{"id":49302,"date":"2022-02-24T12:31:12","date_gmt":"2022-02-24T02:31:12","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=49302"},"modified":"2022-02-24T12:31:12","modified_gmt":"2022-02-24T02:31:12","slug":"australia-workers-endure-on-going-real-wage-cuts-as-corporate-profits-soar","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=49302","title":{"rendered":"Australia – workers endure on-going real wage cuts as corporate profits soar"},"content":{"rendered":"

\t\t\t\tYesterday (February 23, 2022), the ABS released the latest – Wage Price Index, Australia<\/a> – for the December-quarter 2021. The WPI data shows that nominal wages growth remained modest to say the least. The data shows that the significant cuts to workers’ purchasing power continue, and, in my view, constitute a national emergency. While the conservatives are railing about inflation now and looking to target workers’ wages (further cuts), the evidence is that the wages side is not driving any inflationary pressures – the opposite is the case. The business sector, as a whole, thinks it is clever to always oppose wages growth and the banks love that because they can foist more debt onto households to maintain their consumption expenditure. But the reality is clear – there can be no sustained recovery for the economy post Covid without significant increases in the current rate of 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 December-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>\n0.7<\/td>\n2.3<\/td>\n<\/tr>\n
Public hourly wages<\/td>\n0.7<\/td>\n2.1<\/td>\n<\/tr>\n
Total hourly wages<\/td>\n0.7<\/td>\n2.3<\/td>\n<\/tr>\n
Basic CPI measure<\/td>\n1.3<\/td>\n3.5<\/td>\n<\/tr>\n
Weighted median inflation<\/td>\n0.9<\/td>\n2.7<\/td>\n<\/tr>\n
Trimmed mean inflation<\/td>\n1.0<\/td>\n2.6<\/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

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 again in the December-quarter in both the private and public sectors.<\/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 December-quarter, while nominal wages growth ticked up slightly (2.23 to 2.3 per cent), the inflation rate remained well above the wages growth, which meant that real purchasing power continued to fall (for three successive quarters).<\/p>\n

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The next graph shows the growth in private sector real wages since the December-quarter 2005 to the December-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 December-quarters 2020 is an outlier created by the temporary government decision to offer free child care for the December-quarter which was rescinded in the December-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

The results for the December-quarter 2021 tell us that for most of 2021, real wages have been falling in Australia.<\/p>\n

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

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