24th April 2015
A new report outlines how Australian workers’ living standards are falling, with real wages going backwards in 2013 for the first time in over a decade.
The report by progressive think tank Per Capita finds that the average worker saw a $118 fall in the purchasing power of their pay in 2013, as wages failed to keep pace with inflation.
While wage growth remained low last year, inflation fell on the back of slumping fuel prices, meaning that Australian workers were better off.
Over the longer term, Australian workers have benefitted from the proceeds of the commodity price and production boom, with a real wages rising an average of $484 per year.
The report’s author, Per Capita executive director David Hetherington, said the highest increase in real wages was an $825 surge in 2003, while there were four other annual rises above $700 so far during the new millennium.
The research finds that those wages increases were more than offset by increases in gross value added per hour worked, meaning that improved labour productivity more than paid for the pay rises.
In turn, the report cites research that shows workers’ share of national income falling from 65.6 per cent to 59.7 per cent between 2000 and 2012.
David Hetherington attributes this decline to falls in union membership and weaker bargaining positions for workers.
If we’re not delivering income growth through work, then living standards will suffer.David Hetherington, Per Capita
“We’ve seen this decoupling of productivity and wages and it’s because workers have less bargaining power,” he argued on Radio National Breakfast.
“Union coverage has fallen to all time lows. You see increasing pressure around things like penalty rates, where the minimum wage should keep pace with the median wage.”
Infrastructure and skills investment needed
With the wages share of the economy declining, that means it was only the significant increase in overall national income, mainly due to the commodities boom and improved productivity, that has kept employee pay packets ahead of inflation.
Mr Hetherington argues that there is another factor threatening living standards for many workers – commuting time.
His report cites studies that show the average commute has grown from three hours and 37 minutes per week in 2002 to four hours and 50 minutes, as Australian cities have sprawled and become more gridlocked.
The study argues that the extra $4,577 in post-tax real income received by Australian workers must be viewed in the context of 56 hours of extra unpaid commuting per year.
Mr Hetherington said this highlights the need to spend more money on infrastructure, while also investing in education to build the skills on which labour productivity growth is based.
“We need structural reform in terms of investment and productivity. So what we haven’t done well in the last 10 to 15 years is to use the proceeds of the boom to invest in the infrastructure and skills,” he said.
“Secondly we need to make sure that we protect and maintain our wage bargaining framework that served us well for a century.”
Mr Hetherington argues that it is this dual enterprise bargaining-minimum wage setting framework that has ensured that Australian workers have captured some of the benefit of their productivity improvements, unlike US workers who have seen real wages stagnate for four decades.
Mr Hetherington said the fall in US real wages was a key factor behind the country’s recent severe recession.
“It remains a fact that the vast majority of people in our society earn their primary income through work and, if we’re not delivering income growth through work, then living standards will suffer,” he concluded.