WAGES - IS IT TIME FOR THEM TO RISE?
No business owner really wants to engage about the need for wages to increase. Wage rises continue to increase at a rate below average, with many indicators, commentators and economists saying this can’t continue.
Whilst increasing the costs of running businesses is no easy thing, read on…
If you have an HR expert, salary surveys will be referred to across the spectrum of roles in your business, as will employee engagement, turnover and culture. Hidden costs around turnover should be discussed if your wages are well below market trends, or if your turnover is generally higher than benchmarks.
Such discussions should be coupled with sound analysis around business profit, long-term objectives and profit projections, as well as economic trends.
And, there is the wider picture again - the moving pieces of cost of living, poverty, social and marketing trends, consumerism, and the ultimate success of businesses, can be drawn into this topic on wage rises.
With unemployment so low at 5.1%, it is unusual to continue to have poor wage growth in what is essentially a tight labour market which leads experts to concur this cannot continue.
In real terms at the moment, the 2.3% average wage rise is almost cancelled out by the 1.9% cost of living.
WHAT ARE THE STATS?
Taken from ABS.
Annual Wage rises – 2.3% (Sept 2018), a slight rise from 2.1%
Unemployment rate – 5.1% (Oct 2018), down from 5.5% at the start of this year
Cost of living – 1.9% (Sept 2018)
Wage increases remain stagnant, as per the table below. While the last quarter has been stronger for wage growth (some of which is due to the legislated 3.5% increase in the minimum wage), there is a long way to go.
Where is the silver lining?
From a personal business perspective, the positives of a wage increase come from reducing turnover and the associated costs, improving culture and engagement (and hence you should increase output), and lowering the cost of absenteeism. You may also become an Employer of Choice, attracting greater talent.
However, there are other positives of a wider economic nature around more “global” wage increases. If there is a nationwide wage increase trend beyond just the cost of living, the thought process goes a little like this:
Increase Paul’s wages to exceed (within reason) the cost of living. Paul and his family save a little, are more independent and financially savvy. If mortgage rates continue to be manageable, Paul and his family have more disposable income to spend on holidays, purchases, home improvements, sports, technology, etc;
The more Pauls who are comfortable and can afford to spend, the better all businesses will be – no matter what you sell or the service you provide;
The more Pauls who are struggling week-to-week, with wage rises barely keeping above cost of living (like what we are experiencing now), the more contracted spending becomes, and hence businesses suffer.
While it’s not as simple to detail all the economic and social aspects of wage rises in a single blog, the essence is that more substantial wage rises in Australia will be inevitable, if indicators remain as they are. Prepare for it as a business as you would any other challenge, take the positives from it while reducing your risk.
Every business is different, the intricacies around wages, obtaining the best from people, contracts of employment, wage trends, enterprise agreements and awards are all difficult. It can be a minefield - get in touch with uson ways we, as business consultants, can help you engage, reward and get the best out of your people.