Report finds pay rise for one in four workers critical to economic recovery

An increase to the minimum wage is critical to Australia’s economic recovery according to a new report released today by independent think tank Per Capita.

The Just Reward: the case for a wage rise after COVID-19 report has detailed how a 3.5% rise in the minimum wage will flow through to higher take-home pay for the one in four Australian workers, creating a significant boost to consumer confidence and spending. 

According to the report, spending by private households is vital to supporting Australia’s economic recovery, especially while international borders remain closed leaving major industries such as tourism and internal education still struggling.

Well over half of Australia’s economy relies on consumer spending, which is driven by household income growth, not employment growth – but wages have been stagnant for years and look to remain that way.

“Wages for Australian workers have been stagnant for the better part of a decade and show no sign of recovering to a rate of growth that allows working families to keep pace with the inflation of prices,” reported Per Capita.

“Budget papers released on Tuesday 11 May reveal that the Government’s projected economic growth is predicated on an assumption that consumer spending will grow by a massive 5.5% in the 2021-2022 financial year.

“This is a highly optimistic assumption, given that consumer spending has not grown at such a pace in more than two decades, and that the same projections predict weak wage growth across the same period.”

The Government’s reliance on consumer spending for fiscal recovery is at odds with their support of employer groups and business lobbyists arguing against a much-needed increase in the minimum wage.

In their submissions to the Annual Wage Review, business lobby groups including the Australian Chamber of Commerce and Industry (ACCI) and the Australian Industry Group (AIG) have urged the  Fair Work Commission to limit any increase in the minimum wage to just 1.1 per cent, well below the rate of inflation predicted by the federal government’s budget papers earlier this month.

This would see the roughly one in four workers experience a real cut in take-home pay of more than 2 per cent over the coming twelve months – conditions Per Capita said will not support an increase in consumer spending.

“Put simply, if people don’t have enough hours of work, or if their hourly rate of pay is insufficient to meet the growing costs of living, they won’t have sufficient money to spend into the economy: security is critical to confidence,” the report said.

“It is imperative that low- and middle-income households receive adequate wage increases to compensate for years of wage stagnation and months of lost income.

“Imperative not only for working Australians and their families, but critical to the task of lifting consumer confidence and spending needed to boost the revenues of small and medium enterprises across the nation.”