No, wage rises do NOT increase inflation or send businesses broke
Here at United Workers Union (UWU), our big focus each year is to build a powerful campaign for minimum-and-award-wage increases. This year is no exception.
We know the cost of living is out of control, and that’s why we need to keep pushing wages upwards. You can read more about how we do that here.
And every year, bosses use their giant megaphone in the media to try and spread panic that the sky will fall in if workers get a decent wage increase.
Yes, inflation and a cost-of-living crisis affect us all, but wage increases are not the problem.
We’re pushing for a 5 per cent increase to minimum and award wages, as well as a 9 per cent increase across lower-paid feminised industries such as early childhood education.
For many award workers, our award review claim would mean a wage increase of about $50 per week.
But bosses want our wages to go backwards, so their profits can go sky high. They’re pushing for wage increases of as little as 2 per cent, which in real terms is actually a wage cut of about $1500 a year.
It can be easy to get swept up in fear-mongering. But, the truth is, many of these arguments are total nonsense.
MYTH 1: Stage 3 tax cuts will offset low wages
This year, the Australian Industry Group and other employer lobbyists are claiming Labor’s stage 3 tax cuts will bring enough relief to low-wage earners, so that any award wage increase does not need to be above 2-3 per cent.
This argument also extends to Labor’s promises of energy bill relief and increased rent assistance. Employers have also cited increased superannuation of 0.5 per cent as a barrier to ‘affordable’ wage increases.
But, tax cuts are not wage rises. It is absurd to link the two. We have never heard from employer groups that executive pay and bonuses should be cut because of tax breaks awarded to companies, executive bonuses and high earners.
This argument also ignores the many workers on minimum wages who are part-time and so already earn under the taxfree threshold and will receive no tax cuts at all.
MYTH 2: The union claim is “reckless”
Although inflation has been returning to ‘manageable levels’, minimum and award wages still have a way to go to catch up to rises in inflation over the past three years – and the rising cost of living. This means that, despite unions winning last year’s rise of 5.75 per cent, the minimum wage has still fallen in real terms.
This year, unions like UWU are asking for a 5 per cent rise for all workers on award wages, but many employer groups call this excessive.
According to Policy Director at the Centre for Future Work and Guardian columnist Greg Jericho, this rise would just make up for the past three years.
“Even after last year’s increase, the award wage was still 2% lower in real terms than it had been in 2020. The ACTU proposal for a 5% increase would only get the award wage back to where it was in 2020.” (The Guardian, 24/3/24)
Are you getting slammed by rising costs? Share your story here.
MYTH 3: A wage increase that exceeds inflation will lead to job cuts
This is another scare tactic that comes out every year. Employer groups try to claim that job losses will be inevitable if workers receive a decent minimum wage hike. But, the evidence for this claim just isn’t there.
“Most studies have shown that minimum wage increases actually have a positive effect on unemployment,” Greg told us when we spoke to him last year.
This is further backed up by an OECD report that states there is “increasing consensus among policymakers and academics that, at the level set in most OECD countries, minimum wage increases (even large ones) have had a positive effect on low incomes but no or limited negative effects on employment.”
MYTH 4: Award wage increases will lead to higher inflation and interest rates
Many businesses claim that wage increases push up inflation and interest rates. But the research doesn’t back this claim.
“Wage increases only become inflationary when they increase by more than inflation plus productivity’, says Greg Jericho.
And when wages increase higher than inflation, that’s not a bad thing. It actually means improved living standards for all.
“That’s kind of the point. Because if (wages) don’t increase by more than inflation, then people’s living standards go backwards. We have productivity improvements and that enables businesses to afford wage rises above inflation,” Greg explained.
MYTH 5: The union claim will force small businesses to the wall
Year after year, business groups claim that small businesses are the ones who will see the worst impacts from award wage rises. Small businesses often claim they don’t have the resources to absorb any extra costs. This year Entrepreneurial and Small Business Women Australia have argued that increased entitlements for Australian workers will force them to send Australian jobs overseas.
However, when we spoke to Greg, he says the data doesn’t stack up.
“The reality of the data [is that] small business profits have grown much stronger than their wages bill.”
“This is a claim that is made every year regardless of what the minimum wage increase is. And it doesn’t hold up to scrutiny, because we know that small businesses have grown over the years,” he said.
Big business pretends to care about small business
Meanwhile, big businesses try to look like they have nothing to gain directly from keeping wages low. They’re just sticking up for “mum and dad” small businesses, who would be hit hard by rising wages when they can least afford it.
But in truth, big business always benefits from wage growth that’s below inflation. If wages stay low, their profits go up too.
“They always claim that any increases above inflation will send companies to the wall, spur inflation or set off a wage-price spiral. And it hasn’t happened. They keep saying it and keep getting written up as though it’s fact, despite the fact that it hasn’t occurred the previous 20 times they’ve said it,” Greg said.
Excessive company profits, not wage rises, are what has led to inflation rising and the cost-of-living crisis we currently have. Big businesses are more interested in keeping profits high than paying decent wages.
We need an increase to the minimum wage. What can you do about it?
If these myths tell you anything, it’s that employers will say anything to stop you getting the pay you deserve. Fortunately, unions like UWU will fight like hell to help our members get the biggest pay rise possible.
Each year we make a submission to the Fair Work Commission to make our case for a higher pay rise – and union members play a critical role. You can read more about the award review process and how we campaign for better pay here. The Commission’s decision on new pay rates will be announced in June.
Join with us as UWU members fight for better pay and a better future for every worker in Australia.
