If as an ordinary worker you feel like you have been financially marching backwards for the last five and a half years then you probably have

“Backing business generates higher wages, jobs & growth.”  [Australian Treasurer & Liberal MP for Kooyong Josh Frydenberg, Twitter, 8 March 2019]

Such a confident quote from a Coalition Treasurer in campaign mode - but is it true?

According to the Dept. of Prime Minister & Cabinet/ASIC at the end of the period 30 July 2013 to 31 June 2014, there were est.2.6 million actively trading businesses in Australia and, according to the ABS by the end of  2017-18 there were 2.3 million actively trading businesses in the market sector in Australia.

Despite the Morrison Government alleging that by November 2018 it had created 1.2 million more jobs since September 2013, it's easy enough to see that in January 2019 the seasonally adjusted unemployment rate was only 0.6% lower than it was when the Abbott-Turnbull-Morrison Coalition Government came to power in September 2013.

Additionally, it would appear that the ratio of unemployed persons to job vacancies in late 2013 was est. 20 unemployed individuals for very 1 job vacancy and by December 2018 this stood at an est. 15.57 unemployed individuals for every 1 job vacancy.

So what about wages growth?

The Global Financial Crisis ran from 2007 to 2008 and Australia came through this crisis relatively unscathed.

So with little structural damage to our financial institutions or the industry & business sectors, the national economy should be chugging along nicely.

By now ordinary workers should be reaping the rewards for their productivity - as labour input to market sector multifactor productivity increased by 3.0% overall on quality adjusted hours worked basis in 2017-18 (while capital input only grew by 2.0%).

The biggest labor input increases occurred in Administrative and Support Services (8.2%), Manufacturing (3.8%), Accommodation and Food Services (3.7%), and Professional, Scientific and Technical Services (3.7%).

However, this is what each Australian's nominal slice of the economic pie looked like by December 2018......

According to the Australian Bureau of Statistics (ABS) in the December Quarter 2018; Compensation of employees increased by 0.9% nationally. 

In the Australian Capital Territory  the compensation increase was 2.1%, in Tasmania 1.6%, Queensland 1.5%, Victoria 1.4%, New South Wales 0.7%, and South Australia 0.1%. However compensation growth went backwards in Western Australia at -0.2% and Northern Territory -0.7%.

Also according to the ABS; The Consumer Price Index (CPI) rose 0.5 per cent in the December quarter 2018.  This followed a rise of 0.4 per cent in the September quarter, a rise of 0.4% in the June quarter and a 0.4% rise in the March quarter 2018.

It doesn't take a genius to see that nationally the effect of that December national compensation increase was actually 0.9% minus 0.5% CPI equalling 0.4% when it came to how far those few dollars in wage increase would stretch the weekly pay packet.

Why is low wages growth occurring? Well according to the Minister for Finance and the Public Service & Liberal Senator for Western Australia Mathias Cormann it is deliberate Morrison Government policy to suppress wages growth.

Low wage growth is no accident. Watch @MathiasCormann confirm that. pic.twitter.com/z8fGGCO52Z

— Australian Unions (@unionsaustralia) March 8, 2019

The result of this ongoing wages suppression? A continuation of the downward progression of disposable income and rising household debt, as illustrated in this graph from 2015 onwards.

ABC News, 9 September 2018

BACKGROUND

 Business Insider, 4 March 2019:

The ABS on Monday (4 March) released its Business Indicators results for December 2018, which showed trend growth in company gross operating profits at a healthy 9.6 per cent over the year to the December quarter.

Seasonally adjusted, that figure was even higher, hitting double digits at 10.5 per cent.

The figures were boosted by a strong performance that quarter, with trend growth up by 0.9 of a percentage point on the September quarter, or by 0.8 of a percentage point when seasonally adjusted.

The New Daily, 7 March 2019:

Chief executives and chief financial officers don’t get bonuses for increasing their companies’ labour costs – so they try not to.

Chairpersons and boards are not clapped on their collective back by institutional investors for devoting a greater share of revenue to wages – so they don’t.

And the cumulative effect of those simple realities is now unavoidable: Years of real, take-home wages going backwards while corporate profits increased, have meant household consumption is stalling and taking the economy with it.

Yet such is the myopic nature of corporate focus, business leaders react with horror to the idea that employees need a bigger share of the pie.

The business lobby claims wage increases aren’t possible without productivity trade-offs – but that’s after the productivity increases of recent years going overwhelmingly to higher profits.

Quite simply, the key business lobby groups have little credibility. They claimed reducing penalty rates would increase employment – it didn’t. They claimed cutting company tax would increase wages: It hasn’t and it won’t.

Household consumption accounts for more than half of the economy. According to the ABS, and nicely reported by Greg Jericho with helpful graphs, real household disposable income per capita has fallen back to where it was in 2010.

“Average compensation per employee” grew by only 1.5 per cent in 2018 – an even worse result than the better-publicised ABS wages index.

It’s only population growth that’s providing what little retail sales and GDP growth we have….

The Fair Work Commission (FWC) increased the minimum wage by 3.5 per cent last July – against the arguments of the business lobby – and by 3.3 per cent in July 2017. 

That increase of 6.8 per cent barely registered on the various measures of wages growth.

The conundrum of business needing consumers to have income growth, but 

not wanting to pay workers more, is a little like the “Paradox of Thrift” – it makes sense for an individual in uncertain times to save and not spend as much, but if everyone does it, uncertain times turn into bad times.

As argued here previously, business is holding a very determined wages strike. 

Corporate leaders don’t need FWC permission to do it, they just have to hang together to keep a lid on wage rises. In the process, they’re shooting themselves in the foot.

For the Coalition government, the result is a record of economic failure.