Pay Increases Still in the Doldrums

The strange economic contradiction of low unemployment and low wage rises continues. In the space of two days, both the Bureau and Statistics and the Commonwealth Department of Employment published compelling figures showing wage increases at record lows.

Governor of the Reserve Bank of Australia, Philip Lowe, has expressed the view recently that wages could rise to a higher share of GDP (at the expense of profit share) without creating serious inflationary pressures. Interestingly, the low wage-low unemployment phenomenon is not confined to Australia and is occurring in other industrialised nations.

But Australia’s case is a little unusual because our unemployment rate is relatively low and has been for such a long time. While the enterprise bargaining stream carries some of the load for explaining this conundrum, it isn’t the whole story. Lowe cites globalisation and changes in technology as two levers acting on the low pay rise regime. Workers are aware of the competition pressures these factors bring and hence have lower wage rise expectations.

The figures show that overall wage rises in the private sector are at record lows, and, for the first time so too are increases in the public sector. It remains to be seen what impact the large increase in award rates (3.3% on 1st July this year) has on wage outcomes in bargaining in the near to medium term.

Wage Price Index, June Quarter 2017, published 16 August 2017

Trends in Federal Enterprise Bargaining, March Quarter 2017, Department of Employment, published August 14, 2017