Opinion Corporate chiefs should back wage hikes - because cheating customers ain’t smart business
When you think about it clearly, the case for minimum award wages to be raised by 5.1 per cent is open-and-shut. So is the case forstop the rate of inflation from falling back towards the Reserve Bank’s 2 to 3 per cent target zone.
Should the economy slow or even contract, unemployment could rise and the hoped-for gain in profits would be lost. Cheating your customers ain’t a smart business plan. Is that what you think? It’s certainly what the employer-group spruikers want you to think. But it’s nonsense. Hidden within it is a mad assumption, that wages are the only cost a business faces.Unless all those other costs have also risen by 5.1 per cent, the business can pass on to its customers all the extra wage cost with a price rise of much less than 5.1 per cent.
Any competent economist could do this, but only two economists from the Australia Institute, Matt Saunders and Dr Richard Denniss, have bothered, in a paper forthcoming this week,The official tables show that the proportion of total business costs accounted for by labour costs varies greatly between industries, ranging from less than 3 per cent in petroleum refining to almost 71 per cent in aged care.
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