The latest data from the Employment Hero SME Index indicates that employment for Australian workers will likely worsen once the new national Minimum Wage increases, which came into force on 1 July, take effect.
The Index found that median hours worked in April (calculated a month in arrears) declined by 6.4 per cent month-on-month. This drop was seen across all states and territories, business sizes, industries (except for manufacturing, transport, and logistics), and all age groups minus those under 18.
Additionally, in the construction and trade services, healthcare and community services, and retail, hospitality and tourism sectors, median hours worked fell year-on-year, as was seen across all age groups. Meanwhile, median hourly wages increased by 7.1 per cent year-on-year, which the Index interpreted as an increase in hourly rates among most Australian employees even though they work fewer hours than a year ago.
Accordingly, the SME Index for May, which indicated that private sector wages have outpaced inflation, is at odds with the Fair Work Commission’s wage rise decision, which is seen as a warning sign that impending wage increases may exacerbate negative employment trends in the second half of 2023.
As the Index infers that employees’ take-home pay has decreased given the reduction in hours worked, this aligns with the drop seen in discretionary spending across the retail, hospitality, and tourism sectors and the ABS’s underemployment statistics, corroborating the finding that Australia is in a consumer recession. In May 2023, the median hourly wage for Australian SME employees was $35.87. Retail, hospitality, and tourism sectors fell across average employment growth (-0.1 per cent), median hourly wages (-1.3 per cent), and median hours worked (-4.7 per cent) month-on-month. The median hours worked by employees in these sectors also declined compared to a year ago (-1.2 per cent).
The healthcare and community services sector is also affected. While the average employment growth for SMEs in these industries is still growing, median hourly wages (-1.3 per cent) and hours worked (-6.2 per cent) have declined month-on-month and, in the latter case, year-on-year (-2.2 per cent). Demand for these services has likely decreased due to the cost of living crisis.
“Employment Hero supports wage rises and the prosperity of both employees and employers,” Ben Thompson, Co-founder and CEO of Employment Hero, said. “We know that thriving, robust economies create great opportunities for businesses and employees alike. But businesses are facing economic headwinds and the pressures of inflation; further wage rises that ultimately cause a wage-price spiral or unemployment benefit no one, especially not employees.
“Our data shows wages are already outpacing inflation, and we are deeply concerned the FWC’s wage rise decision will exacerbate the current decline in employment growth reported in the SME Index,” Thompson added. “For example, some employers will have no choice but to reduce their employee numbers or drop hours. We are conscious of short-term gains that may produce long-term pain for Australian workers, especially as consumer spending appears to wane.
“We are fully supportive of better outcomes for employees and employers. Employees earning more is a great thing and we know the positive impact this has on society,” Thompson said. “However, the challenge Australian workers will likely face coming into the second half of the year is securing ample hours of work, which relies heavily on the stability and growth of our SME sector.”
