The Australian Retail Council (ARC) says the Fair Work Commission’s decision to increase minimum and award wages by 4.75% per cent will significantly increase labour costs for retailers already navigating weak consumer demand, rising operating expenses and some of the most challenging trading conditions in recent years.
ARC Chief Legal & Industrial Relations Officer Lindsay Carroll said retailers value their employees and recognise the importance of fair wages, but decisions of this magnitude cannot be viewed in isolation.
“Retailers support fair wages and recognise the contribution retail employees make every day, but this decision comes on top of a growing list of cost pressures that businesses are already struggling to absorb,” Ms Carroll said.
“Labour is one of the largest costs in running a retail business. Combined with rising energy, rent, insurance, freight, compliance and security costs, this decision will place additional strain on already thin margins across the sector.”
ARC research conducted earlier this year found three in four retailers were fully or partially absorbing rising business costs rather than passing them directly on to customers.
“Retailers have worked hard to protect customers from higher prices despite absorbing significant increases in operating costs over recent years. The capacity to continue doing that is not unlimited.”
Ms Carroll said the decision would be particularly challenging for small and medium-sized retailers already operating in an environment of subdued consumer spending and fragile confidence.
“For some retailers, this decision will mean difficult choices about investment, hiring, operating hours and future growth plans.”
The decision also comes ahead of the Fair Work Commission’s recent junior pay rates ruling taking effect, further increasing labour costs for businesses employing younger workers.
“Retail is one of Australia’s largest employers of young people and provides hundreds of thousands of first jobs and career pathways. The cumulative impact of today’s decision and the junior pay rates decision will materially increase employment costs for many retailers.”
Ms Carroll said sustainable wage growth ultimately depends on stronger productivity growth and a business environment that supports investment and job creation.
“If Australia wants higher wages over the long term, we also need policies that lift productivity, reduce regulatory burden and improve business competitiveness.”
“Without action to address the growing cost of doing business, the pressure on retailers will continue to build, and ultimately that has consequences for investment, employment opportunities and the prices Australian consumers pay.”