The Labor leader, Bill Shorten, has called on Malcolm Turnbull to ditch his $200m marriage equality plebiscite and use $50m to give Arrium Steel a one-off grant instead.

Shorten said Arrium needed the grant to help it update its technology, making the whole of the steelmaker’s business more attractive a sale as a going concern, rather than be sold off in pieces.

Arrium was placed in administration in April after negotiations with its lenders broke down following sustained low commodity prices, and it has not yet found a buyer.

Shorten said Labor wanted to protect Australia’s steel manufacturing industry and it was far more important to keep Arrium in one piece than to waste money on an expensive plebiscite.

He said that during the election campaign the Turnbull government had only pledged to lend Arrium $49.2m but it should boost that support with an extra $50m grant to keep steel manufacturing in Australia.

“For a little bit of grant funding, this business has got a very bright future,” Shorten said on Wednesday during a visit to South Australia. “Our steelmakers are amongst the best in the world but what they need is a government who’s willing to back them up.

“It isn’t good enough that while Mr Turnbull struts the world stage, while he talks about spending $200m on a wasteful plebiscite on marriage equality, he can’t guarantee $50m to help save local jobs.

“For Labor the equation is clear, you can either spend $200m on a wasteful marriage plebiscite, or you can spend $50m saving local jobs.”

In June, Turnbull dismissed a proposed bailout of Arrium’s steelworks in Whyalla, South Australia, describing it as premature.

During the election campaign, he pledged to lend Arrium’s administrators $49.2m so they could buy new equipment for the company’s iron ore operations. That loan has since been approved.

On Wednesday, workers at the Whyalla steelworks said they would hold a vote next week to agree to a 10% pay cut to save the company about $17m a year, according to reports. A 10% pay cut would make the business more appealing to potential buyers.

The South Australian senator Nick Xenophon said on Wednesday if Arrium’s workers were willing to “do their bit” to save the company then federal and state governments ought to support the company financially, too.

He said the question of marriage equality should be dealt with by a vote in parliament, rather than spending millions of dollars on a plebiscite.

“It’s very difficult to ask any worker to take any form of pay cut, but clearly a lot of workers in Whyalla understand how difficult things are,” he said. “Making sure that Arrium survives as a structural steelmaker in this country is a good investment in the future of Australian manufacturing.

“We are facing a precipice in the next few months, when the car-making sector in this country effectively shuts down by the end of 2017. We can’t afford to lose Arrium because that will basically be the beginning of the end of manufacturing in this country.”

The treasurer, Scott Morrison, has criticised Shorten for trying to link the same-sex marriage plebiscite to the problems at Arrium.

“It’s sadly a bit of cheap politics from Bill,” Morrison told Sky News. “The government has been working very closely with the South Australian government across party lines on this. We’re working closely with the administrators, Greg Hunt has been down there.

“What Bill’s basically saying is throw some money at it and that money will just end up with the banks ... he rails against the banks every other day but he’s actually putting forward a solution which he doesn’t seem to appreciate would just effectively be a cash-through to the banks.”

Labor says the marriage equality plebiscite will cost $200m, because that refers to the total economic cost.

The plebiscite will cost $170m to hold, including funding the yes and no campaigns, which the government will fund from consolidated revenue.

But it will also incur an estimated regulatory burden of $32.5m, being the time taken for people to cast their vote, according to the explanatory memorandum to the plebiscite (same-sex marriage) bill.

The total economic cost of the plebiscite is therefore estimated to be $202.5m.

Arrium employs more than 7,000 workers, including about 3,500 in South Australia.