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Are Uber, Airbnb and Amazon wage rise killers?

Are Uber, Airbnb and Amazon wage rise killers?

Peter Switzer
13 June 2017

By Peter Switzer

Just when one of Australia’s best fund managers, Hamish Douglass, of the Magellan Financial Group described Uber as a big ponzi scheme, we learnt that the share of Australian gross domestic product (GDP) going into workers' pockets has hit a record low!

In case you haven’t noticed that despite our very impressive economic growth story (103 quarters without recession, which equals the best ever in the world!), we have two worrying economic problems. First, business investment (the big source of future growth and jobs) is remaining too low and wages growth is poor.

A Fairfax story says: “The Australia Institute analysis shows the 46.2% share of GDP in the March quarter was the lowest recorded since the Australian Bureau of Statistics started collecting the data in 1959”.

Economist Jim Stanford at the Institute's Centre for Future Work said the relationship between growing GDP and growing labour compensation has been weaker in the past year than at any other time on record.

Jim wants a step-back-in-time old world solution, such as stronger minimum wages and protection of penalty rates but this might be ignoring the strange new world we live in.

This is the world of Uber that has changed the taxi industry forever. Airbnb has hit the hotel/accommodation industry. Amazon is threatening to destroy Aussie retailers, Netflix is undermining free-to-air TV and even hurting Foxtel!

Foreign online retailers are selling everything from frocks to suit to jewellery to sporting goods and, until recently, many of these products didn’t pay or charge a GST!

Local bookkeepers compete with their rivals in Bangladesh and we no longer buy cars made here.

Now which one of the industries do you think are in a great position to grant pay rises to their staff?

Car dealers will be threatened by driverless cars and car-sharing businesses. Fintech companies are trying to replace mortgage brokers, financial planners and bankers.

Journalists are being shown the door as the digital age KO’s newspapers and magazines and travel agents are competing with some of the best deal-delivering websites ever!

And ever airlines are selling their own tickets!

I’d love to see a list of the businesses that genuinely can afford to pay their workers higher wages without hurting their profits and share prices.

We live in a world where if a worker is underperforming and jeopardising the longevity of a small business and the jobs of colleagues, he or she goes on stress leave to avoid losing a job and can easily proceed to sue the business because of bullying, sexual harassment or any other trumped up charge to ensure they get go away money.

And this all follows a GFC that could have easily turned into a Great Depression. And we have people whingeing about slow wages growth when home loan interest rates are under 4%, if you’re smart enough to go looking for one.

Cars, white goods, overseas holidays and clothes have never been so cheap and unemployment here is 5.7%, which is a lot better than say France, where it’s 9.6% and that’s a five-year low!

France is a country that has hung on to many old world labour laws and its high unemployment rate doesn’t surprise many economists.

And what’s even more worrying is that the big threat companies such as Uber, Amazon and Airbnb don’t play by the same rules imposed on their rivals.

Normal businesses operate for profit but Uber and Amazon don’t make profit. Their wage rates are not helpful to raising the overall wages of Australians. Just imagine what Harvey Norman, JB Hi-Fi, Wesfarmers, Woolworths, Metcash and all the businesses preparing for the Amazon onslaught would be thinking about pay rises?

Would the big four banks be eagerly looking forward to giving out pay rises following the bank levy? Sure, they have huge profits but these link to their share prices, which are damn important to our super funds that are very long our banks!

Don’t get me wrong. As a business commentator, I’m amazed at the business models of Amazon, Uber, etc., but their threat to the old world makes generous pay rises hard to imagine going forward, until we see great economic growth, a tightening job market and an overall feeling that Australia and the world economy are going gangbusters.

And I realise that a lot of people who want pay rises are the very consumers who are rejecting local for-profit businesses (which have higher prices) for zero-profit or loss-making businesses that give us really low prices.

The price conscious consumer is killing jobs and pay rises, unwittingly, at least in the short term. Maybe it could be forever, if the likes of Amazon decimate local retailers.

That said, some people in this brave new world are getting big hikes in their pay. Last week, there was a fair bit of consternation amongst shareholders when the CEO of Google’s parent — Alphabet — was shown to have been paid $US200 million last year! Well, at least some people are getting nice pay rises.

One final point. I hate being anti-new world but we have to make new players play by rules that society deems fair. The market is not always right and that’s why we have road rules, why we pay taxes and why we help people really down on their luck.

Politicians let Uber compete against taxis (which needed competition) but the protection of travellers via insurance and car safety checks were ignored, which was unfair.

Hotels pay a lot to ensure sleeping guests have fire protection, fire escapes, CCTV, safe electrical systems, etc., which Airbnb places don’t have to have.

I love competition but it has to be fair. I love the idea of pay rises for all but it has to be affordable. And the new world of hi-tech juggernauts not playing by the rules is making it very hard for those playing by the rules to pay up.

By the way, I don’t think Uber is a ponzi scheme but it’s a business that has succeeded under the cool image of being a disruptive business. However, when John Symond with Aussie Home Loans disrupted the banks in the 1990s, he did not break any rules, he just took lower profits per loan and cut costs.

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