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Wage decision ‘out of sync’ with economy: Ridout

09-06-2010
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Australian Industry Group chief executive Heather Ridout says Fair Work Australia's large minimum wage increase is out of sync with the current economic climate.

"The $26 per week increase comes at a time when employers are still dealing with the effects of the downturn, global conditions are uncertain and consumer confidence is weakening, she says.

"It appears the Tribunal has awarded a “catch-up” increase but this approach is risky.

"There is a risk this increase will slow the pace of job creation and that for many households the benefits of higher wage rates will be offset by a reduction in employment opportunities.”

From July 1, as well as paying the minimum wage increase, thousands of employers will be required to pay increased wage rates, penalties and loadings under modern awards.

"Even a large percentage of employers who pay over-award wage rates will potentially be affected, says Ms Ridout.

“In a yet to be released Ai Group survey, 55 per cent of respondents indicated that they will either be legally required to pass on the minimum wage increase or will choose to pass on the wage increase to employees.

"For a single person currently earning the Federal Minimum Wage of $543.78 a week, the increase in weekly after-tax income, after taking into account the changes to income tax to take effect from 1 July, will be approximately $25. This represents a 4.9 per cent increase in disposable income.”

And for a single-income family with two young children, the increase in disposable income would be in excess of $34 a week – an increase in disposable income of about 4.5 per cent.

"The increase in wages will impose higher costs on employers who, in addition to the increase in wages, will have to meet higher payroll tax, superannuation guarantee and workers’ compensation liabilities.  At a modest estimate of an extra 20 per cent the increase in wages of $26 a week will cost employers over $31 per week," Ms Ridout said.

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