After yesterday’s wage price index figures showed most of Australia’s workers currently have declining real wages and have now had three straight quarters of below 2% annual growth, you’d have thought many of those who have long demanded wage cuts would be cheering.
But, surprisingly, there was silence. The Australian Financial Review had little to say about it beyond Jacob Greber’s coverage. The masthead that has long called for more industrial relations deregulation and lamented how Australia is a “high cost economy” didn’t cheer. Then-JPMorgan Australia chief economist Stephen Walters, who in 2014 demanded “real wages have to come down” didn’t grace its pages to voice his approval, or that of the Australian Institute of Company Directors, where he now works.
Nor did other business groups. The Business Council was silent; Jennifer Westacott didn’t break cover to find yet another way of putting her foot in it on the subject. BCA chairman Grant King did mention low wages growth in an op-ed yesterday morning, before the release of the figures. The lack of wages growth, he observed, was “a real issue for all working Australians” — the kind of profound insight that explains why the BCA is so well-regarded these days.
The normally voluble James Pearson of the Australian Chamber of Commerce and Industry, always happy to demand lower wages, didn’t issue a cheerful media release. Long-time IR deregulation advocate Innes Willox of the Australian Industry Group couldn’t be found to laud wage cuts. Tasmanian backbencher Eric Abetz, who in 2014 warned of a wages explosion, expressed no satisfaction that the serious threat to the economy he identified three years ago had been neutralised. Nor did any of his backbench colleagues step forward to celebrate declining real wages, despite the Liberal Party for decades calling for wage cuts. Surely, if nothing else, this government has been successful in implementing a core Liberal policy? Nary a word.
Strange. It’s almost as if, despite demanding that Australian workers have their wages cut as an instinctive reflex for decades, they don’t want to be associated with it when it happens. Judith Sloan at The Australian, at least, devoted a piece to exploring why exactly wages are stagnant here and in other western economies.
Nor is this the first time real wages have fallen in recent years. It happened in 2013-14, too — back when inflation was a whopping 3%. Now it’s 2.1%, but wages growth has fallen even further. And yet, since then, business has successfully pushed for the Fair Work Commission (allegedly an inflexible, Labor-created impediment to workplace productivity) to cut penalty rates.
Perhaps the penny has started to drop within business that cutting wages weakens demand. Or perhaps not. The retail sector, after all, has been among the most vociferous in calling for penalty rate cuts, apparently oblivious to the impact of cutting the wages of low-income earners who spend a greater proportion of their income than the rest of us, despite experiencing first hand the result of wages stagnation via flat and falling retail turnover in recent quarters, with three of the last four months producing negative sales growth.
The government’s wages growth plan is, apparently, to keep forecasting it will get better in the hope that eventually it will, even as it tells the Fair Work Commission to go easy on minimum wage increases — which don’t help the poor anyway, it says. Business’ wage growth plan is to keep calling for more IR deregulation and company tax cuts (that’s the business plan for everything; if aliens invaded Earth tomorrow, the Business Council would call for an urgent tax cut to help repel them). Many of Australia’s largest companies and lobby groups are currently lamenting that Australians don’t like or appreciate them. Funny that.
“Not like this” they say. “we meant in actual value, not real terms”
The race to the bottom has no bottom. It’s a bottomless pit driven by greed that has no ceiling.
They’ve all (from this government all the way up their chain-of-command sponsors) gotten what they wanted, flat-lining wages, a decline in disposable incomes and increased debt – they should be satisfied – anything that goes wrong from here can only be “someone else’s fault”?
….. Imagine their orgasmic rapture if they’d been able to accomplish their reversal of wages crusade?
This is not said in anger or envy just reality- if the top echelon of “workplaces” are being paid millions literally millions then how can those at the bottom receive wage increases.
In addition if the Millions paid to the top depend on their ability to cut costs at the bottom then again the top will prosper while the bottom do not.
I am no economist but I ask what is the future of this country if the many at the bottom have no money to spend, no hope for their children’s futures and no trust in those who purport to represent us.
The poorest households have average annual income of $33,911, the wealthiest ten percent are around 7x better off with $232,175.
We should be debating what level of wealth and income disparity we’re comfortable with and gives the best overall economic performance – for instance would the Australian Economy perform better if the income disparity between the poorest one million households and the wealthiest was 6x or 8x?
Suggesting that if we cut company taxes and simultaneously make welfare more difficult to obtain, thus potentially increasing disparity, will increase our economic growth and generate jobs is simply an ideologically-driven wish unless and until the Treasurer comes up with some independent economic modelling to confirm the assertion.
The poorest households have average annual income of $33,911, the wealthiest ten percent are around 7x better off with $232,175.
And even that doesn’t come close to showing the true scale of inequality.
The difference between those at 10% and those at 1% is at least as big, as is the difference between those at 1% and 0.1%.
The income and wealth distribution curves are very exponential.
Correct, for the poorest 1% of households life must be hell.
For me the important point in all this is that Scott Morrison seems to take the position that if the disparity in household income for the bottom 20% is made even worse, that’s acceptable collateral damage in his quest to make a stronger economy.
The consensus of many economists and even the IMF is that increased income disparity retards economic performance.
If Scomo has modelling from Treasury to refute that, he should table it and let’s debate it.
We also must acknowledge that we should not let increased income/wealth disparity just happen like it’s some inevitable by-product of “sound economic policy”.
It’s about time a Treasurer stood up and “owned” the level of disparity they regard as acceptable.
Today, the poorest 2 million Aussie households have av net worth of a lousey $32k and the wealthiest 2mio average is 2,212k or roughly 70 x the wealth!
If the current policy settings are going to increase the disparity, we should debate this and be informed by what the modelling suggests is economically optimal.
Great comments, Dougz and Drsmithy.
” The consensus of many economists and even the IMF is that increased income disparity retards economic performance.” NOW it is, but for the last thirty years mainstream economists and the IMF were fine with the inequality deregulation, privatisation and austerity produced.
Ideologically-driven or simply greed-driven?