No, wage rises will NOT increase inflation
Here at United Workers Union (UWU), our big focus is building a powerful campaign to increase Award wages. We know how hard life is right now and why we need to push wages upwards. You can read how we do that here.
But on the other side of the fence are business and employer groups. They do NOT want your pay to rise because it might eat into their fat profits.
So they come up with a list of reasons there shouldn’t be an increase to Award wages.
Some of these reasons can sound pretty convincing and it’s easy to get swept up in their fear mongering.
Truth is, a lot of these arguments are total nonsense.
We spoke to Greg Jericho, who is Policy Director at the Centre for Future Work, a Guardian columnist and prolific tweeter, who busts some of the most common myths from employers about Award wage rises.
MYTH 1: The Union claim is “reckless”
We all know how much inflation has risen in the past few years. Award wages haven’t risen by nearly the same amount. This means the minimum wage has actually fallen in real terms. Unions like UWU are asking for a 7% rise for all workers on Award wages, but many employer groups call this excessive.
According to Greg, this rise is just trying to make up for the past two years.
“It’s still not getting those on the (Award) minimum wage back to where they were in 2020. So it’s not reckless, it’s not extreme. And it is just helping undo some of the damage of the past two years,” he said.
MYTH 2: A wage increase that exceeds inflation will lead to job cuts
This is another porky that comes out every year. Employer groups try to claim that job losses will be inevitable if workers receive a decent minimum wage hike. It’s simply not true.
“Most studies have shown that minimum wage increases actually have a positive effect on unemployment,” Greg told us.
This was further backed up by an OECD report from December 2022, which said “increasing consensus among policy makers 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 3: Award wage increases will lead to higher inflation and interest rates
Lots of business groups claim that But Greg said that their research has found it would have little impact on either.
“Wage increases only become inflationary when they increase by more than inflation plus productivity. At the moment, they’re certainly not,” Greg continued.
When wages increase higher than inflation, that’s not a bad thing either. That means improved living standards.
“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 4: 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. They often claim that small businesses don’t have the resources to absorb any extra costs.
However, according to Greg, when you look at the data, it just 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.
MYTH 5: Big business cries crocodile tears about small business
At the other end of the spectrum, 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 businesses does benefit 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 it keeps 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 rather than paying decent wages.
MYTH 6: These are turbulent times – a big wage increase could lead to recession
Everyone fears the R word and there are many claims that a 7% wage increase could tip us into a recession. But according to Greg, it’s just not true.
“Recessions don’t occur because of wage rises, the biggest risk at the moment for recession is increasing interest rates, which is working to slow the economy. And unfortunately, (the Reserve Bank) is trying to tackle inflation as though it has been caused by workers where we would argue it’s actually been caused by companies,” he said.
“The minimum wage has fallen about 7 or 8% over the past two years in real terms. A 7% (minimum wage rise) would only return some of that value. So it’s not even making up for the past two years, it’s just trying to give low paid workers a small bit of relief,” Greg concluded.
So, we need an increase to 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 we need your help. You can read more about the process here, which wraps up in June when a decision on new pay rates is announced.
But we need to keep building our power. In this game, numbers really do matter, so if you’re not a member, it’s time to join. There are close to three million workers on Award wages and when more of us are Union members, our voice grows louder, stronger and impossible to ignore.
Join with us as UWU members fight for better pay and a better future for every worker in Australia.