflation back to its 2 to 3 per cent target band.
“The Commission must reject the simplistic calls by the ACTU for inflation-matching wage increases,” Mr McKellar said.
“Instead, a carefully calibrated approach is necessary which balances the pressures faced by business and households alike.”
The Australian Industry Group lodged a submission on Friday calling for a “responsible” 3.8 per cent in the minimum wage.
Advertisement
While the Coalition has not come out in favour of a specific outcome, shadow treasurer Angus Taylor said he hoped the minimum wage rise was “balanced”.
“The Coalition strongly supports the independent decision-making process of the Fair Work Commission,” Mr Taylor told The Australian Financial Review.
Economists have warned that another inflation-linked wage rise threatens to keep inflation higher, and could trigger another interest rate increase later in the year.
After resuming its cycle of cash rate increases last week, the Reserve Bank has warned that a stalling of productivity growth meant that even wages growth not much higher than 3 per cent could be inconsistent with getting inflation back down into its target band of 2 per cent to 3 per cent.
CBA expects an increase similar to last year when workers on awards earning more than $869 a week received a 4.6 per cent pay lift, but those below pocketed $40 a week, which equated to a pay rise of between 4.6 per cent and 5.2 per cent.
“A bigger increase could see us tweak our RBA call,” cautioned CBA chief economist Gareth Aird. Otherwise, CBA believes the RBA has finished its tightening cycle and will keep the cash rate on hold at 3.85 per cent.
Advertisement
On Thursday, the employment report for April will be released with the jobless rate forecast to stay at 3.5 per cent. A Reuters poll suggests a gain of 25,000 in employment, following a stronger-than-expected 53,000 lift in March.
With Cecile Lefort
FAQs
Jobs to be cut, prices to rise if 7pc minimum wage claim goes ahead? ›
Jobs to be cut, prices to rise if 7pc minimum wage claim goes ahead. Retail and hospitality employers have warned that a 7 per cent inflation-linked minimum wage rise will cause firms to cut jobs while driving up prices, potentially forcing the Reserve Bank of Australia to jack up interest rates.
What will the federal minimum wage be in 2023? ›| State | 2022 Minimum Hourly Wage | 2023 Minimum Hourly Wage |
|---|---|---|
| California | $14.00 for employers with 25 or less workers; $15.00 for larger businesses. | $15.50 for all employers. |
| Colorado | $12.56 | $13.65 |
| Connecticut | $14.00 | $14.00 |
| Delaware | $10.50 | $11.75 |
Abolishing the federal minimum wage would help small businesses. Some economic theory suggests it would lower labor costs, expand the worker pool, raise profits, and reduce costs for consumers, as businesses tend to pass off the burden onto them. Also, ending it would delay the automation revolution.
What should minimum wage be with inflation? ›Paul Sonn of the National Employment Law Project said the minimum wage should first be gradually increased to $21.25 an hour between now and 2027. “That's the level that the $15 wage would have reached by then if it had kept up with inflation and worker productivity growth,” Sonn said.
What would happen if the minimum wage was raised? ›Increasing the minimum wage is expected to lift individuals out of poverty and improve work ethic, however, it also comes with many possible negative implications, such as inflation and a loss of jobs.
Will federal employees get a cost of living raise in 2023? ›General Schedule (GS) employees will receive a raise of 4.1 percent across-the-board in 2023, and a 0.5 percent locality adjustment. The 4.6 percent raise is the largest single-year pay boost for federal employees since 2002. Workers will receive higher paychecks starting the first pay period in January 2023.
What is the projected wage increase for 2023? ›The average increase for 2023 will fall between 4% and 5%. Just 11% of companies (compared to 18% of companies last year) said they'll increase base pay by more than 5%, according to the report.
Who benefits from a higher minimum wage? ›A large increase to the minimum wage not only increases the wages of those workers who previously earned less than the new minimum wage but also spills over to workers with moderately higher wages.
What will happen if the government sets the minimum wage? ›Two things happen when the government imposes a minimum wage: The amount of labor hired in the market decreases. In our example, the number of unskilled workers employed decreases from 1,000 to 800. Thus while those who have jobs earn a higher wage, there are now some individuals who no longer have jobs.
Can states ignore the minimum wage? ›States are required to follow federal minimum wage law. States can pass their own laws to make the wage higher, equal to or lower than the federal law, but they can't make other changes that overrule the federal law, for instance, who is exempt or how many hours constitutes a work week.
What is the real minimum wage in the US? ›
Although the real dollar minimum wage in 1970 was only 1.60 U.S. dollars, when expressed in nominal 2022 dollars this increases to 12.04 U.S. dollars. A large difference from the federal minimum wage in 2022 of 7.25 U.S. dollars.
Will inflation go up if we raise minimum wage? ›Position: Minimum Wage Does Not Increase Inflation
As unemployment rises and discretionary spending capacity decreases, the economic theory is inflation would decrease as there is less demand for products.
Minimum wage increases have trivial effects on inflation
If every penny of this higher minimum wage fed directly into higher prices—that is, none of it was financed by higher productivity or lower profits—the move to $15 would create a one-time step-increase in the overall price level of less than 0.5%.
A survey of the economics research shows the likelihood of a substantial reduction in employment. A recent Congressional Budget Office report estimated that 1.4 million jobs would be lost if a new $15 federal minimum wage is signed into law.
Does raising minimum wage reduce jobs? ›“A minimum wage increase doesn't kill jobs,” said Reich, chair of UC Berkeley's Center on Wage and Employment Dynamics (CWED). “It kills job vacancies, not jobs. The higher wage makes it easier to recruit workers and retain them. Turnover rates go down.
How many jobs would be lost if minimum wage increase? ›Opponents of a $15 minimum wage often refer to a report from the U.S. Congressional Budget Office that estimates increasing the wage to that level would reduce employment by 0.9 percent, or 1.4 million workers, by 2025.
What will the 2023 COLA be for federal employees? ›Individuals receiving insurance benefits under the Federal Employees Compensation Act (FECA) received a 6.3 percent COLA in March 2023. This number was determined by comparing the December 2022 CPI-W (291.051) to the December 2021 CPI-W (273.925).
What will be the federal pay cost-of-living in 2023? ›For example, last year's version of the FAIR Act proposed a 5.1% average pay raise, combining a 4.1% across-the-board raise, plus a 1% average locality pay increase. But for 2023, President Joe Biden enacted a 4.6% raise, composed of a 4.1% across-the-board raise and a 0.5% locality pay boost.
What is the federal benefit increase for 2023? ›The latest such increase, 8.7 percent, becomes effective January 2023.
What is a good salary in 2023? ›If a worker works 52 weeks a year, this equates to a national annual salary of $51,168, up 5.1 per cent from the previous year. Any sum beyond that should be regarded as a good salary; however, this is not always the case.
What is the average salary in the US by age? ›
| Demographic | 2022 Median Weekly Income | 2022 Median Annual Income (Estimated) |
|---|---|---|
| 20-24 years old | $703 | $36,556 |
| 25-34 years old | $976 | $50,752 |
| 35-44 years old | $1,180 | $61,360 |
| 45-54 years old | $1,181 | $61,412 |
If an employee's current annual salary is $50,000, and he earns a $2,500 raise, then the annual salary will increase to $52,500.
Who is most affected by minimum wage? ›More than half of all affected workers are prime-age workers between the ages of 25 and 54. Although men make up a larger share of the overall U.S. workforce, the majority of workers who would be affected by a raise to the minimum wage (57.9 percent) are women.
What would $15 minimum wage do to the economy? ›The most recent analysis from the Economic Policy Institute found that increasing the minimum wage to $15 by 2025 would generate $107 billion in higher wages. Their earlier analysis indicates that an increase from $7.25 to $9.80 per hour between 2012 and 2014 would have generated “approximately 100,000 new jobs.”
What does a $15 minimum wage do to the economy? ›According to the basic economics 101 explanation, an increase in the minimum wage motivates more people to enter the labor market because they will earn more money. At the same time, an increase in the minimum wage increases firms' costs and the quantity of labor demanded decreases (firms hire fewer workers).
Can a family survive on the US minimum wage? ›The minimum wage does not provide a living wage for most American families. A typical family of four (two working adults, two children) needs to work nearly two full-time minimum wage jobs each (a 77-hour work week per working adult) to earn a living wage.
Was minimum wage ever a living wage? ›The minimum wage in the United States is no longer a living wage. Even though many states are paying more than this amount, minimum-wage earners continue to struggle to make ends meet. At $7.25, the federal minimum wage hasn't kept up with the cost of living in more than half a century.
What happens if state minimum wage is higher than federal? ›What about if the state or local minimum wage is higher? If the state or local minimum wage is higher than the federal rate, pay your employees the state or local rate, whichever is higher. Pro tip: When choosing between federal, state, and local minimum wage laws, always pay your employees the highest rate.
What state has no minimum wage? ›Five states have not adopted a state minimum wage: Alabama, Louisiana, Mississippi, South Carolina and Tennessee. Two states, Georgia and Wyoming, have a minimum wage below $7.25 per hour.
What states have a $15 an hour minimum wage? ›Which States Have a $15 per Hour Minimum Wage? Washington, California, and Massachusetts are the states with a minimum wage of $15 per hour or above. Workers from Connecticut will have something to smile about as we get to mid-2023.
Why was minimum wage unconstitutional? ›
The infamous Lochner v. New York decision of 1905 specifically held that it was unconstitutional to regulate men's working hours because it violated their right to freedom of contract under the Fourteenth Amendment's due process clause.
What is the average salary in America? ›The median salary of 35- to 44-year-olds is $1,197 per week or $62,244 per year. That said, the number conceals considerable variation by gender. For example, male 35- to 44-year-olds earn a median salary of $1,299 per week, whereas women in the same age bracket earn a median of $1,086 per week.
What percentage of the US population lives on minimum wage? ›What percentage of Americans make minimum wage? Roughly 1.5% of all Americans make the federal minimum wage.
What was the average salary in 1970? ›The median money income of all families in 1970 was about $9,870. This was about $440 or 4.6 percent higher than the 1969 median of $9,430. However, prices rose approximately 5.9 percent in 1970 and in terms of constant dollars, median family income in 1970 was about the same as in 1969.
What is causing inflation? ›As the labor market tightened during 2021 and 2022, core inflation rose as the ratio of job vacancies to unemployment increased. This ratio is used to measure wage pressures that then pass through to the prices for goods and services. As workers bargain for better pay, firms begin to increase prices.
What was the original minimum wage? ›The federal minimum wage was introduced in 1938 at the rate of $0.25 per hour (equivalent to $5.19 in 2022). By 1950 the minimum wage had risen to $0.75 per hour. The purchasing power of the federal minimum wage has fluctuated; it was highest in February 1968, when it was $1.60 per hour.
When was the last time the minimum wage was raised? ›Congress hasn't increased the minimum wage since 2009, when it went from $6.55 to $7.25.
What states are pushing for $20 minimum wage as inflation persists? ›ALBANY, N.Y. (AP) — Just years after labor activists persuaded a handful of states to raise their minimum wage to $15 per hour, workers initially thrilled with the pay bump are finding their hard-won gains erased by inflation.
What will inflation be in january 2023? ›CPI inflation was 10.1% in January 2023 (Index: 126.4), down from 10.5% in the year to December 2022. RPI* inflation was 13.4% in January 2023 (Index: 360.3), unchanged from the year to December 2022.
Does minimum wage affect poverty? ›Researchers determine that regardless of the scenarios, a federal minimum wage increase would reduce poverty among all race and ethnic groups. Considering this wage increase would likely impact 56 million workers, it has the potential to bring great financial relief to families who need it most.
Why do most economists oppose raising the minimum wage? ›
Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment. This is one reason why 72 percent of US-based economists oppose a federal minimum wage of $15.00 per hour.
Does raising minimum wage raise everyone's wages? ›Raising the minimum wage means that business owners and employees in the United States are legally required to raise the hourly wage for their minimum wage workers—and only their minimum wage workers. If you're already earning above minimum wage, your employer won't be required to give you a pay increase too.
Will minimum wage increase in the future? ›Changes to states minimum wages in 2023.
Although the federal minimum wage of $7.25 has not budged since 2009, nearly half of the country increased their minimum wages for hourly workers after January 1, 2022 to compensate their employees, and more than twenty will provide additional increases going into 2023.
Raising wages reduces costly employee turnover and increases productivity. When the minimum wage goes up, employers can reap such benefits without being placed at a competitive disadvantage, because all companies in their field are required to do the same.
Why would raising minimum wage be good? ›Raising the minimum wage reduces turnover. Higher wages lead to lower employee turnover, resulting in reduced recruiting and training costs. An analysis by the Center for American Progress estimates that the cost of replacing low-wage workers is equal to about 16 percent of the employee's annual salary.
How much will minimum wage be in 2023? ›Rate Changes Due to the Minimum Wage Increase – January 1, 2023. Due to the enactment of Senate Bill (SB) 3, the California minimum wage increased to $15.50 per hour, effective January 1, 2023, for all employers.
What would happen if minimum wage was too high? ›Raising the minimum wage would increase the cost of employing low-wage workers. As a result, some employers would employ fewer workers than they would have under a lower minimum wage. However, for certain workers or in some circumstances, employment could increase.
Should minimum wage be raised to $15 an hour? ›A $15 minimum wage by 2025 would generate $107 billion in higher wages for workers and would also benefit communities across the country. Because underpaid workers spend much of their extra earnings, this injection of wages will help stimulate the economy and spur greater business activity and job growth.
Is the federal minimum wage going up 2024? ›Raise The Wage Act of 2019
Raise the federal minimum wage to $8.55 this year and increase it over the next five years until it reaches $15 an hour in 2024. After 2024, adjust the minimum wage each year to keep pace with growth in the typical worker's wages.
For example, last year's version of the FAIR Act proposed a 5.1% average pay raise, combining a 4.1% across-the-board raise, plus a 1% average locality pay increase. But for 2023, President Joe Biden enacted a 4.6% raise, composed of a 4.1% across-the-board raise and a 0.5% locality pay boost.
What is the federal pay increase for 2024? ›
Even with a largest in decades pay raise, inflation could keep fed salaries trailing behind the private sector. President Biden, in his FY 2024 budget, has proposed a 5.2% pay raise for feds. Sounds pretty good. An extra nickel over every dollar feds earned just last year.
What is the minimum wage at Walmart in 2023? ›The current wage at Walmart is $12.00 to 18.00 an hour and will rise to $14.00 to $19.00 an hour on March 2, 2023. It should be noted that certain states already have a minimum wage of $16.00 an hour, including Connecticut, California, Massachusetts, and Washington.
What is the highest minimum wage in the US? ›- Washington: $15.74. Living wage: $19.58.
- California: $15.50. Living wage: $21.24.
- Massachusetts: $15. Living wage: $21.35.
- New York: $14.20. Living wage: $21.46.
- New Jersey: $14.13. Living wage: $18.71.
Changes to states minimum wages in 2023.
Although the federal minimum wage of $7.25 has not budged since 2009, nearly half of the country increased their minimum wages for hourly workers after January 1, 2022 to compensate their employees, and more than twenty will provide additional increases going into 2023.
Position: Minimum Wage Does Not Increase Inflation
While arguments for wage-push inflation exist, the empirical evidence to back these arguments up is not always strong. Historically, minimum wage increases have had only a very weak association with inflationary pressures on prices in an economy.
Under this system in recent decades pay caps affecting especially higher-level feds increasingly have come into play. Where locality pay would boost some upper level feds to much higher salaries, the congressionally mandated limit for executive pay sets an absolute ceiling of $183,500 for those within that pay system.
What is the average hourly wage in the US 2023? ›In April 2023, the average hourly earnings of all employees in the United States was at 11.01 U.S. dollars. The data have been seasonally adjusted.
What is the lowest starting pay at Walmart? ›| Job Title | Range | Average |
|---|---|---|
| Sales Associate | Range:$10 - $16 | Average:$12 |
| Stocker | Range:$10 - $16 | Average:$12 |
| Personal Shopper | Range:$11 - $15 | Average:$13 |
| Pharmacy Technician | Range:$12 - $20 | Average:$15 |
The range of salaries for store employees will also climb to $14 to $19 an hour, from $12 to $18 an hour. About 340,000 store employees will get a raise, representing 21% of Walmart's 1.6 million U.S. employees.