The report provides an overview of the relevant research literature relating to the concepts and determinants of productivity, business competitiveness and viability and their relationship with minimum wages. It also presents various measures of productivity, business competitiveness and viability and their trends at an aggregate and industry level over the medium term. Using the ABS Business Longitudinal Database, the report examines measures and determinants of productivity, business competitiveness and viability at a firm level.

The main conclusions drawn from the report show that the determinants of productivity, business competiveness and viability are interrelated, as the determinants of productivity also influence the competitive performance of the firm and hence its viability. The review also indicates that the overall effect of minimum wages on productivity for Australia is ambiguous, and there are different implications depending upon whether increased training or the replacement of low-skilled labour with high-skilled labour is driving the results. Furthermore, while minimum wages are theorised to have an adverse impact on profitability and business closure rates, the evidence appears to be inconclusive.

An analysis of the data by industry demonstrates that sectors responsible for the productivity surge of the 1990s were also accountable for the slowdown thereafter. The data also shows that award-reliant industries have relatively low levels of labour productivity and exhibit higher levels of competition, as evidenced by relatively low levels of market concentration and small profit margins, as well as relatively high proportions of businesses that report a loss over the course of a financial year. In addition, the report finds that around two-thirds of the businesses operating within award-reliant industries in June 2007 survived to June 2009, which was slightly below the average across all industries.

Focusing on firms that engage in different types of employment arrangements, an analysis of firm level data finds that relative to other types of firms, firms that paid only award rates were less likely to experience increased productivity and profitability and exhibited lower survival rates. The subjective nature of some of the measures used however, adds more uncertainty to these findings and the direction of causality remains ambiguous.