With record low wages growth, workers don't need anymore 'flexibility'

Extract from The Guardian

Greg Jericho

The weak wages growth and stagnant incomes remains one of the biggest issues for the Australian economy, and for people’s purchasing power

‘As employers push for the removal of Sunday penalty rates, the figures show that workers are already seeing their purchasing power decline.’ Photograph: Kevin Fleming/Getty Images

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Thursday 23 February 2017 06.00 AEDT 

With the Fair Work Commission announcing its decision on penalty rates today, the latest data released by the Australian Bureau of Statistics shows worker’s wages are growing at record lows and their real wages remain at the level they were nearly four years ago.
The Reserve Bank governor, Philip Lowe was spot on when he suggested in a speech yesterday that “wage increases are likely to remain below average for some time yet”.
But saying “below average” is putting a nice spin on it. The latest wage price index figures saw wages grow by a record low 1.9% in 2016 – only slightly more than half the long-term average rise of 3.4%:

The weak growth is across both the private and the public sectors – both recorded record low growth throughout 2016:

And the bad news is that there appears no sign of any corner being turned – the December quarterly growth was also a record low growth for both private and public sectors:

The weak wages growth and stagnant incomes remains one of the biggest issues for the Australian economy.
Philip Lowe yesterday noted that this period of record low wages growth comes at a time when household debt is at record highs and the combination of which is restricting households’ ability to spend.
The manner in which house prices have increased faster than wages is highlighted when we compare the wages and residential house prices since 2003:

In Sydney the picture is even starker. Since December 2011, wages in New South Wales have increased by 12%, while Sydney house prices have increased by around 65%.
And even aside from the issue of housing affordability, the low wages growth is leading to a decline in people’s purchasing power.
In the past four years, there have only been five quarters where real wages grew by more than 0.1% - a truly pathetic result.
From 2003-2013, real wages on average grew each year by 0.85%, and yet the last time we saw such an annual rise was in December 2012:

It says something about the lack of demand for workers at the moment that even while we are experiencing record low levels of inflation, we are unable to achieve an increase in real wages.
The stagnant real wage growth we’re currently experiencing has been going on longer than that experienced during the GFC:

And is not a situation that appears likely to change any time soon.
While economists do expect inflation growth to begin rising, in its latest Statement of Monetary Policy, the RBA suggested that “firms expect little change in wage growth over the next year”.
Should wages stay at record lows while inflation growth returns to more normal levels of around 2%, that would mean further declines in real wages. That is a fairly terrifying prospect given since the Liberal government took power in September 2013, real wages have grown by a miserable 0.3%.

Because wages are taxed at a nominal rate, and payments such as family tax benefit are also affected by nominal rises in wages, that means a 2% rise in your wage does not mean the amount of money you have in your hand goes up by 2% (because your average tax rate goes up, and the amount of payments you receive declines).
As a result, such meagre increases in real wages almost assuredly means people’s purchasing power has fallen since the LNP government came to power – the money you get for your labour buys less than it did four years ago.
The wages data however continues to highlight the flexibility in our industrial relations system – something that gets far too little credit from employer groups, who seek only ever lower labour costs through measures such as a reduction of penalty rates.
The mining and construction industries continue to see lower than average wages growth – reflecting both the drop off in production and employment in those areas and, especially in the construction industry, the high level of labour available for work:

The Fair Work Commission’s decision on penalty rates primarily affects retail and hospitality workers. So it worth noting that wage rises in the retail sector have closely followed the employment growth in the industry – exactly as you would desire in a flexible industrial relations system:

The level of flexibility in the system is also evident in the low level of wages growth in the public sector.
While across the nation public sector wages grow faster than in the private sector, such wages mostly include teachers and staff in public health. But the view of public servants receiving pay rises out of step with the rest of the community is quite wrong – despite the current hoo-ha over ATO workers balking at working an extra nine minutes each day.
Public servants in Canberra have not had wages rises higher than that of the average private sector worker since March 2013, and over the past decade have actually had lower wages growth – 33.4% compared to 34.1%:

The wage price index figures highlight yet again that our industrial relations system is more than flexible enough. Wages are growing at record lows in line with record low levels of underlying inflation and a historically weak jobs growth in 2016.
And as employers push for the removal of Sunday penalty rates, the figures show that workers are already seeing their purchasing power decline.
Should penalty rates be reduced or cut it would be yet more evidence for many workers that “flexibility” in industrial relations is really code for them being worse off.