My Blog

Tag: Economics

  • The key legislation changes that will help workers get a better deal

    However, with recent changes to industrial relations laws, and with unemployment at record low levels, some workers are now in a better position to bargain for better pay and conditions.

    Slow wages growth, low bargaining coverage and high levels of insecure work are good indicators of how workplace power imbalances have stifled prospects for many employees.

    Over the last decade Australia’s wage growth has been at its weakest since the middle of the last century, coverage of workers by enterprise agreements has rapidly eroded, and over a third of workers are now in insecure casual, labour hire or fixed-term jobs.

    Bargaining hobbled

    Despite low unemployment – meaning there are fewer workers available to fill vacancies – employees have not been able to bargain for higher pay and the real value of wages has been declining.

    Industrial relations reforms passed by parliament in late 2022 are designed to restore some balance to the workplace.

    The changes don’t mean there is a massive shift of power to workers but, with the removal of some barriers to bargaining, there should be greater opportunity for employees to gain improvements at work.

    At the present time, the labour market is tight and employers are competing to find and retain workers so they may be prepared to offer higher wages and other benefits.

    Already, unions representing early childhood education and care workers have applied to use a new multi-employer bargaining option – which came into force last month – to seek a pay increase for these low-paid workers.

    While it will be some time before we see any outcomes, there is early evidence that other bargaining reforms are getting workplace bargaining moving after years of decline. Certainly some employers may now be more ready to negotiate enterprise agreements to avoid being roped into multi-employer agreements.

    Other non-bargaining reforms introduced as part of the 2022 Secure Jobs, Better Pay package attracted much less attention than bargaining changes during last year’s debates over the new laws.

    However, these other changes are not insignificant for working conditions.

    The right to flexible work

    More than half of all employees now have new rights to request flexible work, including employees who are parents of children of school age or younger, carers and workers aged 55 or over, those with a disability or people experiencing or supporting someone experiencing family violence.

    Before the flexibility changes, which came into effect in June, some limited flexible work rights already existed. However, now there is much greater onus on employers to show there are reasonable business grounds if they wish to refuse employees’ requests for flexible work.

    While this is no guarantee that all employees can access the flexibility they need, it has potential to be a game-changer in some workplaces through pushing employers to find ways to organise work for greater employee-friendly flexibility.

    Research shows that Australians are some of the most stressed and overworked of all workers worldwide. We know we need better-work life balance.

    Post-pandemic, there is widespread experience of more flexible work arrangements and greater recognition of the benefits of flexible work.

    There is some impetus to lock in more employee-friendly flexibility, and workers are having some success in achieving these changes through collective bargaining.

    Working lives are longer than ever, including as the retirement age has just been increased to 67 years.

    Along with pay increases that stop the decline in the value of wages, bargaining for better work-life balance will continue to be important.

    The post The key legislation changes that will help workers get a better deal appeared first on The Australia Institute's Centre for Future Work.

  • If the unemployment rises to 4.5% who is likely to lose their job?

    The next 12 months ahead look to be a time of rising wages, and rising unemployment. The Reserve Bank is trying to raise unemployment in order to prevent rising wages. It’s target of 4.5% will see around 130,000 to 150,000 more people unemployed than is currently the case.

    Labour market policy director, Greg Jericho, in his Guardian Australia column, examines which workers are likely to be the ones who will lose their jobs.

    In a bitterly ironic point, he notes that these are the same workers whom Deputy Governor of the Reserve Bank Michele Bullock recently boasted were the ones who had gained the most from the strong employment growth of the past 18 months:

    people on lower incomes and with less education who have benefited the most from the strong labour market conditions

    More worrying is that the Reserve Bank’s own estimates suggest that the rises in unemployment over the next year will see Australia breach the “sahm Rule” of recession, in which the unemployment rate rises more than 05%pts in a year. Oddly however the RBA’s correspondence on the issue revealed in an FOI disclosure has them suggesting that for Australia the recession trigger is a 0.75% rise.

    Either way, history suggests that when unemployment rises in a year by the amount the RBA is estimating it usually keeps rising.

    The RBA’s own estimates show just how close to a recession the economy is set to go in the next year. It already looks likely to hit workers with low skills and low paid jobs, and if the RBA gets it wrong, it will quickly hit many more of society.

    The post If the unemployment rises to 4.5% who is likely to lose their job? appeared first on The Australia Institute's Centre for Future Work.

  • Australian and Global Union Leader Sharan Burrow to Deliver Second Annual Carmichael Lecture

    Former ACTU president Sharan Burrow will deliver the second annual Carmichael Lecture.

  • Bolstered by a biased tax system, house prices keep rising

    Despite rising interest rates, the latest figures from the Bureau of Statistics show that Australia’s house prices rebounded in the March quarter of this year. Policy director Greg Jericho writes in his Guardian Australia column that since the beginning of the pandemic property prices around Australia have risen 26% while at the same time average household disposable income has increased just 8%.

    This disparity has massive consequences for affordability. Had for example the median property price in Sydney risen in line with household incomes since June 2020, instead of being $1.15m it would be $954,000 – a $196,000 difference.

    Underlying the strength of the market even in the face of rising interest rates is the fact that Australia’s tax system is biased towards property investors.

    The most recent taxation statistics covering 2020-21 showed for the first time the number of investors recording property net profits was greater than those recording a loss. Such a situation only occurred because of the record low interest rates at the time. We know that the past 12 months will have seen a large spike in the number of people negative gearing their properties and thus not surprisingly housing remains an attractive investment not in spite of rising interest rates, but because of rising interest rates.

    The post Bolstered by a biased tax system, house prices keep rising appeared first on The Australia Institute's Centre for Future Work.

  • Blame Game on Inflation has Only Just Begun

    That’s because inflation never affects all prices and incomes evenly. Some prices shoot up, while others grow slowly or decline. Some incomes keep pace with rising prices (or even outpace them), while others lag far behind. Thus the impacts of inflation are always uneven. And this sparks economic and political controversy.

    This distributional conflict is readily visible in current Australian inflation. As prices took off after the lockdowns, corporate profits surged dramatically, reaching their highest share of GDP ever by 2022.

    Meanwhile, wages – which were historically weak even before the pandemic – lagged far behind. In the last two years, consumer prices rose 12.5% (and more for essentials, like food and energy). Average wages grew less than half as much – barely 6% – in the same time.

    That means the purchasing power of workers’ wages is falling. It’s the biggest and fastest real wage cut in postwar history – and record profits from those higher prices are the corollary of workers’ falling real incomes.

    Despite the fact that wages have lagged, not led, recent inflation, the powers-that-be are still targeting workers to bear the brunt of the anti-inflation effort. The Reserve Bank is now using high interest rates to cool off employment and slow wage growth.

    This inflation has produced clear winners, and clear losers. So it’s a myth to proclaim that inflation “hurts all Australians,” pretending we can all join together in a shared national effort to wrestle prices to the ground.

    Our Centre for Future Work published research showing just how lopsided the impacts of inflation have been in Australia. We analysed official national accounts data from the ABS, including income flows, output data, and changes in average economy-wide prices.

    From end-2019 (just before the pandemic) to September 2022 (latest data at the time), higher corporate unit profits accounted for 69% of excess inflation (over and above the RBA’s 2.5% target). Unit labour costs accounted for just 18%, and other stakeholders (including small business) the remainder.

    This confirmed that workers are the victims of inflation, not its cause, and raised big questions about the RBA’s determination to target wages (not profits) for tough anti-inflation medicine. Our findings sparked widespread interest and anger. So business peak bodies, and business-friendly commentators, have launched a steady stream of attacks against our report since its release in February.

    RBA and Treasury officials also disagree with our conclusions. They have not challenged our actual numbers: indeed, internal RBA memos replicated and confirmed our finding that wider corporate profit margins account for the lion’s share of higher prices since 2019.

    But despite this evidence, these officials deny soaring corporate profits are a concern in the anti-inflation battle. Profits grew most dramatically in the energy and mining industries, they say. This is certainly true – due in part to sky-high prices paid by Australians for petrol, gas, and other resource-intensive products. So we can’t magically exclude this super-profitable sector from our analysis of inflation, nor our plan for tackling it.

    They also claim profits outside of mining have not increased. This is false: non-mining profits have been less spectacular than resources, but profit margins have widened significantly, reinforcing inflation. Consumers are reminded of this every time they visit a supermarket, book an airline ticket, or try to rent an apartment.

    In sum, these arguments cannot deny that business has profited mightily from the current inflation – especially, but not solely, in energy and mining – while workers have suffered.

    A flip side of this class conflict over inflation was starkly visible last week, when the Fair Work Commission announced a 5.75% increase in Award wages. That doesn’t quite keep up with inflation, but it sure helps.

    Within minutes, the same corporate lobbyists so offended by our research, lined up to denounce the wage increase as inflationary. They want Australia’s lowest-paid workers, whose living standards have already declined, to sacrifice further. Little wonder business peak bodies hate ay public attention on their own record profits.

    The blame game over inflation will get more heated in the months ahead. Inflation is likely to ease, as many of the unique post-pandemic factors (supply chains, energy price shock, pent-up demand) that underpinned firms’ price increases gradually abate. But real wages have fallen – and workers, understandably, want to repair that damage.

    So workers will demand wage gains in excess of inflation. And by all rights, they deserve that. That need not cause further inflation, especially if record high profit margins come back to earth.

    Corporations, however, want to sustain their record profits as long as possible. They want to keep wages down, and the RBA seems determined to help. So buckle up: the great Aussie debate over inflation is just getting started.

    Jim Stanford is Economist and Director of the Centre for Future Work at the Australia Institute, and the author of Profit-Price Spiral: The Truth About Australia’s Inflation.

    The post Blame Game on Inflation has Only Just Begun appeared first on The Australia Institute's Centre for Future Work.

  • The economy is slowing as households get smashed by yet more rate rises

    The March quarter saw Australia’s economy grow a rather pathetic 0.2% and fall 0.3% in per capita terms. As policy director Greg Jericho writes in his Guardian Australia column, the economy is slowing at a pace that normally would see the Reserve Bank thinking about cutting rates.

    And yet as poor as these figures are, worse is likely to come as the March quarter does not include the two most recent rate rises and only a small amount of the impact from the rate rises in February and March. Both the Treasury and the RBA estimate the Australian economy will go backwards on a per capita basis over the next year and these figures suggest their estimates are if anything too optimistic.

    Households are reducing their savings as wages fail to keep up with inflation. Over the past 2 quarters, household consumption grew at an annualised pace of just 1%. Whenever household consumption has grown that slow the economy has either been in a recession or teetered on the edge.

    And yet despite acknowledging there was uncertainty over household spending, the RBA on Tuesday decided to raise rates in order to essentially slow household spending.

    All they have done is once again hit households that already need a standing 8 count.

    The figures pleasingly showed that total wages are now growing solidly due to both increased employment and better wage growth. But this has not come at the expense of profits, indeed corporate profits in the March quarter rose 3.2% – faster than the 2% increase in unit labour costs. Real unit labour costs rose just 0.2% in the March quarter while real unit profit costs rose 1%.

    This again highlights that profits more than wages drive inflation, and raising rates to slow wage growth by raising unemployment is a poor monetary policy that only risks an unnecessary recession.

    The post The economy is slowing as households get smashed by yet more rate rises appeared first on The Australia Institute's Centre for Future Work.

  • Fair Work: 5.75% Award Wage Boost will not cause Wage-Price Spiral

    Today’s 5.75% award wage increase is a necessary boost for the lowest paid workers but does not keep pace with inflation.

    The Fair Work Commission (FWC) has today explicitly said this increase “will consequently not cause or contribute to any ‘wage price spiral’”.

    Key Points:

    • Award wage increase of 5.75% is less than inflation, which is running at 7%. (This covers approx. 20% of workers)
    • FWC Commission have said explicitly this will not cause or contribute to a so-called ‘wage-price spiral’
    • FWC acknowledges the increase “will not maintain the real value of modern award minimum wages nor reverse the reduction in real value which has occurred”
    • Australia Institute research shows excess corporate profits, not wages, are the major driver of inflation
    • Fair Work Commission also increased the national minimum wage by 8.65% (this covers approx 0.7% of workers)

    “This is a necessary boost, but insufficient to keep the lowest paid workers ahead of inflation,” said Dr. Greg Jericho, Policy Director at the Australia Institute’s Centre for Future Work.

    “It’s significant that the Fair Work Commission has explicitly said this will “not cause or contribute to any wage-price spiral”. At a time when companies are making record profits, our research shows profits, not wages, are the major driver of inflation.

    “The FWC notes it “will make only a modest contribution to total wages growth in 2023-24 and will consequently not cause or contribute to any wage-price spiral.

    “The FWC has made it clear the Reserve Bank can not blame low paid workers wages for driving inflation in the event they raise interest rates next week.”

    Excerpt from Fair Work Commission Decision:

    As the total wages of modern award-reliant workers constitute a limited proportion of the national wage bill, we are confident that the increase we have determined will make only a modest contribution to total wages growth in 2023-24 and will consequently not cause or contribute to any wage-price spiral.

    We acknowledge that this increase will not maintain the real value of modern award minimum wages nor reverse the reduction in real value which has occurred over recent years.

    The post Fair Work: 5.75% Award Wage Boost will not cause “Wage-Price Spiral” appeared first on The Australia Institute's Centre for Future Work.

  • The level of public housing needs to return to previous levels

    There is rarely a debate in Australia that generates more heat than housing. The causes of housing unaffordability and the solutions to it are varied and often get bogged down in power plays and political scaremongering. But as policy director Greg Jericho notes, building more homes is a pretty obvious solution, and more public housing needs to be at the forefront.

    The NSW Productivity Commission this week released a report into housing in NSW that recommended “Building more homes where people want to live.” To this end it suggested raising average apartment heights in suburbs close to the CBD, allowing more development near transport hubs and encouraging townhouses and other medium-density development.

    All of this is worthy. And if combined with the reform of the negative gearing and the capital gains discount will do much good.

    But the report noted that “New South Wales experienced a 45% surge in priority applicant households on the social housing register, with 6,519 priority social housing applicants waiting for assistance as at 30 June 2022”. And yet it did not mention public housing or any social housing solutions at all.

    In the past public housing was a much greater share of Australia’s housing market.

    In 1983 14 public housing building approvals were made for every 100 private sector ones. Now it’s 1.7:100.

    The level of new housing per head of population has fallen and it is thus little wonder that house prices have risen beyond the means of many.

    We need more housing and we desperately need more public housing.

    In the 2019 election campaign, the ALP pledged 250,000 new houses over 10 years. That has now become 30,000 over 5 years under the proposed Housing Fund. It is time for more ambition from the government and more housing for low and middle income earners.

    The post The level of public housing needs to return to previous levels appeared first on The Australia Institute's Centre for Future Work.

  • Profit-Price Spiral an Inconvenient Truth for Big Business: Economists

    New media reports today quoting former Australian Competition and Consumer Commission Chair Rod Sims have reaffirmed the findings of Australia Institute research showing excess profits from companies like Coles and Woolworths are significant contributors to inflation.

    Key Points:

    “That the business lobby has been unable to disprove a single number from our research is a testament to the careful, evidence-based nature of our work,” said Dr. Jim Stanford, Director of the Centre for Future Work and report author.

    “It’s notable that many of the voices now seeking to cast doubt on the evidence behind a profit-price spiral were silent during the prolonged rhetoric on the existence of a wage-price spiral.

    “The report ‘Profit-Price Spiral: the Truth Behind Australia’s Inflation’ contained new macroeconomic data confirming that increasing profit margins per unit of real output in Australia’s economy account for a strong majority (over two-thirds at that time, based on September quarter 2022 data) of above-target inflation since the outbreak of the COVID pandemic in early 2020. The data we presented on the surge in profits, coincident with rising inflation, is clear, sourced to ABS data, and has not been challenged.

    “The RBA’s internal correspondence about our report (released as part of a freedom of information request) in fact replicated and verified our finding that rising profit margins account for the bulk of increased nominal valuations in Australia, comparing end-2019 to late-2022.

    “Macroeconomic trends since then (including December quarter 2022 data released after our initial report) confirm that unit profit margins are still elevated.

    “Contrary to the view of some Australian commentators, numerous high-quality research reports from think tanks, universities, and even central banks in other countries have confirmed the importance of rising profit margins in explaining the acceleration of inflation since the COVID pandemic, using methodological approaches similar to our own statistical decomposition. We cited several of those complementary studies in our follow-up report, Profits and Inflation in Mining and Non-Mining Sectors, and other similar research has been published more recently.

    “The main thrust of the critical commentary on our report has not been to challenge its empirical findings on the rapid increase in profits, but rather to deny that any generalised increase in profitability has been the cause of the inflation. Some claim that the rise in profits has been limited to the mining sector, which somehow doesn’t ‘count’ – even though products produced by that sector (including petrol, gas, and other fossil fuels) have been a leading source of recent inflation.

    “Our subsequent research showed that profit margins have also increased (albeit less dramatically) in several non-mining sectors. Others claim that swollen profits are just a side-effect of inflation that was caused by other forces (usually including supposed excess wage growth or consumer disposable incomes). That debate over the direction of causation is rather moot: the undeniable reality is that profits are at all-time record levels in Australia, while workers’ real wages continue to decline.

    “Business peak bodies who argue for continued wage suppression desperately want to hide the reality that they have profited from the inflation that is causing a crisis in living standards. This explains their interest in trying to challenge our findings.

    “The Australia Institute stands by its research. Arguing about the dimensions, causes, and remedies of the inflation problem is a normal part of the national economic debate. We look forward to similar scrutiny being applied to those arguing that wages are driving inflation in Australia.”

    The post Profit-Price Spiral an Inconvenient Truth for Big Business: Economists appeared first on The Australia Institute's Centre for Future Work.

  • Workplace Law Reform Must Limit Cancer of Gig Work in Care Economy: Research

    Researchers have recommended limits are placed on the growth of gig work in the NDIS as part of the third tranche of the Commonwealth Government’s industrial relations reforms later for later this year. Researchers say the promised reforms to ‘Employee-like’ forms of work should be used to protect minimum employment standards and quality service delivery for care workers and consumers.

    Key findings

    • The gig work model is growing in the care economy and NDIS, undermining wages, conditions and gender pay equality
    • Care workers on platforms are younger, less experienced and more likely to be migrant workers than workers in the broader care and support workforce.
    • Platform care work is insecure on-demand work, working time is fragmented, pay can be unpredictable. Many workers’ earnings are equivalent to below award-level pay.
    • Worker-friendly flexibility is limited and is mainly only possible in short hours jobs. Flexibility comes at the expense of a living wage.
    • Care and support platform workers are isolated and largely invisible, working in private homes without organisational supervision, support, guidance or training.
    • In platform and other independent contracting arrangements, risks and responsibilities for care quality and client safety are devolved to individual workers.
    • Platforms compete by avoiding the costs and risks of business fluctuations, of employing workers and of accountability for care and support quality and safety. Costs and risks are devolved to low-paid and insecure frontline workers.
    • Platforms profit from retaining funds that are allocated for employong workers and providing training and supervision.

    “Unregulated gig work is a cancer for workers rights in Australia,” said Dr Fiona Macdonald, Policy Director, at the Australia Institute’s Centre for Future Work.

    “The growth of gig work on digital platforms in the care economy eats away at minimum employment conditions and shifts risk on to care consumers and staff.

    “Care is a public good. Stopping the gigification of disability and aged care workforces is necessary to prevent public funding allocations for essential workers’ wages, superannuation, training and supervision from being diverted to profits.

    “Sector-specific reforms are currently being considered for the road transport industry. Yet, in the public care and support sectors, the same concerns—safety, sustainability and viability—are being approached through disconnected policy processes, rather than being addressed head on.

    “The Women’s Budget Statement reiterated the Government’s commitment to ‘a sustainable and productive care and support economy that delivers quality care and decent jobs’. Gig care work should be addressed with a view to gender equality.

    “We are seeing the Gigification of care work and, without protections, we will risk seeing this spread to other sectors of the labour market.”

    Recommended policy responses:

    • The Government has committed to reforms to ‘Employee-like’ forms of work in 2023
    • These reforms must be designed to restore full employment rights and benefits to all care and support workers, including minimum wages, super & WHS
    • Comprehensive employment minimum standards should apply for all care and support workers, regardless of employment status
      Digital platforms in the care sector should be bound by mandatory codes of conduct

    The post Workplace Law Reform Must Limit Cancer of ‘Gig Work’ in Care Economy: Research appeared first on The Australia Institute's Centre for Future Work.