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In the last 23 years nominal wages growth in Australia peaked in the second half of 2008 (4.3%). Since then, with partial and short-lived recoveries, the general tendency has been to a fall. We seem to be in the midst of one such recovery: from a low of 1.4% in the second half of 2020 to 2.3% by the end of 2021. When will this recovery, very partial as it is, stop or how much ground will it regain remains to be seen.
Although not ideal, in the low-inflation environment prevalent in Australia for much of the time since September 2013 (when the incumbent COALition took power), federal policy-makers found little political pressure to lift wages: wage-earners may not have felt financially buoyant, but on average they could keep pace with the cost of living.
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That’s not to say that nobody remarked on the miserly nominal wage growth (both in comparison to Australia’s own record, as seen directly in the opening chart, and in terms of real wages) affecting Aussie workers. Two early commentators were the ABC’s Stephen Long and … RBA Governor Phil Lowe!
Back in June 2017, Long penned the first of a number of pieces on that (his colleague Gareth Hutchens joined him a little later). His opening lines:
It wasn’t quite Karl Marx, but, for a central bank boss, it was heady stuff: the Reserve Bank governor, no less, exhorting workers to demand higher pay rises.
One could almost imagine Phil Lowe breaking out into a stirring rendition of The Internationale: “Arise ye workers from your slumber, arise ye prisoners of want … ”
Well, almost.
For decades, calling on the workers to demand wage justice was the last thing you were likely to hear from the boffins who walk the hallowed halls of 65 Martin Place.
On the contrary, workers and unions were admonished for demanding pay rises; blamed for threatening to fuel inflation, undermine the profit share of national income and ruin the economy.
This is what Long is talking about:
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Not many were as keen on that solution to the wages stagnation problem (Lowe included). An alternative, bypassing worker empowerment and unions and strikes and other such unpleasantness, was to shut down immigration (“Attention Labor: All migrants kill wages”). It’s a supply and demand problem, they say: excess supply of labour leads to unemployment and low wages.
As attractive in its simplicity as it may sound to the simple-minded, it didn’t work: COVID closed borders saw net migration fall into negative figures, unemployment fell, but the promised renewed golden age of automatic wage growth – surprise! – did not materialise.
Instead, as inflation rose and currently fluctuates between 2% and 3%, nominal wages growth fell well below 3%: And real wages shrunk: no longer can wage stagnation be ignored, least of all by a regime claiming their alleged competence as economic managers as their main (if not only) selling point.
Another solution bypassing messy unions and strikes (this one preferred by former Minister for Trade and Small Business, Craig Emerson – Labor) is productivity. In a nutshell, the idea is that increased productivity allows for cost savings in production, which allows for higher wages (besides higher profits and/or lower prices). Everybody wins (for a sample of the distinctly Pollyanish taste of Emerson’s view, you can check his discussion with Ellen Fanning).
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The thing with Emerson’s productivity silver bullet is that productivity is already going up (together with prices and profits), but wages aren’t following. Newsflash, Craig: we aren’t winning. Nobody’s singing Kumbaya My Lord.
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Although their “solution” is a dead-end, Labor at least acknowledges there is a problem. Scotty from Marketing doesn’t want to talk about it. He talks a lot about the ec-hon-omy, but in his ec-hon-omy textbook the word “wages” does not appear.
For Josh Fraudenberg – Scotty’s Treasurer – the solution is simple (yes, you guessed): supply and demand. Unemployment starting with a “4” didn’t do the trick, but everything will be fine when (and if) unemployment starts with a “3”: three is the magical number.
Meanwhile, Scotty’s Minister for Industrial Relations, Michaelia Cash, promises to double down in her relentless anti-union jihad.
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Mathias Cormann (Scotty’s former Minister for Finance and current big boss at the OCDE) knew better – or was less cautious – than his former boss and colleagues:
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Last Saturday Johanna Nicholson, ABC’s Weekend Breakfast host, interviewed Kristy McBain, Eden-Monaro (NSW) Labor MP.
This is one of the questions Nicholson asked: “Labor is promising to lift wages, but what power does Labor have to lift wages?”
That’s been one of Scotty from Marketing’s talking points as well. An hour or two later, speaking from Mowbray (Tasmania), he used it against Labor:
The Labor Party talks about all of these things but they have no plan to address them. They have no economic plan to do something about it. They say that they can lift people's wages. Well, how are you going to do that? They have no magic pen that makes people’s wages go up, any more than they have a magic pen that can change the price of a lettuce. Talking about the problem is not enough, Mr Albanese. Having a plan to deal with it is what you need. And that’s what we have.
McBain struggled to answer Nicholson’s question, and I imagine other Labor pollies would have struggled, too. Albo, I would bet, would never have tackled Scotty’s bullshit.
Any unionist, however, could have answered that question. It isn’t rocket science, either. The short answer? Simple: to lift wages the first thing is to dismantle Cormann’s “deliberate design features of our economic architecture”.
The public sector pay rise cap of the NSW State Government (COALition) is one. It’s probably the clearest example possible of a government’s power to suppress wage growth as well. Sure, Scotty’s federal regime cannot be blamed for a decision taken by his NSW party colleagues. It, however, shows that a dislike for higher pay is in the DNA of his party.
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Wage theft is another. At least in Australia, it’s widespread and generalised. Scotty could have done something about it. Yet, last year Cash scuttled an already weakened bill penalising wage theft. Why? Ask her. A possibility is that she actively approves of employers’ robbing their workers; another possibility is that she acted out of spite: she would not pass into law the only sweetener included in the Industrial Relations Bill, after all the poisonous provisions had been removed. So, she instructed her Senate colleagues to vote against their own bill.
Insecure/precarious work (casual, part-time, gig economy, fixed-term contracts, labour hire) is yet another. One in three Aussie workers are in such insecure forms of employment: you may work today, nobody knows about tomorrow. Insecure work was introduced through legislation, in the name of Cormann’s flexibility. Legislation could eliminate it: the government has power, even as Scotty pretends to not know this fact.
Legislation, introduced by Hawke and Keating and further developed by Howard and Rudd/Gillard constrained union power. Cash wants to further this.
Want to increase workers’ pay? Let unions do their job. Labor will not do that for us. Maybe the Greens and/or the Socialist Alliance will.
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