In terms of positive outcomes, the G20 is a pointless talkfest. It was important when the world faced the real threat of a depression as the global financial crisis unfolded and co-ordinated action was required, but since then it has gone the way of other major talkfests like the G7 and the APEC summit. The substantive action is on the sidelines, in bilateral meetings. Politicians and the media who accompany them, however, have to portray the get-together as a major achievement, so we were treated to a dutiful series of stories this morning about various wins for Malcolm Turnbull.
Like other summits, however, what the G20 is good for is to illustrate negative outcomes — what didn’t get agreed, what didn’t get mentioned, what words were omitted from the all-important communique (laboriously workshopped over weeks beforehand by bureaucrats). Much of the focus of the weekend G20 was of course on Donald Trump and the growing isolation of the United States under his, erm, stewardship.
But there was another omission of much greater importance, an issue more important than any other to hundreds of millions of workers worldwide went ignored in the discussion and communique: the continuing weakness in wage growth and the way the gains of globalisation and liberal economic polices are going to capital, not workers. There was one — literally one — reference to wages in the entire 5000-word communique. “We emphasise that fair and decent wages as well as social dialogue are other key components of sustainable and inclusive global supply chains.”
So there. And we know how much bread “social dialogue” puts on the table, especially if your global supply chain isn’t “inclusive” enough.
The disease of wage stagnation is rampant across the West. Australian workers know all about it. But it’s not even particularly bad here. In the UK, real wages declined in the six years from 2008 to 2014 and have only partially recovered since then — and in fact fell again in 2017. In Canada, real wages growth in 2016 hit its lowest level since 1998. The EU has recorded persistent low wages growth since financial crisis. Only in the US have real wages grown in recent years, as employment growth surged under Barack Obama — but wage growth there was weaker in 2016 and 2017 than previous years.
This is part of a long-term trend of income shifting from workers to business. International Monetary Fund figures show that across the developed world, the share of national income paid out to workers had fallen to less than 40% in 2015 from close to 55% in 1970. This is partly because of technological change, but also because globalisation puts downward pressure on wages, both directly through greater competition, but indirectly through capital flows (short-term capital flows are volatile, exacerbate slowdowns and make workers compete internationally for investment; it’s now widely accepted that short-term capital flows worsen inequality and have few benefits).
Meanwhile, of course, corporate executives continue to give themselves massive pay packets; while rampant executive remuneration growth has slowed in recent years, top execs in Australia still pull in over 50 times average earnings. And their income has continued growing while workers have gone backwards.
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G20 labour and finance ministers meeting in Turkey in 2015 were sufficiently exercised by all this that they had not one but two papers on the issue. But despite election results in the US, UK and the rise of populist political parties on the right and left demonstrating deep voter disenchantment with neoliberalism-as-usual, G20 leaders ignored it.
That entirely complements the approach of our government, which has made noises about wage stagnation but continues to push policies to slash wages, hold down growth and restrict unions’ capacity to effectively represent workers, all at the behest of business. If there was ever any doubt that, have a look at (yet another) great Adele Ferguson piece for Fairfax today in which she outlines how business has fought back against the government’s belated efforts to do something about rampant wage underpayment in the retail franchise sector.
As we’ve seen, at least in Australia we have a central bank that understands there are serious economic consequences to persistent stagnant wages, with Reserve Bank governor Philip Lowe urging Australian workers to start demanding bigger pay rises. Not so in the US, where Federal Reserve is singing from an outdated song book. In March 2014, Fed chair Janet Yellen said she believed that “perhaps 3 and 4% wage inflation would be normal” — a figure actual growth never came within cooee of. For one month short of five years inflation in the US has fallen short of the Fed’s target of 2%, and annual wages growth has remain stuck at between 2% and a high of 2.8% in January this year (now back to 2.5% in June). But from post-meeting statements and other remarks since then, the Fed seems to be stuck on its “wage rises drive inflation higher” argument, even as economists and analysts puzzle about why wages growth has slipped backwards this year.
Like the Fed, our government, and its G20 counterparts, is desperately hoping persistent wage stagnation is just some aberration that will disappear with labour market growth. If we follow the pattern of the United States, wages growth will pick up a bit — but not by much, and not consistently. The days of 4% growth that we saw in the 2000s seem unlikely to return; even the 3% of the Gillard years looks ambitious. This is enraging voters in Australia and across the world. The longer governments and companies try to ignore it and hope it will just magically go away, the worse it’s going to get. And it’s not like they haven’t been repeatedly warned. In democracies, voters won’t cop a system that works for elites but doesn’t work for them.