The dirty secret behind those calls for employee wage cuts
It was truly awful timing.
Yesterday Australian Industry Group boss Innes Willox delivered a lunchtime address to the “workplace relations special interest group” of the exclusive Brisbane Club. It was billed by his media people as a “major IR speech”, though as it turned out it was the same industrial relations speech every employer representative has given for years, calling for flexibility and reform and attacking trade unions and the Fair Work Act as impediments to productivity growth and getting business costs down. Within a couple of sentences, Willox was declaring “we are a high-cost economy … We need to start cutting our costs now … We need to find ways to lift productivity,” etc, etc — you know the drill.
But even before Willox’s audience had settled down to enjoy their entree of Hervey Bay scallop ceviche (with compressed melon, lemon puree, hoisin, furikake seasoning and soused fennel), the Australian Bureau of Statistics had inflicted a savage blow on Willox’s argument. It revealed that the seasonally adjusted wage price index in the December quarter had risen 0.7%, giving a growth rate for the whole of 2013 of 2.6% (seasonally adjusted) or 2.5% (trend) over the last year. That was the lowest wage growth on an annual basis since the ABS had begun the series in 1997.
In fact it’s so low it was below the rate of inflation for 2013, which was 2.7%, so Australian workers had a real wage cut, which a number of commentators have been complaining we need to have, if only we could have an IR system that delivered it. And the decline in real wages accelerated in the second half of 2013 — in the six months to December, the consumer price index rose at an annual rate of 4.0%, while wages growth was 2.4%.
Today the ABS inflicted more damage on the Willox case. Full-time adult average weekly ordinary earnings grew by just 3.2% in trend terms in the year to November — the lowest annual growth since 2006.
The reason for such persistently slow wages growth, as the Reserve Bank of Australia has pointed out, is a weak labour market. And, equally relevantly, an IR system that has not prevented weak demand for labour from translating into weak wages growth. The Fair Work Act, if you believe business and their cheerleaders at The Australian and The Australian Financial Review, is a throwback to the pre-1993 era of industrial relations responsible for low productivity and high wages that have made Australia “an expensive place to do business”. But first it delivered labour productivity growth, and now it has delivered low wage growth.
So while Willox was explaining the need for urgent IR reform to the very special interests at the Brisbane Club as they tucked into their Northern NSW veal fillet prepared sous vide with horseradish milk puree, mushroom saute, sweet peas, roast celeriac and spinach dressing, his argument, to the extent it had ever held together, was falling apart.
“The dirty little secret of our economic debate at the moment is that business has rarely had it so good.”
But not all employer group were caught on the hop. The ABS data produced a moment of Pythonesque absurdity when the Australian Chamber of Commerce and Industry issued a media release complaining about “stagnant real wages growth” and blaming Labor for it, saying the National Broadband Network and the Renewable Energy Target were responsible. Even better, ACCI reckoned low real wages growth demonstrated the need for IR reform. “The Productivity Commission review of the Fair Work Act cannot come soon enough for the business community,” trilled ACCI’s Burchell Wilson.
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