Businesses are ‘hoarding staff’ by cutting hours, report says

Employment Hero’s August SmartMatch Employment Report highlighted some alarming red flags that are arising for young workers across the country.

As the divide within the Australian economy continues to grow. According to a new Employment Hero report, rising wages and shrinking hours are creating various challenges for Aussie businesses.

The report pinpointed wageflation as a major catalyst for these challenges, as despite a 6.2 per cent annual moving average wage uptick in wages, productivity is suffering as businesses struggle to balance the wage inflation issue.

The report highlighted that the persistent wageflation is, in fact, fuelling, a hotter-than-reported jobs market, with verified wage growth among SMEs sitting well above the Australian Bureau of Statistics (ABS) wage growth figure of 4.1 per cent reported in June.

Although wage growth is a positive aspect, the overall reduction in hours worked, which was also highlighted in the ABS data, has been a cause for concern.

Small and medium-sized enterprises (SMEs) are bearing the brunt of rising wages, lopping employee hours despite the additional strain on their operations. The report stated that this behaviour is an indicator of “labour hoarding”, where businesses are desperately trying to retain staff in anticipation of future labour shortages and the sting of the cost of recruitment.

“Wage growth is outpacing productivity, which is completely unsustainable, particularly for small businesses folding under the surging cost of operating,” said Ben Thompson, chief executive and chief economist at Employment Hero.

“It’s becoming harder for business owners to strike the right balance between maintaining staff and managing wageflation, which means more Australians will inevitably be grappling with job insecurity and inconsistent wages. Wageflation over the long term creates problems on both sides of the market, particularly where a paypacket boost today could spell a layoff in the future.”

The widespread adoption of increasing casual contracts is also proving to be a cause for concern, especially for young Australians. Casual employment has surged throughout Australian businesses, yet has not fully translated into greater financial security for workers. Casual employees saw a 4.9 per cent drop in hours worked year on year, thus increasing job insecurity.

Other details found that full-time employees earned a median hourly wage of $50.50, compared to $37.50 for casual employees, representing the difference between stability for one side and vulnerability for the other.

Young Australians aged 18 to 24, often heavily employed in retail, hospitality, and tourism, saw a 6.7 per cent month-on-month and 4.4 per cent year-on-year decline in hours worked across all sectors.

While wages in the retail, hospitality, and tourism sectors grew by 4.4 per cent year on year, the 2.7 per cent decrease in hours worked in those sectors cancels out the wage growth, once again leading to a lack of financial security for young Australian workers.

“It’s also alarming to see the disparity between economic activity across the nation, particularly in unionised sectors like healthcare and construction, [which] have the highest median wages in the country. While some regions and sectors are thriving, others are facing a lethargic economy where productivity ultimately suffers. When jobs growth across the country is uneven, this creates ripple effects for the communities who are most impacted,” said Thompson.