The Fair Work Commission has effectively split the difference amid conflicting opinions on business’ ability to afford higher minimum wages.

While the Australian Council of Trade Unions (ACTU) pushed for a $27 a week increase, the Australian Chamber of Commerce and Industry (ACCI) wanted the wage increase limited to $5.70.

The Fair Work Commission (FWC) decision to award $16 a week was based, it says, on a consideration of both viewpoints. This represents a 2.3 increase for minimum wage earners, which it says “is the lowest for the last decade”.

The Commission explained the decision was made based on the conflicting factors that the “forces for rising inequality have been subdued”, which “reduces the work that needs to be done by the national minimum wage”, and evidence to suggest businesses can afford higher wages, with bankruptcy rates at their lowest since 2008.

The ACTU argues that rises in health care (four per cent), education (five per cent) and childcare (seven per cent) motivated the 4.2 per cent increased it recommended, and that inequality is still increasing.

“We are extremely concerned that every year that gap is getting wider and wider and we’re heading down the path of the US where we could have an entrenched class of working poor in this nation,” says ACTU secretary Dave Oliver.

In contrast, the ACCI points to rising unemployment and a softening labour market, and says the FWC’s ruling will threaten gross employment.

“Most small businesses run on lean margins, operate in a price sensitive environment and are unable to pass these costs on to consumers,” says Jenny Lambert, ACCI director of employment, education and training.

“So there is a real prospect it will lead to firms reducing staff numbers or the hours offered.”

Amid the debate, it should be noted that the minimum wage increase will apply to around 800,000 workers nationally. A larger group, the 1.06 million paid through awards, will receive pay rises ranging from $18.70-$31 a week.

This second, larger group are responsible for a sizeable segment of consumer discretionary spending, and their pay increase could very well offset any necessary increase in pricing.

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