By Chetan Khanna
As university students, you might be wondering how this wage dispute affects you. Well, you might work in retail or fast food, or you might be studying economics and interested in how the labour market operates. Allow me to catch you up! The Australian Retailers Association (ARA) recently called for a 3.8 per cent increase in minimum and award wages for retail and fast-food workers due to percentage increase of real wages set to fall to levels similar to those in Dec 2008 as displayed in figure 1. However, this proposal has caused some controversy, as it is the highest of all employer groups. The wage increase would affect 2.6 million award workers as well as hundreds of thousands under retail and fast-food agreements, which tie their annual wage rises to the minimum wage decision.
The ARA's submission argues that a 3.8 per cent increase would account for a forecast drop in inflation by June next year and a 0.5 per cent rise in superannuation. This means that workers would be able to keep up with the rising cost of living.
Figure 1. Real wages index chart (ABS, 2022).
However, the Shop Distributive and Allied Employees Association (SDA) disagrees with the ARA's proposal. The SDA is supporting ACTU’s call for 7 per cent, stating that its members are experiencing hardship that has surpassed the global financial crisis. The union argues that retail profits mean that employers can afford to pay workers a real wage rise.
It's not just these two groups who have weighed in on the wage dispute. The Australian Chamber of Commerce and Industry has called for a 3.5 per cent increase, while the Australian Council of Trade Unions is pushing for a record 7 per cent increase.
Figure 2. Inflation monthly CPI indicator (RBA, 2023).
So, what do these numbers mean for the average worker? Well, the consumer price index (figure 2.) for the December quarter was 7.8 per cent, with underlying inflation at 6.9 per cent. But monthly CPI indicators suggest headline inflation fell to 6.8 per cent in February. The ARA argues that the Fair Work Commission should not base its decision solely on past inflation rates but also on the year ahead. It cited Reserve Bank forecasts that underlying inflation would fall to 4.3 per cent by the end of the year and 3.3 per cent by June next year.
On the other hand, the SDA points out that a study by the University of Wollongong Associate Professor Martin O’Brien found that the proportion of retail employee households assessing themselves as ‘‘just getting along’’ and ‘‘poor’’ had increased from 26 per cent to 30 per cent last year. This suggests that workers are struggling to make ends meet.
One female assistant department manager described herself to the union as ‘‘working poor’’ and said mortgage, car, and phone bills took up her entire pay. Another 55-year-old female retail worker quoted in the submission said she was now paying bills in instalments, and her situation was ‘‘desperate’’.
The SDA argues that the top 10 retailers’ earnings before interest and taxes increased by 51 per cent since 2019, and sales rose for eight of them last year. This suggests that employers have the means to pay their workers more.
However, the ARA warns that anything higher than 3.8 per cent should be offset by productivity gains to reduce inflation risks and avoid “overstretching smaller retailers who have limited reserves to incur higher labour costs, in addition to higher costs of doing business”. The retail association said there were “early indications that economic growth was slowing”, with the retail sector reporting the first month-on-month declines in trade for more than a year last December. Analysts report that retail sales volumes are flat and that growth in retail trade is driven by price increases, not volume. Overall, a potential wage increase is evidently required and has the potential to positively impact both employees and businesses, careful consideration and planning is necessary to ensure long-term sustainability.
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