“Undervaluation of skills”: Why retail staff are among lowest paid workers

Amid intense cost of living and other inflationary pressures, retail workers are among the hardest hit within the Australian workforce, a new report has found. Many retail staff are struggling to make ends meet, with wages not proportionate to rising expenses.

According to the 2023 O’Brien report – conducted by labour economist Dr. Martin O’Brien and engaged by the SDA, which surveyed retail industry employees – 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.

Meanwhile, 27 per cent of ‘retail households’ were found to be unable to raise emergency funds, or shared that they would have to engage in “drastic measures” in order to raise these funds. This figure is 13 per cent higher than non-retail households.

The report also revealed that households containing retail industry employees earned 85 per cent less than the household income of other industry employees. 

The financial pressure on retail workers comes at the same time as an escalation in other pressures, such as customer aggression and crime occurring in the retail sector.

Industry-wide issue

National secretary for the SDA – the union for fast food, warehouse and retail workers – Gerard Dwyer said that low earnings is a broad, industry-wide issue, with many staff employed on a casual or part-time basis.

He pointed to recent data showing that about 66 per cent of non-managerial, full time, adult employees in the retail industry were earning less than $1250 per week: compared to just over 35 per cent of equivalent staff across the entire workforce.

He added that wages were not keeping pace with cost of living pressures – which is part of the problem that retailers might be facing when it comes to retaining staff. However, he said this wasn’t the extent of the challenges faced by the retail workforce.

“The increased intensity of work – driven often by the growth of online – is really challenging retail workers. Staffing levels and workload intensity are real problems now in retail,” Dwyer said.

Another contributing factor that is keeping wages down, Dwyer explained, is wage theft, which has been plaguing the industry for many years. He said this was exacerbated by “work off the clock” policies – such as uncompensated extra work.

In line with the SDA’s submission to the Fair Work Commission’s Annual Wage Review, he raised the following suggestions to help amend the issue.

“Provide wage increases in line with inflation, ensure all hours worked are paid for, moderate workloads and work intensity and ensure all breaks are given,’ Dwyer said.

Undervaluation of skills

Low wages and underpayment of retail staff, as well as burnout and turnover, is an international issue within the retail industry. Further, the Covid-19 pandemic has compounded and exacerbated these pre-existing issues within the sector.

According to Forbes, 649,000 US retail staff gave notice that they were quitting their job in April 2020 – the highest number since tracking began 20 years prior. 

Meanwhile, the company wage tracker by the Economic Policy Institute – which surveyed staff from March to November 2021, and was last updated in April 2022 – revealed that many of the largest and most profitable retail and fast food firms pay staff less than $15 per hour.

This includes McDonalds, Burger King and Starbucks which – according to the tracker – saw 89 per cent, 83 per cent and 63 per cent of staff paid less than $15 per hour during that period.

Meanwhile, in 2021, the Living Wage foundation found that UK supermarket workers were most affected by low earnings during the outbreak of the Covid-19 pandemic, with HR magazine reporting that 45 per cent of non-specialised retail workers were earning below the living wage.

Professor of Gender, Work and Employment relations at the University of Sydney Business School, Professor Rae Cooper AO told Inside Retail that a significant portion of the retail workforce were employed on minimum rates.

She said that, as with many feminised and service sector jobs, the relatively low pay reflected an undervaluation of their skills.

‘We know that retail workers exercise significant and complex skills that are product based, technology based and interactional.  As digitalisation has impacted retail, the work and the skills required to do it has become even more complex,” Cooper said.

“Frontline workers, such as those in customer-facing roles, tend to be on lower rates of pay, despite the complexity and intensity of their jobs.”

She pointed to research conducted by her and her team, which demonstrated that retail workers were struggling with workloads. With responsibilities and stress levels rising throughout the Covid-19 pandemic, she said that many staff were confronted with low wages and insecure work, and considered leaving the sector.

“Low paid workers, like frontline retail employees, feel the pinch of cost of living more than others.  Workers in retail need and deserve a decent pay rise,” she said.

Keeping pace

The Australian Retailers Association (ARA) CEO Paul Zahra explained that most Australians start their working life in retail or hospitality, as a means of developing their personal and professional skills, and advancing their careers.  

He said that the retail industry often recruits younger people who are generally paid a lower rate than those with seniority.

“Advancing from a frontline role into a management or supervisory role [comes] with additional responsibilities, [and] is the best way for frontline people to increase their earning capacity [in retail],” Zahra said.

The majority of retail workers are women, who are already underpaid compared to male counterparts and are routinely looked over for promotions. This, combined with high levels of sexual harassment in retail, has led many women to leave the industry.

As part of its 2023 Annual Wage review submission, the ARA advocated for a sustainable increase in the minimum wage to help retail workers keep pace with the rising cost of living.

The organisation appealed for a wage increase based on the underlying rate of inflation at the time the FWC hands down its decision, less the impact of increases in superannuation from July 2023 and the projected decrease in inflation for 2023-24 as forecast by the Reserve Bank of Australia (RBA).

Based on this calculation, the ARA advocated for a 3.8 per cent increase in the minimum wage, taking effect July 1 2023.

“We believe an increase of this magnitude strikes the balance between an employer’s ability to keep pace with the rising costs of doing business, against an employee’s expectation that wages grow in line with prices,” The ARA said.

“Given these considerations, any wage increase must therefore be sustainable in the current economic environment, while delivering wages growth to retail workers. We believe our recommended increase in the minimum wage of 3.8 per cent strikes this balance.”

Zahra added that if staff weren’t fairly compensated for their work, they would feel undervalued [which] can lead to burnout, exhaustion and higher turnover.

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