My Blog

Tag: Economics

  • Real wages plummet and will take years to recover

    Labour market policy director, Greg Jericho notes in his Guardian Australia column that the fall in real wages has been the worst since the introduction of the GST and in the first 3 months of this year real wages fell 1.5%.

    So steep has been the fall that real wages are now back essentially to where they were at the time of the September 2013 election.

    The fall highlights that talk about Australia having recovered from the pandemic ignores the most basic aspect of the economy – the living standards of workers from their wages.

    The fall is such that even with the RBA’s estimates of solid wage growth recovery over the next two years, should Australia return to pre-pandemic trend real wages growth, it would take till 2031 to recover workers purchasing power back to the levels of 2020.

    That would we a lost decade of living standards.

    The post Real wages plummet and will take years to recover appeared first on The Australia Institute's Centre for Future Work.

  • Real wages are shrinking, these figures put it beyond doubt

    Read the full article Real wages are shrinking, these figures put it beyond doubt on The Conversation.

    The post Real wages are shrinking, these figures put it beyond doubt appeared first on The Australia Institute's Centre for Future Work.

  • Working With COVID: Insecure Jobs, Sick Pay, and Public Health

    Almost one in five Australians (and a higher proportion of young workers) acknowledge working with potential COVID symptoms over the course of the pandemic, according to new opinion research published by the Centre for Future Work.

    The research confirms the public health dangers of Australia’s existing patchwork system of sick leave and related entitlements.

    The main findings of the report, based on a poll of 1000 Australians, include:

    • More than one in three (37%) employed Australians have no access to statutory paid sick leave entitlements (including workers hired under casual employment arrangements, and self-employed workers). Another 12% had access only to pro-rated part-time entitlements.
    • When the pandemic hit Australia, barely half (51%) of employed workers could count on regular full-time income if they had to stay home from work.
    • Almost one in five respondents (19%), and a higher proportion of young workers (29%), acknowledged working with potential COVID symptoms at some point during the pandemic. This confirms the public health dangers of Australia’s patchwork system of sick leave and related entitlements.
    • Polling results also confirm that a significant proportion of workers (17%) also attended work after exposure to someone possibly infected with COVID.
    • Given inadequate sick pay entitlements and the surprising share of workers attending work in violation of public health advice, it is not surprising that 18% of workers did not feel safe attending their normal workplaces during the pandemic.

    This research indicates that Australia’s sick pay entitlements are clearly inadequate to protect workers’ health and safety at work and allow them to stay home from work when health advice requires it. The expansion of non-standard and insecure forms of work (including part-time work, casual jobs, contractor positions, and ‘gigs’) has heightened concern that many workers do not have the effective ability to stay home from work for health reasons.

    Government should expand sick pay entitlements to cover all workers, and also implement strategies to limit and reduce the incidence of insecure work: including by constraining employers’ use of ‘permanent casual’ arrangements, sham contracting, and on-demand gigs, none of which provide normal and healthy paid leave entitlements.

    Unfortunately, the current federal Government has done the opposite by reinforcing this shift toward insecure working arrangements – including through its 2021 amendments to the Fair Work Act, which cemented and expanded employers’ rights to hire workers on a casual basis (with no sick pay) in virtually any job they wish.

    The post Working With COVID: Insecure Jobs, Sick Pay, and Public Health appeared first on The Australia Institute's Centre for Future Work.

  • One in Five Worked with COVID Symptoms; Sick Leave Entitlements Must Be Strengthened

    Almost one in five Australians (and a higher proportion of young workers) acknowledge working with potential COVID symptoms over the course of the pandemic, according to new opinion research released today by the Australia Institute’s Centre for Future Work.

    The research confirms the public health dangers of Australia’s patchwork system of sick leave and related entitlements, as new ABS data released today indicates 32% of Australian households had one or more members exhibiting COVID symptoms in April.

    Key Findings:

    • More than one in three (37%) employed Australians have no access to statutory paid sick leave entitlements (including workers hired under casual employment arrangements, and self-employed workers). Another 12% had access only to pro-rated part-time entitlements.
    • When the pandemic hit Australia, therefore, barely half (51%) of employed workers could count on regular full-time income if they had to stay home from work.
    • Almost one in five respondents (19%), and a higher proportion of young workers (29%), acknowledged working with potential COVID symptoms at some point during the pandemic. This highlights the public health dangers of Australia’s patchwork system of sick leave and related entitlements.
    • Polling results also confirm that a significant proportion of workers (17%) also attended work after exposure to someone possibly infected with COVID.
    • Given inadequate sick pay entitlements and the surprising share of workers attending work in violation of public health advice, perhaps it is not surprising that 18% of workers did not feel safe attending their normal workplaces during the pandemic.
    • Australia’s sick pay entitlements are clearly inadequate to allow workers to stay home from work when health advice requires it. The expansion of non-standard and insecure forms of work (including part-time work, casual jobs, contractor positions, and ‘gigs’) has heightened concern that many workers do not have the effective ability to stay home from work for health reasons.
    • Government should expand sick pay entitlements to cover all workers, and also implement strategies to limit and reduce the incidence of insecure work: including by constraining employers’ use of ‘permanent casual’ arrangements, sham contracting, and on-demand gigs, none of which provide normal and healthy paid leave entitlements.
    • Unfortunately, the current Federal Government has done the opposite by reinforcing the shift toward insecure working arrangements – including through its 2021 amendments to the Fair Work Act, which cemented and expanded employers’ rights to hire workers on a casual basis (with no sick pay) in virtually any job they wish.

    “Our research shows that too many workers are not following public health guidelines and isolation instructions, to the detriment of their own health, and the health of their colleagues and the broader community,” said Dr Jim Stanford, economist and director of the Australia Institute’s Centre for Future Work.

    “Millions of workers have either used up all the paid sick leave they are entitled to, or do not receive sick pay entitlements in the first place. There is no doubt this has contributed to the epidemic of people attending work with possible COVID symptoms.

    “With incomplete sick leave coverage, workers face a devil’s choice: between staying home to protect themselves, their colleagues and the public; or going to work regardless simply to make ends meet.

    “The policy implications of this analysis are clear. The government needs to expand sick pay entitlements to cover all workers, including those in casual employment and self-employed situations.”

    The post One in Five Worked with COVID Symptoms; Sick Leave Entitlements Must Be Strengthened appeared first on The Australia Institute's Centre for Future Work.

  • To really address housing affordability we need to think differently

    The problem is that for many decades, housing policies have overwhelmingly been geared toward increasing demand within the private-sector housing market. This has only served to pump prices and make it harder for first-home buyers to enter the market, and also increasing the age that people are buying their first home.

    Policy Director, Greg Jericho, writes in a column for Guardian Australia, that we need to instead focus on the supply side – increasing the stock of housing – and we also need to be bold enough to look outside the typical private-sector model.

    The Australia Institute’s Nordic Policy Centre has proposed a number of measures that have been pursued in Norway, Sweden and Finland that show the solution to housing affordability is not about creating tax distortions that benefit homeowners or which serve only to transfer money from low-income people to the wealthy, but instead treats housing as a need rather than just a wealth-building asset.

    After decades of failure, the solution to housing affordability needs to be something other than more policies designed to lift housing prices.

    The post To really address housing affordability we need to think differently appeared first on The Australia Institute's Centre for Future Work.

  • Submission to Productivity Commission: Aged Care Employment

    Submission on aged care workforce conditions to the Productivity Commission.

    Authors: Fiona Macdonald

    Download the full report.

  • Real wages should rise – anything else means declining living standards

    Labour market policy director, Greg Jericho, in his column in Guardian Australia, however notes that wages should grow faster than inflation, and so long as real wages are not outpacing productivity growth then such rises are not exerting any inflationary pressure. He also shows that given the recent estimates for inflation by the Reserve Bank, a 5.1% increase would not be enough to prevent the minimum wage falling in real terms over the next financial year.

    The problem is not that wages have been fuelling inflation, but that for the past 20 years real wages have risen slower than productivity.

    We need to change the debate from a reflex that assumes low wages is the ideal to realising that given workers are the economy they should be rewarded fairly for their efforts and improvements in productivity.

    You cannot say the economy is healthy if real wages are falling, and most certainly not if the lowest paid in Australia are seeing their living standards decline.

    The post Real wages should rise – anything else means declining living standards appeared first on The Australia Institute's Centre for Future Work.

  • The Wages Crisis Revisited

    A comprehensive review of Australian wage trends indicates that wage growth is likely to remain stuck at historically weak levels despite the dramatic disruptions experienced by the Australian labour market through the COVID-19 pandemic. The report finds that targeted policies to deliberately lift wages are needed to break free of the low-wage trajectory that has become locked in over the past nine years.

    The report, The Wages Crisis: Revisited, authored by three of Australia’s leading labour policy experts: Professor Andrew Stewart from Adelaide Law School, Dr Jim Stanford from the Centre for Future Work, and Associate Professor Tess Hardy from Melbourne Law School, updates analysis and recommendations from their 2018 edited book, The Wages Crisis in Australia.

    The report shows that annual nominal wage growth recovered after initial lockdowns during the pandemic – but rebounded only to the same slow pace (just above 2% per year) recorded for several years prior to COVID. Unprecedented fluctuations in employment and labour supply, including a significant decline in the official unemployment rate, do not seem to have altered wage growth, which is still tracking at the slowest sustained pace in post-war history.

    The research found little correlation between the lasting slowdown in wage growth after 2013, and changes in supply-and-demand balances in the labour market. Traditional market forces did not cause the wages crisis, and market forces are unlikely to be able to fix it – even with a relatively low unemployment rate.

    Instead, the authors identified nine policy and institutional factors which were more important in explaining the deceleration of wages, including: the erosion of collective bargaining coverage; inadequate minimum wages; pay restraint imposed on public sector workers; and widespread wage theft.

    The problem of restrained compensation in public and human services reaches further than just the pay caps imposed directly on public servants. Wages in publicly funded services (like aged care, the NDIS, and early child education) are also held back by inadequate funding and weak labour standards in those programs. The report makes special mention of the need to improve wages in aged care, in the wake of the recent Royal Commission’s finding that wages in the sector must be improved as a top priority in improving care standards and attracting the new workers the sector needs.

    The authors suggest that nominal wages should grow faster than 4% per year in coming years, to restore healthy relationships with productivity growth, inflation, and national income distribution. But a resuscitation of wage growth will not occur without proactive wage-boosting policies.

    The authors list five broad measures to quickly support wage growth. One is a proposal for a new statutory definition of employment. This would prevent businesses from drafting contracts that present workers as being self-employed, even if in reality they have no business of their own. The authors predict that such arrangements will become far more widespread, including in the growing gig economy, in the wake of two recent decisions by the High Court.

    The post The Wages Crisis Revisited appeared first on The Australia Institute's Centre for Future Work.

  • Wages Will Continue to Lag Without Targeted Wage-Boosting Measures: New Report

    A comprehensive review of Australian wage trends indicates that wage growth is likely to remain stuck at historically weak levels despite the dramatic disruptions experienced by the Australian labour market through the COVID-19 pandemic. The report finds that targeted policies to deliberately lift wages are needed to break free of the low-wage trajectory that has become locked in over the past nine years.

    The report, The Wages Crisis: Revisited, authored by three of Australia’s leading labour policy experts: Professor Andrew Stewart from Adelaide Law School, Dr Jim Stanford from the Centre for Future Work, and Associate Professor Tess Hardy from Melbourne Law School, updates analysis and recommendations from their 2018 edited book, The Wages Crisis in Australia.

    The report shows that annual nominal wage growth recovered after initial lockdowns during the pandemic – but rebounded only to the same slow pace (just above 2% per year) recorded for several years prior to COVID. Unprecedented fluctuations in employment and labour supply, including a significant decline in the official unemployment rate, do not seem to have altered wage growth, which is still tracking at the slowest sustained pace in post-war history.

    “It is striking that despite so much turmoil in our labour market during and after the pandemic, wage growth is still stuck at historically weak rates,” noted Professor Andrew Stewart.

    The research found little correlation between the lasting slowdown in wage growth after 2013, and changes in supply-and-demand balances in the labour market.

    “Traditional market forces did not cause the wages crisis, and market forces are unlikely to be able to fix it – even with a relatively low unemployment rate,” said Dr Jim Stanford.

    Instead, the authors identified nine policy and institutional factors which were more important in explaining the deceleration of wages, including: the erosion of collective bargaining coverage; inadequate minimum wages; pay restraint imposed on public sector workers; and widespread wage theft.

    The problem of restrained compensation in public and human services reaches further than just the pay caps imposed directly on public servants. Wages in publicly funded services (like aged care, the NDIS, and early child education) are also held back by inadequate funding and weak labour standards in those programs.

    The report makes special mention of the need to improve wages in aged care, in the wake of the recent Royal Commission’s finding that wages in the sector must be improved as a top priority in improving care standards and attracting the new workers the sector needs.

    “A combination of underfunding, outsourcing, and precarious employment has suppressed wages for some of the most important jobs in our economy,” commented Associate Professor Tess Hardy. “The Aged Care Royal Commission identified this problem, and directed government to solve it, but so far the government has done nothing to improve wages.”

    The authors suggest that nominal wages should grow faster than 4% per year in coming years, to restore healthy relationships with productivity growth, inflation, and national income distribution. But a resuscitation of wage growth will not occur without proactive wage-boosting policies.

    The authors list five broad measures to quickly support wage growth. One is a proposal for a new statutory definition of employment. This would prevent businesses from drafting contracts that present workers as being self-employed, even if in reality they have no business of their own. The authors predict that such arrangements will become far more widespread, including in the growing gig economy, in the wake of two recent decisions by the High Court.

    “The High Court has said that employment status has to be determined by what your contract says, not what you actually do. That opens the door to much wider use of contractor models, even when the actual conditions of work clearly indicate an employment-like relationship”, said Prof Stewart. “Without urgent action to prevent minimum wage laws being avoided in that way, the negative impacts on wages will steadily become much worse.”

    The post Wages Will Continue to Lag Without Targeted Wage-Boosting Measures: New Report appeared first on The Australia Institute's Centre for Future Work.

  • Why commentary that wages growing in line with inflation will drive up inflation is completely misguided

    Today the opposition leader, Anthony Albanese was asked about wages in the following exchange:

    Journalist: “You said that you don’t want people to go backwards. Does that mean that you would support a wage hike of 5.1% just to keep up with inflation?

    Anthony Albanese: “Absolutely”.

    Any other response would be to suggest that real wages – and thus people’s ability to purchase goods and services with the money they earn – should decline.

    The suggestion that wages rising in line with inflation or even marginally above inflation will increase inflation in a “return to the 1970s” wage spiral ignores basic economics and the advice of the Treasury department.

    Real wages should rise – and unless they are outpacing productivity there is no case to be made that they are driving inflation.

    This very point was made in February by the Secretary of the Treasury, Steven Kennedy when he noted

    “if we can achieve productivity growth of 1.5 per cent, then nominal wages [assuming inflation of 2.5 per cent] can grow at four per cent and put no pressure on inflation”[i].

    The problem is not that wages are growing too fast, but that over the past 3 years they have not kept pace with inflation and productivity growth.

    From June 2019 to the end of 2021 inflation has increased 5.7% and productivity has grown by 4.5%. And yet rather than wages growth being equal to the sum of those two measures, nominal wages in that period increased just 4.8%, and real wages have fallen 0.8%. Real wages have thus declined, while real labour productivity increased.

    The evidence is clear that wages did not cause the current surge in inflation. There is no reason to believe that suppressing wages will cause inflation to moderate. Asking workers to accept a permanent reduction in their real living standards to fight inflation that they did not cause is neither fair nor economically sensible.

    The Reserve Bank has rightly suggested that it will keep an eye on labour costs, however it should be noted that in the 12 months to March while the Consumer Price Index grew 5.1%, the Producer Price Index, which measures the inflation of input costs, rose 4.9%, and nominal unit labour costs grew just 4.0%. This confirms that inflation is not being driven by labour costs.

    Moreover, Non-farm, Real Unit Labour Costs are now 3.1% below their pre-pandemic level of December 2019.

    That decline is even faster than the long-term trend.

    Real unit labour costs index (non-farm)

    A fall in real wages will only continue the transfer of national income from workers to corporate profits – something which also occurred when inflation was falling. Workers were told then to accept lower wages growth (and also public-sector wage caps) because inflation was low. Now they are being told to accept lower wages because inflation is high – and for no fault of their own.

    [i] Economics Legislation Committee, 16 February 2022.

    The post Why commentary that wages growing in line with inflation will drive up inflation is completely misguided appeared first on The Australia Institute's Centre for Future Work.