Today’s national accounts data for the quarter and year to June 30 is mainly of historical interest, particularly given the Reserve Bank has punished households with 2.25 percentage points of rate rises since May, meaning the current year may be very different.
The economy grew 0.9% in the three months to June, and 3.6% year on year.
One important input to the GDP number, however, is of more than historical interest. The wage share of total income fell to another record low in the June quarter: just 48.5%.
The profit share of total income surged by more than a whole percentage point to a new record: 32.9%.
Why? The Business Indicators data from Tuesday, which were an important input to the national accounts, showed that company gross operating profits (a particular way of measuring corporate profitability for the national accounts) rose 7.6% seasonally adjusted, which was more than double the 3.3% rise wages and salaries rose 3.3% seasonally adjusted.
But more importantly the 12-month figures for the 2021-22 financial year show that company gross operating profits were up 28.5% while wages and salaries were up just 6.8%. Wages and salaries aren’t comparable to the wage price index, but they’re still a useful comparative indicator.
Much of the rise in corporate earnings was due to the surge in prices for thermal coal, oil and gas (profits in manufacturing and logistics were also up strongly, but they’re small beer compared with mining and energy). But we haven’t seen the likes of Woodside, BHP, Santos, Beach Energy, Whitehaven — the windfall winners from the invasion of Ukraine — sharing any of their good fortune with their employees, except those in executive suites or boardrooms.
That profits/wages contrast further adds to the historical imbalance between the wages and profits share of total factor income. June was only the fourth quarter in history when the wage share was below 50% and the first time it was below 40%.
It was also good news for business on the productivity front: real unit labour costs fell 1.6% in the quarter and 4.8% through the year. So much for a tight labour market.
Two measures of wages or employee earnings in the national accounts are COE (Compensation of Employees) and AENA (Average Earnings National Accounts). Both are pretty blunt measures — COE measures the total remuneration to employees for work done and AENA is COE divided by the total number of employees. COE does include irregular payments to employees such as bonuses — so all those bonuses that keep being reported should be in the figures.
COE rose 2.4% in the final quarter, which was the highest since the September, 2010 quarter — but that was helped by a 2.9% rise in hours worked (fewer COVID lockdowns) and a 0.9% rise in the total number of people employed. Strikingly, private COE rose 3.1% while public COE by just 0.4%, showing the public sector wages are still holding back wages growth.
But the big issue in the Australian economy remains the power of capital versus that of labour — and the huge imbalance between the two.
Corporations won’t be happy until we have returned to slavery. And workers will even need a self funded certificate IV in that.
Don’t you mean a govt funded one – corporations refuse to invest in their staff and leave it to us! The taxpayer, despite the booming profits!
Once again, a demonstration that productivity in relation to worker pay is a rhetorical fiction. It doesn’t matter whether it’s true, but it sounds true, and has the added bonus of blaming the victim for their own lot.
“If only you worked harder you’d get paid better. Harder still. Harder than that. Keep going! Look, the shareholders are doing it tough and my bonus is down this year.”
In Noam Chomsky and Marv Waterstone’s book ‘Consequences of Capitalism’, they make the claim that ALL profit is derived from the work of the labourer, and that this makes the saying “A hard day’s work for a fair day’s pay” a complete myth. It was never true.
And I can’t stop thinking about it.
Capitalism isn’t new, but we’ve become so unmoored from its character and its realities that simple observations such as this are startling (at least to some).
One of the main considerations for my mind is that we know that work needs to happen for a society to function, and that we’re always going to have the problem of how to distribute goods in a society.
I think the difficulty with dislodging some form of capitalism is that it’s very hard to say that the fruits of one’s labour shouldn’t be the labourer doing it, or that we can benefit when there is mutual self-interest guiding cooperation. Grant those and you have the inevitability of some form of capitalism. Granting that, however, doesn’t really justify a system in which the investor has primacy, or why we have such an elaborate tax system designed to benefit those who already have more resources than they need.
It feels to me that we are approaching a neo-feudalism, only one that’s “meritocratic” in the sense than anyone in theory can become part of the feudal class with the right breaks. In practice, we tolerate a good portion of our fellow citizens living in poverty, with food / housing / medical insecurity, and a good portion more working as hard as they can to stay just above that, yet bristle at the idea that our tax code shouldn’t be so skewed towards investors. It feels so American.
Agreed. It holds the employee responsible for that which is the actual responsibility of the employer. When the business fails to organise itself properly and provide appropriate tools, why should the employees be accountable.
Someone said a while ago that what the Gross Domestic Product calculation actually measures is the success of the rich and corporations in removing money from the pockets of those who actually earn it. And they’re getting better at removing it all the time.
Words of Mass Distraction….
At what point are workers going to have to have extra limbs grafted, to meet the demands of this “Productivity God”?
…. Just to get a pay rise to lift them above working poverty.
In one of her best known books, “Nickel and Dimed”, an examination of poverty in the US, the late Barbara Ehrenreich wrote that “(t)he ‘working poor,’ as they are approvingly termed, are in fact the major philanthropists of our society.”
I wonder if there’s any estimate of how much of the profits are exported, through dividends on particular?