Employment ‘likely to worsen’ this financial year

New data suggests employment for Australian workers will likely worsen now that the new national minimum wage increases have come into effect.

According to Employment Hero’s SME Index for May, private sector wages have outpaced inflation, signalling a warning that further wage increases may exacerbate negative employment trends in the second half of this year.

The index, which uses an accumulative dataset of over 140,000 small and medium-sized enterprises (SMEs) and 1.4 million employees, revealed that median hours worked in April (calculated a month in arrears) declined by -6.4 per cent month on month. This drop was seen across all states and territories, business sizes, industries (except for manufacturing, transport, and logistics), and all age groups minus those under 18.

Additionally, in the construction and trade services; healthcare and community services, and; retail, hospitality, and tourism industries, median hours worked fell year on year, as was seen across all age groups, Employment Hero explained.

“Given median hourly wages increased by 7.1 per cent year on year, this likely means that while most Australian employees work fewer hours than a year ago, their median hourly rates have increased,” it said.

“As the index infers that employees’ take-home pay has decreased given the reduction in hours worked, this aligns with the drop seen in discretionary spending across the index’s retail, hospitality, and tourism sectors and the ABS’ underemployment statistics, corroborating Australia is in a consumer recession. In May 2023, the median hourly wage for Australian SME employees was $35.87.

“Indeed, the retail, hospitality, and tourism sectors fell across average employment growth (-0.1 per cent), median hourly wages (-1.3 per cent), and median hours worked (-4.7 per cent) month on month. The median hours worked by employees in these sectors also declined compared to a year ago (-1.2 per cent), signalling this decrease is more than just a seasonal slump.

“The healthcare and community services sector also appears to be experiencing signs of distress. While the average employment growth for SMEs in these industries is still growing, median hourly wages (-1.3 per cent) and hours worked (-6.2 per cent) have declined month on month and, in the latter case, year on year (-2.2 per cent). Demand for these services has likely decreased due to the cost-of-living crisis.”

Commenting further, Ben Thompson, co-founder and chief executive of Employment Hero, said: “Employment Hero supports wage rises and the prosperity of both employees and employers. We know that thriving, robust economies create great opportunities for businesses and employees alike.

“Businesses are facing economic headwinds and the pressures of inflation; further wage rises that ultimately cause a wage-price spiral or unemployment benefit no one, especially not employees.

“Our data shows wages are already outpacing inflation, and we are deeply concerned the FWC’s wage rise decision will exacerbate the current decline in employment growth reported in the SME index. For example, some employers will have no choice but to reduce their employee numbers or drop hours. We are conscious of short-term gains that may produce long-term pain for Australian workers, especially as consumer spending appears to wane.”

“We are fully supportive of better outcomes for employees and employers. Employees earning more is a great thing, and we know the positive impact this has on society. However, the challenge Australian workers will likely face coming into the second half of the year is securing ample hours of work, which relies heavily on the stability and growth of our SME sector.”