The Weekend AFR contained a nice primer on wages growth in Australia, which has overwhelmingly benefited higher income earners over the past 20 years:
The broader truth for the government is that there are many at the bottom of the labour market who will complain that they are now being asked to bear the costs of cleaning up a boom they never fully enjoyed.
The official data shows that wages for the bottom 20 per cent of full-time workers have climbed only 26 per cent since 1993, compared to 45 per cent for workers in the top 45 per cent. The median wage – for the worker in the middle of the pack – has grown by 34 per cent over the period…
The attacks on “weak-kneed” bosses are a sure way of deflecting pressure from the government onto bosses and unions. Employment Minister Eric Abetz has even warned of a wages break-out.
But the evidence is that Australian businesses are moving surprisingly quickly to rein in their wage bills in response to the slowdown in the economy. The government’s rhetoric could be seen as out of touch by workers and firms that are already making sacrifices…
The government can argue that in many industries Australian workers are paid more than overseas competitors, which is certainly a problem for trade-exposed companies such as Ford and SPC.
Australian industrial wages are roughly equal to those in Germany, where productivity is much higher, and significantly higher than in Asia or even the United States…
On the other hand, those actually on the minimum wage will see it differently. In purchasing power parity terms, which adjust for the higher cost of living here, Australia’s minimum wage is about the same as the Netherlands’ or Belgium’s, and only slightly higher than New Zealand’s.
The above findings highlight, once again, why the Government will have difficultly blaming Australia’s falling competitiveness on unionised labour. While there are certainly some examples of gouging – the construction and maritime unions come to mind – the fact remains that wage pressures are broad-based across the economy and, if anything, skewed towards the top.
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It also highlights the need for shared sacrifice, whereby the burden of adjustment is spread across the population, as well as the need to reduce cost/wage pressures by lowering the cost of land and housing.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
