Average pay rates among small businesses have grown by more than 4 per cent this year off the back of the tightest labour market in decades, according to new research.
Data on more than 130,000 small to medium businesses using technology software firm Employment Hero shows the average hourly rate of 1.75 million employees increased 1.4 per cent between May and June, and 4.3 per cent since January.
The company’s inaugural SME index suggests labour shortages in low-paid jobs such as hospitality have started to bite.
Employment Hero chief executive Ben Thompson said changes in average rates could be influenced by lack of staff as much as wage growth.
“We’ve seen a lot of change in industry engagement – people moving from hospitality and retail into knowledge work – and if that means we’ve seen some senior roles with high salaries terminated through resignation and moving from one sector to another, then that could definitely affect the average rate of pay,” Mr Thompson said.
“For example, in healthcare if you saw a lot of highly experienced mature-age nursing staff resigning due to COVID burnout that could lead to a decrease in the average wage.”
The report found retail, hospitality and tourism experienced an increase in average hourly rates of 4.7 per cent from May to June.
However, healthcare suffered a decrease in its average rate of 4.2 per cent. Agriculture, mining and energy experienced the biggest fall, 11.6 per cent.
Overall, the Employment Hero report found medium-sized firms, which also experienced the biggest increase in staff, were driving the most recent surge in average hourly rates.
Small businesses (fewer than 20 employees) and large businesses (more than 200) had their average hourly wage growth marginally decline.
Asked how they would deal with this year’s minimum wage increase of up to 5.2 per cent, about 24 per cent of 500 respondents said they would “have to review prices” and 16 per cent said they would need to work more hours.
About 11 per cent said they would have to let staff go and 10 per cent planned to outsource work locally. About 7 per cent said they would seek to identify cost savings outside of pricing and staffing changes.
The report follows an analysis by JP Morgan economist Jack Stinson last week that suggested wage growth was still tepid because vacancies were concentrated in industries such as hospitality that also had the lowest margins.
“Such firms are less willing to bid wages up to levels above marginal product,” Mr Stinson’s analysis said.
“The consistently high level of unfilled vacancies should then be read as a partial signal that firms cannot fill positions at any cost, explaining some of the disconnect between very low unemployment and middling wage growth.”
Whitehaven Coal chief executive Paul Flynn told The Australian Financial Review his ASX-listed company had been relying on paying retention bonuses “on a quarterly basis, just to make sure people stay put because the market is very, very tight”. “All the miners are running hard and then the government is competing for the same labour with all the infrastructure building they have got going around the country … so the government is contributing to a lot of the inflationary pressure by their own actions here so that is challenging for us,” he said.
