Wednesday, August 25, 2021

The official figures say wages aren’t growing — here’s why they’re wrong

Have you heard about the latest wage figures? I hope not. They’re meaningless.

What the widely quoted measure of average weekly earnings purports to show is that wages grew a mere 0.1% over the year to May. It’s not true. It’s not what happened. For most of us, wages grew by much more.

That’s not to say wage growth has been high — the best estimate is that private sector wages have climbed 1.9% over the past year and public sector wages a record low 1.3% — but both are still well above nothing, and generally well above our near-record low rates of consumer price inflation.

A check-in with reality would tell you that mid last year the Fair Work Commission lifted award wages 1.75%. Mid this year it lifted them 2.5%.

So how could it be that the official figures, published by a trusted organisation, the Australian Bureau of Statistics, show average earnings static, climbing just 0.1%?

The first thing to say is that the bureau is probably embarrassed by the figures.

They are “not designed to produce movement in earnings data” it says on its website, before acknowledging that’s exactly what they are used for.

‘Not designed’ to measure wage growth

Australia’s pensions are adjusted twice a year in accordance with a formula that includes average weekly earnings.

The figure is built into private contracts. If it wasn’t published, many contracts wouldn’t work.

To create it, the bureau surveys about 5,130 employers every six months, asks what they are paying their workers, and uses the answers to calculate an average female wage, an average male wage, an average part-time wage, an average full-time wage, and a lot of other averages besides.

The ‘average wage’ isn’t typical

One problem is that averages are not representative. The survey suggests the average full-time wage is A$90,330, whereas in reality six in ten earn less.

The mid-way (median) full-time worker earns $10,000 less. The average is boosted by a few enormously high earners and can’t be taken seriously.

An entirely separate problem arises when you try to use averages to calculate growth. The average is only an average of what’s averaged, and that can change.

When low-wage workers lose jobs…

Here’s an example. What would happen if a recession caused everyone working only four hours per week to lose two hours? It would push their earnings down and push down average weekly earnings, which would be about right.

But what if each of those people lost a further two hours, taking their hours down to zero. Their low hours would no longer be included in the total to be averaged, and (without them in it) average earnings would climb.

…the average wage goes up

That’s what happened a bit over a year ago. The bureau says COVID restrictions “led to a large decrease in the number of jobs, people employed and hours worked, with lower-paid jobs and industries particularly impacted, including jobs in accommodation and food services, arts and recreation services”.

The loss of those lower-paid and low hours jobs in catering, the arts and other industries “had the effect of increasing the value of average weekly earnings”.

Layoffs pushed the average wage up.

Fortunately, the bureau says by November many of the low-wage workers laid off got some hours back, depressing growth in the average wage (but not growth in any actual wages) resulting in recorded growth of just 0.1% in the year to May.

Many have probably since lost hours with this year’s renewed lockdowns, pushing average wages (but not actual wages) higher again.

It’s enough to make you think the legislation and contracts should switch from a measure that’s close to worthless to one that actually measures wage growth.

The bureau offers such a measure. It’s called the wage price index, and the bureau has been trying to encourage people to switch to it since 1998.


Read more: Other Australians don't earn what you think. $59,538, is typical


It is also built around a survey of employers, but rather than asking how much they pay each worker, it asks how much they pay for each job title and classification. The bureau calculates growth by comparing like with like, regardless of how many people were employed in each classification at the time.


Wage Price Index

Annual growth in total hourly rates of pay excluding bonuses, public sector and private sector. ABS

The results are believable: private sector like-for-like wages climbed 1.9% over the past year, and public sector wages 1.3%.

But even they are not right when it comes to the wage growth of individuals.

Individuals get promoted, and (much less often) demoted. They change jobs, usually for better ones.

People aren’t positions

So if you were trying to use the recent like-for-like wage growth of around 2% per year as a guide to what will happen to your own wage (in order, for instance, to work out whether you could afford a mortgage) you would probably guess too low.

It’s why many Australians — those who’ve got not only regular pay rises but also promotions — wonder what the fuss about low wage growth is about.


Read more: Top economists say cutting immigration is no way to boost wages


A good measure of the actual wage growth of Australians doesn’t yet exist, although it might soon. The bureau is working on tracking individuals through the use of payroll data reported to the tax office.

In the meantime the (HILDA) Household, Income and Labour Dynamics in Australia survey that tracks 17,000 Australians over time finds that the actual wage growth of full-time workers is indeed higher than the like-for-like figure suggests (which might help explain soaring home prices) although it too is weakening.

Part time workers don’t seem to get the same benefit.

As Mark Wooden, director of the HILDA survey puts it, “Australians in full-time work are doing pretty well – provided they remain in employment”.The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Tuesday, August 24, 2021

Top economists in no rush to offer cash incentives for vaccination

Australia’s top economists are reluctant to endorse the use of either cash incentives or lotteries to boost vaccination rates.

A survey of 60 leading Australian economists selected by the Economic Society has instead overwhelmingly endorsed a national advertising campaign (90%), vaccine passports for entry to high-risk settings such as flights, restaurants and major events (85%) and mandatory vaccination for high-risk occupations (81.7%).

Offered six options for boosting uptake once supply was in place and asked to pick as many as they liked, only 35% picked cash incentives and only 31.7% lotteries.

Many said advertising and vaccine passports should work on their own.

Others, such as Uwe Dulleck from the Queensland University of Technology, suggested that while cash and lotteries might also work, “maybe a little bit”, they were ethically no better than coercion.

The panel selected by the Economic Society includes leading experts in the fields of behavioural economics, welfare economics and economic modelling. Among them are a former and current member of the Reserve Bank board.


Read more: Paying Australians $300 to get vaccinated would be value for money


Michael Knox of Morgans Financial said the most important thing for getting Australians vaccinated was “trust”.

Trust could be built through a national advertising campaign delivered via doctors and chemists as well as the media.



Others supported advertising in principle, but doubted the government’s ability to do it well.

The Australian government’s A$3.8 million “tacos and milkshake” campaign about sexual consent did not inspire confidence, said RMIT’s Leonora Risse.

The University of Sydney’s Stefanie Schurer said an easy and effective measure would be to simply reduce “transaction costs”. Many vaccinations don’t take place simply because they are difficult to arrange.

‘What’s in it for me?’

Former OECD director Adrian Blundell-Wignall said as a child in the 1950s, if you turned up on the day the polio or smallpox caravan was at school, you were either lined up and injected with a vaccine, or else given a lump of sugar with vaccine on it to swallow. “There was no debate, thank heaven.”

Underlying the reticence of two-thirds of those surveyed to endorse vaccine payments — along the lines of the $300 suggested by Labor or “VaxLotto” suggested by the Grattan Institute — was a concern that it would change the debate to “what’s in it for me?”.

Reserve Bank board member Ian Harper said “what’s in it for the rest of us” was at least as important.


Read more: Why lotteries, doughnuts and beer aren't the right vaccination 'nudges'


Macquarie University’s Elisabetta Magnani said cash incentives could “validate mistrust”. The University of Sydney’s Susan Thorp was concerned they might set a precedent.

“Would people expect another cash incentive in future for COVID vaccination boosters or for flu shots or childhood diseases?” she asked.

‘My body, my choice’

Two of the 60 economists surveyed backed “no additional measures”. UNSW Sydney economist Gigi Foster said the choice should be an individual’s, made without social shaming, goading, moralising or outright coercion.

But others strongly disagreed about individual choice. The University of Melbourne’s Leslie Martin said while personal choice mattered, it “should not come at a cost to others”. And Stefanie Schurer said in a world where individual freedoms were already wildly curbed, vaccination mandates and passports did not seem off the charts:

A requirement for children to meet immunisation schedules has been attached to childcare payments since 1998 and for the Family Tax Benefit A supplement from 2012. Families can access their family-related Centrelink payments only if their child’s vaccination schedule is up-to-date. In 2015 exemption rules were tightened to make it harder for so-called conscientious objectors. States such as NSW have also introduced vaccination mandates for children to access childcare centres.

Several of the economists who supported cash payments and lotteries said they should be held in reserve and used only as a “last resort”.

The Grattan Institute’s Danielle Wood said even if they only shifted the dial a few percentage points, there was a big difference between getting 75% of people vaccinated and 80%.

Eighty per cent might be enough to get a re-opening of the economy to “stick” without the need for further lockdowns.


Detailed responses:

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Wednesday, August 18, 2021

Australia is at risk of taking the wrong tack at the Glasgow climate talks, and slamming China is only part of it

Buried within the prime minister’s response to the latest report from the Intergovernmental Panel on Climate Change is just about everything we’re at risk of getting wrong at the Glasgow climate talks in October.

After slamming China — whose emissions per person are half of Australia’s — for not doing more to cut emissions, Scott Morrison said the Glasgow talks were the “biggest multilateral global negotiation the world has ever known”.

If he treats the talks as just another (big) negotiation, we’re in trouble.

The way the Department of Foreign Affairs and Trade usually treats negotiations is hold something back, hold out the prospect of “giving it up,” and then only make the concession if the other side gives something in return. Even if holding back damages Australia.

Cars are a case in point. From an economic point of view, there is no reason whatsoever to continue to impose tariffs (special taxes) on the import of cars — none, not even in the eyes of those who support the use of tariffs to protect Australian jobs. Australia no longer makes cars.

Yet the tariff remains, at 5%, making it perhaps A$1 billion harder than it should be for Australians to buy new cars (although nowhere near as hard as it was in the days when the tariff was 57.5%).

The tariff seems to be in place largely to give the Department of Foreign Affairs and Trade something to negotiate away in trade agreements: for use as what the Productivity Commission calls “negotiating coin”.

Here’s how it worked in the 2014 Australia-Korea Free Trade Agreement. Australia agreed to remove the remaining 5% tariff on Korean cars, “with consumers and businesses to benefit from downward pressure on import prices”.

But Australia didn’t remove the tariff on car imports altogether, which would have given us a much bigger benefit but denied the department negotiating coin.

The next year the department did it again, agreeing to give up the tariff on imported Japanese cars in the Japan-Australia Economic Partnership Agreement (but not on other cars) so Australians could “benefit from lower prices and/or greater availability of Japanese products”.

Two years later, it did it again, with cars from China.

When the UK and European agreements are negotiated, it’ll do it there too.

Australia holds back reforms

Eventually Australians will get what they are entitled to. But the point is that rather than advancing the cause of free trade, the department has held back, treating a win for the other side as a loss for us, when it wasn’t.

The Centre for International Economics believes the much bigger earlier set of tariff cuts lifted the living standard of the average Australian family by A$8,448.

Had our trade negotiators been in charge, we would still be waiting. Instead the Hawke and then the Keating governments pushed through unilateral reductions, asking for nothing in return.


Read more: This is the most sobering report card yet on climate change and Earth's future. Here’s what you need to know


As former Trade Minister Craig Emerson put it, this gave Australia “credibility in international trade negotiations way beyond the relative size of our economy”.

Does that sound like the sort of thing Australia might need at Glasgow, to have enough credibility to urge even bigger emitters to deliver the kind of cuts on which our futures and future temperatures depend?

It won’t work with China

The prime minister is right to say that China is the world’s biggest greenhouse gas emitter, even though its emissions per person are low. Its high population means it accounts for 28% of all the greenhouse gases pumped out each year. The next biggest emitter, the United States, accounts for 15%

But China’s status is new. Until 2006 it pumped out less per year than the United States. Because the US has had mega-factories and heating and so on for so much longer, it is responsible for by far the biggest chunk of the greenhouse gasses already in the atmosphere: 25%, followed by the European Union with 22%.



China might reasonably feel that countries like the US that have done the most to create the problem should do the most to fix it.

Like Australia, the US pumps out twice as much per person as China and has much more room to cut back.

On the bright side, China knows that being big means it is in a position to make a difference to global emissions in a way that other countries cannot on their own. And that’s a position that can benefit its citizens.

China’s latest five-year plan, adopted in March, commits it to cut its “carbon intensity” (emissions per unit of GDP) by 18%. If it beats that five-year target by just a bit (and it has beaten its previous five-year targets) its emissions will turn down from 2025.

It is aiming for net-zero emissions by 2060.

Australia needs China’s help

The Intergovernmental Panel on Climate Change finds that Australia is especially susceptible to global warming. We’re facing less rain in winter, longer heatwaves, drier rivers, more arid soil and worse droughts.

We are right to want China to do more, but the worst way to achieve it is to say “we won’t lift our ambition until you lift yours”.

Hardly ever a worthwhile strategy, it is particularly ineffective when we don’t have bargaining power.


Read more: Climate change has already hit Australia. Unless we act now, a hotter, drier and more dangerous future awaits, IPCC warns


The only power we’ve got is to set an example, unilaterally, as we did with tariffs. And to ramp up our ambition.

If Australia said it would do more, and didn’t quibble, it might just count for something.

It’s all we can do, and it’s the very best we can do.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Wednesday, August 11, 2021

Casino operator Crown plays an old business trick: using workers as human shields

Casino operator Crown Resorts must be desperate or think we’re dumb.

Last week, before the royal commission into its right to hold a casino licence in Victoria, Crown resorted to one of the oldest, most discredited, tricks in the book. It used its workers as shields.

“More than 20,000 people work across Crown’s resorts. Over 11,600 of those work in Melbourne. The vast majority of them were of course not complicit in the misconduct,” its lawyer Michael Borsky told the commission.

Revoking Crown’s licence would sentence Crown’s employees to “enormous disruption and possibly financial hardship” at a time when many were already “living through great uncertainty and hardship”.

And not only Crown’s employees. Among Crown’s shareholders were “tens of thousands of small shareholders and, indeed, superannuation funds”.

Removing Crown’s licence would not only endanger Crown’s workers, it would have “a significant impact on the Victorian tourism industry”.

Crown provided 10% of Melbourne’s hotel rooms. Before COVID-19 hit, it contributed A$1.2 billion per year to Victoria’s economy.

It’s a logically flawed defence of the kind I first heard from Alan Bond’s Bond Corporation in the late 1980s, several years before he was imprisoned for fraud.

Trying to fend off an attempt to have his breweries placed in receivership, the company said Bond had 20,000 employees. They might not “have a job to go to on Tuesday”.

The logical flaw was the suggestion that if Bond didn’t own the breweries, the breweries wouldn’t exist.

The beers made by those breweries — Tooheys, Swan and XXXX — are still being made today.

Similarly, if Crown loses its casino licence, its 10% of Melbourne hotel rooms will still be there, most likely run by someone else. Its casino (or one like it) will also still be there, also run by someone else.

Clive Palmer tried it as well

The use of this flawed argument reached its peak early last decade during the battle over Labor’s proposed resource super profits tax.

Despite its name, the tax was designed as a profit-sharing arrangement. The government would be on the hook for 40% of the cost of each project and would take 40% of the profit.

If a project was profitable for a mining company, then 60% of the project would also be profitable, meaning the tax ought to make no difference to its willingness to invest.


Read more: Mineral wealth, Clive Palmer, and the corruption of Australian politics


Yet mining magnates such as Clive Palmer and Andrew Forrest threatened to abandon Australia and take their money elsewhere, to Africa or to China.

Their threats were no more a threat to Australian mining than Alan Bond’s was to Australian brewing.

If Forrest and Palmer had walked away (or even BHP and Rio Tinto, which talked along similar lines), someone else would have walked in.

The arrangement might not be to their liking, but it would be to the liking of someone else prepared to take the profit in their place.

Crown, as Royal Commissioner Ray Finkelstein pointed out on August 3, is profitable. Its casino operation is very profitable: “maybe on the decline a little bit, but very profitable”.

“The way industry works is somebody will always step in, so I don’t treat 12,000 employees [as] at risk. ” Finkelstein said.

“They might change their employer, but they are not at risk of losing their jobs.

Nor were suppliers or tourists at risk.

"When we have a profitable operating business, there will be an operator there out in the world, a suitable one.”

A line that used to work — on television

That Crown thought it could spin this line might have something to do with the experience of its largest shareholder, from whom Crown is now distancing itself.

James Packer used to own Channel Nine (as in an earlier era did Alan Bond).

For most of its life, Australia’s television owners have played chicken with the bodies meant to be policing them — the Australian Broadcasting Tribunal and then the Australian Communications and Media Authority.

Each body was given enormous power: the power to suspend or cancel a licence, but with a catch. It lacked lesser powers.


Read more: The TV networks holding back the future


If it suspended or cancelled an operator’s licence, the station would go off the air (at least for a while). The authority would be deluged with complaints.

Packer, Bond and the other owners could use their viewers as human shields.

Time after time (11 times in five years) the authority found Nine had breached the industry code of practice. Time after time it failed to invoke the ultimate sanction.

In a 2005 report for the authority, Professor Ian Ramsay said this meant that in effect it had “less enforcement powers” than other authorities.

Crown’s workers don’t place it beyond the law

Blessedly, in 2006 (as Packer was selling out of Nine) the government acted on Ramsay’s report. The authority can now issue fines and seek enforceable undertakings, without fear of blow-back.

For Finkelstein to accept that if Crown’s licence was revoked its workers or the tourist industry would suffer would be to accept that, like the television industry was for many decades, Crown is beyond the practical reach of the law.

He is giving every indication he thinks no such thing.The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Wednesday, August 04, 2021

Paying Australians $300 to get vaccinated would be value for money

I reckon Albo’s on the right track. The opposition leader wants to pay A$300 to every Australian who is fully vaccinated by December 1.

The Grattan Institute is on a similar theme. It has proposed a $10 million per week lottery, paying out ten $1 million prizes per week from Melbourne Cup day. One vaccination gets you get one ticket. Two gets you two tickets.

The costs are tiny compared to what’s at stake. Treasury modelling released on Tuesday puts the cost of Australia-wide lockdown at $3.2 billion per week.

Paying people to get vaccinated fits the government’s criteria of a response that’s “temporary, targeted and proportionate”.

And the published research on small payments shows they are extraordinarily effective, often more effective than big ones.

A few years back, Ulrike Malmendier and Klaus Schmidt of US National Bureau of Economic Research discovered that a small gift persuaded the subject of an experiment to award contracts to one of two fictional companies 68% of the time instead of the expected 50%.

Small payments can be more effective than big ones

A gift three times as big cut that response to 50%, which was no better than if there had been no gift at all.

The effect of small payments to pregnant British smokers has been dramatic.

Offered £50 in vouchers for setting a quit date, plus £50 if carbon monoxide tests confirmed cessation after four weeks, £100 after 12 weeks and £200 in late pregnancy in addition to the counselling and free nicotine replacement therapy given to the other pregnant smokers, those offered the payment were more than twice as likely to quit — 22.5% compared with 8.6%.


Read more: Albanese calls for $300 vaccination incentive, as rollout extended to vulnerable children


Never mind that these small sums ought to have made no financial sense.

The gifts were minuscule compared with the money the recipients would have saved anyway by not smoking, yet they worked so well that the researchers estimated the cost of the lives saved at just £482 per quality-adjusted year.

Around 5,000 British miscarriages each year are attributable to smoking during pregnancy. The participants randomly assigned the offer of a payment not to smoke gave birth to babies that were on average 20 grams heavier.

The incentives can be even smaller.

Mai Frandsen at the University of Tasmania has trialled offering smokers half as much — a A$10 voucher on signing up, then $50 per checkup in addition to support from a pharmacist. The results are encouraging.

Lotteries are cheaper still. The Grattan Institute’s suggestion of a $10 million per week payout sounds like a lot, but it isn’t when divided by Australia’s population.

A preliminary analysis of Ohio’s Vax-a-Million lottery found it increased takeup by 50,000-80,000 in its first two weeks at a cost of US$85 per dose.

Beer, doughnuts, dope

Other incentives offered with apparent success in the US include free beer, donuts and (in Washington state) free cannabis.

They needn’t work for everyone. A survey conducted by the Melbourne Institute in June found that of those who were willing to get vaccinated but hadn’t got around to it, 54% would respond to a cash incentive.

Of those who weren’t willing or weren’t sure, only 10% would respond to cash.


If you were paid a cash incentive, would you get vaccinated as soon as possible?

Melbourne Institute Pulse of the Nation survey

But the important thing about vaccination is that not everyone needs to do it.

The Grattan Institute believes 80% of the population needs to be vaccinated before we can reopen borders.

The national cabinet has adopted a lower target: 80% of Australians over 16, which is 65% of the population.

Vaccination expert Julie Leask says when it comes to child vaccines, most non-vaccinating parents are simply “trying to get on with the job of parenting”. If it’s made easy for them, they’ll do it.


Read more: When will we reach herd immunity? Here are 3 reasons that's a hard question to answer


There’s not a lot to be gained by trying to reach these who actually don’t want to be vaccinated. Try too hard, and you’ll get their backs up.

The tragedy of the government’s COVID vaccine rollout (aside from the difficulties with assuring supply) is that the government hasn’t made it easy.

Vaccination ought to be easy

The government could have made it easy. When it sought advice last year from departments including the treasury, it was told to do what’s done for the flu vaccine — to distribute it through employers and pharmacies as well as general practitioners, so as to make it almost automatic.

The best part of a year later, it’s a view the prime minister is coming round to. Most of us don’t go to the doctor very often — it’s out of our way.


Read more: Over 18 and considering AstraZeneca? This may help you decide


For a government that came to office promising to slash red tape for business and offered businesses incentives to invest, this government appears not to have fully grasped the importance of red tape and incentives when it comes to health.

It might yet. Prime Minister Scott Morrison said yesterday he had investigated something along the lines put forward by Albanese. General Frewen, in charge of the COVID taskforce, said it wasn’t needed “right now”.

When the time comes, if we remain under-vaccinated, Morrison can reach for it.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Monday, August 02, 2021

Top economists say cutting immigration is no way to boost wages

Australia’s top economists have overwhelmingly rejected cuts to either permanent or temporary migration as a means of restoring lost wage growth.

The 56 leading economists polled by the Economic Society and The Conversation include a former head of the Fair Pay Commission and a former expert member of the Fair Work Commission’s minimum wage panel.

Among the experts, selected by their peers, are specialists in economic modelling and the economics of labour markets from both the private and public sectors.

All but five rejected cuts in temporary migration as a means of boosting wage growth. All but three rejected cuts in permanent migration.

The results put the economists at odds with Reserve Bank Governor Philip Lowe, who last month drew a link between temporary migration and weak wage growth saying employers had been using overseas hires to fill gaps that would have been filled by locals, diluting “upward pressure on wages in these hotspots”. He said this might have spilled over to rest of the labour market.

Cutting temporary and cutting permanent migration were the first two of ten options for boosting wage growth presented to the panel of economists. The panel rated them third last and second last. Only “holding back growth in female and older worker participation” was marked down more.

Each economist was asked to pick three of the ten options. The most popular, picked by 78.2%, was measures to boost productivity growth. The next most popular, picked by 50.9%, was measures to boost business investment.



Michael Keane of The University of NSW said the idea that population growth and increased labour supply were constraining wage growth was “so naive as to not really be worthy of comment”.

Consultant Rana Roy said only a “cultivated amnesia” could ignore the near-uninterrupted growth in real wages in US, industrialised Europe and Australia amid record inbound immigration in the decades after the second world war.

Gabriela D'Souza of the Committee for Economic Development of Australia said the idea owed much to a “one dimensional view of the world” that took account of only the direct impact of immigrants on particular wages and not the impact of their demand for goods and services on a broader range of wages.

Dozens of studies had identified the overall impact as “near zero”.

Productivity ‘almost everything’

Robert Breunig of the Australian National University said immigrants appeared to add to productivity rather than detract from it, meaning slowing down immigration could slow down rather than add to productivity and growth.

Three quarters of the panel nominated productivity growth as the most important precondition for higher wages growth, endorsing the conclusion of Nobel Prize winning economist Paul Krugman that “productivity isn’t everything, but in the long run it is almost everything.”

Krugman famously added that a country’s ability to improve its standard of living over time depended “almost entirely on its ability to raise its output per worker”.


Wages growth is way below the Reserve Bank’s +3% target

Total hourly rates of pay excluding bonuses, seasonally adjusted. Change from corresponding quarter of previous year. ABS Wage Price Index

Ian Harper, a former head of the Howard government’s Fair Pay Commission and a current member of the Reserve Bank board, said that without productivity growth, any boost in wages growth that was delivered was likely to be nominal — matched by inflation — rather than real, delivering higher living standards.

One of the best tools for lifting production per worker was business investment.

One of the five economists who thought immigration hurt wages growth, Macquarie University’s Geoffrey Kingston, said it seemed to do it by thinning investment per worker. In the 1980s, under Prime Minister Bob Hawke, increased immigration helped push down real wages for five years in a row.

Several of those surveyed said wage growth needed investment in more than machines. Griffith University’s Fabrizio Carmignani said what also mattered was investment in “human capital” via education and research and development.


Read more: Exclusive. Top economists back unemployment rate beginning with '4'


Adrian Blundell-Wignall, a former division chief at the Organisation for Economic Co-operation and Development, said reforming the education system and getting rid of elitism had to be part of the plan.

“That the best predictor of how well you do at school is how rich your parents are and where they went to school is a national tragedy,” he said. “The entitlement and club economy that comes with this permeates politics, business, and who gets the best jobs after completing school.”

Former Rudd and Gillard government minister Craig Emerson said while measures to boost productivity growth were essential, even if implemented soon, they would take years to flow through into higher wages.

It’s how you divide the pie

Saul Eslake said whether or not higher productivity growth actually delivered higher real wages would depend on the division of the fruits of that growth between wages and profits.

John Quiggin said nearly every reform of Australia’s industrial relations system since 1975 had acted to reduce the bargaining power of unions. All ought to be reviewed with a “presumption in favour of repeal”.

Mala Raghavan of the University of Tasmania said wage growth had become uneven. Wages for a small number of managers had soared while wages for others — especially casual workers — had barely moved.


Read more: Top economists want JobSeeker boosted $100+ per week, tied to wages


The Australian National University’s Emily Lancsar saw a triple benefit from reforming the industrial relations system to support higher wage decisions: it would increase wages directly, it would put money that would have been paid out as profits in the hands of people likely to spend it, and the increases would flow through to workers not directly affected by the decisions.

Labour market specialist Jeff Borland added that there was a case for strengthening the ability of unions to obtain gender pay equity in female-dominated occupations.

None of those surveyed were optimistic about the prospect of quickly lifting wages growth. The Reserve Bank said in July it wasn’t planning to lift interest rates until aggregate growth exceeded 3%.


Detailed responses:

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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