Essay on How Minimum Wage Affects Businesses

The minimum wage debate is the argument over the lowest liveable wage nationally. A national minimum wage provides an income base rate for all workers in Australia within each industry. The two main stakeholders impacted by the minimum wage debate include employees and trade unions and employers. Minimum wage affects various stakeholders such as employees and trade unions. Employees work collaboratively with trade unions in an attempt to increase the minimum wage to sure they are able to make ends meet with increasing living costs. Employees seek flexible working hours, safe working environments and a decent minimum wage. According to a national survey conducted for the ACTU, approximately 60% of Australians have concerns about a “working poor” and are supportive of an increase in the national minimum wage. Although Australia has the highest minimum wage by international standards at approximately $18.93 an hour, the majority of employees can not afford to live off that amount. (Anon, 2014) Trade unions are associations that are formed to protect their rights and interests.

Employees within an industry will join the corresponding union such as retail workers joining the SDA union. Currently, unions are demanding raises to the minimum wage to be able to create a “living wage”. (Karp, 2019) Although trade unions are not directly affected by the minimum wage debate, they are important for protecting employee pay and conditions that make up a decent wage. In recent years, unions launched the Secure Jobs. Better Future Campaign in an attempt to improve the rights and working lives of 40% of the Australian workforce employed in insecure work. At the same time, the national paid parental scheme began in which employees are entitled to a maximum of 18 weeks’ pay on the National Minimum Wage. (Actu.org.au, 2019) Unions have fought for employees for decades achieving penalty rates, long service leave, annual leave and awards. (ACTU Australian Unions, 2018) On the other hand of the minimum wage debate are employers.

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Employers have a financial liability to make as much money as possible. They can do this by paying employees the lowest wage possible meaning their expenses are kept low. However, paying employees at a lower rate increases the chances of employees leaving incurring direct costs such as advertising and recruitment agency fees and indirect costs such as customers not getting attended to and sales orders not getting filled. Another important factor for employers is competition. Increasing minimum wage rate means that employers will attempt to cut costs in other areas of the business which in turn could affect available employment. (Bishop, 2018) ii. Analysis Sustainability is the avoidance of using products that harm the environment and the use of natural resources. Employers have the responsibility to ensure that their business is operating in an ecologically sustainable way. The triple bottom line is a framework in which companies should commit to focusing on social and environmental concerns in the same way that they do on profits. Although the minimum wage increase is better for employees and results in increased spending thus helping the economy. It has a reverse effect for employers - especially in the case of small business owners. As they do not have a large franchise in their corner and thus might not have that brand recognition for money to constantly flow in. They now have to close on weekends or work/give shorter hours to be able to afford to pay their employees and still make a profit. (Maunder, 2018) Although an employer may want to make their business environmentally sustainable, this will not occur if their employees have a lack of thorough understanding of sustainability.

Companies should embrace corporate social responsibility (CSR). A business having corporate social responsibility means that they are able to reduce costs, differentiate their brand and create employee and customer engagement. (Klingenberg and Kochanowski, 2015) CSR also allows for innovation which is a benefit to companies and society. For example; Unilever was able to innovate hair conditioner that uses less water. Without sustainability, the company would have not created such a product. Employers who recognise their human resources as their most valuable assets feel socially responsible for them. This can include; treating employees in a socially responsible way, considering employee health and wellbeing and the impact on them. (Kramar, 2014) Sustainable HRM shifts the focus from societal and corporate sustainable development to the level of the individual employee and the HR systems. (Docherty et al 2002) An example of this is L’Oréal whose human resource policy adopts the following objectives: 1. Recruitment of people from multicultural backgrounds and encouragement of diversity 2. Promotion of personal and professional development through training programs 3. Encouragement of social dialogue (Ehnert, 2009) It was discovered that retailers have a substantial influence on sustainability issues due to their position in the supply chain between producers and customers. (Wilson, 2015) Social sustainability refers to the ability of a community to develop processes and structurers which not only meet the needs of its current members but also support the ability of future generations to maintain a healthy community. It is reflected in product responsibility, including product performance, safety, and standards. A portion of individuals’ social sustainability depends on the quality of their employment, including how a company treats them, how fulfilling their job is, or whether they make enough money to support a decent quality of life. (Patel, 2017) iii. Position/Critique As a standpoint for our business, we recommend against an increase in minimum wage. As a small business, we are not reliant on a brand name to attract customers and have to rely on word of mouth, quality food, and quality service. Although I understand that our employees need an increase, it is a big cost on the business. I have nearly 20 staff and 40 per cent of our operating costs is our wage bill. Many of the small business owners are earning less than the minimum wage in order to pay their staff.

I think the government should increase the minimum wage rate to a suitable rate that allows employees to be able to afford basic human essentials. However, I do believe that they should take into consideration the effect a high wage increase would have on small business owners like myself and how it impacts the whole country. Although many people argue that an increase in wages means an increase in spending, it does not reach every small business. The minimum wage is only a safety net for those people who already have a job. The reality is that the more it costs to employ, the less viable a business becomes. This means that they are less likely to employ, increasing unemployment, theft, and crime. As a small business, we recommend that a minimum wage review is held every 24 months. We believe this benefits both the employee and the employer as they know there is a certain amount that they need to build their life and business around. As a business, this means we know how much of our operating costs will go towards our wage bill and thus building a successful business that can give back to the community from an economic standpoint and support ecological practices. A positive for employees is that it reduces unemployment, employees do not lose hours and can share the workload. While employees may need more money, having wages that don’t fluctuate as much will allow them to create a life around a set income.