There’ll be no economic recovery without a wages recovery

Published: 14/07/2021
Category: Analysis
Published: 14/07/2021
Category: Analysis

The Covid pandemic – still raging around the world and now in my hometown of Sydney – has highlighted, perhaps more than any previous moment in history, the fundamental distinction between what is good for the whole society, and what is good for the wealthy and affluent.  

Around the world, millions have died, tens of millions faced a frightening disease and economies were humbled.

Yet world stock markets hit record highs.  Here, during the pandemic, the wealth of Australia’s billionaires doubled.  Corporate profits rose more than 10 per cent.   

But even before the pandemic, the false promise of trickle-down economics was clear. 

For the last generation, wealth has been trickling up not down. During the pandemic, that trickle became a torrent.

And not even the federal government’s boasting of its management of the economy at this year’s budget could hide the reality of the wages crisis in Australia.

As others have noted, when even the Governor of the Reserve Bank says there is a problem with wages, the issue is clearly at crisis point.

Australia has had eight straight years of zero wage growth in real terms.

It has been the worst record of wage growth in the country’s post-war history.

And yet the Government and business continue to produce rose-coloured forecasts.

It is not as if workers aren’t doing their bit.

The workers’ share of total output has declined on trend – their slice of the national economic pie is shrinking, a sign of worsening inequality in Australia

Labour compensation (including superannuation contributions) hit a record low of 47 per cent of Australia’s GDP in 2019.

That’s the smallest share of the pie for workers since the Bureau of Statistics began reporting this data back in 1959.

From a peak labour share of 57.4 per cent of GDP in 1975, over one-tenth of the economic pie has been taken away from workers.

That loss of 10.4 per cent of GDP is worth $208 billion in today’s terms.

That works out to a stunning average of more than $15,000 in lost income for every waged worker.

And the Government and economists keep debating the cause of the wages crisis.

Every month a new theory is put forward. One week it is that unemployment is too high. Then it is because productivity isn’t growing fast enough. The next is that under-employment is too high.

Last week it was because immigration has been too high.

It’s time our country faced up to the truth. Our wages problem is a bargaining power problem. It hasn’t happened by accident. 

It is because of policies designed to weaken the bargaining power of workers.

When workers try and bargain in Australia, it is like being tied to a chair and asked to stand up when every arm and every leg is tied down.

Over the years as employers have won precedents to the detriment of working people and the laws have become even more restrictive and the bonds have been tightened.

And as it gets easier to outsource and casualise jobs, the harder those bonds have tightened. 

Our bargaining rules operate to severely limit and restrict working people at every step.

Last year, when the Government oversaw talks between unions and employer groups, we again witnessed employers trying to loosen the restrictions on them, and push back on the few protections workers still have.

In the past, Australian workers could rely on the bargaining and award system to allow strongly unionised workers to drive wages growth. This helped those workers, but also dragged those without bargaining power up as well.

It set the floor, and it lifted all workers up.

But the current laws do not support workers bargaining for wage rises.

It is harder than it has ever been for working people, and the award system operates as a mere safety net, frozen in place and unable to respond when there are changes to wage levels within an industry.

This is how labour-hire companies have also prospered – they have marketed their services as a method of cutting wages as good secure properly paid jobs are replaced with insecure, low paid jobs.

And employers have been given more rights and more ways out of paying decent wages and conditions.

As a result of the Aurizon Decision of the Full Bench of the Fair Work Commission in 2015, employers are able to argue that enterprise agreements should be cancelled altogether if bargaining is too hard.

This means that workers wages and entitlements can be radically slashed, stripping them of 20 years’ worth of bargained gains overnight.

This is a threat that employers have been using at bargaining tables since 2015 – come to an agreement or suffer a unilateral pay cut and lose important job security safeguards built up over the years like redundancy payments.

The effect of these threats has further tightened the bonds.

No wonder we have a wages crisis.

In two weeks’ time, the Australian union movement comes together for our triennial Congress, where delegates from every union debate our policy and direction. We will be meeting in the shadow of our country’s latest COVID-19 lockdown, with our largest city facing its greatest challenge since the pandemic began. 

This makes our work more urgent and gives us greater focus. Workers have been at the forefront of the battle against COVID-19, and we intend to be at the heart of the debates about how to recover and rebuild.

We won’t accept a recovery that entrenches disadvantage.

We can’t accept a recovery until there is a wages recovery.

And we will continue to fight for better, stronger laws to allow workers to bargain.

Do Something Powerful

This opinion piece first appeared in the Australian Financial Review

There’ll be no economic recovery without a wages recovery

There’ll be no economic recovery without a wages recovery