{"id":30282,"date":"2015-02-25T15:46:54","date_gmt":"2015-02-25T05:46:54","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=30282"},"modified":"2015-02-25T15:46:54","modified_gmt":"2015-02-25T05:46:54","slug":"national-income-continues-to-be-redistributed-from-wages-to-profits-in-australia","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=30282","title":{"rendered":"National income continues to be redistributed from wages to profits in Australia"},"content":{"rendered":"

\t\t\t\tOne of the salient features of the neo-liberal era has been the on-going redistribution of national income to profits away from wages. This feature is present in many nations. As I noted in yesterday’s blog – Employer group demands free labour from Government<\/a> – employer groups in Australia are upping the ante and demanding that the Government provide them with free labour. It goes like this – the government runs a fiscal austerity campaign, which creates rising unemployment. They then harass the unemployed for daring to apply for the below poverty line income support. If that is not enough, then the private sector demands the Government hand these unemployed workers over to them for free to “make coffee” and other tasks. Its a lovely world that we are living in. Meanwhile there is growing pressure on Australia’s wage setting tribunals to scrap penalty and overtime rates, allegedly because they damage employment and firms are just busting to put more workers on as long as wages drop. The Australian Bureau of Statistics published the latest – Wage Price Index, Australia<\/a> – for the December-quarter today and we learn that the annual growth in wages is now at the lowest level since the data series began in the June-quarter 1997. The annual hourly wage inflation is now down to 2.5 per cent overall and 2.4 per cent in the private sector. With productivity growth running slightly slower and the annual inflation rate dropping sharply in recent quarters as the overall economy slows down (and oil prices fall), the shift to profits slowed marginally in the December-quarter. But Real Unit Labour Costs (RULC) continued to fall. Further, the long-term trends are still alarming with employment growth flat or negative and unemployment rising.
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\nI have had a long association with these tribunals as an expert witness and I cannot recall the employers’ representatives ever<\/strong> agreeing that the time is right for wage rises. If their submissions are to be taken on their word then there would never be any wage increases.<\/p>\n

And with nominal wages growth slowing rapidly over the last several quarters and the redistribution of national income towards profits continuing, they are still not satisfied.<\/p>\n

That is the nature of capital – always wanting more and harassing the government to take their side and help them get it.<\/p>\n

The problem with this neo-liberal era is that governments around the world have agreed to working on that side of the struggle against workers. Something has to give.<\/p>\n

The wage series is the quarterly ABS Wage Price Index published by the ABS. The Non-farm labour productivity per hour series is derived from the quarterly National Accounts.<\/p>\n

A compact dataset can be downloaded from the RBA Table H2 Labour Costs and Productivity<\/a>. I extrapolated the average growth over the last five years to get the December-quarter productivity result, given the national accounts data is not released until early March.<\/p>\n

Nominal wage and price inflation<\/strong><\/p>\n

The first graph shows the overall annual growth in the Wage Price Index since the September-quarter 1998 (this series was first published in the September-quarter 1997).<\/p>\n

I also superimposed the annual inflation rate (Consumer price index) – the red line. The bars above the red line indicate real wages growth and below the opposite.<\/p>\n

The big funny-looking jump in 2001 was the introduction of the Goods and Services Tax which created a once-off adjustment in the level of the CPI.<\/p>\n

So after falling for three quarters, then steadying, the real wage grew modestly in the December-quarter 2015 – at an annual rate of 0.8 per cent.<\/p>\n

But as we will see later, this is still well under the productivity growth rate, which means that the redistribution of national income towards profits is still on-going.<\/p>\n

\"Australia_WPI_CPI_Inflation_1998_2014\"<\/a><\/p>\n

<\/div>\n

Real wages growth subdued in December-quarter<\/strong><\/p>\n

The following graph shows the annual growth in real wages from the first-quarter 2001 to the December_quarter 2014 (I cut out the GST effect).<\/p>\n

After a few quarters of hard real wage cutting, the private sector returned to positive real wages growth but at very subdued rates.<\/p>\n

The rise in real wages in 2012 into 2013 was the result of the strong growth encourage by the fiscal stimulus. The declining profile after that is associated with the end of the mining investment boom exacerbated by the obsessive fiscal austerity that was introduced (too early) <\/p>\n

\"Australia_real_wages_growth_sector_2001_December_2014\"<\/a><\/p>\n

<\/div>\n

Workers not sharing in productivity growth<\/strong><\/p>\n

The next graph shows the annual hourly real wage change for the private sector (blue bars) and the annual hourly productivity growth (green line) since the March-quarter 2001.<\/p>\n

Productivity growth has been relatively strong in recent quarters, which is one reason why employment growth is so flat. For each extra dollar of real output, less workers are needed when productivity growth rises.<\/p>\n

Historically (for periods which data is available), rising productivity growth wass shared out to workers in the form of improvements in real living standards. Higher rates of spending then spawn new activity, which soaks up the workers lost to the productivity growth.<\/p>\n

The neo-liberal period marked a shift in that relationship as we discuss below.<\/p>\n

Clearly, since the September-quarter 2011, the payoff to workers from the positive productivity growth has been absent with real wages growth lagging productivity growth.<\/p>\n

In recent quarters, the gap has been large.<\/p>\n

\"Australia_RW_LP_2001_December_2014\"<\/a><\/p>\n

<\/div>\n

Real wages and productivity growth – a massive redistribution to profits<\/strong><\/p>\n

To understand the significance of the gap between real wages growth and labour productivity growth the following points should be noted:<\/p>\n