Economists sometimes like to think we can never have good things, and the news – even if good – is never as good as you think. So let us celebrate the strongest annual wage growth since 2009. Strong wages are a good thing – especially when driven as they were in the September quarter by raises for the lowest paid.
The September quarter wage growth of 1.3% – although the largest increase on record – was not a shock and came in line with most expectations. As such, they should not spook the RBA into raising rates.
Even still, the September figures do stand out – especially for the private sector, which had a 1.4% jump – breaking the quarterly record of 1.2% that occurred back in June 2008:
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Nearly half (49%) of workers in the private sector got a pay rise in July, August or September. And the average rise was a very strong 5.8%.
The September quarter is always when most workers get a pay rise. Not only is it the start of the new financial year when many enterprise agreements have scheduled pay rises, it is also the quarter in which all workers on awards get a pay rise.
In June, the FWC gave workers on awards a 5.75% pay rise. Added to the mix this year is the 15% wage rise won by aged care workers. Together with individual agreements, you get a rather abnormal increase in one quarter that we know will not be replicated in the next figures.
In this context it is not surprising that 40% of people who got a pay rise in the September quarter received one larger than 4%:
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You would expect that number to decline next quarter, but it is nonetheless clear there have been solid increases in wages over the past 12 months - from the 3.2% annual growth this time last year - to 4.0% now:
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Of course, one good quarter does not undo all the damage of the past few years.
In the September quarter, inflation rose 1.2%. This means private-sector workers saw their real wages improve, but compared with last year they remain worse off. The 4.2% annual rise in private-sector wages is well behind the 5.4% growth of the CPI. And over the past three and half years, prices have left wages in the dust:
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The value of wages in real terms is still more than 5% below where it was prior to the pandemic. Despite the small improvement in September, the purchasing power of people’s wages remains back where it was 14 years ago in 2009:
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So yes, real wages have stopped falling, but the path back to where we were before the pandemic remains long and slow.
One thing we are starting to see is private-sector wages getting back in sync with service prices:
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The RBA will no doubt pay particular attention to that as they have been repeatedly saying they are worried about service prices because they remain ever vigilant that wages will begin to grow “unsustainably”.
And yet given the historic falls in real wages, it is not surprising workers are after some redress.
This is most evident in the public sector, where not only has the value of their wages fallen due to inflation, but they have in some cases been subject to wage rise caps for more than a decade.
The end of these caps allows public-sector workers to bargain for wages without being subject to artificial constraints. Thus in September workers in public administration and safety had solid wage growth and yet over longer periods their wage growth is at the back of the pack:
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We can grasp just how much tougher getting a wage rise currently is in the public sector than for those in the private sector, given the September quarter saw a record one-quarter rise for private-sector workers but just the 36th biggest rise for those in the public sector.
One place where public-sector workers are very much being left behind by their private sector counterparts is in the ACT. Public sector workers in Canberra (who of course also mostly include commonwealth public-sector workers) only had a 2.4% rise compared with 5.8% for private-sector workers. South Australian public servants overall are the ones doing it the toughest though, with a mere 1.8% wage rise in the past year:
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We know talk of wage rises will turn to the effect on interest rates. But after the past decade of slowing wage growth and then the horror of the past two years as inflation driven by supply-side issues and companies using their competitive advantage to increase prices saw real wage collapse, we all deserve a decent pay rise.
And if we are ever to recover our lost purchasing power, we need plenty more wages rises above inflation.
Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work
