“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......
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%.
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.
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.
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.
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.
