In the past couple of months, Reserve Bank governor Philip Lowe and an increasing number of columnists and economists have rediscovered that old ’70s and ’80s economic frightener: the wage-price spiral.
Lowe has mentioned the phrase, a proposed explanation for inflation, several times in the past month as it appears to eclipse his previous concerns about the need for rises in wages, especially in real wages.
In the RBA’s final statement for the year following a board meeting last month, Lowe said: “Given the importance of avoiding a prices-wages spiral, the board will continue to pay close attention to both the evolution of labour costs and the price-setting behaviour of firms in the period ahead.”
No doubt the tightest labour market in four decades — highlighted by the latest labour market data from the Australian Bureau of Statistics (ABS) — will keep the chattering classes warning about the dangers of a “wages explosion”, stoking fears of a spiral where wages chase prices ad infinitum and we all end up “rooned” like Hanrahan.
Those fears are simply mindless reruns of ancient industrial relations and economic history — nostalgia that passes for economic analysis among the neoliberals and others in business and policymakers.
Further reports this week from the ABS on the health, shape and structure of the Australian labour market shoot down those fears and should put them to bed. But they won’t, because a wage-price spiral, like blaring headlines about strikes, is scaremongering by people who should know better.
The ABS confirmed that union coverage in the Australian economy is now at a record low: just 12.5% of the 11.4 million people in the labour force in August 2022 were union members. That’s around 1.4 million workers, a decrease from 14.3% coverage in 2020, and 41% in 1992 (in the last recession).
The bureau said the education and training industry (at 30%) and the professional occupation group (19%) had the highest rates of union membership. But they were still down slightly from the 2020 levels of 31% and 21%, respectively.
This begs the question: how will a small proportion of the Australian workforce convince millions more people to strike and demand higher wages when agreements, contracts and other deals clearly restrict them from doing so?
Getting a damaging wage-price spiral from such a small proportion would be laughable if it wasn’t for the likes of Lowe voicing these concerns and giving them legitimacy. The labour market is tight — according to the ABS, the number of job vacancies was double the pre-pandemic level, with about 380,000 spots unfilled, despite a record 6.5% of workers holding more than one job.
The number of secondary jobs was highest in health care and social assistance, education and training and administrative and support services — all mostly lower-paid workforces (who received the bulk of a 3.1% rise in the September quarter’s wage price index in the form of the two national pay rises).
The proportion of vacant jobs rose in all industries between March 2020 (the start of the pandemic) and September 2022. The ABS said the increase was most pronounced in accommodation and food services and arts and recreation services — two industries for which jobs and hours have also been particularly impacted during the pandemic.
“The accommodation and food services industry saw the largest increase in the share of jobs that were vacant, increasing from 1.2% in March quarter 2020 to 5.1% in the September quarter 2022,” ABS labour statistics chief Bjorn Jarvis said.
And the ABS data has one very pertinent fact for the wages debate: the Labour Account statistical series clearly shows “average income per employed person” rising 1.6% in the quarter to $22,409 and 3.5% over the year to September. But that was clearly slower than the 2% quarter-on-quarter rise reported in the June quarter and the 4.8% annual rate.
The data includes everyone employed in Australia — from CEOs to part-time workers. That’s why it’s a low figure compared with average weekly earnings. The data shows wages-growth slowing, not accelerating into a spiral.
This Lowe fella is trying to have it every which way. He lies about wage rises being just around the corner. He was saying this for years. He lies about interest rates staying low till 2024. No, he is fearmongering us not to go for higher wages even after saying we haven’t had any, aren’t likely to get any, and now we shouldn’t get any and don’t deserve any because of the fear of inflation and our apparent lack of productivity.
Gees he sure hates workers. He worries about inflation therefore wage rises bad. He worries about recession, and asks why are there no wage rises to stimulate economic growth. He worries about a housing bubble but lets interest rates remain at record lows for years in fact. Now he is throwing out the rule book in an apparent panic to do all different things and be all things to all people. Imagine if he were to pilot a plane. He would reverse thrust the engines before take off because he is worried about hitting a flock of birds that are part of the pigment of his fertile imagination and blame someone else for the impending doom.
The government needed to have sacked the RBA Board long ago. The guy down the front bar of the Woolloomooloo Bay Hotel of a morning could do a better job.
There may have been 41% of the workforce unionised in 1992 but that meant bugger all to most of them. During this recession employers effectively blackmailed their “unionised” workforce into accepting lower wages and conditions and threatened their staff with the sack or the closure of the business. Like SPC at Shepparton. Like Amacon Interiors in 1993 at 7 Hills where we had to change from a 5% plus C+BUS Super account to a 3% inferior Wealthpac one (no relation to Westpac I hasten to add). Like Boral in Bathurst where I worked. We had 3 shifts over a 5 day 24 hour period. Weekends off. The morning shift was a no penalty shift. The afternoon was a 15% penalty shift. I was on that. 2.00 – 10.00pm. The night shift was 30%. The award says night and arvo were 15% shift penalty so they made us all rotate to get the zero on the mornings and 15% for both arvos and nights. Bad all round and nothing we could do about it as it was in the Timber Workers award which was a federal award then. Doesn’t exist now obviously. I left the company soon after and know that those who remained in this company’s employ would have Buckley’s chance of owning a home or even a TV set and I shudder to think what cars they would have driven. Some jobs are best avoided because the award terms and conditions are really low and enterprise bargaining was meant to uplift it but in many cases it hasn’t.
I can be as militant as I like but if the workforce are desperate like they were at Boral – Timber Industries Bathurst, they won;t strike. They will be beaten in the courts as well. On a 15% shift loading for 1990/91 financial year I earned a click over $18,000. Of course the better educated are in unions now but they have their own problems too with casualisation and contracting and permanent contracting too.
Wish I had the answer but this is just to let you know that the bar for industrial conditions is really set low for now and always.
Lowe and his board are managing the economy for the benefit of themselves and the billionaire/millionaire class. Its unfortunate that the rest of us have to suffer to maintain the incomes of this mob but it is a price the board is happy to pay.
The data is devalued by all the changes to the terms ’employed’, ‘workforce’, and so on, which have been put in place by various political parties for their own benefit. It’s all newspeak a la 1984 now. I have no answer for why people see no benefit in joining a union – they must be rugged individualists. Industry, small businesses etc all have their own unions of which they are members. Part of the reason wages stagnate. United, we stand. Divided, we fall.
Is time he got the he’ll out of there, he has managed to stuff it all up and got a fairly decent pay for being a fool!