Everyone can relax about wages growth. It’s all fixed, according to business, in the wake of yesterday’s 3.1% annual growth for the September quarter in the wage price index.
“Businesses are delivering the strongest rate of wages growth in a decade,” said Business Council head Jennifer Westacott, warning of “the harmful unintended consequences of a massively expanded multiemployer bargaining stream”.
“Australians can’t afford a system that slows down this strong private sector wages growth,” she piously noted.
At the Australian Industry Group, Innes “the workers’ friend” Willox said “the increase in the wage price index released by the ABS today shows that the pace of wages growth is picking up strongly. This is occurring without the assistance of the heavy-handed provisions in the government’s IR bill currently in the Parliament … The pick-up in wages growth is occurring organically.”
It’s true that private sector wages growth, at 3.4% in annual terms, hasn’t been this high since December 2012, when Labor was last in power.
But it’s mostly down to the Fair Work Commission’s (FWC) annual wage decision in June to give the lowest paid a substantial pay rise, or $40 a week, with the encouragement of the government. According to the Australian Bureau of Statistics, this decision “was a significant contributor to hourly wage rate increases in the retail trade, administrative and support services, accommodation and food services, public administration and safety and health care and social assistance industries”.
Retailing, which saw the highest growth of all (4.2%) was also helped by a one-off situation of two award increases within the year.
Together, all those sectors affected by the FWC ruling account for 5.6 million workers or more than 40% of the entire workforce. Sorry, Innes, but the FWC forcing employers to substantially lift wages for Australia’s worst-off workers ain’t “organic”.
If you want to know what was happening “organically”, there’s the transport sector (2.5% annual growth), education (2.2%), utilities (2.9%) or mining (2.7%), along with stronger sectors like construction (3.4%) or manufacturing (3.6%).
The irony of business boasting of the strongest wages growth in a decade is that in December 2012, unemployment was 5.4% — nearly two points higher than the 3.5% it averaged in the September quarter. Nothing more clearly demonstrates just how broken the industrial relations system is than that comparison.
The other irony is that business is declaring wages are all sorted when — as a direct result of the actions of business — real wages are falling rapidly. The consumer price index rose 1.8% in the three months to September for an annual rate of 7.7%. That means real wages fell over the year to September by 4.3% for private sector workers and 5.3% for public sector workers, for whom wages growth is still a distant memory. That rushing sound you can hear is your income plummeting.
When workers are going backwards that fast as a result not merely of externally sourced inflation but businesses increasing profits, it takes real chutzpah for business to declare victory. The only victory on the wages front is that of the businesses that Westacott and Willox represent, not their workers.
The extent to which organic, fair trade, gluten-free wages growth is now occurring — long past the point when labour market economists insisted it should have, and still at levels well below a decade ago (WPI growth reached 4% for private sector workers in 2011) — suggests that the labour market continues to fail to translate demand for labour into significantly higher wages, even in sectors seeing strong growth.
In short, it’s compelling evidence the government really does need to change the rules of the industrial relations system to stop employers from facing the full consequences of higher demand for labour.
