By Peter Switzer
One of the oldest taunts of the right-wing fraternity in the 1970s and the 1980s was that wage rises were killing jobs.
Nowadays, unions are less influential on wage outcomes, except for some key industries such as construction, teaching, nursing and the public service, and this comes when there is a constant outcry that wage rises are too low.
However, while this unwanted trend is often portrayed as an injustice, akin to the dismissal of Gough back in 1975 and the lack of fresh water for third world countries, maybe with all the whinging about slow wage rises we’re forgetting a few things.
Let me list them:
- Interest rates are historically low, so anyone with a mortgage really is living in a real wage bonus land. And anyone who has lived through the 8-9% rates we saw not that many years after the GFC and 17% in the 1980s would have to agree with me on this point.
- This low-wage story hasn’t been helped by the end of the mining boom, which pushed up mining wages and also national average wages.
- We have seen tax cuts over the past decade, which means our after-tax incomes are miles better than those of yesteryear.
- While we know power bills are expensive because of the Internet and globalisation which has brought the likes of Zara, H&M, Amazon, discount airlines, etc. to local consumers, the real wage (what you can buy with your dough) is still OK, without being fantastic. For the record, CommSec’s Craig James has this to say on the subject: “Wages grew by around 2% over the past year with underlying inflation up around 1.7%. And while wage growth is modest, it still is running faster than inflation and thus represents real wage growth. Some analysts will use headline inflation as a gauge on real wages, however that is boosted by a temporary lift in fuel prices, which should be more subdued in the coming quarter.”
- We’re actually getting a lot of jobs and I wonder if the low wages growth could be helping. Do you think? In case you missed it, we got job numbers and this is what happened: “Employment rose by 42,000 in May after rising by 46,200 in April (previously reported as a rise of 37,400 jobs). Full-time jobs rose by 52,000, while part-time jobs fell by 10,100. Economists had tipped a near 10,000 increase in jobs.” (CommSec) And we’ve created around 155,000 jobs this year! Hours worked rose by 1.9% in May (the biggest rise in 11 years) and were up by 2.3% over the year (strongest annual growth in 17 months). The unemployment rate fell from 5.7% to 5.5%, which is a four-year low!
Office workers, Brisbane. Source: AAP
But I hear you ask — can we trust these numbers from the Australian Bureau of Statistics (ABS)? Well, this is what Craig James says and I agree: “One strong economic result is viewed with suspicion. Two strong results are viewed with cautious optimism. Three strong job results are viewed as confirmation of a very positive trend.”
Business confidence and conditions readings have been well over their long-term averages lately and job ads have been sensational and are at six-year highs!
Sure, it would be great if wages were rising more quickly but inflation would take off and then interest rates as well. And then our doomsday merchants would be worrying about rising inflation as well as spiking interest rates, mortgage stress and then a possible recession and rising joblessness.
Maybe what we have is not great but it’s OK, and let’s hope economic growth picks up over the next couple of years to help wages trend higher.
So for the moment, put a lid on your wage whingeing because they won’t be rising slowly forever.
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