You’d think it’s the end of the world as we know it if there is a $1.00 an hour increase to the minimum wage based on the ‘news’ coverage of this debate. Across a range of media outlets business lobbyists, conservative politicians, retailer representatives and some retailers themselves have been saying how awful such an increase would be.
Yesterday, on ABC radio Melbourne and 3AW there were retailers saying products had gone up 200% and 300% and other costs had gone up and a $1.00 an hour wage increase would eat into margin.
Gee, I wish there was fact checking of these claims.
And, I wish there was more comprehensive questioning.
And, if there is a case, it would be good for transparency around the details.
Pretty much every retailer I know has has signed a lease agreeing to an annual 5% increase in rent, sometimes more. That’s right, they contracted this 5% rent increase to be annual.
So, here’s my question? If people make a business, as so many retailers say, why would there be any hesitation on a 5% increase in pay for people … for without them, there may be no business.
Like, why agree to an annual locked-in 5% increase in rent costs but not labour?
A business on a knife edge that goes under for a $38.00 increase in the cost of an employee for 38 hours in a week is a business with a problem anyway.
People on the minimum wage are likely to spend what they earn. That helps the economy. That $1 an hour is beneficial for the economy.
We need smarter journalists who ask more thoughtful questions and who challenge selfishness. I want to hear the retailers asked about paying more rent every year and how they justify this while not wanting to pay their valued employees more every year.
It would be good to sit with a retailer who says they cannot afford the extra $1 an hour and unpack their business numbers from P&L back through inventory data, roster decisions … all decisions that gets the business to the point where $1 an hour is not affordable.
Sure, I want my business costs to fall. And, sure, I want to make more money. The reality is that we are all participants in this one economy. Constant squeezing that the bottom end is bad for those being squeezed, the economy and society. We should care about that.
As for the claims about products costing more. Some do cost more. But they cost more for everyone. There are smart ways to deal with product cost increases. It is lazy to complain. It is appalling to suggest that because of those cost increases you should not pay your employees more.
I appreciate my take will upset some. That’s not my intention. I want an intelligent discussion about wages and business costs, so that all participants understand the facts and, hopefully, through this better understand more sides of the debate on wages.
But, let’s think for a moment, how could small business retailers respond to a $1 an hour increase in labour cost?
The best response is to engage with it on the shop floor. Here are my suggestions:
- Make sure everyone working in your business understands the numbers: where you make money and where you do not make money. Yes, this means being open on the business numbers. A couple of decades ago there was a movement led by the awesome Jack Stack, Open Book Management, it helped turn plenty of businesses around. The more those working in the business understand the numbers the more likely they will work with you.
- Show the connection between what the business makes and what they make or could make through more hours or, even, a bonus(!!).
- Set goals for the business and people in the business who can make a difference to the business performance.
- Make decisions based on evidence for its is these decisions that make local retail shops more money than gut decisions.
- Drive your overall business GP. The higher that is the more you are insulated from increases in your two biggest cost areas: labour and occupancy.
- Think about each decision through the prism of: does this position me better to deal with rising costs, including rising wages costs.
- Turn around and look back into your business for it is likely there are things you can do right now to improve your position. Here is the most easy move: look at inventory you have on the shelves that has not sold in 6 months or more. It’s dead stock. Dead cash, unless you sell it for something. Mine your business data and find opportunities like this.
I could go on. If a $1 an hour increase in labour cost bothers you, confront it as a business opportunity rather than a pure negative. It’s a door opening opportunity I think.
It frustrates me that the wages debate is a debate, with sides. All of us in business benefit if more people in the economy, our economy, have more money to spend, especially if they are in the cohort likely to spend money. If we could all talk about this without taking firm sides we’d have a better opportunity of navigating a path forward we are all happy with.
It’s a different way to look at it that’s for sure. I already may my staff above the award by $1.50 an hour. It has helped me keep good people. I know some other retailers in my small town who have done the same. If there is an increase I’ll look at what I pay again because keeping good people is cheaper than training up new ones.
I’m a casual in a newsagent and studying business at uni. I agree with what’s been written here, especially about trusting us with more information about the business. I see things that waste that doesn’t make sense.
The labour is debatable in tha it is a variable expense and shoulkd be looked at it this way. The worker can and rightly so, lave by giving notice and if a casual rate -work only to suit temesleves. Providing ofcourse that the employee agrees. There is no fixed arrangement Term or rate. One can pay over the award, which by the wau many are doing.
Stff shortage in all industries is paramaount.
Thefore the compraion with Occupancy sosts (fixed for a givn period) doesen’t equate.
The tennant as you know, (you have mentioned this many times re landlords, especially Shopping Centres) can’t change this. Today I visited my local Shoppng Complex ( a very large one at that) and saw more boardings (closures) than ever before Target for one and few chain outlets ,Women’s Fashion and homewares,Square meter return is now more releveant tan ever before. This is for both the landlord and the tennant as it is the major interest for both.
the large inclusive section of your post is very importatnt and today it is vital that staff take an interest in the buisiness and what it is that pays their keep. It also give the staff memeber pride in improving “their” section, which could lead to even more wage increase for performance relatd results.
Again, nothing wrong with this quite the reverse it should be encouraged.
Pride and productivity go together.
a graet post however the mixed comparison should be another issue as it is probaly the one thing retailers cannot change during the lease agreement and it’s too late the renegotiate without having an advantage point.
Whilst we are on the reail spending space and position subject Australia Post have just published a 51 page document on the Retail Sector with extraordinary Data.
It si entitled 2022 Inside Australian Online Shopping eCommerce Industry Report.
It overs State of e Commerce, Shopper habits, the future of ecommerce, the market perpective,Variety Stores, Fashion and Apparel,Home and Garden,Health and Beauty, Hobbies and recreational Goods, Specialty Food and Liquor.
Australia Post are aloso looking at expanding their Licencee pogram with more Retail outlets.
This is a sign that although retail is sliding since pandemic isloation release, things have not got back to same and some have declined.
Their position is to improve both and they see the Pick ,Pay, Product, along with Package and Post as the complete message promoted on line as well.
They too are an essential service turning their emphasis on “Critical Retail” They also note in the interview process for new licencees a requirement for them to list the current and potential opposition to their proposed outlet purchase,
Newsagents are number one on the list as a major threat.
Mark, constantly promotes the evolution needed in retail within our industry and A.P. recognise this.
It’s now time for “Rip Van Newsagent” to wake up and take notice after some a re doing it and moving on with great gains.If you are interested you can Download the Report it’s well worth it a very good up to date read.
My point Graeme is directed at retailers who willingly lock in an annual occupancy cost increase but complain about an increase of compensation to people who are the heart of their business.
Oh how quickly the world has changed. Less than 12 mths ago the economy was still on life support with Jobsaver and landlord support measures keeping many small businesses and their employees afloat. With inflation now rising and interest rates on the move we now talk about 5 per cent pay increases. This will only lead to wage growth across the board ie not just at the lower end and will fuel further prices increases. Without strong economic growth this can only end badly. For those of us on CPI indexed leases we should be concerned with the current developments.
There are some sectors that have experienced these pressure points in the last couple of years. The shift to work from home and that it has stuck in some sectors has opened international job markets to Australians and this has seen some pay rates rise as much as 100%. This will have a knock on effect for customers of the impacted businesses.
We should also not forget that employees received a 10.5 per cent increase in their employer superannuation contributions in this current financial year. Another 10 per cent increase comes into effect on July 1. I’m old enough to remember when Keating introduced compulsory super. It was used to control wage increases and inflation and to bring interest rates under control. If only our today’s politicians had the same ticker.
As stated they are not comparable examples. One is a fixed contracted cost the other variable for either party to exit.
Steve I agree with your analysis howevr tied to productivity increases can be made by individuals thus rewarding those that perform with recognised reward.
I agree with mark’s thesis that the debate is unhealthy and that those on minimum wage should get an increase. We need to look at matters like this from the perspective of the whole economy and not only rom the perspective of what an owner makes or doesn’t make as the case may be. It is wrong to argue that businesses should be protected so they can open just because.
The minimum wage increase is approved by the independent Fair Trade Commission. the last increase was 6% 2020
-21
Fair Trade are due to look at this issue in July.
Jumping at shadows is Albo ans stupid is the opposition for not stating the case.
the Unions and the Political paeries are aware of this and this is why we are seeing a lot of strike action a repeat of the Seventies I would think.