Wages are a key election battleground

Pay packets have stagnated.

Pay packets have stagnated.

With the federal election in full swing, there are countless campaigns underway – not only from the parties vying for seats themselves, but also business groups, lobby groups and unions seeking to get their issues on the national agenda. 

Increasingly shaping up as a major issue is wage growth, and with the Australian Council of Trade Unions spending big on their ‘Change the Rules’ campaign, wages have become a major battleground in 2019. 

The Australian Council of Trade Unions (ACTU) want to see wages boosted for workers through a number of different policies; a reduction in the number of workers employed on casual contracts, reforming labour hire and contractor regulations, a restoration of penalty rates, and the introduction of industry bargaining. 

The campaign isn’t without merit – wages in Australia have been stagnating for years. 

In the most recent Wage Price Index data published by the ABS, wages grew at only 0.5% for the quarter ending in December to leave wage growth at just 2.3%. 

Over the 15-year period between 1998 and 2013, wages on average grew by 3.5% or more. Since 2012, wages haven’t grown by more than 3%, including a record low of 1.9% in 2017. 

This slow wage growth is hurting the Morrison government, not only from the standpoint of Australians earning less, but also damaging the most recent Federal Budget, which assumed wages growth averaging 2.75% over the 2018/19 period. 

And it’s not just unions who are concerned with the lack of wage growth. 

Speaking to the House of Representatives Economics Committee in February, the Reserve Bank Governor, Phillip Lowe, pointed to stagnant consumer spending as a result of low wage growth. 

“The underlying issue is the lack of income growth,” Lowe said. 

“Many people borrowed, I think, assuming incomes would grow at the old rate and they haven’t. They’re having more difficulty, they’ve got less free cash and so they can’t spend in a way. This is why I put so much emphasis on the need for a pick-up in wage growth.” 

You could be forgiven for thinking that although growth is slow, these numbers show that Australians are still better off on a year-to-year basis. 

Living costs are growing faster than household incomes at a rate of 2.9% over the last three years, according to ABS data. 

Ben Phillips, an associate professor at the Australian National University, has published modelling showing what he terms an ‘income recession’.  

Taking into account disposable income data, CPI and population growth, the modelling shows negative growth in living standards driven by slow wage growth. 

The problem of wage growth is accepted more readily by Labor and the union movement than the current Federal Government. 

Speaking on The Project in October 2018, Jobs and Industrial Relations Minister Kelly O’Dwyer said wage growth had been steady. 

“Over the last 10 years, we’ve actually seen wages increase by around 30% and inflation increase by around 20%. Certainly, wages haven’t grown as fast as people might like, but wages have grown steadily over that period of time.” Ms O’Dwyer said. 

This claim was assessed as “not the full story” by the RMIT ABC Fact Check. 

Regardless, it is generally viewed as a problem that needs to be addressed. 

This is where the major disagreements form between the union movement and business lobby groups. 

In a submission to the Fair Work Commission (FWC) this year, the ACTU argued that the minimum wage should be increased by 10.7% over two years, with ACTU Secretary Sally McManus telling ABC Radio National: “No full-time worker should live in poverty.” 

Opposition Leader Bill Shorten has endorsed directing the FWC to move towards a ‘living wage’ from July 1 if Labor wins the election, but hasn’t yet committed to an exact figure. 

The Business Council of Australia (BCA) agrees that wage growth is slow, but points to sluggish GDP as the reason for the stagnation. 

Speaking after the national accounts figures were released in March, BCA Chief Executive Jennifer Westacott said: “GDP growth of just 0.2% last quarter and 2.3% through the year is simply too low to create the new jobs and growing wages Australians have come to expect over the last two decades.” 

Speaking to Barrie Cassidy on ABC 7:30 in March, Westacott again drew the link between wages and productivity as part of a panel discussion with Sally McManus. 

“We have been calling for wage increases for ages. The question is how you get them. You get them through the economy doing more, you get them through productivity going up. I mean, the link between productivity and wage increases is not theoretical, it’s factual. 

“You can’t get wages up if the economy is slow, you can’t [get] wages up if unemployment is high. We have got to do the hard work of driving companies to invest,” said the BCA Chief. 

McManus was quick to point out productivity levels in Australia have been growing, saying: “Productivity has been going up. We just haven’t been getting our fair share. At the moment, labour share of the GDP is at a 60-year low. 

“So what that means is that profits are going up, productivity is going up and we’re just not getting our fair share of it and that’s the problem.”