Are wage rates to blame? John Menadue

May 8, 2013

We have read a lot recently from retailers and restauranteurs about high wage rates particularly at weekends that are said to be a major burden for business. But is this the full story? There are several factors that we need to consider.

  • Do we have too many retailers and restaurants? Restaurants seem to be opening every second day, driving out mixed-businesses, green grocers and butchers from our shopping streets. Has the proliferation of retail outlets and restaurants reduced profit margins and put pressure on business rather than wages?
  • Our lives are being driven by the 24/7 craze. Do we really need to keep shops and restaurants open like this? What has happened to the desire of many who still value the weekends for family and recreation? Sunday is no longer ‘a day of rest’. But I am probably old-fashioned! I recall that the union campaign for an 8-hour working day featured ‘recreation’ as a key objective. It is now largely forgotten.
  • Retailers have failed to respond adequately to online shopping and the concerns many of us have for the lack of service in retail outlets. The retailers’ case was not helped recently by the managing director of Myers telling us that the levy to pay for the disability scheme would mean less money to spend at Myers.
  • The household savings rate in Australia declined steadily from about 10% in the mid-1970s and falling to below zero by the mid-2000s. This private spending and debt binge couldn’t last and Australians are wisely saving more.  Retailers and restaurants should not have expected that the spending and debt binge would continue.
  • Some retailers and restaurants pine for the US model of flexible and low wage-rates. In the US this has resulted in great inequity and very low wage rates for the working poor. Fortunately we have not gone down that path.

With the softening of the mining boom and restructuring of the economy, there will need to be restructuring including in retail and restaurants. But we should not point the finger at wage rates alone.

John Menadue

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