For all the talk of a near-miraculous rebound in the economy this year before the current COVID outbreak, with unemployment reaching 5% and high hopes for a swift fall to the low 4s, it turns out workers weren’t sharing the joy.
Yesterday’s wage price index figure for the June quarter — before the east coast was plunged into its current protracted Delta nightmare, back when we were patting ourselves on the back about how quickly we’d recovered — was truly awful. It showed a 1.7% annual rise in the 2020-21 financial year.
OK, so it wasn’t flash, you might think — but awful? Well, inflation for the year was 3.8%, driven by what is expected — and certainly hoped — to be a temporary spike in prices. With wages growing at 1.7%, it means Australian workers’ real wages fell 2.1%. It was the largest cut in the purchasing power of their wages since the GST was introduced.
Using one of the Reserve Bank’s preferred inflation measures, the weighted median, real wages were completely flat for the year. But households don’t get to pay the weighted median price at supermarkets and petrol stations.
This wasn’t just about the impact of the pandemic and last year’s recession in the past 12 months. Wages grew by just 0.4% in the June quarter despite strong jobs growth, which meant workers went backwards in real terms by a full 0.4% during the June quarter.
The worst offenders weren’t private employers, but governments. Public sector wages growth over the year was just 1.3%. The ABS pointed out it was the lowest public sector growth rate since it started the series in the 1990s. That means public servant wages were 2.5% below inflation.
Despite the RBA constantly urging higher wages growth and pointing out that governments had significant power to lift wages growth via public sector pay, governments have instead cracked down on public service wages.
The Morrison government went further and decided to link public sector pay to private sector pay. This has led to a reduction in overall wages growth across the country at a time when the goal of both monetary and fiscal policy is to lift it. The self-defeating stupidity of governments’ hostility to public service wages growth is truly staggering — particularly when you remember many people in the public sector, such as health professionals and police, are on the front line dealing with COVID.
And funnily enough, don’t expect the federal government to offer public servants a catch-up so that public sector wages growth rises to the same level as private sector wages growth, which was 1.9% across the year. Much of the “rise” in public service wages came from catch-up payments after previous wage freezes were ended.
The June quarter results are likely to be the peak of wages growth until well into 2022, given the Berejiklian-Morrison disaster that is the current outbreak infecting Victoria, the ACT and now New Zealand and forcing lockdowns wherever the virus goes, in what is emerging as the greatest public policy disaster since the Iraq and Afghan wars. The NZ outbreak forced the Reserve Bank of NZ yesterday to abandon its planned interest rate rise — which would have been the first by a reputable central bank since the pandemic. Nice work, Gladys and Scott.
At 1.7%, the wage price index result is only a fraction behind the RBA estimate for June of 1.75%, but the worsening COVID situation and prospects of another recession over the final six months of 2021 mean the central bank can kiss goodbye to a surge in wages in 2022 through 2024 that would enable it to lift rates.
And we can’t vaccinate our way to wages growth. Under the most optimistic scenarios, COVID infections at “low” levels (by the standards of the US and UK) will be with us into 2022 and will inflict continuing disruption on the economy — especially if Morrison retains his hostility to vaccine mandates out of deference to extremists in his own ranks. As with so many other issues, it’s been left to business to show some leadership, with Qantas yesterday joining SPC in requiring its staff to be vaccinated.
That’s on top of the systemic downward pressure on wages growth that the RBA has discussed several times. Governor Philip Lowe has listed them: “Enterprise agreements that run for a number of years; a business mindset that is very focused on cost control; inflation expectations that are low; relatively high ongoing rates of underemployment.”
It’s not like business can’t pay — the current June 30 full year and interim reporting season is seeing a cascade of higher dividends and share buybacks from large corporations, many of whom have enjoyed windfall profits via JobKeeper that the Morrison government has no interest in even finding out about, let alone recouping.
The longer-term question is whether Australian workers will get their real wages back up to pre-pandemic levels before the late 2020s. It doesn’t look likely, thanks to government bloodymindedness and stupidity.
So we have reached parity with the US at last. We now have a cohort of working poor requiring at least two if not three jobs to survive. What a great achievement, that began with all those hard won victories on the waterfront by Nasty Johnny Howard, Peter Reith and that nice man from Patricks!
Break the unions, deceive workers into thinking they’re better off with individual agreements, and voila! Wages are not even keeping pace with inflation.
What a wonderful country Australia has become under the leadership of the IPA.
Perhaps we could all seek asylum somewhere decent…
Import cheap foreign labour and commit wage theft and other offences upon them
Totally agree with you GoatGirl
We need to call out wage stagnation for what it really is – a form of class warfare with the covert goal of maintaining economic and political inequality in Australia.. Warren Buffet’s comment is of relevance to Australia. Buffet, one of the world’s wealthiest men (Forbes Magazine 2018) – in a moment of honest introspection, calls out the wealthy and powerful elites by stating that the wealthy have been waging class warfare for the past 20 years and moreover they are the ones who are winning as their tax burden had been reduced most dramatically. He could also have mentioned the huge profits of the large business enterprises and the obscene salary packages of some CEO’s.
Hence, the populist attacks by powerful media groups and the Federal Government via such negative stereotypes as ‘the politics of envy’ and ‘class warfare’ serve as cover for the rich and powerful in their war against any move towards greater economic equality and a stronger democracy. The elites realize it is they who must take a loss in order to achieve greater equality.
However, the present level of inequality in Australia could not continue without the passive acceptance of it by the very people who find themselves at the bottom. This group of workers wallow in their belief in the rhetoric of meritocracy, in the belief that if only they try harder they too could find themselves on top and enjoying the ‘good’ things of life. So in a perverse way the lower class fight to maintain inequality for the time when they will score their lucky break and join the ranks of the ;winners; (wealthy class). I suppose you also toss in the mix here Morrison’s constant appeal to aspiration, that is constantly furthering one’s ambition is in itself always desirable and ‘good’.
This acceptance that the current social order is the best one for all when In fact it is best for the wealthy elite and those in power is justified to the majority under the twin falsehoods of meritocracy and equal opportunity. Hence, as a group the disadvantaged are suffering from what Marx would describe as a sense of ‘false consciousness’. This concept is defined as: ‘False consciousness, denotes people’s inability to recognize inequality, oppression, and exploitation in a capitalist society because of the prevalence within it of views that naturalize and legitimize the existence of inequality’ or as was the case in Marx’s time of different social classes
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While Marx did not invent this term his explanation of capitalism was strongly built around it. In contemporary times some theorists use the term dominant or hegemonic ideology in place of the Marxist term above whereby the many are led to believe that something is natural and logical even when it may cut across their own interests and well being. In this case for the poor to support the electoral campaigns of the wealthy such as Clive Palmer or say Donald Trump is a gross case of self deception to believe that such persons are driven by their concern for the less fortunate
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Finally, the breaking of union power has contributed to a more compliant workforce and weakened the demand for fair wages in nations similar to Australia. Some of the most equal nations in the world are the Nordic states such as Norway and Sweden quite simply because they have more powerful union organizations to fight for greater equality and distribution of income and wealth (social justice???) unlike the situation in Australia.
These are some of the reasons I argue inequality is growing in Australia with the covert support of large numbers of the very people faring the worst under the present system.
I like Alan Kohler – Tuesday’s ABC news – reflecting on business whining about not being able to attract workers (no doubt leading to trying to get this government to loosen access to “cheaper worker visas”?) :- “…. They could try money?”
He’s a shocking leftie is Alan Kohler, fancying suggesting that workers be offered more pay!
A right shocker. As if the lower classes could ever be able to afford to live around here (doG forbid – there’d go the neighbourhood), a second Bentley and/or Porsche, holidays in Biarritz and Aspin, and send the off-spring to a St Joey’s, to get their Covid shots out of turn?
And the race-horses?
As pater always used to say, “Money is wasted on the poor.”
I like Kohler too, but I have noticed over the years the frown on his face when house prices dip. The smile always returns when they inevitably rise again a week or so later.
“…if Morrison retains his hostility to vaccine mandates out of deference to extremists in his own ranks.”
Which seems to be saying that Morrison is not himself an extremist, he’s just a bit weak. But Morrison consistently takes the extreme line on so many issues and the time must come to admit Morrison too is an extremist. There’s an old book that has something relevant to say about this. I wonder if Morrison is familiar with it?: Beware of false prophets, which come to you in sheep’s clothing, but inwardly they are ravening wolves. Ye shall know them by their fruits. Do men gather grapes of thorns, or figs of thistles? Even so every good tree bringeth forth good fruit; but a corrupt tree bringeth forth evil fruit. A good tree cannot bring forth evil fruit, neither can a corrupt tree bring forth good fruit. (Mathew 7:15-18)
Problem, what problem? Cost of labour down, asset prices through the roof – that would be mission accomplished for the neo-liberal Work Choices brigade in the Coalition.
“the current June 30 full year and interim reporting season is seeing a cascade of higher dividends and share buybacks from large corporations”
Why are share buybacks legal? Isn’t it market manipulation?
Isn’t there a huge conflict of interest, considering that many of the people making the decision to buy back shares have their remuneration at least partly linked to share price and/or they own or are paid partly in shares?
I bet there is one group of public servants whose pay rises aren’t linked to the private sector or frozen.
“Why are share buybacks legal? Isn’t it market manipulation?”
It’s only market manipulation in the sense that buying shares tends to push up the price. So all share trading is market manipulation.
“Isn’t there a huge conflict of interest, considering that many of the people making the decision to buy back shares have their remuneration at least partly linked to share price and/or they own or are paid partly in shares?”
You might think so, but those involved will point out the remuneration of directors is determined by the shareholders, so there cannot be a conflict of interest – it is simply an interest.