My Blog

Tag: Wages & Entitlements

  • Webinar: Changes to the SCHADS Award and Next Steps to Improve Job Quality

    We recently hosted a special webinar to discuss the Commission’s changes, their significance, and what comes next in the struggle to improve and properly value work in human services.

    The webinar featured two representatives from the Australian Services Union, which was centrally involved in the campaign for these changes: Emeline Gaske, Assistant National Secretary for the ASU, and Michael Robson, National Industrial Coordinator. They reviewed the economic and policy context for the review, the specific changes that have been announced, how they will be implemented, and the next steps in lifting the quality of work in these vital sectors. The conversation was chaired by our Policy Director for Industrial and Social issues, Dr. Fiona Macdonald.

    The post Webinar: Changes to the SCHADS Award and Next Steps to Improve Job Quality in Human Services appeared first on The Australia Institute's Centre for Future Work.

  • 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.

  • 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.

  • High inflation means real wages have plummeted

    Labour market policy director, Greg Jericho, notes in his column in Guardian Australia that even if wages have increased by 2.5% in the next release (up from 2.3% in the 12 months to December) real wages will have fallen 2.5% in the past 12 months.

    That would mean real wages would be back at 2014 levels and barely above where they were when the LNP took office in September 2013.

    Worse still for low-income earners, in the past 12 months the prices of non-discretionary items rose 6.6%. For those whose income goes more towards paying essential bills than does the average household, the pain of these price rises has been much higher. Their real wages have likely fallen by more than 3% in the past 12 months.

    This is why any gloating about a recovery from the pandemic must be tempered to consider the reality of workers’ lives. It is not enough to point to lower unemployment if real wages are falling faster than they ever have outside of the introduction of the GST – especially for lower income earners.

    That is not a recovery; that is a failure.

    With interest rate rises now very much on the way, without wage rises that account for inflation and properly reward for increases in productivity, workers standard of living is set to fall and see them back where they were nearly a decade ago.

    The post High inflation means real wages have plummeted appeared first on The Australia Institute's Centre for Future Work.

  • Universal Public Early Child Education in Australia Would Pay For Itself: Research Report

    Making Early Child Education and Care (ECEC) universal in Australia would pay for itself by unlocking women’s labour supply, boosting GDP and growing government revenues by billions, according to new research from the Australia Institute’s Centre for Future Work.

    With cost of living shaping up as a key election issue, policy experts say boosted funding would ease the pressure on families, while boosting the economy.

    Key Findings:

    • ECEC funding is lower in Australia than other countries, yet private revenues (mostly paid by parents) are higher. Australian parents currently pay more but get less
    • Matching the ECEC funding levels of Nordic countries would generate 292,000 new jobs, directly, downstream and via increased women’s employment
    • If Australian women had the same participation and full-time employment rates as Nordic women Australia’s GDP would be some $132b per year higher
    • Government funding for public and non-profit childcare generates one-third more employment and GDP than funding for private for-profit firms
    • The economic activity supported by expanded funding for public and non-profit ECEC centres would boostAustralian GDP by a further $35b
    • The combined boost to GDP would create an additional $48b in government revenue, more than the cost of providing the childcare services in the first place

    “This is a program that literally pays for itself,” said report author and Senior Economist at the Australia Institute, Matt Grudnoff.

    “This would create tens of billions of dollars in new GDP, hundreds of thousands of jobs and billions of dollars in government revenue – above and beyond the cost of providing those services in the first place.

    “A high-quality, accessible, and non-profit Early Child Education and Care system would facilitate the expanded paid work effort of hundreds of thousands of Australian women, helping close the gender pay gap.

    “At a moment when employers are complaining about a labour shortage, there is an obvious answer: support hundreds of thousands of women to increase their labour supply.

    “Expanded ECEC must be done right, to maximise the potential economic and social benefits. Funding must be directed to not-for-profit and public centres which put top priority on quality – not subsidising the profits of private investors who see children as a profit centre, not a social priority.

    “Childcare is a significant cost-of-living issue for many families with many spending more on childcare than groceries or utilities.

    “This is one of the smartest investments we could make for parents, for employment and for our society. It’s a no-brainer.”

    The report, The Economic Benefits of High-Quality Universal Early Child Education compared ECEC funding levels in Australia to other OECD countries.

    The below table summarises the combined impacts on GDP and tax revenues (for all levels of government) from the increase in labour force participation and full-time work by women, and the direct and indirect jobs associated with ECEC supply.

    The post Universal Public Early Child Education in Australia Would Pay For Itself: Research Report appeared first on The Australia Institute's Centre for Future Work.

  • The Economic Benefits of High-Quality Universal Early Child Education

    A universal ECEC system should be viewed as a fundamental goal for the future Australian economy. Achieving the superior quality and economic benefits of the Nordic systems cannot be done instantly, of course. But our ECEC policies should be reoriented and expanded, with a universal, publicly-delivered, high-quality, and affordable system akin to the Nordic benchmark as its end goal. That will require more substantial investments in ECEC funding, and its reallocation toward the not-for-profit and public facilities which deliver the best quality, and the largest economic benefits.

    The post The Economic Benefits of High-Quality Universal Early Child Education appeared first on The Australia Institute's Centre for Future Work.