The decision, which followed the Annual Wage Review 2022-2023, comes amid heightened cost of living pressures, with the gap between wages and inflation reported to be at its highest level ever recorded earlier this year. These pressures are also reportedly contributing to customer aggression and retail theft, which is causing some retailers to leave the industry. The FWC stated the wage increase would lead to modest contribution to wage growth across 2023-2024. Meanwhile, Employment Minister Tony Burke said that it would make a huge difference in people’s lives.  However, the award rate increase amounted to less than the 6.8 per cent increase to the Consumer Price Index for the 12 months to April 2023, a metric used to measure inflation. While the inflation rate is forecasted to drop in the coming years, award wages are still tracking below rising cost of living. Fuel on the fire The Australian Retailer Association – which represents more than 120,000 retailers – made a submission for a 3.8 per cent increase in minimum and award rates, in line with the forecasted inflation rate for July, minus the expected decrease in inflation over the coming year.  ARA CEO Paul Zahra said that the 5.75 rate increase would add to the significant pressures faced by struggling retailers.” Zahra also cautioned that moderating wage rises would be crucial to preventing a wage-price spiral. This, despite assurances from the FWC that the wage increase wouldn’t cause or contribute to this spiral occurring.  “Many retailers are under enormous financial pressure, with rising operating costs across the board,” Zahra said. “We fear the scale of this increase will tip some businesses over the edge – especially smaller retailers who are on very slim profit margins or in some cases in negative cashflow territory.” Meanwhile, the National Retail Association (NRA) expressed disappointment at the wage increase. NRA Legal director Lindsay Carroll said that the rate increase would lead to businesses cutting work hours, and/or laying off staff. “At every turn business owners are being crunched with additional costs – interest rates, rent, electricity and they were already facing an increase in the superannuation guarantee from July 1,” Carroll said. “Now they are expected to find an additional 5.75 per cent for their wages bill at a time when costs are rising across the board and consumers are tightening their belts.” Meanwhile, Harvey Norman chairperson Gerry Harvey told the Australian Financial Review that retailers would respond to the wage increase by considering letting go of staff. “That’s what every business does when wages go up,” he told the AFR. Real wage cut The Australian Council of Trade Unions (ACTU) secretary Sally McManus said that the award and minimum wages increase was critical during this cost of living crisis. It followed a report by Professor Martin O’Brien which showed that the proportion of households  with a member of the family working in the retail industry, who described their financial situation as “just getting along” and “poor”, increased from 26 to 30 per cent over the last two years. Despite falling below the seven per cent pushed by the ACTU, McManus said that the increase for award workers means they can just keep up with the cost of living.  “Today’s increase means these workers can keep their heads above water and not have to cut back even further,” McManus said.  “With last year’s increase of five per cent and inflation at 6.8 per cent, we clearly do not have a wage-price spiral.” Retail and Fast Food Workers Union (RAFFWU) secretary Josh Cullinan told the ABC that it welcomed wage increases.  However, he affirmed that as it falls below the inflation rate, it doesn’t do enough to offset cost of living pressures faced by workers. “In terms of retail and fast food, over one and a half million workers rely on this increase, and they are obviously clamouring for this extra money in their pay packet next month,” he said. “But it still ends up being a real wage cut,” he said.  All about the margin CEO and founder of the Retail Doctor Group Brian Walker told Inside Retail that the wage increase is a rising cost that all retailers are forced to bear. He said that the challenge for these retailers would be to not pass these costs onto consumers.  Rather, they should further analyse the processes and drivers underpinning productivity, seek to cut costs in unproductive areas, and invest further in areas where they are performing well. Further, he said that they should avoid making cuts relating to customer service, which would likely damage morale, culture and performance in the medium to long term. “For retailers in very competitive marketplaces, it’s all about the margin. So I think there’ll be impacts in terms of cutting staff, regrettably,” he said.  “But I wouldn’t say that every retailer will [cut staff].” He also observed that some retailers might see this as an opportunity to increase its staff levels. “[They’ll consider] what costs they can manipulate and adjust, and whether there’s an opportunity to put more people on, and double down so their service levels improve in this climate.” Worst possible outcome Walker added that it’s hard to argue against the notion that staff on award wages can sufficiently manage cost of living pressures, with rates still below CPI inflation. However, he stressed that retailers need to survive during these challenging economic periods, and be in a position where they can meaningfully employ people. “If the costs of doing business due to wage increases are too great, and they simply can’t tolerate it, then [it’s] the worst possible outcome for employees,” he said.