Daily BulletinHoliday Centre

News

  • Written by David Peetz, Professor of Employment Relations, Centre for Work, Organisation and Wellbeing, Griffith University

Wages growth for Australian workers is among the worst in the industrialised world. For more than a third of workers on individual contracts, wages aren’t growing at all.

This is odd, given Australia is in a “record” 28th year of economic growth with apparently low unemployment and a supposedly strong economy.

Read more: Vital Signs: Amid talk of recessions, our progress on wages and unemployment is almost non-existent

Government economists have floated a range of reasons, from blaming workers not changing jobs enough to caps on public-service salaries. But the most obvious factor is the loss of worker power due to the decline in unionisation over the past three decades.

There's an obvious reason wages aren't growing, but you won't hear it from Treasury or the Reserve Bank ABS 6345.0 Looking for alternative answers Low wage growth is a problem in most industrialised countries, but since 2013 Australia’s nominal wage growth has been less than half the OECD average, according to Jim Stanford at the Australia Institute’s Centre for Future Work. Last year Stanford co-edited a book on the wages crisis in Australia, to which I contributed. In the book’s third chapter, Stephen Kinsella and John Howe declare “the erosion of workers’ rights is the most consequential, and actionable, factor behind the stagnation of wages in Australia”. There's an obvious reason wages aren't growing, but you won't hear it from Treasury or the Reserve Bank Percentage of workforce covered by collective agreements. OECD Database on Union Coverage But some government economists seem to be struggling to recognise this. In July, a deputy secretary of Treasury instead pointed to the problem of workers not switching jobs enough as warranting “further attention”. It was as if, somehow, workers had collectively but separately decided not to apply for higher paying jobs, and this was a cause rather than an effect of lower worker power. Last month the Reserve Bank governor, Philip Lowe, told the House of Representatives Standing Committee on Economics that caps on public-sector wage increases were part of the problem. This suggests the bank recognises there is an institutional element to the issue, though low wage growth is not just a public-sector problem. There's an obvious reason wages aren't growing, but you won't hear it from Treasury or the Reserve Bank Reserve Bank of Australia governor Philip Lowe appears before the House Economic Committee on 9 August 2019. Lukas Coch/AAP Reserve blank In April the Reserve Bank held a conference on low wages growth. One of the papers, by staff in the Reserve Bank’s Economic Research Department, found that union membership declines “are unlikely to account for much of the recent low wages growth”. This finding was odd, because for decades economists have been writing about how unions have raised wages, and how union decline is a factor in rising inequality. In the past Reserve Bank officials have complained that unions were too effective. In 1997, for example, the bank’s deputy governor worried about there being “excessive wage demands”. The paper from the bank’s Economic Research Department is based on analysing statistics from the federal government’s Workplace Agreements Database. It’s a very good database, but it does not contain data on union density (membership as a proportion of employment). So it cannot be used to test if declining union density is affecting wage outcomes. Union density is far from being a perfect measure of union power, but it is better than the proxies the paper uses. In lieu of considering union density, the paper bases its conclusion on finding there has been no decline in the share of enterprise agreements negotiated with union involvement. It also finds wages in union agreements have continued to grow faster than wages in non-union agreements. Neither of these findings proves wage stagnation is unconnected to declining union density. They only show that employees have even less bargaining power when they aren’t unionised. We need stronger evidence than this to overturn decades of research showing unions raised wages. Labour market monopsony That said, the decline in union density is not the only issue. Changes to industrial relations laws have also made it harder for unions to obtain wage increases. Modelling the effects of such things is even harder for economists. Research overseas points to local labour markets being increasingly dominated by a small number of employers. The US National Bureau of Economic Research suggests wages in more concentrated labour markets are 17% lower than wages in less concentrated labour markets. Tacit or explicit agreements between employers to not poach workers, and “non-compete” clauses being forced on even low-skilled workers, also shift power from employees to employers. Read more: This is what policymakers can and can't do about low wage growth As the late Princeton University economist Alan Krueger pointed out last year, monopsony power – the power of buyers (employers) when there are only a few – has probably always existed in labour markets “but the forces that traditionally counterbalanced monopsony power and boosted worker bargaining power have eroded in recent decades”. So yes, there are a number of reasons why workers have less power, and why wages growth is weaker, than in the past. Among them, though, we cannot ignore the critical fall in union bargaining power.

Authors: David Peetz, Professor of Employment Relations, Centre for Work, Organisation and Wellbeing, Griffith University

Read more http://theconversation.com/theres-an-obvious-reason-wages-arent-growing-but-you-wont-hear-it-from-treasury-or-the-reserve-bank-122041

INTERWEBS DIGITAL AGENCY

The Conversation

Politics

Scott Morrison interview with Ray Hadley

RAY HADLEY: Prime Minister, good morning.    PRIME MINISTER: G’day Ray.    HADLEY: Jeez you copped a hammering while I was away.   PRIME MINISTER: Goes with the job mate.    HADLEY: Well, yo...

Ray Hadley - avatar Ray Hadley

Immediate small business support for bushfire affected communities

In response to the devastating bushfires, the Morrison Government has today announced a comprehensive suite of measures to immediately support impacted small businesses.    This initial package ...

Scott Morrison - avatar Scott Morrison

Scott Morrison Press Conference - Australian Parliament House

Good afternoon. While we are facing more benign weather conditions in the short term, this morning, I received briefings from the Bureau of Meteorology, which set out that over the medium term out...

Scott Morrison - avatar Scott Morrison

Business News

2019 Hottest FinTech Startups Overview

Modern technology is experiencing rapid growth, so many industries expect a so-called revolution, and the financial world is no exception. Over the past ten years, people have witnessed the emergence ...

News Company - avatar News Company

How to Choose the Right Data Recovery Solution for your Business

In the modern business environment, data is one of the most important commodities. A typical B2C seller, for instance, offering home delivery service cannot deliver the product to the right addres...

News Company - avatar News Company

CrowdStrike Services Cyber Front Lines Report

New CrowdStrike Report Finds an Increase in Cyber Adversaries Turning to Business Disruption as Main Attack Objective CrowdStrike Services Cyber Front Lines Report offers observations gained from t...

Media Release - avatar Media Release

Travel

The Family Travel Handbook from Lonely Planet

Everything you need to know to take unforgettable trips with your children   Full of practical advice, ideas and inspiration for every type of family, Lonely Planet's The Family Travel Handbook ...

Adam Bennett - avatar Adam Bennett

3 Ideas for a Family-Friendly Holiday to Bali

A family holiday is always an exciting time, but it can often come with its fair share of challenges, especially when trying to keep every member of the family happy. Thankfully, the beautiful islan...

News Company - avatar News Company

The Best Things to Do in Adelaide Hills

Adelaide Hills has long been a relaxing escape for the people of Adelaide and beyond. Its proximity to the capital makes it an accessible destination that feels like you’re miles away from the hustl...

News Company - avatar News Company

ShowPo