The Fair Work Commission’s approval of a 5.75 per cent increase to award wages and an 8.6 per cent increase to the minimum wage has exacerbated the widening rift between small business owners and the government, writes Amanda Rose, founder of Small Business Women Australia.

To be clear, no one wants to see those who earn the least in this country struggle to survive in a brutal cost of living crisis. Yet small business owners cannot be a punching bag for a government eager to push through populist quick-fix solutions, rather than working harder to correct the deep imbalances that are afflicting our economy.

Bad news for businesses already struggling

The truth is, small businesses have nothing left in the tank after the devastation of the pandemic followed by inflation and now, recession-like conditions. Customers are not spending, but rent and wages continue to deplete budgets. Suppliers have to be paid and business owners end up absorbing all the costs for little to no profit.

The latest ABS data shows that the average salary for adults working full-time in Australia is roughly $94,000, while median working hours sat at 38 hours per week. Meanwhile, Glassdoor figures show small business owners earn an average of $80,000 a year. Hardly a princely sum considering one in four business owners work seven days a week.

Neither do they get sick leave, maternity leave, holiday pay, or any of the perks many workers take for granted. Running a small business is rarely a nine-to-five proposition, and when you’re a business owner, it’s a given that you’ll be losing a fair amount of sleep over myriad issues like supply chain backlogs and cash flow.

As an example, a cafe owner with 20 staff who are all on minimum wage will now have to fork out an extra $1,400 per week. Over a year, that is $72,800 extra in costs on top of a 25 per cent increase in electricity prices, amongst other financial pressures.

Not only would this wipe out the profits from the small business and in some cases, leave them in the red, but it could also potentially force them to shut up shop for good. This scenario isn’t a rarity for many business owners, 30 per cent of whom are expected to close over the next 12 months.

Australian economy needs small businesses to survive

In the long run, this will spell more misery for everyone. Without small business, Australia’s economy will stagnate. Small business contributes $438 billion or 33 per cent of Australia’s total GDP. It fosters innovation and creates vibrant communities around it.

Most pertinently, small business employs over 4.7 million people and 41 per cent of the business workforce, making it Australia’s biggest employer. Creating more difficulties for small business owners only leads to an increase in unemployment.

But in place of making it harder for small businesses to operate, why isn’t the government doing more to help them instead?

Rather than bumping up the minimum wage and leaving small business owners hanging, the government should consider tax breaks for small businesses and implement rebates that are actually useful.

A meagre $650 bill relief payment isn’t going to cut it. There were no meaningful concessions in the government’s budget announcement last month but it did make sure the $150,000 instant asset write-off for businesses was reduced to $20,000.

Though some progress has been made with regards to helping small businesses access more lucrative government contracts, the $392 million Industry Growth Program and the $23.4 million Cyber Wardens program to improve cyber security for small and medium enterprises won’t be of much use if businesses aren’t around to take advantage of them.

More security for small businesses is needed

Given the current economic climate, which is expected to worsen thanks to the 12th rates rise since May last year, more needs to be done to help small businesses hold on for longer. As it stands, small business owners can’t afford to run their operations, which means more Australian workers may not have a job in the near future.

Inflation remains stubbornly high, but is likely to be difficult to tame due to fears that the government-backed pay rises will trigger other workers to seek higher pay across the economy.

Boosting low-earner workers’ pay without protecting small businesses only prolongs the issue. In the end, the damaging effects of inflation will erode savings, render basic living costs unaffordable, hurt business growth, and worsen income inequality.

Overseeing a period where mass closure of small business is a possibility will certainly make it harder for the economy to bounce back. Only by securing the interests of small business can the government hope to secure the future of our economy.

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