Real Wage Cuts Hit Marginal Electorates Hard

New analysis of income tax data confirms a dramatic slowdown in Australian wages in recent years – and the slowdown is worse than previous statistics indicated.

The research is contained in a new report from the Centre for Future Work at the Australia Institute.  It shows that average nominal wages in Australia grew just 1.7% per year between 2012-13 (when the wage slowdown took hold) and 2016-17 (most recent tax data available). That's below the average national rate of inflation over that period (1.9%), resulting in a decline in the average real wage.

While the wage slowdown was experienced across the country, some regions were particularly hard-hit. Real wage losses were especially large in Queensland and Western Australia. Moreover, the impact was disproportionate in regional communities in both states -- located in some of the most fiercely contested electorates in the current federal election campaign. This suggests that public anger over falling real wages could be politically pivotal to the result on May 18.

View the full report here.

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The Impact of Minimum Wages on Recent Wage Trends

Tomorrow the Australian Bureau of Statistics will release its quarterly Wage Price Index: the most commonly-reported measure of wage growth in Australia’s labour market. Given the importance of public debates about wages and wage policy in the current federal election campaign, this release is timely and politically important.

This briefing note reviews some methodological issues related to the WPI. It also considers recent data confirming the visible impact on the WPI of last year’s strong increase in the national minimum wage.

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Arena Magazine: For More Jobs and a Living Wage

The Australian policy journal Arena has published a wide-ranging article by Centre for Future Work Director Jim Stanford on the labour market issues at play in the current federal election.

Stanford argues that the sense of "superiority" which typically accompanies economic debates during Australian election campaigns is muted in the current contest, because of the poor performance of the labour market in recent years. Unemployment and especially underemployment remain high; the quality of work has deteriorated; and wages have experienced their weakest performance since the end of the Second World War.

Visit Arena's website to see the full article here.


Denying Wages Crisis Won't Make It Go Away

As the great novelist Isaac Asimov wrote, “The easiest way to solve a problem is to deny it exists.” Business leaders and sympathetic commentators have adopted that advice with gusto, during current public debates over the unprecedented weakness of Australian wages.

Even as Australian voters express great concern over stagnant wages, and strong support for policy measures to boost wages (like restoring penalty rates and lifting minimum wages), business leaders continue to claim that wages are doing just fine, thank you.

In this commentary, Centre for Future Work director Jim Stanford challenges this attitude of denial. The empirical evidence is overwhelming, he argues, that traditional wage mechanisms have broken down in Australia - and as a result workers are not getting a healthy share of the productivity they produce.

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Penalty Rate Cuts Will Exact Big Toll Over Easter/ANZAC Day Period

Many Australians are eagerly anticipating a unique concentration of public holidays in coming days. There is a ten-day period (stretching from Good Friday through Sunday, 28 April) during which many employees only have to work three days. Many Australians are now arranging to take those three days off: creating an extended 10-day holiday for the “price” of just three days leave.

Of course, many other Australians will be required to work during this period, and so for them the appeal of this coming period is diminished. Adding insult to injury, however, is the fact that their compensation for working during this period is being significantly reduced as a result on ongoing reductions in penalty rates for Sunday and public holiday work in the retail, accommodation, and food and beverage industries. A new report from the Centre for Future Work puts a number on the total loss of wages that will be experienced by workers in the broad retail and hospitality sectors through the coming holiday period: $80 million this year, rising to $107 million for a similar period once the rate cuts are fully implemented.

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Economics 101 for the ABCC

The Australian Building and Construction Commission's decision to press charges against 54 steelworkers for attending a political rally, with potential fines of up to $42,000 per person, is abhorrent on any level. No worker should face this kind of intimidation for participating in peaceful protest.

But why is the ABCC, established to police construction workers and their unions, now going after steelworkers? It claims that since the factory they work at sells steel to construction sites, it is in effect part of the construction industry. But that claim, if taken seriously, means that the whole economy -- and all workers -- are subject to the ABCC's crusade.

In this commentary, Jim Stanford explains the basic economics of supply chains to the autocrats at the ABCC:

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Budget 2019-20: Ooops, They Did It Again!

You would think that after 5 consecutive years of wage forecasts that wildly overestimated actual experience, the government might have learned from its past errors – and published a wage forecast more in line with reality. But not this government. They are still trying to convince Australian workers, who haven’t seen real average wages rise in over 5 years, that better times are just around the corner. And rosy wage forecasts are helpful in justifying their equally optimistic revenue forecasts: since if Australians are earning more money, they will be paying more taxes!

So the 2019-20 Commonwealth budget, tabled Tuesday evening by Treasurer Josh Frydenberg, featured another valiant prediction that fast wage growth is indeed still “just around the corner.” Despite a slowdown in wage growth in the last months of 2018, this budget simply replicates last year’s wage forecast – but delayed by one more year. Crucially, there  is no discussion justifying why Australian workers might have confidence in this year’s forecast, when the last five so widely missed the mark (and always in the same direction).

Our analysis of the 2019-20 Commonwealth budget focuses on the wages crisis facing Australian workers, and challenges the claim that cutting personal tax cuts can somehow compensate workers for the fact that their wages are not growing.

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Tax Cuts Can't Compensate for Flat Wages

This week's pre-election Commonwealth budget will feature reductions in personal income taxes, as the Coalition government tries to overcome a disadvantage in the polls in the coming federal election. Public debate in recent weeks has been focused on the economic and social hardship caused by the unprecedented slowdown since 2013 in Australian wage growth. It is likely that the government will portray its personal tax cuts as a form of "compensation" for slower wage growth.

But new analysis from the Centre for Future Work shows it is mathematically impossible for personal income tax cuts to offset the loss in family incomes resulting from years of wage stagnation. The report simulates the effects of ongoing regular wage increases on household incomes, compared to the "savings" of personal income tax cuts. Regular, compounding wage increases provide boosts in disposable income dozens of times larger than tax cuts. Moreover, tax cuts always come with a "cost" for households - in the form of foregone public services and income supports that also contribute to workers' standard of living.

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Labour Reforms in New Zealand, and Lessons for Australia

Australia can learn much from the policy leadership of the Ardern Government in New Zealand and its reforms to address stagnant wages and rebuild a more inclusive workplace relations framework, according to new research from the Centre for Future Work at the Australia Institute.

As Australia's debate over wages and workplace rights heats up ahead of this year's federal election, important changes in labour policy are also being implemented right across the Tasman Sea. Under the Labour-Green-NZ First coalition government which came to office in New Zealand in 2017, several progressive changes in labour law have already been enacted. Others are in development.

Economist Alison Pennington reviews the policy reforms underway in New Zealand, and considers their relevance for Australia, in a new paper published by the Centre for Future Work.

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124 Labour Policy Experts Call for Measures to Promote Stronger Wage Growth

124 labour policy experts have today published an open letter calling for proactive measures to help accelerate the rate of wages growth in Australia’s economy. The legal experts, economists, and other policy analysts agreed that “stronger wages in the future would contribute to a stronger, more balanced and fairer Australian economy,” and they proposed several broad strategies to boost wages.

 

The letter is being circulated today through internet and social media channels, and through a full-page advertisement in the Australian Financial Review.

 

Here is the letter and the list of signatories and their complete titles and affiliations.

 

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