Wage stagnation is the front line of a class war

Bill Shorten, presenting his plans to reform industrial relations to lift wages growth, told Australia’s business elite this week that “getting wages moving isn’t a war-cry for class warriors”. Except, it should be. Wage stagnation in Australia, as in other economies, is an act of class war. It’s a war started by powerful corporations and enabled by their political and media allies. 

Wages are stagnant because our industrial relations playing field is tilted in favour of employers. Workers can only bargain at the enterprise level, and even then there are a range of impediments: the right to strike has been progressively curtailed, the powers of unions restricted, and employers often hold the trump card of being able to default workers back down to sub-standard award pay and conditions.

Wages are stagnant because corporations have grown larger and more dominant in their respective markets over the last three decades, giving them greater power versus consumers, versus other, usually smaller, businesses, versus regulators and politicians, and versus workers. Wages are stagnant because employers have been allowed to engage in an epidemic of wage theft against their own workers, often involving the exploitation of foreign workers here on student or temporary visas.

There may be other factors. Technology and automation are routinely cited. Barely a week goes past without yet another breathless report on how 30%, 40%, pick whatever number you like, of jobs will be automated in coming decades. As John Quiggin astutely observed a couple of years ago, in fact technological change has always been with us and we’ve usually dealt with it without significant dislocation. Jobs are constantly being made obsolete, just as new jobs are constantly being created. But the inability of workers to aggressively bargain for higher wages and the dramatically enhanced power of corporations are the key factors. Not for nothing is the current level of industrial disputation now less than 5% of what it was in the 1980s. Strikes, which have been demonised for decades in Australia as the product of militant, unreasonable and greedy unions, are a demonstration of industrial disputation in action. The near-negligible level of industrial action suggests employers are winning easily.

But policymakers within government and at the Reserve Bank insist all is well and all workers have to do is wait… and wait, and wait. The current government has had to downgrade its wages growth forecasts every year but one since coming to power in 2013. It did that again last December. It has resolutely refused to accept that wage stagnation is a serious issue, it has supported cuts to penalty rates, opposed minimum wage increases and continued to demonise unions as a threat to the economy. The Reserve Bank has been equally culpable, sticking to the fiction that workers just need to wait a few more quarters and market forces will eventually force wages up.

The result of this wilful refusal to take wage stagnation seriously is likely to be a permanent downward shift in wage expectations by workers — which is exactly what corporations want. Should wages growth eventually reach 3% some time in 2020, or 2021, workers will be told that happy days are here again. In fact, compared to the years before 2013, 3% wages growth — which is likely to represent just 0.5-0.75 percentage points of growth after inflation — is pitiful. A permanent cut in wages growth will be locked in, to the benefit of corporations and shareholders.

Labor’s decision to make wages a central issue in the election campaign is the right one, not so much in political terms as in democratic terms. At a time when many Australians believe the political and economic system is only delivering for corporations and the wealthy and not them, it is crucial that a major section of the governing class signals its commitment to shifting the balance back. Labor’s relatively anodyne proposals to tilt the industrial relations playing field back toward workers and unions and restore penalty rates — and which may stretch to allowing pattern bargaining in some industries — have naturally been demonised by business and their media cheerleaders at the Financial Review and The Australian. According to the head of the Business Council, when it comes to wages growth, “the most important institution to get us back on track is the business community.” Problem is, it’s been left up to “the business community” for years now and the result has been six years of stagnant wages and, for some private sector workers, falling real wages.

This pearl-clutching and “just leave it up to us” stuff from business, and the wilful refusal of policymakers to engage on the issue, is understandable. Politicians, the senior staff of the Reserve Bank, media executives and CEOs and chairs haven’t got the faintest idea what wage stagnation actually means. They have no idea what choices ordinary families have to make because people’s incomes have barely kept up with inflation. They don’t understand the misery of feeling like you can’t get ahead, the gnawing uncertainty of what might happen if unexpected expenses arise, the resentment that CEOs can be paid your lifetime earnings in a single year while breaking the law.

Wage stagnation is a slow, grinding war of attrition, being waged by companies against workers. And companies are winning.