{"id":48697,"date":"2021-11-17T14:08:50","date_gmt":"2021-11-17T04:08:50","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=48697"},"modified":"2021-11-17T14:08:50","modified_gmt":"2021-11-17T04:08:50","slug":"wages-growth-in-australia-goes-from-terrible-to-bad-as-real-wage-cuts-continue","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=48697","title":{"rendered":"Wages growth in Australia goes from terrible to bad as real wage cuts continue"},"content":{"rendered":"

\t\t\t\tToday (November 17, 2021), the ABS released the latest – Wage Price Index, Australia<\/a> – for the September-quarter 2021. The WPI data shows that nominal wages growth rose above levels recorded in previous quarters and the pattern resembled the pre-pandemic growth path – low to modest. The inflation rate continues to outstrip nominal wages growth, which means that workers in all sectors bar ‘Professional, scientific and technical services’ experienced on-going cuts drops in their real wages (purchasing power). The behaviour of nominal wages in Australia gives us a clear signal that there is little prospect of sustained inflationary pressures emerging from the labour market any time soon. Wages in the public sector grew by only 1.6 per cent over the 12 months as a result of the ridiculous wage freezes and wage caps that the federal and state governments are imposing. There can be no sustained recovery for the economy post Covid without a significant shift in the way we think about wages growth.
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The Wage Price Index:<\/p>\n

\n… measures changes in the price of labour, unaffected by compositional shifts in the labour force, hours worked or employee characteristics\n<\/p><\/blockquote>\n

Thus, it is a cleaner measure of wage movements than say average weekly earnings which can be influenced by compositional shifts.<\/p>\n

The summary results (seasonally adjusted) for the September-quarter 2021 were:<\/p>\n\n\n\n\n\n\n\n\n\n
Measure<\/td>\nQuarterly (per cent)<\/td>\nAnnual (per cent)<\/td>\n<\/tr>\n
Private hourly wages<\/td>\n0.6<\/td>\n2.4<\/td>\n<\/tr>\n
Public hourly wages<\/td>\n0.5<\/td>\n1.7<\/td>\n<\/tr>\n
Total hourly wages<\/td>\n0.6<\/td>\n2.2<\/td>\n<\/tr>\n
Basic CPI measure<\/td>\n0.8<\/td>\n3.0<\/td>\n<\/tr>\n
Weighted median inflation<\/td>\n0.5<\/td>\n2.1<\/td>\n<\/tr>\n
Trimmed mean inflation<\/td>\n0.5<\/td>\n2.1<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

On price inflation measures, please read my blog post – Inflation benign in Australia with plenty of scope for fiscal expansion<\/a> (April 22, 2015) – for more discussion on the various measures of inflation that the RBA uses – CPI, weighted median and the trimmed mean The latter two aim to strip volatility out of the raw CPI series and give a better measure of underlying inflation.<\/p>\n

What the ABS said:<\/h2>\n

The ABS Media Release<\/a> – said that:<\/p>\n

\nThe … Wage Price Index (WPI) rose 0.4 per cent in September quarter 2021 with the annual growth rate of 2.2 per cent …<\/p>\n

This release of WPI shows the return of a more regular September quarter pattern of wage growth, following the labour market disruptions through 2020 and 2021<\/p>\n

Wage and salary reviews around the end of the financial year, scheduled enterprise agreements and annual award rises all contributed to growth. Pockets of wage pressure continued to build for skilled construction-related, technical and business services roles, leading to larger ad hoc rises as businesses looked to retain experienced staff and attract new staff.\n<\/p><\/blockquote>\n

So, in some instances, firms are using price inducements to retain skilled staff and attract new employees.<\/p>\n

Real wage trends in Australia<\/h2>\n

The summary data in the table above confirm that the plight of wage earners continues in Australia.<\/p>\n

Real wages fell in the September-quarter in both the private sector but public sector after a period of low growth.<\/p>\n

It is clear that the public sector wage caps (state and federal) have created an environment where private sector wage rises are being constrained, independently of the state of the private labour market.<\/p>\n

The first graph shows the overall annual growth in the Wage Price Index (public and private) since the December-quarter 2000 (the series was first published in the December-quarter 1997) and the RBA’s core annual inflation rate (red line).<\/p>\n

The blue bar area above the red line indicate real wages growth and below the opposite.<\/p>\n

In the September-quarter, there was some sign of better wages growth while the inflation rate eased as the temporary factors abated.<\/p>\n

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<\/div>\n

The next graph shows the growth in private sector real wages since the September-quarter 2005 to the September-quarter 2021. The core inflation rate is used to deflate the nominal wages growth.<\/p>\n

The blue bars are the annual rate of change, while the red line is the quarterly rate of change.<\/p>\n

The fluctuation between the June- and September-quarters 2020 is an outlier created by the temporary government decision to offer free child care for the September-quarter which was rescinded in the September-quarter.<\/p>\n

Overall, the record since 2013 has been appalling.<\/p>\n

Throughout 2017 and into 2018, real wages growth was negative. But then there were several quarters of modest real wages growth. The trend, however, is towards zero real wages growth.<\/p>\n

The sharp spike downwards in the June-quarter 2021 is the result of very moderate nominal wages growth combined with a transitory surge in the CPI inflation rate.<\/p>\n

So it is interesting that the ABS think this is a return to the ‘norm’ – which just means the norm is pretty awful.<\/p>\n

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<\/div>\n

The aggregate data shown above hides quite a significant disparity in quarterly wage movements at the sectoral level, which are depicted in the next graph.<\/p>\n

The blue bars are the current quarterly change, while the red triangles are the previous quarterly change.<\/p>\n

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<\/div>\n

Sectoral Variability<\/h2>\n

The aggregate data shown above hides quite a significant disparity in quarterly wage movements at the sectoral level, which are depicted in the next graph.<\/p>\n

The blue bars are the current quarterly change, while the red triangles are the previous quarterly change.<\/p>\n

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<\/div>\n

The ABS also reported that:<\/p>\n

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