Australian Economy

Calls for minimum wage delay questioned following business recovery

The unions are hotly opposed to this after two years of previous delays during the pandemic, saying it is becoming increasingly difficult to distinguish pandemic recovery from structural change or consumer behaviour.

The commission analysis, conducted by University of Melbourne labour economist Jeff Borland, used filled jobs, vacancy levels and output value to assess the strength of each sector compared with immediately before the onset of COVID-19.

On hospitality, which has the highest share of workers (63 per cent) on award wages, Professor Borland concluded that jobs in the sector had increased by 3.6 per cent compared with pre-pandemic levels, even if output was still lagging.

As a result, the sector was classified as almost recovered or just “marginally below the level prior to the onset of COVID-19”.

Retail’s output and jobs were well above pre-pandemic levels and, although the output for arts and recreation was slightly lower, it was not enough to offset their boom in jobs.

Wholesale trade was “almost recovered” as total jobs appeared to be still 6 per cent below March 2020 even if output was above that level.

However, the report clashes with employer analysis that found that hospitality’s output was still 11.7 per cent below the pre-COVID-19 period, if measured from December 2019 to December 2021.

“Accommodation and food services has consistently been recognised as one of the worst-affected sectors,” AiGroup said in its submission to the panel.

Decision ‘important’ for wage growth

“The economic conditions for accommodation and food services remain very difficult.”

Employer groups and the ACTU were unavailable for comment.

The minimum wage decision affects about 2.6 million workers, or 23 per cent of the economy, due to its flow-on effect to award rates.

ANZ senior economist Catherine Birch said she expected the wage increase to be between 4 per cent and 4.5 per cent this year and that it was an “important assumption” in the bank’s forecast for overall wage growth to accelerate above 3 per cent this year.

“If the increase undershoots our expectations, wages growth will likely be weaker than we expect, and vice versa,” she said in an analysis released on Thursday.

The bank previously forecast 3.5 per cent wage growth by the end of this year but is now reviewing that figure following sluggish wage data in the first quarter.

The Reserve Bank has forecast 3 per cent wage growth by the end of 2022 but predicts it will not be until the end of 2023 that wage growth hits 3.5 per cent.

However, Capital Economics senior economist Marcel Thieliant said wage growth above 3 per cent by the year-end was still possible even if the minimum wage rise was just 3.5 per cent, provided private sector workers averaged 4 per cent pay rises by the last quarter. Private sector pay was 3.4 per cent at the start of the year.

“But anything less than that [a 3.5 per cent minimum wage rise] will make it quite hard,” he said.

He cautioned that the 23 per cent of employees covered by the minimum wage “overstates their impact on wage growth” because ABS wage surveys weigh the job’s share of the total wage bill.

“We estimate that the share of employees earning the minimum wage/awards is only 15 per cent so the impact of the minimum wage hike on wage growth isn’t as large as many think,” he said.

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